SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended June 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 _____
0-19263
(Commission File No.)
SUPREMA SPECIALTIES, INC.
(Exact name of registrant as specified in its charter)
New York 11-2662625
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
510 East 35th Street, Paterson, New Jersey 07543
(Address of principal executive offices including zip code)
Registrant's Telephone Number, including area code: (973) 684-2900
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Share Purchase Rights
<PAGE>
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 ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ] The aggregate market value of the registrant's Common Stock
held by non-affiliates of the registrant as of September 2, 1999 was
$28,729,882.
As of September 2, 1999, there were 4,519,621 shares of the registrant's Common
Stock outstanding.
Documents Incorporated by Reference:
Suprema Specialties, Inc.'s definitive Proxy Statement for the annual
meeting of shareholders which will be filed on or before October 28, 1999
is incorporated by reference into Part III of this Form 10-K Annual Report.
<PAGE>
Part I
Item 1. Business
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.
General
Suprema Specialties, Inc. and its wholly owned subsidiaries (hereinafter
referred to collectively as the "Company") manufactures, processes and markets a
variety of premium, gourmet natural cheese products, using fine quality imported
and domestic cheeses.
The Company manufacturers bulk cheeses at its facilities in Manteca,
California and Ogdensburg, New York and purchases bulk cheeses from foreign
sources (primarily from Europe and to a lesser extent, South America) and
domestic sources. Bulk cheese is repackaged and sold to food service
distributors and food manufacturers under the Suprema Di Avellino(R) name or on
a private label basis or is grated or shredded and packaged by the Company and
sold to retail customers under the Suprema Di Avellino(R) name. The Company
packages its products for retail sale in convenient, easy to use, tamper
evident, resealable, clear plastic cups, bags and shakers.
The Company commenced operations in 1983 and currently markets and
distributes its products nationally.
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<PAGE>
Products
The Company's product line, which it principally markets under the Suprema
Di Avellino(R) brand name, currently consists primarily of grated and shredded
imported and domestic parmesan and romano cheeses, imported pecorino (sheep's
milk) romano cheese (including "lite" versions of these products containing less
fat and fewer calories), bulk mozzarella, ricotta and provolone cheese products.
Its cheese products are natural, containing no preservatives, additives,
sweeteners, dehydrated fillers or artificial flavorings. These cheese products
are often used as cooking ingredients and as flavor enhancements and complements
to other foods, such as pastas, meat sauces, soups and salads.
For retail sales, the Company packages a significant portion of its
products in resealable tamper-evident transparent plastic cups and eight ounce
shakers, permitting consumers to reseal the package which the Company believes
maximizes freshness and enhances visual appeal.
The Company also sells certain of its products in shrink-wrapped plastic
packaging and in plastic pillow packs. These packs range in size from one to ten
pounds or can be packaged in customized sizes for food service distributors and
food manufacturers.
Production
The Company has increasingly emphasized the marketing and sale of domestic
Italian variety cheese products manufactured at its Manteca, California facility
and its Ogdensburg New York facility. For the years ended June 30, 1997, June
30, 1998 and June 30, 1999, respectively, sales of mozzarella, ricotta and
provolone cheese products manufactured at such facilities accounted for
approximately 54.7%, 71.8% and 87.2%, respectively, of the Company's net sales.
The Company also processes natural cheese products, which involves shredding,
grating and packaging, at its facility in Paterson, New Jersey. These facilities
serve as distribution points for various geographic markets throughout the
United States.
The Company's East Coast production facility is located in Paterson, New
Jersey and is equipped with state of the art equipment for grating, shredding
and packaging the Company's products. The Company, as of September 2, 1999,
operated this facility at approximately 63% of full production capacity. The
Company's West Coast facility is located in Manteca, California and is equipped
with state of the art equipment for cheese production, shredding, packaging and
whey processing. As of September 2, 1999, the Company operated this facility at
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approximately 75% of full production capacity. The Company's Northeast facility
is located in Ogdensburg, New York and is equipped with equipment for cheese
production and whey processing. As of September 2, 1999, the Company operated
this facility at approximately 75% of full production capacity.
The Company employs a Director of Operations at each facility. The
Company's Directors of Operations make preproduction inspections of each
product, and monitor critical manufacturing and processing functions. Random
samples of each product are regularly sent to outside laboratories, which
perform routine physical, chemical and micro-biological tests of products.
Customers
The Company sells its cheese products directly and through distributors to
supermarkets and other retail customers, including grocery stores, delicatessens
and gourmet shops; food service industry distributors, which distribute the
products to, among others, restaurants, hotels and caterers; and food
manufacturers. The Company's products sold to food service industry distributors
and food manufacturers are sold principally in bulk. The Company's supermarket
customers include several regional chain stores, such as King Kullen, Shop-Rite,
BJ's, Foodtown, Stop'N Shop, D'Agostino's, Super Valu, and Giant.
For the fiscal years ended June 30, 1997, June 30, 1998 and June 30, 1999,
sales of cheese products to retailers accounted for approximately 10%, 6% and
3%, respectively, of the Company's net sales; sales to food service companies
accounted for approximately 83%, 88% and 91%, respectively, of the Company's net
sales; and sales to food manufacturers accounted for approximately 7%, 6% and 6%
respectively, of the Company's net sales.
For the fiscal years ended June 30, 1999 and June 30, 1998, A&J Cheese
Company accounted for 18% of the Company's revenues. For the fiscal year ended
June 30, 1997, A&J Cheese Company and Lisanti Foods of New Jersey accounted for
14% and 10% of the Company's net sales respectively.
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Marketing, Sales and Advertising
The Company currently employs regional sales representatives to market its
products to retail customers primarily in New York, New England and California,
and one national representative who is responsible for sales of the Company's
products to the food service industry. In addition, the Company engages
independent food brokers throughout the United States for marketing to both
retail and food service customers. Food brokers, who are paid on a commission
basis, and salaried sales representatives, are generally responsible in their
respective geographic markets for identifying customers, soliciting customer
orders and inspecting merchandise on supermarket shelves. To achieve greater
market penetration, the Company intends to continue to strengthen and expand its
sales force and food broker network. The Company also employs a Vice
President-Sales, who is responsible for managing and coordinating the entire
sales program. This includes making sales presentations to food brokers and
working with regional sales representatives and food brokers in the marketing
and selling of products to, and the maintenance of relationships with, retail
customers.
The Company believes that product recognition by customers, consumers and
food brokers is an important factor in the marketing of the Company's products.
Accordingly, the Company promotes its products and brand name through the use of
promotional materials, including full color product brochures, circulars, free
standing product displays and newspaper inserts. The Company also employs a Vice
President of Market Development in an effort to increase product recognition in
various geographic markets.
The Company generally sells its cheese products pursuant to customer
purchase orders and fills orders within approximately seven days of receipt.
Because orders are filled shortly after receipt, backlog is not material to the
Company's business. Substantially all of the Company's products are delivered to
customers by independent trucking companies.
Suppliers
For the fiscal years ended June 30, 1997, June 30, 1998 and June 30, 1999,
the Company's largest supplier, a milk cooperative, accounted for approximately
31%, 25% and 21%, respectively, of all purchases. The Company does not usually
maintain contracts with its suppliers. The Company believes that there are
numerous alternative sources of supply available to it, including for products
currently provided by its largest supplier.
For the years ended June 30, 1997, June 30, 1998 and
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June 30, 1999, approximately 7%, 5% and 18%, respectively, of the Company's
supply requirements were manufactured by various foreign producers in Europe and
South America. Currently, the Company imports certain of its bulk cheese
directly from foreign suppliers and, to a lesser extent, also purchases through
domestic importers. The Company purchases cheese supplies in large quantities in
order to obtain volume discounts and places its orders for import bulk cheese
approximately four to six months in advance of anticipated production
requirements.
The Company is subject to various risks inherent in dependence on foreign
sources of supply, including economic or political instability, shipping delays,
fluctuations in foreign currency exchange rates, custom duties and import quotas
and other trade restrictions, all of which could have a significant impact on
the Company's ability to obtain supplies and deliver finished products on a
timely and competitive basis. Cheese imported from Argentina is currently
subject to United States import quotas and custom duties. There are currently no
quotas or custom duties imposed on pecorino romano cheese imported into the
United States from Italy, although there are quotas and duties imposed on
parmesan cheese imported from Italy.
The Company also purchases certain of its cheese requirements from domestic
sources. The Company manufactures certain of its cheese requirements primarily
for sale to the food service industry. For the fiscal years ended June 30, 1998
and June 30, 1999, approximately 95% and 82%, respectively, of the Company's
supply requirements were manufactured by the Company or purchased from domestic
sources.
Trademarks
In September, 1992, the Company registered the name "Suprema Di
Avellino(R)" with the United States Patent and Trademark Office.
Government Regulation
The Company is subject to extensive regulation by the United States Food
and Drug Administration (the "FDA"), the United States Department of
Agriculture, and by other state and local authorities in jurisdictions in which
the Company's products are manufactured, processed or sold, regarding the
importation, manufacturing, processing, packaging, storage, distribution and
labeling of the Company's products. Applicable statutes and regulations
governing cheese products include "standards of identity" for the content of
specific types of cheese; nutritional labeling and serving size requirements;
and general "Good Manufacturing Practices" with respect to production processes.
The Company's manufacturing and processing facilities
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are subject to compliance with federal and state regulations regarding work
safety and environmental matters. The Company's manufacturing and processing
facilities and products are subject to periodic inspection by federal, state and
local authorities. The Company believes that it is currently in substantial
compliance with all material governmental laws and regulations and maintains all
material permits and licenses relating to its operations.
Advertising relating to the Company's products is subject to review of the
Federal Trade Commission and state agencies to monitor and prevent unfair or
deceptive trade practices.
Competition
The Company faces significant competition in the marketing and sales of its
products. The Company's wholesale products compete with other products on the
basis of price, quality and service. The Company's retail products compete for
consumer recognition and shelf space with cheese products which have achieved
significant national, regional and local brand name recognition and consumer
loyalty including such product brands as Kraft, Sorrento, Sargento and Polly-O.
The Company also competes with other importers of foreign cheese and companies
manufacturing substitute cheese products. These products are marketed by
companies with significantly greater financial, manufacturing, marketing,
distribution, personnel and other resources than the Company, thereby permitting
such companies to procure supermarket shelf space and to implement extensive
advertising and promotional programs, both generally and in response to efforts
by additional competitors to enter into new markets. The food industry is also
characterized by the frequent introduction of new products, accompanied by
substantial promotional campaigns. The Company's products are positioned as
premium, gourmet products and, accordingly, are generally higher in price than
certain similar competitive products. The Company believes the principal
competitive factors in the marketing of cheese products are quality, freshness,
price, product recognition, packaging convenience and ease of use.
As is the case with other companies marketing cheese products, the Company
is subject to evolving consumer preferences and nutritional and health-related
concerns. The Company believes that the absence of preservatives, additives,
sweeteners, dehydrated fillers or artificial flavorings increases the
attractiveness of its products to consumers. In addition, the Company has
introduced certain "lite" cheese products containing less fat and fewer
calories. The Company will continue to endeavor to respond to certain consumer
concerns about dairy products, such as the cholesterol, calories, sodium,
lactose and fat content of such products. The Company expects to
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see increased competition from other companies whose products or marketing
strategies address these consumer concerns.
Employees
As of September 2, 1999, the Company had 169 full-time employees of which
13 are employed in executive capacities and management positions, 18 are engaged
in sales and marketing and administrative capacities and 138 are engaged in
production and operations. In June, 1997, the employees of Suprema Specialties
West, Inc. which represent approximately 50% of the total workforce, elected to
form a Union. In December 1997, the Company formalized a contract with its union
employees which remains in effect through December 31, 1999. The Company is
currently in negotiations with its union employees to formalize a new contract.
The Company considers its relations with its employees to be good.
Item 2. Properties
The Company operates three facilities: manufacturing facilities in Manteca,
California and Ogdensburg, New York and its executive offices and production
facility in Paterson, New Jersey.
The Company's facility in Paterson, New Jersey consists of an aggregate of
approximately 32,000 square feet and contains the Company's executive offices as
well as production, storage and shipping facilities and has been expanded to
include a refrigerated/freezer storage facility. On March 29, 1996, the Company
purchased its Paterson 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 approximately $686,250 was used to pay the remaining
obligation to the landlord. In March 1999, the Company refinanced its mortgage
on the Paterson facility with Fleet Bank for a principal amount of $929,573. The
seven year note bears interest of 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.
The Company's facility in Manteca, California, which consists of an
aggregate of approximately 85,000 square feet and contains a cheese
manufacturing operation, as well as a whey processing operation and storage and
shipping facilities, is occupied under a net lease which expires on August 31,
2005, and which may be extended at the option of the Company for two (2)
additional five-year periods subject to further extension. The basic annual
rental (exclusive of insurance and taxes) is $576,000, subject to adjustment for
increases in the Consumer Price Index during the renewal term. The rent is based
on a formula relating to the Landlord's cost of construction of the
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additional space.
The Company's facility in Ogdensburg, New York, which consists of an
aggregate of approximately 72,000 square feet and contains a cheese
manufacturing operation, as well as storage and shipping facilities, is occupied
under an operating lease which commenced in August 1996 and expires July 31,
2017. However, at July 31, 2002, July 31, 2007, and July 31, 2012 the Company
may elect to terminate the lease. Minimum monthly base rental is $4,000 plus a
fee of $.06 per hundred weight of whole milk sold and delivered, provided that
in no event shall the minimum monthly rent exceed $8,000.
The Company leases, generally with options to purchase, substantially all
of the equipment at these manufacturing and processing facilities, subject to
lease agreements currently providing for annual aggregate payments of
approximately $2,915,000 through 2004.
Item 3. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended June 30, 1999.
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock trades in the over-the-counter market and is
quoted on the NASDAQ National Market System under the symbol "CHEZ" The
following table sets forth the high and low closing bid prices of the Company's
Common Stock for the periods indicated below. The following quotes represent
inter-dealer quotations without adjustment for retail markups, markdowns or
commissions and may not necessarily represent the prices of actual transactions.
Common Stock
------------
High Low
---- ---
Fiscal Year ended June 30, 1998
First Quarter 4 1/4 3 1/4
Second Quarter 3 7/8 2 25/32
Third Quarter 4 15/16 3 1/4
Fourth Quarter 4 7/16 3 3/8
Fiscal Year ended June 30, 1999
First Quarter 4 2 13/16
Second Quarter 5 4 1/2
Third Quarter 7 11/16 4 5/8
Fourth Quarter 7 1/8 4 11/16
The closing price of the Common Stock on September 2, 1999 was 7 7/8.
As of September 2, 1999, the number of record holders of the Company's
Common Stock was 78. The Company believes that this number does not include an
estimated 1,000 beneficial owners of the Company's Common Stock who currently
hold such securities in the name of depository institutions.
In August 1994, the Company completed a private placement of 500,000 shares
of Series A Convertible Preferred Stock at a purchase price of $3.00 per share
with gross proceeds of $1,500,000 and net cash proceeds of approximately
$1,300,000. Each share of Preferred Stock was convertible into one share of
Common Stock. The Preferred Stock bore a cumulative 10% dividend, payable
quarterly. During fiscal year 1996, the Company paid $146,250 of dividends on
the preferred stock. In June 1996 all of the shares of Preferred Stock were
converted
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into Common Stock.
In June 1996, the Company completed a public offering for 1,500,000 shares
of its common stock of which 1,000,000 shares were issued by the Company and
500,000 shares were offered by selling shareholders upon conversion of 500,000
shares of the Company's convertible preferred stock (see above), at a purchase
price of $5.50 per share. Gross proceeds payable to the Company from the
offering was approximately $5,500,000 and net proceeds to the Company was
approximately $4,481,350. The Company received no proceeds from the shares sold
by selling shareholders. In association with the Company's public offering, the
Company granted to the underwriter an option to purchase an aggregate of 225,000
shares of the Company's common stock at the price of $5.50 per share to cover
over-allotments. In July, 1996, the underwriter exercised its option. Gross
proceeds payable to the Company from the issuance was approximately $1,237,500
and net proceeds to the Company was approximately $1,021,791.
The Company has neither paid nor declared any cash dividends on its shares
of Common Stock. The Board of Directors of the Company does not presently
anticipate that cash dividends will be paid on its shares of Common Stock in the
foreseeable future. In addition, the Company's agreement with its bank prohibits
the payment of cash dividends. The Company anticipates that any funds derived
from operations in the foreseeable future will be required to be devoted to the
development of the Company's business and investing and financing requirements.
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Item 6. Selected Financial Data
The following selected consolidated financial information is derived from,
and should be read in connection with management's discussion and analysis of
financial condition and results of operations, and the consolidated financial
statements of the Company contained elsewhere herein.
<TABLE>
<CAPTION>
====================================================================================================================================
Years Ended June 30,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings Statement
Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Sales $176,281 $108,140 $ 88,311 $ 65,104 $ 52,109
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before
Extraordinary
loss on
extinguishment
of debt 4,208 2,417 121 1,409 912
- ------------------------------------------------------------------------------------------------------------------------------------
Net Earnings 4,208 1,406 121 1,409 912
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings Per
Share before
Extraordinary
loss on
extinguishment
of debt
(Basic) .93 .53 .03 .46 .32
Earnings Per
Share before
Extraordinary
loss on
extinguishment
of debt
(Diluted) .86 .51 .02 .40 .32
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings per
Share (Basic) .93 .31 .03 .46 .32
Net earnings per
Share (Diluted) .86 .30 .02 .40 .32
- ------------------------------------------------------------------------------------------------------------------------------------
Weighed Average
Common Shares
Outstanding
(Basic)(1) 4,537 4,563 4,552 2,768 2,352
Weighed Average
Common Shares
Outstanding
(Diluted)(2) 4,884 4,745 5,040 3,195 2,369
====================================================================================================================================
</TABLE>
- ----------
(1) See Footnote 11 to Notes to Consolidated Financial Statements.
(2) See Footnote 11 to Notes to Consolidated Financial Statements.
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<TABLE>
<CAPTION>
====================================================================================================================================
June 30,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet
Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $81,999 $62,081 $47,043 $41,663 $27,212
- ------------------------------------------------------------------------------------------------------------------------------------
Working Capital 56,265 43,873 32,546 19,374 11,209
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term
Obligations
(including
capital lease
obligations
and current
portion) 44,125 35,493 23,772 18,482 13,310
- ------------------------------------------------------------------------------------------------------------------------------------
Total
Liabilities 61,488 45,386 31,754 27,577 19,811
- ------------------------------------------------------------------------------------------------------------------------------------
Warrants subject
to mandatory
redemption -- -- 1,171 1,171 --
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders'
Equity 20,511 16,695 15,289 14,086 7,401
====================================================================================================================================
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table sets forth, for the periods indicated, the percentage
of revenues represented by certain items reflected in the Company's Statements
of Earnings.
<TABLE>
<CAPTION>
==================================================================================================================
Percentage of Revenues
- ------------------------------------------------------------------------------------------------------------------
Year Year Year
Ended Ended Ended
June 30, June 30, June 30
1999 1998 1997
------- ------- -------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales .................................................. 100.0% 100.0% 100.0%
Cost of sales .............................................. 83.0 82.7 83.0
----- ----- ------
- ------------------------------------------------------------------------------------------------------------------
Gross margin ............................................... 17.0 17.3 17.0
- ------------------------------------------------------------------------------------------------------------------
Selling and shipping
Expenses ................................................... 8.0 7.4 10.4
- ------------------------------------------------------------------------------------------------------------------
General and administrative expenses 2.5 3.4 2.5
- ------------------------------------------------------------------------------------------------------------------
Interest expense, net ...................................... 2.5 2.7 2.5
- ------------------------------------------------------------------------------------------------------------------
Other Expense .............................................. -- -- 1.4
----- ----- ------
- ------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and extraordinary item ........ 4.0 3.8 .2
Income taxes ............................................... 1.6 1.6 .1
----- ----- ------
Earnings before extraordinary item ......................... 2.4 2.2 .1
Extraordinary loss on extinguishment of debt ............... -- (.9) --
- -----------------------------------------------------------------------------------------------------------------
Net Earnings ............................................... 2.4 1.3 .1
===== ===== ======
==================================================================================================================
</TABLE>
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<PAGE>
Year Ended June 30, 1999 Compared to Year Ended June 30, 1998.
Revenues for the fiscal year ended June 30, 1999 were approximately
$176,281,000, as compared to approximately $108,140,000 for the fiscal year
ended June 30, 1998, an increase of approximately $68,141,000, or 63.0%. This
increase reflects higher sales volume for food service products manufactured by
the Company.
The Company's gross margin increased by approximately $11,184,000, from
approximately $18,745,000 for the year ended June 30, 1998 to approximately
$29,929,000 for the year ended June 30, 1999, primarily as a result of the
increased sales volume. The Company's gross margin as a percentage of sales
decreased slightly from 17.3% in the year ended June 30, 1998 to 17.0% in the
year ended June 30, 1999. The decrease in gross margin as a percentage of net
sales was due primarily to the higher costs of raw materials during fiscal year
ended June 30, 1999, as well as the shift toward lower margin sales associated
with the food service and food ingredient markets, partially offset by the
increase in sales volumes.
Selling and shipping expenses increased by approximately $6,020,000 from
approximately $8,025,000 during the fiscal year ended June 30, 1998 to
approximately $14,045,000 during the fiscal year ended June 30, 1999. As a
percentage of sales, selling and shipping expenses increased from 7.4% for the
fiscal year ended June 30, 1998 to 8.0% for the fiscal year ended June 30, 1999.
The increase in selling and shipping expenses and the increase of such expenses
as a percentage of net sales is primarily due to increases in advertising and
promotional allowances of $2,996,000, commission expense and shipping expenses
in support of the Company's revenue growth.
General and administrative ("G&A") expenses increased from approximately
$3,636,000 in fiscal 1998 to approximately $4,421,000 in fiscal 1999. The
increase in general and administrative expenses is primarily due to an increase
in personnel and other administrative expenses associated with the Company's
revenue growth. As a percentage of sales, G&A expenses decreased from 3.4% in
fiscal 1998 to 2.5% in fiscal 1999. The decrease in general and administrative
expenses incurred as a percentage of sales is primarily due to the increase in
the Company's revenue growth, partially offset by an increase in personnel and
other administrative expenses in association with the Company's sales growth.
Net interest expense increased to approximately $4,329,000 for the year
ended June 30, 1999 from approximately $2,917,000 for the year ended June 30,
1998. The increase in interest expense was primarily the result of the Company's
expanded borrowing necessary to finance working capital needs.
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<PAGE>
The provision for income taxes for the year ended June 30, 1999 increased
by approximately $1,176,000 compared to fiscal year 1998 primarily as a result
of increased taxable income.
The Company took an extraordinary charge on the extinguishment of the
subordinated debt notes net of tax of approximately $1,011,000 during the
quarter ended December 31, 1997 (See Note 7 to the consolidated financial
statements). The charge was the result of prepayment penalties related to the
early extinguishment of the subordinated debt and associated fees.
Net earnings before the extraordinary charge on the extinguishment of the
subordinated debt increased by approximately $1,791,000 to approximately
$4,208,000 in fiscal year 1999 from approximately $2,417,000 in fiscal year 1998
due to the reasons discussed above.
Net earnings increased by approximately $2,802,000 to approximately
$4,208,000 in fiscal year 1999 from approximately $1,406,000 in fiscal year 1998
due to the reasons discussed above.
Year Ended June 30, 1998 Compared to Year Ended June 30, 1997.
Revenues for the fiscal year ended June 30, 1998 were approximately
$108,140,000, as compared to approximately $88,311,000 for the fiscal year ended
June 30, 1997, an increase of approximately $19,829,000, or 22.5%. This increase
reflects higher sales volume for food service products manufactured by the
Company.
The Company's gross margin increased by approximately $3,697,000, from
approximately $15,048,000 for the year ended June 30, 1997 to approximately
$18,745,000 for the year ended June 30, 1998, primarily as a result of the
increased sales volume. The Company's gross margin as a percentage of sales
increased from 17.0% in the year ended June 30, 1997 to 17.3% in the year ended
June 30, 1998. The increase in gross margin as a percentage of net sales was due
primarily to lower costs of raw materials during the fiscal year ended June 30,
1998, partially offset by higher costs associated with the Ogdensburg New York
manufacturing facility and the shift toward lower margin sales associated with
the food service and food ingredient markets.
Selling and shipping expenses decreased by approximately $1,151,000 from
approximately $9,176,000 during the fiscal year ended June 30, 1997 to
approximately $8,025,000 during the fiscal year ended June 30, 1998. As a
percentage of sales, selling and shipping expenses decreased from 10.4% for the
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fiscal year ended June 30, 1997 to 7.4% for the fiscal year ended June 30, 1998.
The decrease in selling and shipping expenses was primarily due to the unusual
charge associated with the write-off of the marketing service agreements in
fiscal 1997, (see note 5 to the consolidated financial statements) of
approximately $944,000 as such amounts no longer had continuing value as a
result of declining relevance of these product lines, as well as a decrease in
freight expenses due to the Ogdensburg facility coming on line.
General and administrative ("G&A") expenses increased from approximately
$2,181,000 in fiscal 1997 to approximately $3,636,000 in fiscal 1998. As a
percentage of sales, G&A expenses increased from 2.5% in fiscal 1997 to 3.4% in
fiscal 1998. The increase in general and administrative expenses is primarily
due to an increase in personnel and other administrative expenses in association
with the Company's sales growth.
Net interest expense increased to approximately $2,917,000 for the year
ended June 30, 1998 from approximately $2,231,000 for the year ended June 30,
1997. The increase was primarily the result of the Company's expanded borrowing
requirements necessary to finance working capital needs partially offset by a
decrease in capital lease interest expense due to the sale leaseback transaction
completed during the fourth quarter of fiscal 1997.
Other income changed from a loss of approximately $1,259,000 in fiscal year
1997 to $0 in fiscal year 1998. The loss in fiscal year 1997 was attributable to
the sale of the Company's assets in association with the sale leaseback
transaction the Company completed during the fourth quarter of fiscal 1997 (see
note 4 to the consolidated financial statements).
The provision for income taxes for the year ended June 30, 1998 increased
by approximately $1,670,000 compared to fiscal year 1997 primarily as a result
of increased taxable income and an increase in the effective tax rate from 40
percent to 42 percent.
The Company took an extraordinary charge on the extinguishment of the
Subordinated Debt Notes net of tax of approximately $1,011,000 during the
quarter ended December 31, 1997 (See Note 7 to the consolidated financial
statements). The charge was the result of prepayment penalties related to the
early extinguishment of the subordinated debt and associated fees.
Net earnings applicable to common stock before the extraordinary charge on
the extinguishment of the subordinated debt increased by approximately
$2,296,000 to approximately
-16-
<PAGE>
$2,417,000 in fiscal year 1998 from approximately $121,000 in fiscal year 1997
due to the reasons discussed above.
Net earnings applicable to common stock increased by approximately
$1,285,000 to approximately $1,406,000 in fiscal year 1998 from approximately
$121,000 in fiscal year 1997 due to the reasons discussed above.
Liquidity and Capital Resources
At June 30, 1999, the Company had working capital of approximately
$56,265,000 as compared to approximately $43,873,000 in June 1998, an increase
of approximately $12,392,000. The increase in working capital is the result of
the Company's improved operating results as well as proceeds from long term
borrowings of $8,636,000. The cash was used to support the increased accounts
receivable and inventory levels in support of the Company's increased sales
volume.
The Company has a bank revolving credit facility that in December 1998 was
amended to increase the line to $35,000,000 through November 2000. In May 1999,
the loan agreement was further amended to permit the Company to increase the
amount of its stock repurchases from $1,600,000 to $3,200,000. In July 1999, the
agreement was further amended to increase the line to $40,000,000. The rate of
interest on amounts borrowed under the facility is the adjusted LIBOR rate, as
defined, plus 2%. The interest rate at June 30, 1999 was 7.75% 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 and Suprema Specialties
Northeast, Inc. have agreed to pay a commitment fee on the average daily unused
portion of the facility, equal to 1/4 of 1% per annum. Advances under this
facility are limited to 80% of eligible accounts receivable and 40% of all
inventory except packaging material, as defined in the facility agreement. The
facility agreement contains three restrictive financial covenants governing the
facility, including the maintenance of specified total debt to net worth ratios,
minimum levels of tangible net worth, and debt service coverage ratios, as
defined, and a restriction on dividends to common shareholders. The Facility
agreement expires November 2, 2000. As of June 30, 1999, the Company was in
compliance with these covenants. At June 30, 1999, the Company had $30,441,599
outstanding under the long-term revolving credit facility with approximately
$4,501,000 available to borrow under the facility.
In October 1997, the Company entered into an agreement with Fleet Bank,
N.A. pursuant to which the bank provided bridge
-17-
<PAGE>
financing of $10 million to the Company. Approximately $6.7 million of the
proceeds from the loan was used to retire $5.0 million of subordinated debt with
CoreStates Enterprise Fund and repurchase from CoreStates warrants to purchase
354,990 shares of Suprema's common stock. The balance of the proceeds was used
for general working capital purposes. As a result of prepayment penalties
related to the early extinguishment of the CoreStates debt and associated fees,
Suprema took an extraordinary charge of $1.7 million (approximately $1.0 million
net of tax) during the quarter ended December 31, 1997. In March 1998, the
Company entered into a Loan and Security Agreement with Albion Alliance
Mezzanine Fund, L.P. and an affiliate (the "Fund") (see note 7 to the
consolidated financial statements) pursuant to which the Fund loaned $10.5
million to the Company. Proceeds of the loan were used to retire the bridge
financing agreement with Fleet Bank, N.A. entered into in October 1997.
Prior to May 1997, the Company typically financed equipment purchases
through capital lease financing transactions. At June 30, 1999, the Company had
obligations of approximately $2,266,088 under capital leases.
Management believes that the Company has adequate working capital to meet
its reasonably foreseeable cash requirements.
Net cash used by operating activities for the year ended June 30, 1999 was
approximately $7,704,000, as compared with approximately $7,056,000 in the prior
year. The use of cash in operations was primarily the result of increases in
inventory and accounts receivable in support of the Company's increased sales
volume, partially offset by net earnings, and increases in accounts payable,
income taxes payable, other accrued expenses and other current liabilities. Net
cash used in investing activities for the year ended June 30, 1999 was
approximately $667,000 as compared with $1,039,000 in the prior year. The
investing activities relate to continued expenditures for fixed assets
(including capital equipment utilized in the Company's California and New York
manufacturing facilities). As a result, at June 30, 1999, the Company had cash
of $358,214, as compared to $489,890 for the prior year.
As of September 2, 1999, the Company has made no additional commitments for
capital expenditures.
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 June 30, 1999, the
Company has repurchased 78,370 shares of its common stock for a cost of
approximately $396,370.
-18-
<PAGE>
Foreign Currency
The Company is subject to various risks inherent in dependence on foreign
sources of supply, including economic or political instability, shipping delays,
fluctuations in foreign currency exchange rates, custom duties and import quotas
and other trade restrictions, all of which could have a significant impact on
the Company's ability to obtain supplies and deliver finished products on a
timely and competitive basis. The Company has no hedged monetary assets,
liabilities or commitments denominated in currencies other than the United
States dollar.
Effect of New Accounting Pronouncements
In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133, as amended by SFAS 137, standardizes
accounting and reporting for derivative instruments and for hedging activities.
This statement is effective for the Company's 2001 fiscal year. Based on an
assessment of current operations, the Company does not expect SFAS 133 to be
applicable to the Company.
Year 2000 Issue
Definition: "Year 2000" issues refer to possible events resulting directly or
indirectly from the inability of digital computer equipment or software to
accurately and without interruption handle dates both before and after January
1, 2000 and to process the year 2000 as a leap year.
Assessment: 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. In its investigations thus far, the Company has identified no
significant manufacturing processes that will be disrupted by the Year 2000
issues. The Company believes 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
uncertainity reasonably likely to have a material adverse effect on the Company.
Manufacturing Infrastructure: The Company's basic operations involve cheese and
whey processing equipment. In its investigations thus far, the Company has
identified no significant manufacturing processes that will be disrupted by the
Year 2000 issues.
Support systems: The Company believes that it has identified most of the major
computers, software applications and other equipment utilized by such support
systems. The Company's assessment thus far indicates no significant support
system that will be materially affected
-19-
<PAGE>
by the Year 2000 issue. In addition, the Company does routine data backup of
critical systems during the normal course of business. This backup provides the
ability to recover data in the event of a catastrophic computer failure.
Suppliers: The Company has contacted its suppliers to identify any potential
disruption in the supply of raw materials. To date, it has not been determined
whether its principal suppliers are Year 2000 compliant. In the event any of the
Company's principal suppliers are not year 2000 compliant, it may have a
material adverse affect on the Company.
Customers: The Company is committed to providing uninterrupted service to its
customers. The Company expects to resolve any significant Year 2000 issues with
such customers before the occurrence of any business disruptions, although the
Company has limited or no control over the actions of these customers. In the
event any of the Company's principal customers are not year 2000 compliant, it
may have a material adverse affect on the Company.
Conclusion: The Company believes that it is taking adequate steps to address all
significant internal Year 2000 issues that could adversely affect its business
operations. Of course, it is not possible to identify, with complete certainty,
all potential Year 2000 issues that may in some way affect the Company, its
suppliers, or its customers. The Company expects that any disputes arising as
the result of such unidentified Year 2000 issues will be resolved in the normal
course of business.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The carrying amounts of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities,
approximate fair value because of the current nature of these instruments. The
carrying amounts reported for revolving credit and long-term debt approximate
fair value because the interest rates on these instruments are subject to
changes with market interest rates.
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Supplementary Data of the Company are included
following Part IV of this report.
Item 9. Changes in and Disclosure with Accountants on Accounting and Financial
Disclosure
None.
-20-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company
The information called for by this Item will be reported in the Company's
definitive Proxy Statement for the annual meeting of shareholders on or before
October 28, 1999 and is incorporated herein by reference.
Item 11. Executive Compensation
The information called for by this Item will be reported in the Company's
definitive Proxy Statement for the annual meeting of shareholders which will be
filed on or before October 28, 1999 and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by this Item will be reported in the Company's
definitive Proxy Statement for the annual meeting of shareholders which will be
filed on or before October 28, 1999 and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information called for by this Item will be reported in the Company's
definitive Proxy Statement for the annual meeting of shareholders which will be
filed on or before October 28, 1999 and is incorporated herein by reference.
-21-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
See Index to Financial Statements on F-1
(a) 2. Financial Statement Schedules
See Index to Financial Statements on F-1
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during its fiscal quarter
ended June 30, 1999.
-22
<PAGE>
(c) Exhibits
3.1 Certificate of Incorporation, as amended*
3.2 By-laws of the Registrant*
3.3 Amendment to Certificate of Incorporation**
4.1 Rights Agreement, dated as of March 6, 1996, between the Company
and Continental Stock Transfer & Trust Company***
10.1 Stock Option Plan*
10.2 Lease, Option and Assignment to Purchase the Company's Paterson,
New Jersey facility and amendment thereto.*
10.3 Employment Agreement by and between the Company and Mark
Cocchiola.*
10.4 Employment Agreement by and between the Company and Paul
Lauriero.*
10.11 Revolving Loan, Guaranty and Security Agreement by and among the
Company, Suprema Specialties West, Inc. and National Westminister
Bank NJ dated as of February 15, 1994, as amended****
10.14 Form of Equipment Lease between the Company and BLT Leasing Corp.
dated December 28, 1992.*****
10.16 Amendment to Lease and Purchase Agreement, dated October 4, 1994
between East 35th Street Associates and the Company.******
10.17 Loan and Security Agreement among CoreStates, Enterprise and the
Company and Suprema Specialties West, Inc. dated October 25,
1995.*****
10.18 Lease between Cape Vincent Milk Producers Cooperative, Inc.,
Marble City Bulk Milk Producers Cooperative, Inc., Northern New
York Bulk Milk Producers Cooperative, Inc., Seaway Bulk Milk
Producers Cooperative Inc., and the Company, dated May 21,
1996.**
10.19 Master Equipment Lease Agreement No. 32399 between Fleet Capital
Corporation and Suprema Specialties, Inc. dated May 29,1997.**
10.20 Securities Purchase Agreement, dated as of March 9,1998 between
the company and Alliance Capital Management, L.P.(without
exhibits).**
10.21 Note Agreement, dated as of March 9, 1998, between the company
and each of Albion Alliance Mezzanine Fund, L.P. and The
Equitable Life Assurance Society of the United States.**
10.22 Warrant Agreement, dated as of March 9, 1998, between the Company
and Albion Alliance Mezzanine Fund, L.P. and The Equitable Life
Assurance Society of the United States.**
-23-
<PAGE>
10.23 Mortgage by the Company to Natwest Bank N.A. dated March 29,
1996.
10.24 Second Amended and Restated Revolving Loan, Guaranty and Security
Agreement amoung the Company, Fleet Bank, N.A. (as successor to
Natwest Bank N.A. and National Westminster Bank, NJ), Sovereign
Bank, Suprema Specialties West, Inc. and Suprema Northeast, Inc.,
dated as of December 16, 1998.
10.25 Mortgage and Security Agreement by the Company to Fleet Bank,
N.A., dated December 16, 1998.
10.26 Third Modification Agreement between the Company and Fleet Bank,
N.A. (formerly known as Natwest Bank N.A.), dated December 16,
1998.
10.27 First Amendment to the Second Amended and Restated Revolving
Loan, Guaranty and Security Agreement between the Company, Fleet
Bank, N.A., Sovereign Bank, Suprema Specialties West, Inc. and
Suprema Specialties Northeast, Inc., dated May 28, 1999.
10.28 Second Amendment to the Second Amended and Restated Revolving
Loan, Guaranty and Security Agreement between the Company, Fleet
Bank, N.A., Sovereign Bank, Suprema Specialties West, Inc. and
Suprema Specialties Northeast, Inc., dated June 30, 1999.
10.29 Third Amendment to the Second Amended and Restated Revolving
Loan, Guaranty and Security Agreement between the Company, Fleet
Bank, N.A., Sovereign Bank, Suprema Specialties West, Inc. and
Suprema Specialties Northeast, Inc., dated July 22, 1999.
21 Subsidiaries of the Registrant
23.1 Consent of Independent Certified Public Accountants
27 Financial data Schedule.
- ----------
* Incorporated by reference to the registrant's registration statement
on Form S-18, SEC File No. 33-39076-NY
** Incorporated by reference to the registrant's Annual Report on Form
10-K, as amended, for the year ended June 30, 1998.
*** Incorporated by reference to the registrant's registration Report on
Form 8-K dated March 18, 1996.
**** Incorporated by reference to the registrant's Report on Form 10-Q for
the quarter ended December 31, 1995.
-24-
<PAGE>
***** Incorporated by reference to the registrant's Annual Report on Form
10-K for the year ended June 30, 1994.
****** Incorporated by reference to the registrant's Annual Report on Form
10-K for the year ended June 30, 1993.
-25-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Mark Cocchiola
-------------------------
Mark Cocchiola, President
Dated: September 2, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
/s/ Mark Cocchiola Chairman of the Board, Sept. 2, 1999
- --------------------- President, Chief
Mark Cocchiola Executive Officer and
Director (Principal
Executive Officer)
/s/ Paul Lauriero Executive Vice Sept. 2, 1999
- --------------------- President and Director
Paul Lauriero
/s/ Steven Venechanos Chief Financial Sept. 2, 1999
- --------------------- Officer and
Steven Venechanos Secretary
/s/ Marco Cocchiola Director Sept. 2, 1999
- -------------------
Marco Cocchiola
/s/ Rudolph Acosta Director Sept. 2, 1999
- -------------------
Rudolph Acosta
/s/ Paul DeSocio Director Sept. 2, 1999
- -------------------
Paul DeSocio
/s/ William Gascoigne Director Sept. 2, 1999
- -------------------
William Gascoigne
-26-
<PAGE>
SUPREMA SPECIALTIES, INC.
Index to Financial Statements Page
----------------------------- ----
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets - June 30, 1999 and 1998 F-3
Consolidated Statements of Earnings -
For the Years Ended June 30, 1999, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Equity -
For the Years Ended June 30, 1999, 1998 and 1997 F-5
Consolidated Statements of Cash Flows -
For the Years Ended June 30, 1999, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7 - F-17
Report of Independent Certified Public Accountants on
Supplemental Schedule F-18
Schedule II - Valuation and Qualifying Accounts and
Reserves - For the Years Ended June 30, 1999,
1998 and 1997 F-19
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
================================================================================
Board of Directors and Shareholders
Suprema Specialties, Inc.
Paterson, New Jersey
We have audited the accompanying consolidated balance sheets of Suprema
Specialties, Inc. and Subsidiaries, as of June 30, 1999 and 1998, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended June 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Suprema Specialties,
Inc. and Subsidiaries as of June 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1999 in conformity with generally accepted accounting principles.
BDO Seidman, LLP
Woodbridge, New Jersey
August 9, 1999
F-2
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
June 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current:
Cash $ 358,214 $ 489,890
Accounts receivable, net of allowances of
$570,290 and $470,290 at June 30, 1999
and 1998, respectively 36,007,542 23,239,810
Inventories 35,918,720 28,511,930
Prepaid expenses and other current assets 596,023 688,117
Income taxes receivable -- 235,348
Deferred income taxes 228,000 188,000
------------ ------------
TOTAL CURRENT ASSETS 73,108,499 53,353,095
PROPERTY, PLANT AND EQUIPMENT, net 7,085,948 6,999,695
OTHER ASSETS 1,804,528 1,728,616
------------ ------------
$ 81,998,975 $ 62,081,406
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 12,123,099 $ 7,469,422
Current portion of capital leases 550,761 500,964
Mortgage payable - current 49,220 43,457
Income taxes payable 1,710,000 --
Accrued expenses and other
current liabilities 2,409,839 1,467,034
------------ ------------
TOTAL CURRENT LIABILITIES 16,842,919 9,480,877
DEFERRED INCOME TAXES 1,120,000 956,186
REVOLVING CREDIT LOAN 30,441,599 21,262,000
SUBORDINATED DEBT 10,500,000 10,500,000
LONG-TERM CAPITAL LEASES 1,715,327 2,266,090
MORTGAGE PAYABLE 868,468 921,413
------------ ------------
61,488,313 45,386,566
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000
shares authorized, 4,598,897 and 4,562,800
issued, respectively 45,988 45,628
Additional paid-in capital 11,247,154 11,243,347
Retained earnings 9,613,890 5,405,865
Treasury stock at cost, 78,370 shares
at June 30, 1999 (396,370) --
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 20,510,662 16,694,840
------------ ------------
$ 81,998,975 $ 62,081,406
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
================================================================================
<TABLE>
<CAPTION>
Years ended June 30,
-----------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ 176,281,035 $ 108,140,007 $ 88,311,454
Cost of sales 146,351,545 89,395,062 73,263,129
------------- ------------- -------------
Gross margin 29,929,490 18,744,945 15,048,325
------------- ------------- -------------
Operating expenses:
Selling and shipping expenses 14,045,503 8,024,823 9,175,567
General and administrative
expenses 4,421,124 3,636,090 2,180,576
------------- ------------- -------------
18,466,627 11,660,913 11,356,143
------------- ------------- -------------
Income from operations 11,462,863 7,084,032 3,692,182
Interest expense (4,328,838) (2,916,992) (2,231,820)
Other -- -- (1,259,081)
------------- ------------- -------------
(4,328,838) (2,916,992) (3,490,901)
------------- ------------- -------------
Earnings before income taxes and
extraordinary item 7,134,025 4,167,040 201,281
Income taxes 2,926,000 1,750,157 80,500
------------- ------------- -------------
Earnings before extraordinary item 4,208,025 2,416,883 120,781
Extraordinary item - loss on
extinguishment of debt (net
of income tax of $762,000) -- 1,011,001 --
------------- ------------- -------------
Net earnings $ 4,208,025 $ 1,405,882 $ 120,781
============= ============= =============
Basic earnings per share
before extraordinary item $ .93 $ .53 $ .03
============= ============= =============
Basic earnings per share related
to extraordinary item $ -- $ (.22) $ --
============= ============= =============
Basic earnings per share $ .93 $ .31 $ .03
============= ============= =============
Diluted earnings per share
before extraordinary item $ .86 $ .51 $ .02
============= ============= =============
Diluted earnings per share related
to extraordinary item $ -- $ (.21) $ --
============= ============= =============
Diluted earnings per share $ .86 $ .30 $ .02
============= ============= =============
Basic weighted average shares outstanding 4,536,605 4,562,800 4,552,146
============= ============= =============
Diluted weighted average shares
outstanding 4,883,685 4,744,919 5,039,995
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
<CAPTION>
Common stock Additional Treasury stock
---------------------------- paid-in ---------------------------- Retained
Shares Amount capital Shares Amount earnings
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1996 4,300,193 $ 43,002 $ 10,163,537 -- $ -- $ 3,879,202
Net proceeds from
underwriters over
allotment 225,000 2,250 1,021,791 -- -- --
Exercise of stock
options and warrants 37,607 376 58,019 -- -- --
Net earnings -- -- -- -- -- 120,781
------------ ------------ ------------ ------------ ------------ ------------
Balance, June 30, 1997 4,562,800 45,628 11,243,347 -- -- 3,999,983
Net earnings -- -- -- -- -- 1,405,882
------------ ------------ ------------ ------------ ------------ ------------
Balance, June 30, 1998 4,562,800 45,628 11,243,347 -- -- 5,405,865
Exercise of stock
options and warrants 1,667 16 4,151 -- -- --
Exercise of cashless
warrants from
investment broker 34,430 344 (344) -- -- --
Net earnings -- -- -- -- -- 4,208,025
Acquisition of
treasury stock -- -- -- 78,370 (396,370) --
------------ ------------ ------------ ------------ ------------ ------------
Balance, June 30, 1999 4,598,897 $ 45,988 $ 11,247,154 78,370 $ (396,370) $ 9,613,890
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
Years ended June 30,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 4,208,025 $ 1,405,882 $ 120,781
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depreciation 581,017 504,603 990,877
Amortization 295,858 143,343 242,203
Provision for doubtful accounts 100,000 -- --
Loss on sale leaseback transaction -- -- 1,259,085
Write-off of prepaid commissions/licensing fees -- -- 943,863
Deferred income tax provision (recovery) 122,000 403,000 (199,500)
Extraordinary loss on extinguishment of debt -- 1,011,001 --
(Increase) decrease in assets:
Accounts receivable (12,867,732) (8,572,802) (5,861,207)
Inventories (7,406,790) (6,049,509) (5,561,066)
Prepaid expenses and other current assets 92,094 (8,336) 330,945
Prepaid income taxes 235,348 685,895 (717,225)
Other assets (371,770) (49,133) 1,403,907
Increase (decrease) in liabilities:
Accounts payable 4,653,677 2,057,944 (1,092,998)
Income taxes payable 1,710,000 751,062 (244,413)
Accrued expenses and other current
liabilities 944,619 661,280 236,252
------------ ------------ ------------
Net cash used in operating activities (7,703,654) (7,055,770) (8,148,496)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property plant
and equipment (667,270) (1,039,215) (2,852,287)
------------ ------------ ------------
Net cash used in investing activities (667,270) (1,039,215) (2,852,287)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit loan 54,302,599 29,554,981 36,791,000
Repayment of revolving credit loan (45,123,000) (23,882,837) (28,941,144)
Proceeds from subordinated loan -- 10,500,000 --
Proceeds from secondary offering/options -- -- 1,082,436
Deferred financing costs in connection with new
subordinated debt -- (797,584) --
Principal payments of mortgage (47,182) (39,875) (36,588)
Principal payments of capital leases (500,966) (436,422) (6,420,125)
Payments to retire subordinated loan and
repurchase warrants -- (6,793,613) --
Proceeds from sale-leaseback -- -- 9,565,000
Proceeds from exercise of stock options 4,167 -- --
Costs in connection with sale-leaseback -- -- (1,088,436)
Acquisition of treasury stock (396,370) -- --
------------ ------------ ------------
Net cash provided by financing activities 8,239,248 8,104,650 10,952,143
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (131,676) 9,665 (48,640)
CASH, beginning of period 489,890 480,225 528,865
------------ ------------ ------------
CASH, end of period $ 358,214 $ 489,890 $ 480,225
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized of $55,000
in 1998 and $51,996 in 1997) $ 3,774,024 $ 2,669,167 $ 2,403,700
Income taxes 830,000 32,070 1,233,187
Noncash investing and financing transactions:
Purchases of property and equipment through
capital leases -- 330,000 3,653,262
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1 - ORGANIZATION AND BUSINESS DESCRIPTION
Suprema Specialties, Inc., a New York corporation incorporated on August 15,
1983 and its subsidiaries (the "Company") manufacture, process and market a
variety of premium, gourmet natural cheese products.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
The consolidated financial statements include the financial statements of
Suprema Specialties, Inc. and its wholly-owned subsidiaries, Suprema Specialties
West, Inc. and Suprema Specialties Northeast, Inc. All intercompany transactions
and balances have been eliminated in consolidation.
Inventory
Inventories are valued at the lower of cost (determined by the first-in,
first-out method) or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is being provided
by use of the straight-line method over the estimated useful lives of the
related assets. Leasehold improvements are amortized over the shorter of the
term of the lease, including renewal options that are probable of exercise, or
the useful lives of the assets. Equipment under capitalized leases is being
amortized over the useful lives of the assets.
Long-Lived Assets
Long-lived assets, such as property, plant and equipment, are evaluated for
impairment when events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through the estimated undiscounted
future cash flows from the use of these assets. When such impairment exists, the
related assets will be written down to fair value. No impairment losses have
been recorded in each of the three years in the period ended June 30, 1999.
Financing Costs
The Company amortizes the deferred financing costs incurred in connection with
the Company's borrowings over the life of the related indebtedness (3-10 years).
Such costs amounted to $1,677,325 and $1,744,519 at June 30, 1999 and 1998,
respectively.
Product Introduction Costs
The Company incurs certain costs in connection with expanding its market
position in the United States. These costs, referred to in the industry as
"slotting" are deferred and amortized over the stated program period, generally
ranging from one to twelve months.
Revenue Recognition
The Company records revenues when products are shipped. Customers do not have
the right to return products shipped.
F-7
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
Advertising Costs
The Company expenses advertising costs as incurred and cooperative advertising
costs when related revenue is recognized. Advertising costs amounted to
approximately $5,860,000, $2,864,000 and $3,004,000 in 1999, 1998 and 1997,
respectively, and are reflected in selling and shipping expenses in the
accompanying statements of earnings.
Stock-Based Compensation
The Company accounts for its stock option awards to employees under the
intrinsic value based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under the
intrinsic value based method, compensation cost is the excess, if any, of the
quoted market price of the stock at grant date or other measurement date over
the amount an employee must pay to acquire the stock. The Company provides pro
forma disclosures of earnings and earnings per share as if the fair value based
method of accounting had been applied as required by Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation"
(see Note 10).
Income Taxes
Income taxes are recorded in accordance with SFAS No. 109, which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Risks and Uncertainties
In December 1997, the Company formalized a two year collective bargaining
agreement with the employees of Suprema Specialties West, which represent 50% of
the total workforce. The agreement expires on December 1, 1999. The Company
considers its relations with its employees to be good.
Financial Instruments
The carrying amounts of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities,
approximate fair value because of the current nature of these instruments. The
carrying amounts reported for revolving credit and long-term debt approximate
fair value because the interest rates on these instruments are subject to
changes with market interest rates or approximate rates for loans with similar
terms and maturities.
The fair value of the long-term debt and capital leases approximates the
recorded value based on borrowing rates currently available for loans with
similar terms and maturities.
F-8
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
Computation of Earnings Per Share
Basic earnings per share has been computed using the weighted average number of
shares of common stock outstanding. Diluted earnings per share includes the
assumed exercise of stock options using the treasury stock method that could
potentially dilute earnings per share.
Treasury Stock
Treasury stock is recorded at cost. Gains and losses on disposition are recorded
as increases or decreases to additional paid-in capital with losses in excess of
previously recorded gains charged directly to retained earnings.
Effect of New Accounting Pronouncements
In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133, as amended by SFAS 137, is effective for the
Company's 2001 fiscal year. Based on an assessment of current operations,
management does not expect SFAS 133 to be applicable to the Company.
Reclassifications
Certain items have been reclassified in the 1998 and 1997 financial statements
to conform to the current year presentation.
NOTE 3 - INVENTORIES
Inventories consist of the following:
June 30,
---------------------------------
1999 1998
----------- -----------
Raw materials $ 9,110,302 $ 3,640,655
Finished goods 25,848,208 24,046,053
Packaging 960,210 825,222
----------- -----------
$35,918,720 $28,511,930
=========== ===========
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
June 30,
---------------------------------
1999 1998
----------- -----------
Property and plant $ 1,553,859 $ 1,545,900
Equipment 5,715,095 4,937,767
Leasehold improvements 1,173,271 1,182,662
Furniture and fixtures 202,544 183,075
Delivery equipment 48,178 48,178
Construction in progress 462,165 590,259
----------- -----------
9,155,112 8,487,841
Less: Accumulated depreciation and
amortization 2,069,164 1,488,146
----------- -----------
$ 7,085,948 $ 6,999,695
=========== ===========
F-9
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT (continued)
In May 1997, the Company entered into a sale-leaseback transaction whereby fixed
assets with a net book value of $10,824,082 were sold for $9,565,000 and leased
back under operating leases. In connection with this transaction, $4,847,382 of
capital leases were paid in full. A loss of $1,259,081 resulted from this
transaction which is reflected as other expense. The Company incurred costs of
$1,088,436 primarily related to prepayment penalties on the capital leases.
These direct costs have been included in other assets and are being amortized
over eight years, the life of the operating lease.
Included in property, plant and equipment are plant and equipment acquired under
capital leases with an initial cost of $3,419,067 and $3,419,067 and accumulated
amortization of $833,743 and $539,313 as of June 30, 1999 and 1998,
respectively.
NOTE 5 - MARKETING SERVICE AGREEMENTS
Prior to 1994, the Company entered into marketing service agreements with
unaffiliated third parties expiring at various dates through June 1998, pursuant
to which the Company was provided with certain marketing and program support
services, including the payment of advertising promotional expenditures by such
parties in exchange for commissions based on Company sales of specified
products. In addition, two of the agreements provided that after an initial
period (as defined in the agreements) the Company or the providers of the
marketing services have the right to convert some or all of the remaining
estimated commissions to common stock of the Company at the market price at the
time of conversion. For the year ended June 30, 1997, commission expenses
related to the marketing service agreements, was approximately $794,000.
During 1994, 1995 and 1996, portions of these agreements were prepaid, with the
1996 amount being the final settlement of the remaining agreements. These
amounts were being charged to expense over the remaining three years of the
related agreements as the applicable sales revenue was recorded. In the fourth
quarter of 1997, as a result of a review of the Company's retail cheese
business, it was determined the remaining asset amounts, $943,863, no longer had
continuing value. This amount was written off and was included in selling and
shipping expenses.
NOTE 6 - INCOME TAXES
The provision for income taxes consists of the following:
June 30,
------------------------------------------
1999 1998 1997
----------- ----------- -----------
Current:
Federal $ 2,243,000 $ 1,145,000 $ 233,000
State 561,000 202,000 47,000
----------- ----------- -----------
2,804,000 1,347,000 280,000
----------- ----------- -----------
Deferred:
Federal 104,000 343,000 (169,600)
State 18,000 60,000 (29,900)
----------- ----------- -----------
122,000 403,000 (199,500)
----------- ----------- -----------
Provision for income taxes $ 2,926,000 $ 1,750,000 $ 80,500
=========== =========== ===========
F-10
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 6 - INCOME TAXES (continued)
The following reconciles income taxes at the U.S. statutory rate to the
provision for income taxes:
June 30,
------------------------------------
1999 1998 1997
---------- ---------- ----------
Computed tax expense at statutory rates $2,425,600 $1,416,800 $ 68,000
State taxes, net of federal tax benefit 382,100 262,100 10,500
Travel and entertainment expenses not
deductible 34,000 17,000 2,000
Officers life insurance not deductible 5,500 5,400 3,500
Other, net 78,800 48,900 (3,500)
---------- ---------- ----------
$2,926,000 $1,750,200 $ 80,500
========== ========== ==========
Deferred income taxes arise from the difference between book and tax accounting
for depreciation, the allowance for doubtful accounts, financing fees and
product introduction costs.
The net deferred tax liabilities are comprised of the following components as of
June 30, 1999 and 1998:
June 30,
--------------------------------
1999 1998
----------- -----------
Depreciation $ 389,000 $ 279,419
Product introduction costs 6,648 44,913
Deferred sale leaseback costs 326,531 390,427
Financing fees 397,821 241,427
----------- -----------
1,120,000 956,186
Accounts receivable reserve (228,000) (188,000)
----------- -----------
$ 892,000 $ 768,186
=========== ===========
NOTE 7 - LONG-TERM DEBT
Revolving Credit Loan
In December 1998, the long-term revolving credit facility (the "Facility")
between the Company and a bank was amended to increase the line to $35,000,000
through November 2000. The rate of interest on amounts borrowed under the
Facility is the adjusted LIBOR rate, as defined, plus 2% (7.75% as of June 30,
1999). 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. In connection
with obtaining the Facility, the Company and Suprema Specialties Northeast, Inc.
has agreed to pay a commitment fee on the average daily unused portion of the
Facility, equal to 1/4 of 1% per annum. Advances under this Facility are limited
to 80% of eligible accounts receivable and 40% of all inventory (except
packaging material), as defined in the Facility agreement. The Facility
agreement contains three restrictive financial covenants, including the
maintenance of specified total debt to net worth ratios, minimum levels of
tangible net worth, and debt service coverage ratios, as defined, and a
restriction on dividends to common shareholders. As of June 30, 1999, the
Company was in compliance with these covenants.
At June 30, 1999, the Company had approximately $4,501,000 available for
borrowing under the Facility. Borrowings are required to be repaid in November
2000.
F-11
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
In July 1999, the agreement was amended to increase the line to $40,000,000.
Subordinated Debt Facility
In October 1995, the Company entered into a Loan and Security 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. The loan was
secured by a subordinated security interest in substantially all of the assets
of the Company and was subordinated to the loan of the Company's senior lender.
The loan bore interest at 11 3/4% per annum. In connection with the execution
and delivery of the Loan Agreement, the Company delivered a Warrant to the Fund
exercisable for nominal additional consideration for 354,990 shares of the
Company's Common Stock. After October 1, 2000, or upon the occurrence of certain
other events, 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 another bank
pursuant to which the bank provided bridge financing of $10 million to the
Company. Approximately $6.7 million of the proceeds was used to retire the $5.0
million subordinated debt and the repurchase of warrants attached to the
subordinated debt. The balance of the proceeds was used for general working
capital purposes. These transactions resulted in an extraordinary loss of
approximately $1,011,000, net of tax. The extraordinary loss was comprised of
(i) 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 with
Albion Alliance Mezzanine Fund, L.P. and The Equitable Life Assurance Society of
the United States (collectively, the "Funds") pursuant to which the Funds 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 1/2% per
annum. Interest is payable monthly at the rate of 12% with 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
Loan Agreement, the Company delivered to the Funds, a Warrant to purchase
105,000 shares of the Company's common stock exercisable at $4.125 (the market
price at the date of the agreement). The values ascribed to such warrants and
the related amortization expense are not material. The warrant is exercisable
through March 1, 2006.
Mortgage Payable
On March 29, 1996, the Company purchased its Paterson 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 bore interest at 8.51% per annum. On March 29,
1999, the Company refinanced the mortgage 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.
F-12
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 7 - LONG-TERM DEBT (continued)
Mortgage Payable (cont)
Principal payments on long-term debt over the next five years and thereafter are
as follows:
2000 $ 49,220
2001 30,495,167
2002 57,928
2003 62,643
2004 3,567,743
Thereafter 7,626,586
-----------
$41,859,287
===========
NOTE 8 - CAPITAL LEASES
There are various equipment and furniture and fixtures financed under capital
leases. These leases have interest rates ranging from 6.7% to 11.5%. At June 30,
1999, the Company's future minimum lease payments under capital leases are as
follows:
2000 $ 804,333
2001 800,333
2002 642,431
2003 590,629
2004 87,661
----------
Total minimum lease payments 2,925,387
Less: amount representing interest 659,299
----------
Present value of minimum lease payments 2,266,088
Less: current portion 550,761
----------
Long-term portion of capital leases $1,715,327
==========
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Lease
The Company rents warehouse space and certain equipment under lease arrangements
classified as operating leases. The lease for the production facilities in
Manteca, CA, which was renewed in December 1994, expires 10 years from the date
of completion of construction of each segment of the facility with two five year
renewal options. The Company also leases its Ogdensburg, NY, facility. The lease
is for 5 years with three 5 year renewals at the Company's option. Rent expense
was approximately $2,971,000, $2,400,000 and $922,000 for the years ended June
30, 1999, 1998 and 1997, respectively. Future minimum rental payments under
non-cancelable operating leases are approximately $3,110,000 for each year
through 2004 and $4,093,000 thereafter.
Contingencies
The Company is a party to legal proceedings arising in the normal conduct of
business. Management believes that the final outcome of these proceedings will
not have a material adverse effect on the Company's financial position.
F-13
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 10 - STOCKHOLDERS' EQUITY
In June 1996, the Company completed a public offering for 1,500,000 shares of
its $.01 par value common stock of which 1,000,000 shares were issued by the
Company and 500,000 shares were offered by selling shareholders upon conversion
of 500,000 shares of the Company's convertible preferred stock at a purchase
price of $5.50 per share. Gross proceeds from the offering were approximately
$4,481,350. The Company received no proceeds from the shares issued during the
offering from those shares offered by the selling shareholders.
In 1997, an additional 225,000 shares of Common Stock were sold pursuant to the
exercise of the underwriters' over-allotment option which generated net proceeds
of approximately $1,024,000.
Stock Option Plan
On February 11, 1991, the Company adopted the 1991 Stock Option Plan. In
December 1998, the Company adopted the 1998 Stock Option Plan (collectively, the
"Plans"). Under the Plans, officers, directors and key employees of the Company
are eligible to receive up to 900,000 and 500,000 incentive and/or non-qualified
stock options, respectively. The Plans, which expire in February 2001 and
November 2008, respectively, are administered by the board of directors. The
selection of participants, allotment of shares, determination of price and other
conditions of the grant of options are determined by the board of directors at
its sole discretion in order to attract and retain persons instrumental to the
success of the Company. Incentive stock options granted under the Plans vest
evenly over the first three years and are exercisable for a period of up to ten
years from the date of grant at an exercise price which is not less than the
fair market value of the common stock on the date of grant, except that the term
of an incentive stock option granted under the Plan to a shareholder owning more
than 10% of the outstanding common stock may not exceed five years and its
exercise price may not be less than 110% of the fair market value of the common
stock on the date of the grant.
Stock option transactions under the Plan are summarized as follows:
<TABLE>
<CAPTION>
Weighted Weighted
1991 Average 1998 Average
Plan Exercise Plan Exercise
Shares Price Shares Price
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at June 30, 1996 346,000 $ 3.66 -- --
Granted 176,000 $ 3.84 -- --
Exercised (13,500) $ 3.08 -- --
-------- -------- -------- --------
Outstanding at June 30, 1997 508,500 $ 3.73 -- --
Granted 243,000 $ 3.25 -- --
Exercised -- -- -- --
-------- -------- -------- --------
Outstanding at June 30, 1998 751,500 $ 3.58 -- --
Granted 134,250 $ 3.17 143,000 $ 4.63
Exercised (1,667) $ 2.50 -- --
-------- -------- -------- --------
Outstanding at June 30, 1999 884,083 $ 3.52 143,000 $ 4.63
======== ======== ======== ========
Options exercisable at June 30, 1999 529,362 $ 3.65 -- --
======== ======== ======== ========
Weighted - average fair value of
options granted during fiscal 1997 176,000 $ 2.21 -- --
======== ======== ======== ========
Weighted - average fair value of
options granted during fiscal 1998 243,000 $ 1.22 -- --
======== ======== ======== ========
Weighted - average fair value of
options granted during fiscal 1999 134,250 $ 1.79 143,000 $ 2.66
======== ======== ======== ========
</TABLE>
F-14
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 10 - STOCKHOLDERS' EQUITY (continued)
Stock Option Plan (cont)
The following table summarizes information about stock options outstanding at
June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------- -----------------------------------
Weighted-
Average Weighted- Weighted-
Range of Number of Remaining Average Average
Exercise Options Contractual Exercise Number Exercise
Prices ($) Outstanding Life (Years) Price ($) Exercisable price ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1991 Plan
2.50 to 4.00 764,083 7.40 $3.34 412,692 $3.37
4.00 to 5.63 120,000 6.40 4.65 116,670 $4.63
- -------------------------------------------------------------------------------------------------------------------------------
2.50 to 5.63 884,083 7.25 $3.52 529,362 $3.65
===============================================================================================================================
1998 Plan
4.63 143,000 9.75 $4.63 -- --
===============================================================================================================================
</TABLE>
Under the accounting provisions of SFAS 123, the Company's net earnings and
earnings per share before extraordinary item would have been:
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Earnings before extraordinary item:
- as reported $ 4,208,025 $ 2,416,883 $ 120,781
- pro forma 3,999,219 2,259,454 44,887
Basic earnings per share before extraordinary item:
- as reported .93 .53 .03
- pro forma .88 .50 .01
Diluted earnings per share before extraordinary item:
- as reported .86 .51 .02
- pro forma .82 .48 .01
</TABLE>
The pro forma effect on net earnings and earnings per share for 1999, 1998 and
1997 may not be representative of the pro forma effect in future years because
it includes compensation cost on a straight-line basis over the vesting periods
of the grants and does not take into consideration the pro forma compensation
costs for grants made prior to 1996.
The fair market value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants: expected volatility of 44% in 1999, 46% in 1998 and
35% in 1997; risk free interest rate of 5.0% in 1999, 5.8% in 1998 and 6.7% in
1997; expected lives of 10 years; and no dividend yield.
Warrants
During 1994 and 1993, a total of 195,000 warrants were issued to unaffiliated
parties at exercise prices ranging from $3.00 to $6.05 per share. At June 30,
1999, these warrants are exercisable and expire in 2003 and 2004.
As discussed in Note 7, the Company granted warrants in October 1997, to
purchase 105,000 shares of common stock exercisable at $4.125 per share through
March 2006.
F-15
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 11 - EARNINGS PER SHARE
Basic and diluted earnings per share for each of the three years ended June 30,
1999, 1998 and 1997 are calculated as follows:
<TABLE>
<CAPTION>
Net
Earnings Shares Per share
(Numerator) (Denominator) Amount
-----------------------------------------
<S> <C> <C> <C>
For the year ended June 30, 1999:
Basic earnings per share $4,208,025 4,536,605 $ .93
Effect of assumed conversion of
employee stock options and warrants -- 347,080 .07
-----------------------------------------
Diluted earnings per share $4,208,025 4,883,685 $ .86
=========================================
For the year ended June 30, 1998:
Basic earnings per share $1,405,882 4,562,800 $ .31
Effect of assumed conversion of
employee stock options -- 182,119 .01
-----------------------------------------
Diluted earnings per share $1,405,882 4,744,919 $ .30
=========================================
For the year ended June 30, 1997:
Basic earnings per share $ 120,781 4,552,146 $ .03
Effect of assumed conversion of
employee stock options and warrants -- 487,849 .01
-----------------------------------------
Diluted earnings per share $ 120,781 5,039,995 $ .02
=========================================
</TABLE>
The earnings per share computation for the year ended June 30, 1999 was based
upon the 4,562,800 shares outstanding at the beginning of the year less a
proration of the 78,370 shares of treasury stock repurchased during the fiscal
year ended June 30, 1999. Also included in the weighted average number of common
shares are the pro-rata portion of 34,430 shares issued upon the exercise of
cashless warrants granted to an investment banker in 1994 in connection with the
private placement of Preferred Stock, options exercised by an employee, as well
as incremental shares attributable to assumed exercise of options and warrants.
The earnings per share computation for the year ended June 30, 1998 was based
upon 4,562,800 shares outstanding during the year; 569,400 shares issuable under
stock options and the warrants were excluded from the calculation since the
exercise price exceeded the average fair market value of the Company's common
stock during the period.
The earnings per share computation for the year ended June 30, 1997 was based
upon 4,300,193 shares outstanding at the beginning of the year, plus a pro rated
225,000 shares arising from the issuance of common stock issued upon exercise of
the underwriters over allotment option in the Company's secondary public
offering; 286,000 shares issuable under stock option were excluded from the
calculation since the exercise price exceeded the average fair market value of
the Company's common stock during the period.
Stock Repurchase Program
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 June 30, 1999, the
Company has repurchased 78,370 shares of its common stock for a cost of
approximately $396,370.
F-16
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12 - CONCENTRATION OF CREDIT RISK
The Company provides credit to customers on an unsecured basis after evaluating
customer credit worthiness. Since the Company sells to a broad range of
customers concentrations of credit risk are very limited. The Company also
provides an allowance for bad debts for accounts receivable where there is a
possibility for loss.
The Company maintains demand deposits with major banks. At June 30, 1999 and
1998, all of the Company's cash was held in one major bank.
NOTE 13 - MAJOR CUSTOMERS
During the fiscal year ended June 30, 1999, the Company had sales to a major
customer of approximately $32,305,000, representing approximately 18% of net
sales. At June 30, 1999, three customers represented 33%, 19% and 14% of net
accounts receivable.
During the fiscal year ended June 30, 1998, the Company had sales to a major
customer of approximately $19,600,000, representing approximately 18% of net
sales. At June 30, 1998, three customers represented 33%, 17% and 14% of net
accounts receivable.
During the fiscal year ended June 30, 1997, the Company had sales to two major
customers of approximately $12,125,000 and $9,099,000 representing approximately
14% and 10% of net sales, respectively. At June 30, 1997, one customer
represented 19% of net accounts receivable and no other customers exceeded 10%.
NOTE 14 - EMPLOYEE BENEFITS
In July 1998, the Company instituted a 401(k) plan for all employees who are not
covered under the collective bargaining agreement. Under the plan, the Company
matches each eligible employees' contribution up to 25% of the employee's first
8% of contributions. Contributions during the year amounted to approximately
$40,000 for the year ended June 30, 1999.
NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of quarterly results of operations for the 1999 and
1998 fiscal years (in thousands of dollars except per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
1999 Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $35,899 $45,652 $45,863 $48,867
Gross profit 6,125 7,925 7,706 8,173
Income from operations 2,419 2,817 2,878 3,348
Net earnings 815 1,041 1,056 1,296
Basic earnings per share .18 .23 .23 .29
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share .17 .21 .21 .27
=================================================================================================================================
1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net sales $25,156 $26,113 $26,407 $30,464
Gross profit 4,272 4,471 4,725 5,277
Income from operations 1,450 1,657 1,830 2,147
Earnings before extraordinary item 478 610 635 694
Extraordinary item, net -- (1,011) -- --
Net earnings 478 (401) 635 694
Net earnings per share before .10 .13 .14 .16
extraordinary item
Extraordinary item -- (.22) -- --
Basic earnings per share .10 (.09) .14 .16
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share .10 (.09) .14 .15
=================================================================================================================================
</TABLE>
F-17
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Suprema Specialties, Inc.
Paterson, New Jersey
The audits referred to in our report dated August 9, 1999 relating to the
consolidated financial statements of Suprema Specialties, Inc., which is
contained in Item 8 of this Form 10-K, included the audits of the June 30, 1999,
1998 and 1997 financial statement schedule listed in the accompanying index.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedule based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO Seidman, LLP
Woodbridge, New Jersey
August 9, 1999
F-18
<PAGE>
Schedule II
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED JUNE 30, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning of Costs and Other Deductions End of
Description Period Expenses (1) Accounts (2) Period
- ----------------------------- -------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1997
Accounts receivable
allowance $508,290 $ -- $ -- $ 38,000 $470,290
======== ========= ========= ========= ========
YEAR ENDED JUNE 30, 1998
Accounts receivable
allowance $470,290 $ -- $ -- $ -- $470,290
======== ========= ========= ========= ========
YEAR ENDED JUNE 30, 1999
Accounts receivable
allowance $470,290 $ 100,000 $ -- $ -- $570,290
======== ========= ========= ========= ========
</TABLE>
(1) To increase accounts receivable allowance.
(2) Uncollectible accounts written off, net of recoveries.
F-19
- --------------------------------------------------------------------------------
MORTGAGE
by
SUPREMA SPECIALTIES, INC.
as Mortgagor
to
NATWEST BANK N.A.
as Mortgagee
Dated: March 29, 1996
- --------------------------------------------------------------------------------
Mortgaged Premises: 508-522 East 35th Street
Block L1516, Lot 5
Paterson, New Jersey
Record and Return to: Windels, Marx, Davies & Ives
120 Albany Street Plaza
New Brunswick, NJ 08901
Attn: Howard P. Lakind, Esq.
Prepared by:
------------------------------
Howard P. Lakind, Esq.
<PAGE>
MORTGAGE
THIS MORTGAGE (hereinafter referred to as the "Mortgage"), is made this
29th day of March, 1996,
BY
Suprema Specialties, Inc. a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, having its principal
office at 510 East 35th Street, Paterson, New Jersey 07543-0280 (hereinafter
referred to as the "Mortgagor"),
TO
NatWest Bank N.A., a national banking association duly organized and validly
existing under the laws of the United States of America, having its principal
office located at 10 Exchange Place, Jersey City, New Jersey 07302 (hereinafter
referred to as the "Mortgagee").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Mortgage Note dated the date hereof, in the
original principal amount of ONE MILLION FIFTY THOUSAND AND 00/100 DOLLARS
($1,050,000.00) lawful money of the United States of America, executed by the
Mortgagor, as maker, and delivered to the Mortgagee, as payee (hereinafter
referred to as the "Note"), the Mortgagee has agreed to make a loan to the
Mortgagor (hereinafter referred to as the "Loan");
WHEREAS, this Mortgage is given and made by the Mortgagor to the Mortgagee
as security for (i) the repayment of the indebtedness of the Mortgagor to the
Mortgagee evidenced by the Note, and (ii) the performance of the terms,
conditions and covenants of the Mortgagor set forth in the Note, this Mortgage
and the other loan documents executed in connection therewith (hereinafter
collectively referred to as the "Loan Documents");
NOW, THEREFORE, in order to induce the Mortgagee to make the Loan to the
Mortgagor and to secure the payment of the indebtedness of the Mortgagor to the
Mortgagee evidenced by the Note made by the Mortgagor to the order of the
Mortgagee and to secure the performance by the Mortgagor of all of its other
obligations and covenants pursuant to the Note and the other Loan Documents, and
to assure payment of all other indebtedness, monetary obligations, liabilities
and duties of any kind of the Mortgagor, direct or indirect, absolute or
contingent, joint or several, due or not due, liquidated or not liquidated,
arising under the Note, this Mortgage, and the other Loan Documents, the
Mortgagor has mortgaged, given, granted, released, assigned, transferred and set
over unto the Mortgagee, and by these presents does hereby mortgage, give,
grant, release, assign, transfer and set over unto the Mortgagee, its successors
and assigns forever, the following described property and rights:
ALL those certain lots, pieces or parcels of land and premises situate,
lying and being in the City of Paterson, County of Passaic, and State of New
Jersey, as more particularly described on SCHEDULE "A" attached hereto and made
a part hereof (hereinafter referred to as the "Premises"); and
TOGETHER with all buildings, structures, and improvements of every nature
whatsoever now or hereafter situated on the Premises (hereinafter referred to as
the "Improvements"); and
TOGETHER with all and singular the tenements, hereditaments, rights-of-way,
privileges,
<PAGE>
liberties, easements, riparian rights, woods, waters, watercourses, mineral, oil
and lights and appurtenances thereunto belonging, or in any wise appertaining,
and the reversion and reversions and remainders, rents, income, issues and
profits thereof; and
TOGETHER with all right, title and interest of the Mortgagor, now owned or
hereafter acquired, in and to any streets, the land lying in the bed of any
streets, roads or avenues, opened or proposed, in front of, adjoining or
abutting the Premises to the center line thereof, and all strips and gores
within or adjoining the Premises, easements and rights-of-way, public or
private, all sidewalks and alleys, now or hereafter used in connection with the
Premises or abutting the Premises; and
TOGETHER with all furniture, fixtures, equipment and other articles of
personal property owned by the Mortgagor and now or hereafter attached to or
used in connection with, or with the operation of, any improvements located on
the Premises, as to which this Mortgage constitutes a security agreement under
the New Jersey Uniform Commercial Code (in addition to and not in lieu of any
other security agreement between the parties), including, without limitation,
all building supplies and materials, furniture, fixtures and equipment; all
furnaces, motors, dynamos, incinerators, machinery, generators, partitions,
elevators, steam and hot water boilers, heating, air conditioning equipment,
wall cabinets, lighting and power plants, coal and oil burning apparatus, pipes,
plumbing, radiators, sinks, bath tubs, water closets, refrigerators, gas and
electrical fixtures, stoves, ranges, shades, screens, blinds, washing machines,
clothes dryers, dishwashers, freezers, awnings, vacuum cleaning systems,
sprinkler systems or other fire prevention or extinguishing apparatus and
materials, including all accessories, additions, substitutions and replacements
thereof, and all cash and non-cash proceeds thereof, all of which shall be
deemed to be and remain and form a part of the Premises and are covered by the
lien of this Mortgage. If the lien of this Mortgage shall be subject to a
conditional bill of sale, chattel mortgage, or other security interest covering
any such property, then all the right, title and interest of the Mortgagor in
and to such property, together with the benefits of any deposits or payments now
or hereafter made thereon, are and shall be covered by the lien of this
Mortgage; and
TOGETHER with any and all awards, damages, payments and other compensation,
and any and all claims therefor and rights thereto, which may result from taking
or injury by virtue of the exercise of the power of eminent domain, or any
damage, improvements, injury or destruction in any manner caused to the Premises
or thereon, or any part thereof; and
TOGETHER with all the estate, right, title, interest, property, possession,
claim and demand whatsoever of the Mortgagor, as well in law as in equity, of,
in and to the same and every part and parcel thereof with the appurtenances
(hereinafter the Premises and all the Improvements, rights, interests and
benefits that go with it as described above shall be collectively referred to as
the "Mortgaged Premises").
TO HAVE AND TO HOLD the above-granted Mortgaged Premises unto the
Mortgagee, its successors and assigns, to its and their own proper use, benefit
and behoof forever.
PROVIDED THAT if the Mortgagor shall well and truly pay, or there shall
otherwise be paid to the Mortgagee, the indebtedness evidenced by the Note
secured hereby at the time and in the manner provided in the Note and/or this
Mortgage, and the Mortgagor shall well and truly abide by and comply with each
and every covenant and condition set forth in this Mortgage, the Note and the
other Loan Documents, then these presents and the lien and interest hereby
transferred and assigned shall cease, terminate and be void. The Mortgagee shall
release the Mortgaged Premises and renounce any other rights granted to it
herein, and shall execute at the request of the Mortgagor a release of this
Mortgage and any other instrument to that effect deemed
<PAGE>
necessary or desirable, upon payment and performance being made on the
indebtedness and covenants secured hereby.
ARTICLE I. THE MORTGAGOR REPRESENTS, WARRANTS, COVENANTS AND AGREES WITH
THE MORTGAGEE AS FOLLOWS:
Section 1. Definitions. In this Mortgage, all words and terms not defined
herein shall have the respective meanings and be construed herein as provided in
the Note. Any reference to a provision of the Note shall be deemed to
incorporate that provision as a part hereof in the same manner and with the same
effect as if the same were fully set forth herein.
Section 2. Interpretation and Construction. The provisions of the Note
shall be applied to this Mortgage in the same manner as applied therein.
Section 3. Beneficiaries. Nothing herein expressed or implied is intended
or shall be construed to confer upon, or to give to, any person other than the
Mortgagor and the Mortgagee any right, remedy or claim under or by reason
hereof. All covenants, stipulations and agreements herein contained by and on
behalf of the Mortgagor shall be for the sole and exclusive benefit of the
Mortgagee.
Section 4. Indebtedness. The Mortgagor shall pay the indebtedness evidenced
by the Note and secured by this Mortgage at the time and in the manner provided
for the payment of the same in the Note.
Section 5. No Credit for Taxes Paid. The Mortgagor shall not be entitled to
any credit against payments due hereunder by reason of the payment of any taxes,
assessments, water or sewer rent or other governmental charges levied inst the
Mortgaged Premises.
Section 6. Seisin and Warranty. The Mortgagor is seized of an indefeasible
estate in fee simple in the Mortgaged Premises, and Mortgagor warrants the title
to the Mortgaged Premises, subject to those title exceptions set forth in title
commitment no. 96-LT-0016 issued by Stewart Title Guaranty Company, as continued
through the date hereof. The Mortgagor hereby covenants that the Mortgagor shall
(i) preserve such title and the validity and priority of the lien of this
Mortgage and shall forever warrant and defend the same to the Mortgagee against
all lawful claims whatsoever and the claims of all persons or entities
(hereinafter collectively referred to as "Persons") whomsoever claiming or
threatening to claim the same or any part thereof, and (ii) make, execute,
acknowledge and deliver all such further or other deeds, documents, instruments
or assurances, and cause to be done all such further acts and things as may at
any time hereafter be reasonably required by the Mortgagee to fully protect the
lien of this Mortgage.
Section 7. Insurance. (i) The Mortgagor shall obtain, or cause to be
obtained, and shall maintain or cause to be maintained, at all times throughout
the term of this Mortgage, insurance on the Mortgaged Premises in such manner
and against such loss, damage and liability, including liability to third
parties, as is customary with Persons operating properties similar to the
Mortgaged Premises and in the same or similar business and located in the same
or similar areas. Such insurance shall include, without limitation, the
following:
(a) Commercial general liability insurance (including garage liability,
innkeeper's liability, products liability and elevator liability, if applicable)
insuring against any and all liability of the Mortgagor or claims of liability
of Mortgagor arising out of, occasioned by or resulting from any accident or
otherwise resulting in or about the Mortgaged Premises and the adjoining
streets, sidewalks and passageways, including XCU, blanket contractual liability
and completed
<PAGE>
operations coverage, in such amounts as are usually carried by Persons operating
properties similar to the Mortgaged Premises, but in any event with a combined
single limit of not less than $1,000,000.00 for personal injury and property
damage with respect to any one occurrence, which amount shall be increased from
time to time to reflect what a reasonably prudent Person operating property
similar to the Mortgaged Premises would carry, together with excess/umbrella
liability insurance on a "follow form" basis with minimum limits of
$10,000,000.00;
(b) Loss or damage by perils customarily included under standard "all risk"
policies, including business interruption and rental insurance if applicable,
covering all perils and contingencies as may be required by the Mortgagee,
including a so-called "agreed amount" replacement cost endorsement insuring one
hundred percent (100%) of the replacement cost of the Improvements;
(c) For any period during which construction is being performed on the
Mortgaged Premises, "Builder's All-Risk" coverage policy of fire and hazard
insurance (completed value form) with respect to the Mortgaged Premises,
including vandalism and malicious mischief, which insurance policy shall contain
a replacement cost endorsement;
(d) If the Mortgaged Premises are required to be insured pursuant to the
Flood Disaster Protection Act of 1973 or the National Flood Insurance Act of
1968, and the regulations promulgated thereunder, because it is located in an
area which has been identified by the Secretary of Housing and Urban Development
as a Flood Hazard Area, then a flood insurance policy covering the Mortgaged
Premises in an amount not less than the outstanding principal balance of the
Note, or the maximum limit of coverage available, whichever amount is less;
(e) Title insurance coverage in the form of an ALTA standard mortgagee
title insurance policy insuring this Mortgage as a valid first lien on the
Mortgaged Premises in the principal amount of the Note; subject only to those
matters approved by Mortgagee and set forth on the Commitment for Title
Insurance issued to the Mortgagee by a title insurer (hereinafter referred to as
the "Title Company") in connection with this Mortgage; and
(f) Boiler and machinery insurance covering pressure vessels, air
tanks, boilers, machinery, pressure piping, heating, air conditioning and
elevator equipment, provided that the Mortgaged Premises contains equipment of
such nature.
(ii) Each insurance policy required under this Section 7 shall be written
by insurance companies authorized or licensed to do business in the State of New
Jersey having an Alfred M. Best Company, Inc. rating of A or higher and a
financial size category of not less than XII, and shall be on such forms and
written by such companies as shall be reasonably approved by the Mortgagee. Such
insurance coverage may be effected under overall blanket or excess coverage
policies of the Mortgagor, except as to public liability insurance which may be
effected under combined single limit.
(iii) Each insurance policy required under this Section 7 providing
insurance against loss or damage to property shall be written or endorsed so as
to (a) contain a standard mortgagee or secured party endorsement, as the case
may be, or its equivalent, (b) make all losses payable directly to the
Mortgagee, without contribution, and (c) provide for deductibles reasonably
satisfactory to the Mortgagee.
(iv) Each insurance policy required under this Section 7 and providing
public liability coverage shall be written and endorsed so as to name the
Mortgagee as an additional insured, as its interest may appear.
<PAGE>
(v) Each insurance policy required under this Section 7 shall contain a
provision to the effect that such policy shall not lapse or be terminated,
cancelled, altered or in any way limited in coverage or reduced in amount unless
the Mortgagee is notified in writing at least thirty (30) days prior to such
lapse, termination, cancellation, alteration, limitation or reduction. At least
thirty (30) days prior to the expiration of any such policy, the Mortgagor shall
furnish evidence satisfactory to the Mortgagee that such policy has been renewed
or replaced or is no longer required by this Section 7.
(vi) Each insurance policy required under this Section 7 (except flood
insurance written under the federal flood insurance program) shall contain an
endorsement or agreement by the insurer that any loss shall be payable to the
Mortgagee, as its interest may appear, in accordance with the terms of such
policy notwithstanding any act or negligence of the Mortgagor which might
otherwise result in forfeiture of said insurance and the further agreement of
the insurer waiving all rights of set-off, counterclaim, deduction or
subrogation against the Mortgagor (so as not to interfere with the Mortgagee's
rights).
(vii) In the event of loss or damage to the collateral, the proceeds of any
insurance provided hereunder shall be applied as set forth in Section 14 of this
Article I; in the event of a public liability claim, the proceeds of any
insurance provided hereunder shall be applied toward extinguishing or satisfying
the liability and expenses incurred in connection therewith.
(viii) The Mortgagor shall not take out any separate or additional
insurance with respect to the Mortgaged Premises which is contributing in the
event of loss unless it is properly compatible with all of the requirements of
this Section 7.
Section 8. Preservation, Maintenance and Repair. All Improvements which are
presently erected and in the future are to be erected upon the Mortgaged
Premises, shall, at the Mortgagor's own cost and expense, be kept in good and
substantial repair, working order and condition, and the Mortgagor shall from
time to time make, or cause to be made, all necessary and proper repairs,
replacements, improvements and betterments thereto. The Mortgagor shall not
remove, demolish, materially alter or discontinue the use of any material part
of the Mortgaged Premises without the prior express written consent of the
Mortgagee, except that the Mortgagor shall from time to time make such
substitutions, additions, modifications and improvements as may be necessary and
as shall not impair the structural integrity, operating efficiency and economic
value of the Mortgaged Premises. All alterations, replacements, renewals or
additions made pursuant to this Section 8 shall automatically become and
constitute a part of the Mortgaged Premises and shall be covered by the lien of
this Mortgage. The Mortgagor shall not do, and shall not permit to be done, any
act which may in any way impair or weaken the security under this Mortgage.
Section 9. Declaration of No Offset. The Mortgagor represents to the
Mortgagee that the Mortgagor has no knowledge of any offsets, counterclaims or
defenses to the principal indebtedness secured hereby, or to any part thereof,
or the interest thereon, either at law or in equity. The Mortgagor shall, within
fifteen (15) business days upon request by mail, furnish a duly acknowledged
written statement in form reasonably satisfactory to the Mortgagee stating
either that the Mortgagor knows of no offsets or defenses existing against such
indebtedness, or if such offsets or defenses are alleged to exist, the nature
and extent thereof, and in either case, such statement shall set forth the
amount due hereunder.
<PAGE>
Section 10. No Removal of Fixtures. The Mortgagor shall not remove or
suffer to be removed from the Mortgaged Premises any fixtures owned by the
Mortgagor as the term "fixtures" (other than trade fixtures) is defined by the
law in New Jersey presently, or in the future to be incorporated into, installed
in, annexed or affixed to the Mortgaged Premises (unless such fixtures have been
replaced with similar fixtures of equal or greater utility and value or which
have become obsolete).
Section 11. Security Agreement. This Mortgage constitutes a security
agreement under the New Jersey Uniform Commercial Code, and the Mortgagor hereby
grants to the Mortgagee a security interest in all furniture, fixtures,
equipment and personal property and all other machinery, appliances,
furnishings, tools and building materials now owned or hereafter acquired by the
Mortgagor, and installed or to be installed in or on the Mortgaged Premises and
used or to be used in the management or operation of the Mortgaged Premises, and
all substitutions, replacements, additions and accessions thereto, together with
all cash and non-cash proceeds thereof. The Mortgagor shall execute, deliver,
file and refile any financing statements, continuation statements, or other
security agreements that the Mortgagee may require from time to time to confirm
the lien of this Mortgage with respect to such property. Without limiting the
foregoing, the Mortgagor hereby irrevocably constitutes and appoints the
Mortgagee with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority (coupled with an
interest) in the place and stead of such Mortgagor and in the name of such
Mortgagor or in the Mortgagee's own name, for the Mortgagee to execute, deliver
and file such instruments for and on behalf of the Mortgagor. Notwithstanding
any release of any or all of that property included in the Mortgaged Premises
which is deemed "real property", and proceedings to foreclose this Mortgage or
its satisfaction of record, the terms hereof shall survive as a security
agreement with respect to the security interest created hereby and referred to
above until the repayment or satisfaction in full of the obligations of the
Mortgagor as are now or hereafter secured hereby.
<PAGE>
Section 12. Taxes. The Mortgagor shall prepare and timely file all federal,
state and local tax returns required to be filed by the Mortgagor and promptly
pay and discharge or cause to be promptly paid and discharged all taxes,
assessments, municipal or governmental rates, charges, impositions, liens and
water and sewer rents or any part thereof, heretofore or hereafter imposed upon
the Mortgagor or in respect of any of the Mortgagor's property and assets before
the same shall become in default, as well as all lawful claims which, if unpaid
might become a lien or charge upon such property and assets or any part thereof,
except for those taxes, assessments and other governmental charges then being
contested in good faith by the Mortgagor by appropriate proceedings (provided
that such contest shall not result in a new lien being placed on any of the
Mortgagor's properties or assets or result in any of the Mortgagor's properties
or assets being subject to loss or forfeiture as a result of the nonpayment of
such items during the continuance of said contest) and for which the Mortgagor
has maintained adequate reserves or accrued the estimated liability on the
Mortgagor's balance sheets for payment thereof. The Mortgagor shall submit to
the Mortgagee, upon request, an affidavit signed by the Mortgagor certifying
that, to the best of the Mortgagor's knowledge, all current federal and state
information income tax returns have been filed to date and all real property
taxes, assessments, governmental charges or levies and other lawful claims with
respect to the Mortgagor's properties and assets have been paid to date. Upon
the occurrence of an Event of Default, the Mortgagor shall, at the request of
the Mortgagee, in addition to the regular payment on the Note, pay into a
non-interest bearing account held by the Mortgagee, at the times when the
monthly installment of principal and interest is payable, an amount equal to
one-twelfth (1/12th) of the annual estimated real estate taxes levied with
respect to the Mortgaged Premises so that funds are available to pay said real
estate taxes and assessments when due, and such sum shall be held by the
Mortgagee for the payment of such real estate taxes and assessments as they
become due. If the amount so estimated shall prove insufficient, then the
Mortgagor shall pay the required deficiency upon demand.
Section 13. Change in Laws. During the term of this Mortgage, in the event
of the passage after the date of this Mortgage of any law of the State of New
Jersey, or any other governmental entity, changing in any way the laws now in
force for the taxation of mortgages, or debts secured thereby, for state or
local purposes, or the manner of the operation of any such taxes, so as to
affect the interest of the Mortgagee, then and in such event, the Mortgagor
shall bear and pay the full amount of such taxes, provided that if for any
reason payment by the Mortgagor of any such new or additional taxes would be
unlawful or if the payment thereof would constitute usury or render the Loan or
indebtedness secured hereby wholly or partially usurious under any of the terms
or provisions of the obligation secured hereunder, or this Mortgage, or
otherwise, the Mortgagee may, at the Mortgagee's option, declare the whole sum
secured by this Mortgage, with interest thereon, to be immediately due and
payable, or the Mortgagee may, at the Mortgagee's option, pay that amount or
portion of such taxes as renders the Loan or indebtedness secured hereby
unlawful or usurious, in which event the Mortgagor shall concurrently therewith
pay the remaining lawful and nonusurious portion or balance of said taxes.
Section 14. Damage, Destruction and Condemnation.
(i) If all or any part of the Mortgaged Premises shall be damaged or
destroyed, or if title to or the temporary use of the whole or any part of any
of the Mortgaged Premises shall be taken or condemned by a competent authority
for any public use or purpose, there shall be no abatement or reduction in the
amounts payable by the Mortgagor hereunder or under the Note, and the Mortgagor
shall continue to be obligated to make such payments.
(ii) If the Mortgaged Premises or any part thereof is partially or totally
<PAGE>
damaged or destroyed by fire or any other cause, the Mortgagor shall give prompt
written notice thereof to the Mortgagee. Upon the occurrence of such damage or
destruction to the Mortgaged Premises, where the damage to the Mortgaged
Premises exceeds $25,000.00. the Mortgagor shall have no claim against the
insurance proceeds, or be entitled to any portion thereof, and all rights to the
insurance proceeds are hereby assigned to the Mortgagee to be applied on account
of the indebtedness secured hereby that remains unpaid. If the damage exceeds
$25,000.00, the Mortgagee shall have the option, in its sole discretion, either
(a) to settle and adjust any claim under any insurance policies without the
consent of Mortgagor or (b) to allow Mortgagor to settle and adjust such claim
without the consent of Mortgagee; provided that in either case Mortgagee shall,
and is hereby authorized to, collect and receive any such insurance proceeds;
and the expenses incurred by Mortgagee in the adjustment and collection of
insurance proceeds shall be added to the indebtedness hereby, and shall be
reimbursed to Mortgagee upon demand or, in the event and to the extent
sufficient proceeds are available, shall be deducted and retained by Mortgagee
from said insurance proceeds prior to any other application thereof. Each
insurance company which has issued an insurance policy is hereby authorized and
directed to make payment for all losses covered by an insurance policy to
Mortgagee alone, and not to Mortgagee and Mortgagor jointly.
(iii) Mortgagee shall, in its sole discretion, elect to apply the net
proceeds of insurance policies consequent upon any casualty to either (a) to
reduce the indebtedness secured hereby or (b) to reimburse Mortgagor for the
cost of restoring, repairing, replacing or rebuilding (hereinafter collectively
referred to as "Restoring") the loss or damage to the Mortgaged Premises. In the
event Mortgagee elects to use such net proceeds to reimburse Mortgagor for the
costs of Restoring, then such reimbursement shall be subject to the conditions
and in accordance with the provisions of Section 14(viii) hereof. If Mortgagee
elects to apply the net proceeds of insurance to the indebtedness secured hereby
and such proceeds do not discharge the indebtedness in full, the entire
indebtedness shall become immediately due and payable with interest thereon at
the Default Rate.
(iv) In the event net insurance proceeds are made available to Mortgagor
for the purpose of Restoring the Mortgaged Premises, Mortgagor hereby covenants
to restore, repair, replace or rebuild the Mortgaged Premises, to be of at least
equal value, and of substantially the same character as prior to such loss or
damage, all to be effected in accordance with plans, specifications and
procedures to be first submitted to Mortgagee and subject to Mortgagee's
approval. In the event the insurance proceeds are insufficient to pay the
aforementioned restoration costs in full, then Mortgagor shall pay all costs of
such Restoring which are in excess of such net insurance proceeds.
(v) Any portion of the insurance proceeds remaining after payment in full
of the obligations secured hereby shall be paid to Mortgagor or as ordered by a
court of competent jurisdiction.
(vi) At the written request of Mortgagor, the insurance proceeds held by or
for the benefit of Mortgagee shall be held in an interest bearing account.
(vii) In the event of foreclosure of the Mortgage or other transfer of
title to the Mortgaged Premises in extinguishment of the obligations secured
hereby, all right, title and interest of Mortgagor in and to any insurance
policies then in force shall pass to the purchaser of the Mortgaged Premises in
foreclosure, or the grantee of a deed in lieu of foreclosure, and Mortgagor
hereby appoints Mortgagee its attorney-in-fact with full irrevocable authority
(coupled with an interest), in Mortgagor's name, to assign and transfer all such
policies and proceeds to such purchaser or grantee.
<PAGE>
(viii) If Mortgagee elects to apply the net proceeds of insurance policies
to reimburse the costs of Restoring to Mortgagor in accordance with Section
14(iii)(b) and provided no Event of Default has occurred and is then continuing,
the net insurance proceeds held by Mortgagee for Restoring of the Mortgaged
Premises shall be disbursed from time to time upon Mortgagee being furnished
with (a) evidence reasonably satisfactory to it of the estimated cost of
completion of the Restoring, (b) funds (or assurance satisfactory to Mortgagee
that such funds are available) sufficient in addition to the net proceeds of
insurance, to complete and fully pay for the completion of the Restoring and (c)
such architect's certificates, contractors', mechanics' and materialmen's
waivers of lien, contractor's sworn statements, title insurance endorsements,
plats of survey and such other evidence of cost, payment and performance as
Mortgagee may require and approve; and Mortgagee, in any event, may require that
all plans and specifications for such Restoring be submitted to and approved by
Mortgagee prior to commencement of any work, which consent shall not be
unreasonably withheld or delayed. No payment made prior to the final completion
of the Restoring shall, when added to all previous payments, exceed ninety
percent (90%) of the value of the work performed from time to time, as such
value shall be determined by Mortgagee in its sole and exclusive judgment; funds
received by Mortgagee pursuant to subparagraph (b) above shall be disbursed
prior to disbursement of net insurance proceeds, except as may otherwise be
provided herein; and at all times the undisbursed balance of such proceeds
remaining in the hands of Mortgagee, together with funds deposited or
irrevocably committed to the satisfaction of completion of the Restoring, free
and clear of all liens on proceeds held by Mortgagee after payment of such costs
of Restoring, shall be paid to Mortgagor. If there is an Event of Default while
Mortgagee is holding funds for Restoring, Mortgagee may, at its sole option,
apply such funds against the indebtedness secured hereby, in such order,
proportion and priority as Mortgagee may elect in its sole and absolute
discretion.
(ix) Notwithstanding anything to the contrary contained in this Mortgage,
if the Improvements shall be damaged or destroyed (in whole or in part) by any
one fire or other casualty, Mortgagee shall, in accordance with the provisions
of Section 14(viii) above, make the net amount of all insurance proceeds
received by Mortgagee as a result of such damage or destruction after deduction
of the reasonable costs and expense, if any, in collecting the insurance
proceeds, available for Restoring, provided that: (a) no Event of Default shall
have occurred and shall be continuing under the Mortgage, the Note or the other
Loan Documents; (b) Mortgagee shall be reasonably satisfied that the Restoring
can be completed on or before one hundred eighty (180) days after the occurrence
of such damage or casualty; (c) the maturity date of the Note is not less than
18 months from the date of such damage or casualty; and (d) Mortgagor shall
execute and deliver to Mortgagee a completion guaranty in form and substance
satisfactory to Mortgagee pursuant to the provisions of which Mortgagor shall
guaranty to Mortgagee the lien-free (other than the lien presently held by
Mortgagee) completion by Mortgagor of the Restoring in accordance with the
provisions of this Mortgage.
<PAGE>
(x) Any and all awards (hereinafter referred to as the "Awards") heretofore
or hereafter made or to be made to the present, or any subsequent, owner of the
Mortgaged Premises, by any governmental or other lawful authority for the taking
by condemnation or eminent domain, of all or any part of the Mortgaged Premises
(including any award from the United States government at any time after the
allowance of a claim therefor, the ascertainment of the amount thereto, and the
issuance of a warrant for payment thereof), or the proceeds from a sale in lieu
of such condemnation or eminent domain are hereby assigned by Mortgagor to
Mortgagee, which Awards Mortgagee is hereby authorized to collect and receive
from the condemnation authorities, and Mortgagee is hereby authorized to give
appropriate receipts and acquittance therefor. Mortgagor shall give Mortgagee
immediate notice of the actual or threatened commencement of any condemnation or
eminent domain proceedings affecting all or any part of the Mortgaged Premises
and shall deliver to Mortgagee copies of any and all papers served in connection
with any such proceedings. Mortgagor further agrees to make, execute and deliver
to Mortgagee, at any time upon request, free, clear and discharged of any
encumbrance of any kind whatsoever (except the rights of holders of any junior
mortgage loans expressly consented to in writing by Mortgagee, provided such
rights are expressly subordinate to the rights of Mortgagee), any and all
further assignments and other instruments deemed reasonably necessary by
Mortgagee for the purpose of validly and sufficiently assigning to Mortgagee all
Awards and other compensation heretofore and hereafter made to Mortgagor for any
taking, either permanent or temporary, under any such proceeding. If any portion
of or interest in the Mortgaged Premises is taken by condemnation or eminent
domain, either temporarily or permanently, and the remaining portion of the
Mortgaged Premises is not, in the judgment of Mortgagee, an architectural and
economic unit of the same character and is not materially less valuable than the
same was prior to the taking, then, at the option of Mortgagee, the entire
indebtedness shall immediately become due and payable. After deducting from the
Award for such taking all of its expenses incurred in the collection and
administration of the Award, including reasonable attorney's fees and
disbursements, Mortgagee shall be entitled to apply the net proceeds towards
repayment of such portion of the indebtedness as it deems appropriate without
affecting the lien of the Mortgage. In the event of any partial taking of the
Mortgaged Premises or any interest in the Mortgaged Premises which in the
judgment of Mortgagee leaves the Mortgaged Premises as an architectural and
economic unit of the same character and not materially less valuable than the
same was prior to the taking, and provided no Event of Default has occurred and
is then continuing, the Mortgagee shall apply the Award to reimburse Mortgagor
for the cost of restoration and rebuilding the Mortgaged Premises in accordance
with plans, specifications and procedures which must be submitted to and
approved by Mortgagee, and such Award shall be disbursed in the same manner as
is provided in Section 14 (viii) hereof for the application of insurance
proceeds, provided that any surplus after payment of such costs shall be applied
on account of the indebtedness. If the Award is not applied for the
reimbursement of such restoration costs, the Award shall be applied against the
indebtedness, in such order or manner as Mortgagee shall elect.
Section 15. Compliance with Laws. The Mortgagor agrees to comply, and to
cause all tenants of all or any portion of the Mortgaged Premises to comply,
with all laws, rules, regulations and ordinances made or promulgated by lawful
authority which are now or may hereafter be applicable to the Mortgaged Premises
within such time as may be required by law.
<PAGE>
Section 16. Indemnification. The Mortgagor hereby agrees to and does hereby
indemnify, protect, defend and save harmless the Mortgagee and its trustees,
officers, employees, agents, attorneys and shareholders (hereinafter referred to
as the "Indemnified Parties") from and against any and all losses, damages,
expenses or liabilities of any kind or nature and from any suits, claims or
demands, including reasonable counsel fees incurred in investigating or
defending such claim, suffered by any of them and caused by, relating to,
arising out of, resulting from, or in any way connected with this Mortgage and
the transactions contemplated herein (unless caused by the negligence or willful
misconduct of the Indemnified Parties), including, without limitation, (i)
disputes between any architect, general contractor, subcontractor, materialman
or supplier, or on account of any act or omission to act by the Indemnified
Parties in connection with this Mortgage, or (ii) losses, damages, expenses or
liabilities sustained by the Indemnified Parties in connection with any
environmental sampling or cleanup of the Mortgaged Premises required or mandated
by any federal, state or local law, ordinance, rule or regulation, including,
without limitation, the Environmental Laws, as hereinafter defined. In case any
action shall be brought against an Indemnified Party based upon any of the above
and in respect to which indemnity may be sought against the Mortgagor, the
Indemnified Party shall promptly notify the Mortgagor in writing, and the
Mortgagor shall assume the defense thereof, including the employment of counsel
selected by the Mortgagor and reasonably satisfactory to the Indemnified Party,
the payment of all costs and expenses and the right to negotiate and consent to
settlement. Upon reasonable determination made by the Indemnified Party, the
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof; provided, however, that said
Indemnified Party shall pay the costs and expenses incurred in connection with
the employment of separate counsel. The Mortgagor shall not be liable for any
settlement of any such action effected without the Mortgagor's consent, but if
settled with the Mortgagor's consent, or if there be a final judgment for the
claimant in any such action, the Mortgagor agrees to indemnify and save harmless
the Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. The provisions of this Section 16 shall survive the
termination of this Mortgage and the repayment of the Note.
Section 17. Assignment of Rents. The Mortgagor hereby absolutely and
unconditionally assigns to the Mortgagee the rents, issues and profits arising
out of or from the Mortgaged Premises, and the Mortgagor grants to the Mortgagee
the right to enter upon and to take possession of the Mortgaged Premises for the
purpose of collecting the same and to let the Mortgaged Premises or any part
thereof, and to apply the rents, issues and profits, after payment of all
necessary charges and expenses, on account of the indebtedness secured hereby.
This assignment and grant shall continue in effect until this Mortgage is paid
in full and discharged of record. The Mortgagee hereby waives the right to enter
upon and to take possession of the Mortgaged Premises for the purpose of
collecting said rents, issues and profits, and the Mortgagor shall be entitled
to collect, receive, retain and use said rents, issues and profits until the
occurrence of an Event of Default under this Mortgage, but such right of the
Mortgagor may be revoked by the Mortgagee upon the occurrence of an Event of
Default on five (5) days written notice. The Mortgagor shall not, without the
written consent of the Mortgagee, receive or collect rent from any tenant of the
Mortgaged Premises or any part thereof for a period of more than one (1) month
in advance, and in the event of the occurrence of an Event of Default under this
Mortgage, the Mortgagor shall pay monthly in advance to the Mortgagee or to any
receiver appointed to collect said rents, issues and profits, the fair and
reasonable rental value for the use and occupation of the Mortgaged Premises or
of such part thereof as may be in the possession of the Mortgagor, and upon
default in any such payment the Mortgagor shall vacate and surrender the
possession of the Mortgaged Premises to the Mortgagee or to such receiver. If
the Mortgagor does not so vacate and surrender the Mortgaged Premises then the
Mortgagor may be evicted by summary proceedings. Notwithstanding anything above
to the contrary, in the event of a
<PAGE>
conflict or inconsistency between this Section 17 and the Absolute Assignment of
Leases and Rents granted the date hereof by Mortgagor to Mortgagee, the terms of
the Absolute Assignment of Leases and Rents shall govern.
Section 18. Advances. Upon the occurrence of an Event of Default by the
Mortgagor under this Mortgage and/or the Note, the Mortgagee may at its option
remedy such Event of Default, and all payments made by the Mortgagee to remedy
an Event of Default by the Mortgagor (including reasonable attorney's fees) and
the total of any payment or payments due from the Mortgagor to the Mortgagee
which are in default, together with interest thereon at the Default Rate set
forth in the Note (such interest to be calculated from the date of such advance
to the date of payment thereof by the Mortgagor), shall be added to the debt
secured by this Mortgage until paid, and the Mortgagor covenants to repay the
same to the Mortgagee on the next interest payment date of the Note. Any such
sums and the interest thereon shall be a lien on the Mortgaged Premises prior to
any other lien attaching to or accruing subsequent to the lien of this Mortgage.
All monies paid, and all expenses paid or incurred, including attorneys' fees
and disbursements and other monies advanced by Mortgagee to protect the
Mortgaged Premises and the lien of this Mortgage, or to complete construction,
furnishing and equipping or to rent, operate and manage the Mortgaged Premises
or to pay any such operating costs and expenses thereof or to keep the Mortgaged
Premises operational and useable for their intended purpose shall be so much
additional debt secured by the Mortgage, whether or not the indebtedness, as a
result thereof, shall exceed the original principal balance set forth herein,
and shall become immediately due and payable on the next interest payment date
of the Note, and with interest thereon at the Default Rate set forth in the
Note. Inaction of Mortgagee shall never be considered as a waiver of any right
accruing to it on account of any Event of Default nor shall the provisions of
this Section 18 or any exercise by Mortgagee of its rights hereunder prevent any
default from constituting an Event of Default. Nothing contained herein shall be
construed to require Mortgagee to advance or expend monies for any purpose
mentioned herein, or for any other purpose, and any expenditure of monies or
action taken hereunder shall be at the sole option and discretion of Mortgagee.
Section 19. Transfer or Encumbrance of Mortgaged Premises.
(i) No part of the Mortgaged Premises shall in any manner be further
encumbered, sold, transferred or conveyed, or permitted to be further
encumbered, sold, transferred or conveyed, without the consent of Mortgagee,
which consent may be given or withheld in Mortgagee's sole discretion for any
reason or for no reason. The Mortgaged Premises shall not be encumbered by any
secondary or subordinate liens, including mechanics liens. The provisions of
this Section 19 shall apply to each and every such further encumbrance, sale,
transfer or conveyance, regardless of whether or not Mortgagee has consented to,
or waived by its action or inaction, its rights hereunder with respect to any
such previous further encumbrance, sale, transfer or conveyance.
Any consent by the Mortgagee, or any waiver of any Event of Default, under
this Section 19 shall not constitute a consent to, or waiver of any right,
remedy or power of the Mortgagee upon a subsequent Event of Default under this
Section 19.
(ii) Mortgagor recognizes that Mortgagee is entitled to keep its loan
portfolio at current interest rates by either making new loans at such rates or
collecting assumption fees and/or increasing the interest rate on a loan, the
security for which is purchased by a party other than Mortgagor. Mortgagor
further recognizes that any secondary or junior financing placed upon the
Mortgaged Premises (a) may divert funds which would otherwise be used to pay the
indebtedness secured hereby; (b) could result in the acceleration and
foreclosure by such junior
<PAGE>
encumbrancer which would force Mortgagee to take measures and incur expenses to
protect its security; (c) would detract from the value of the Mortgaged Premises
should Mortgagee come into possession thereof with the intention of selling the
same; and (d) would impair Mortgagee's right to accept a deed in lieu of
foreclosure, as a foreclosure by Mortgagee would be necessary to clear the title
to the Mortgaged Premises. In accordance with the foregoing and for the purposes
of (w) protecting Mortgagee's security, both of repayment and of value of the
Mortgaged Premises; (x) giving Mortgagee the full benefit of its bargain and
contract with Mortgagor; (y) assumption fees; and (z) keeping the Mortgaged
Premises free of subordinate financing liens, Mortgagor agrees that if this
Section 19 is deemed a restraint on alienation, that it is a reasonable one.
Section 20. Environmental Matters. (i) For purposes of this Mortgage, the
following terms shall have following meanings:
"Hazardous Materials" shall mean existing and future asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls or related or similar
materials, petroleum products, explosives, radioactive materials, or any other
hazardous or toxic or harmful materials, wastes and substances or any other
chemical, material, substance or element which is hereinafter defined,
determined, identified, prohibited, limited or regulated by the Environmental
Laws, or any other chemical, material, substance or element which is known to be
harmful to the health or safety of occupants of property or which is hereinafter
defined as a hazardous or toxic substance by any Federal, State, or local law,
ordinance, rule or regulation, including, but not limited to, the Toxic
Substances Control Act (15 U.S.C. 2601 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C. 7401 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. 1801
et seq.), and/or the regulations promulgated in relation thereto, all as the
same may be amended from time to time (hereinafter collectively referred to as
the "Federal Statutes"), the New Jersey Spill Compensation and Control Act, as
amended, N.J.S.A. 58:10-23.11 et seq., the New Jersey Environmental Cleanup
Responsibility Act, as amended by the Industrial Site Recovery Act, and as may
be further amended, N.J.S.A. 13:1K-6 et seq., the New Jersey Leaking Underground
Storage Tank Act, as amended, N.J.S.A. 58:1OA-21 et seq. (hereinafter
collectively referred to as the "State Statutes"), and the regulations
promulgated in relation thereto, all as the same may be amended from time to
time.
"Environmental Laws" shall mean any applicable federal, state or local
laws, rules, regulations, resolutions, ordinances, directives or orders (whether
now existing or hereafter enacted or promulgated) or any judicial or
administrative interpretation of such laws, rules, regulations, resolutions,
ordinances, directives or orders or any other applicable determination regarding
land, water, air, health, safety or environment including, for example but not
limited to, the Federal Statutes and the State Statutes.
<PAGE>
"Governmental Authority" shall mean any federal, state, and local
government, governing body, agency, court, tribunal, authority, subdivision,
bureau or other recognized body having jurisdiction to enact, promulgate,
interpret, enforce, review or repeal any Environmental Law.
"Environmental Complaint" shall mean any judgment, lien, order, complaint,
notice, citation, action, proceeding or investigation pending before any
Governmental Authority, including, without limitation, any environmental
regulatory body, with respect to or threatened against or affecting the
Mortgagor or relating to its business, assets, property or facilities or the
Mortgaged Premises, in connection with any Hazardous Material or any Hazardous
Discharge or any Environmental Law.
"Hazardous Discharge" shall mean any release of a Hazardous Material caused
by the seeping, spilling, leaking, pumping, pouring, emitting, using, emptying,
discharging, injecting, escaping, leaching, dumping or disposing of any
Hazardous Material into the environment, and any liability for the costs of any
cleanup or other remedial action.
(ii) The Mortgagor covenants, represents and warrants that except as
disclosed in the Phase I Environmental Site Assessment by Melick-Tully and
Associates, Inc. dated July 20, 1994:
(a) to the best of the Mortgagor's knowledge, after due inquiry and
investigation, none of the real property owned or occupied by the Mortgagor and
located in the state in which the Mortgaged Premises is situated, including, but
not limited to the Mortgaged Premises, has ever been used by previous owners,
operators or occupants or the Mortgagor to generate, manufacture, refine,
transport, treat, store, handle or dispose, transfer, produce, process or in any
manner deal with any Hazardous Material,
(b) the Mortgagor has not received a summons, citation, directive, letter
or other communication, written or oral, from any Government Authority
concerning any intentional or unintentional action or omission on the
Mortgagor's part which had resulted in the violation of any Environmental Laws,
as the same may relate to the Mortgaged Premises,
(c) to the best of the Mortgagor's knowledge, after due inquiry and
investigation, no lien has been attached to any revenues or any real or personal
property owned by the Mortgagor and located in the state where the Mortgaged
Premises are located, including, but not limited to the Mortgaged Premises, for
"Damages" and/or "Cleanup and Removal Costs", as such terms are hereinafter
defined in any Environmental Law, or arising from an intentional or
unintentional act or omission in violation thereof by the Mortgagor or by any
previous owner and/or operator of such real or personal property, including, but
not limited to the Mortgaged Premises,
(d) the Mortgagor has duly complied, and shall continue to comply, with the
provisions of the Environmental Laws governing it, its business, assets,
property, facilities and the Mortgaged Premises, and shall keep the Mortgaged
Premises free and clear of any liens imposed pursuant to such laws,
(e) the Mortgagor shall not, and shall not permit any of its officers,
partners, employees, agents, contractors, licensees, tenants, occupants or
others to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce, process or in any manner deal with any Hazardous
Material on the Mortgaged Premises except in accordance with all Environmental
Laws applicable thereto,
<PAGE>
(f) there is not now outstanding any Environmental Complaint issued by any
Governmental Authority to the Mortgagor or relating to the Mortgagor's business,
assets, property, and facilities or the Mortgaged Premises under any
Environmental Law, and there is not now existing any condition which, if known
by the proper authorities, could result in any Environmental Complaint, and that
(g) the Mortgagor has, and will continue to have, all necessary licenses,
certificates and permits under the Environmental Laws relating to the Mortgagor
and its facilities, property, assets, and business, and the Mortgaged Premises
and the foregoing are in compliance with all Environmental Laws.
(h) there are no underground storage tanks on or under the Mortgaged
Premises.
(iii) If the Mortgagor receives any notice of (a) the presence of Hazardous
Materials on the Mortgaged Premises, (b) any violation of or noncompliance with
any Environmental Law, (c) the occurrence of a Hazardous Discharge on or about
any asset, business, facility or property of the Mortgagor or caused by the
Mortgagor, or (d) any Environmental Complaint affecting the Mortgagor or the
Mortgaged Premises or the Mortgagor's operations, assets, business, facilities
or properties, then the Mortgagor will give written notice of the foregoing to
the Mortgagee within ten (10) days of receipt thereof and shall (1) promptly
comply with the Environmental Laws and all other laws, regulations, resolutions
and ordinances to correct, contain, cleanup, remove, resolve or minimize the
impact of such Hazardous Materials, Environmental Discharge or Environmental
Complaint and (2) shall (A) post a bond from a surety or (B) cause a lending
institution to issue a letter of credit for the benefit of the Mortgagee, and to
any Governmental Authority requiring the same; the surety or the lending
institution, and the form, the substance and the amount of the bond or letter of
credit to be satisfactory to the Mortgagee and satisfactory to the applicable
Governmental Authority, or shall give to the Mortgagee and the applicable
Governmental Authority such other security satisfactory in form, substance and
amount to both the Mortgagee and the applicable Governmental Authority to assure
that the Mortgagor does correct, contain, cleanup, remove, resolve or minimize
the impact of such Hazardous Materials, Environmental Discharge or Environmental
Complaint.
(iv) Without limitation of the Mortgagee's rights under this Mortgage or
applicable law, the Mortgagee shall have the right, but not the obligation, to
exercise any of its rights to cure as provided in this Mortgage or to enter onto
the Mortgaged Premises or to take such other actions as it deems necessary or
advisable to correct, contain, cleanup, remove, resolve or minimize the impact
of, or otherwise deal with, any such Hazardous Material, Hazardous Discharge or
Environmental Complaint upon its receipt of any notice from any person or entity
or Governmental Authority, informing the Mortgagee of such Hazardous Material,
Hazardous Discharge or Environmental Complaint, which if true, could adversely
affect the Mortgagor or any part of the Mortgaged Premises or which, in the sole
opinion of the Mortgagee, could adversely affect its collateral security under
this Mortgage. All reasonable costs and expenses incurred and paid by the
Mortgagee in the exercise of any such rights shall be paid by the Mortgagor to
the Mortgagee upon demand, together with interest from the date that such sum is
advanced, payment made or expense incurred, to and including the date of
reimbursement, computed at the Default Rate. Any such sum paid by the Mortgagee
and the interest thereon shall be a lien on the Mortgaged Premises prior to any
claim, lien, right, title or interest in, to or on the Mortgaged Premises
attaching or accruing subsequent to the lien of this Mortgage, and shall be
deemed to be secured by this Mortgage and evidenced by the Note.
<PAGE>
(v) Upon written request, the Mortgagor shall provide to the Mortgagee the
following information pertaining to all operations conducted in or on the
Mortgaged Premises:
(a) copies of all licenses, certificates and permits under the
Environmental Laws;
(b) material safety data sheets and maps, diagrams and site plans showing
the location of all storage areas and storage tanks for all Hazardous Materials
or other chemicals in, used at, manufactured at, brought to or stored at the
Mortgaged Premises;
(c) copies of all materials filed with any Governmental Authority;
(d) a description of the operations and processes of the Mortgagor; and
(e) any other information which the Mortgagee may reasonably require.
(vi) Upon reasonable notice to the Mortgagor, the Mortgagee, its officers,
employees, agents and contractors, may enter the Mortgaged Premises to inspect
it and to conduct, complete and take such tests, samples, analyses and other
processes (hereinafter referred to as an "Environmental Survey") as the
Mortgagee shall require to determine the Mortgagor's compliance with this
Paragraph and the Environmental Laws (but not more than once during the term
unless Mortgagee reasonably believes there has been a Hazardous Discharge or an
Event of Default has occurred). The costs, expenses and fees of the Mortgagee of
such entry, inspection, tests, samples, analyses and processes shall be paid and
reimbursed by the Mortgagor upon demand by the Mortgagee. Any such sum paid by
the Mortgagee, with the interest thereon at the rate provided to be paid on the
indebtedness secured by this Mortgage, shall be a lien on the Mortgaged Premises
prior to any claim, lien, right, title or interest in, to or on the Mortgaged
Premises attaching or accruing subsequent to the lien of this Mortgage, and
shall be deemed to be secured by this Mortgage and evidenced by the Note.
(vii) In addition to those Events of Default specified in this Mortgage,
the occurrence of any of the following events shall constitute a default under
this Mortgage, entitling the Mortgagee to all rights and remedies provided
therefor:
(a) if any Governmental Authority asserts or creates a lien upon any or all
of the Mortgaged Premises by reason of the presence of Hazardous Materials or
the occurrence of a Hazardous Discharge or Environmental Complaint or otherwise,
and the Mortgagor does not, within the earlier of sixty (60) days after the
recording thereof or prior to the institution by such Governmental Authority of
any steps to foreclose such lien, cause such lien to be discharged of record; or
(b) if any Governmental Authority asserts a claim against the Mortgagor,
the Mortgaged Premises or the Mortgagee for damages or cleanup or remedial costs
related to any Hazardous Materials or any Hazardous Discharge or any
Environmental Complaint; provided, however, such claim shall not constitute a
default if, within fifteen (15) business days of the Mortgagor's receipt of
notice of the foregoing:
(1) the Mortgagor can prove to the Mortgagee's reasonable satisfaction that
the Mortgagor has commenced and is diligently pursuing either: (A) a cure,
remedy or correction of the event which constitutes the basis for the claim, and
is continuing
<PAGE>
diligently to pursue such cure or correction to completion, in strict compliance
with the Environmental Laws or Environmental Complaint, as applicable, or (B)
proceedings for injunction, a restraining order or other appropriate emergency
relief to prevent such Governmental Authority from asserting such claim, which
relief is granted within thirty (30) days of the occurrence giving rise to the
claim and the injunction, order or emergency relief is not thereafter dissolved
or reversed on appeal; and
(2) in either of the foregoing events, the Mortgagor shall (A) give such
surety or other security, which may be required by and satisfactory to both the
Governmental Authority asserting the claim and to the Title Company, to secure
the proper and complete cure or correction of the event which constitutes the
basis for the claim or, (B) at the Mortgagee's request if no such bond or
security has been given, the Mortgagor shall post a bond from a surety or a
letter of credit issued by a lending institution, with the Mortgagee, the surety
or the lending institution, and the form, substance and amount of the bond or
letter of credit to be reasonably satisfactory to the Mortgagee and to the Title
Company, or shall give to the Mortgagee and the Title Company such other
security satisfactory in form, substance and amount to the Mortgagee and to the
Title Company, to secure the payment for all of the work, labor and services
required to effect a proper and complete cure or correction of the condition
which constitutes the basis for the claim.
(viii) The Mortgagor covenants and agrees, at its sole cost and expense, to
indemnify, protect, and save the Mortgagee harmless against and from any and all
damages, losses, liabilities, obligations, penalties, claims, litigation,
demands, defenses, judgments, suits, proceedings, costs, disbursements or
expenses of any kind or of any nature whatsoever (including, without limitation,
reasonable attorneys' and experts' fees and disbursements) which may at any time
be imposed upon, incurred by or asserted or awarded against the Mortgagee and
arising from or out of:
(a) the Mortgagor's failure to perform and comply with this Subsection, or
(b) any Hazardous Material, any Hazardous Discharge, any Environmental
Complaint, or any Environmental Law applicable to the Mortgagor, its operations,
business, assets, property or facilities, or the Mortgaged Premises, or
(c) any action against the Mortgagor under this indemnity.
(ix) Mortgagor and Suprema Specialties West, Inc. (hereinafter referred to
as "Guarantor") have, simultaneously with the execution of this Mortgage,
executed and delivered to Mortgagee that certain Hazardous Material Guaranty and
Indemnification Agreement. The provisions of the Hazardous Material Guaranty and
Indemnification Agreement are intended to supplement and not replace the
provisions of this Section 20 of the Mortgage. In the event there is a conflict
between the terms of the Hazardous Material Guaranty and Indemnification
Agreement and this Mortgage, the terms of the Hazardous Material Guaranty and
Indemnification Agreement will govern, provided those provisions are broader.
Section 21. Advice of Counsel. Mortgagor acknowledges it has thoroughly
read and reviewed the terms and provisions of this Mortgage and the other Loan
Documents and is familiar with the same, that the terms and provisions contained
herein are clearly understood by it and have been fully and unconditionally
consented to by it, and that Mortgagor has had full benefit and advice of legal
counsel of its own selection or the opportunity to obtain the benefit and advice
of counsel of its own selection, in regard to understanding the terms, meaning
and effect
<PAGE>
of this Mortgage and the other Loan Documents, and that this Mortgage and the
other Loan Documents have been entered into by Mortgagor freely, voluntarily,
with full knowledge, and without duress, and that in executing this Mortgage and
the other Loan Documents, Mortgagor is not relying on any representations or
statements either written or oral, express or implied, made to Mortgagor by
Mortgagee or any other person, and that the consideration received by Mortgagor
hereunder has been actual and adequate.
Section 22. Financial Information and Compliance Certificates. Mortgagor
hereby agrees that, so long as the Loan remains outstanding and unpaid, or any
other amount is owing to the Mortgagee hereunder, the Mortgagor will, and will
cause any Subsidiaries, the Guarantor and any Subsidiary of the Guarantor (each
sometimes referred to herein as a "Specified Person") as applicable to:
(i) as soon as available, but in any event within ninety (90) days after
the last day of each of its fiscal year ends, its 10-K report of the Mortgagor
and its subsidiaries as at the last day of the fiscal year and statements of
income and retained earnings and cash flows for such fiscal year each prepared
in accordance with generally accepted accounting principles ("GAAP") and
certified by a firm of independent certified public accountants satisfactory to
the Mortgagee, together with management prepared consolidated and consolidating
balance sheets. Mortgagor shall provide an itemized statement of capitalized
expenses, including, but not limited to, slotting fees, marketing service
agreements and the retail licensing agreement, which shall be broken out on the
management balance sheet, and any expenses related thereto shall be itemized on
the management income statement. Mortgagor shall also provide a breakdown of
selling, general and administrative expenses.
(ii) as soon as available, but in any event within sixty (60) days after
the close of each of the first three (3) quarters of each fiscal year, its 10-Q
report and management prepared consolidated and consolidating balance sheets,
statements of income and retained earnings and cash flows of the Mortgagor 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 in reasonable detail, and certified by the chief
financial or accounting officer of the Mortgagor as having been prepared in
accordance with GAAP (subject to year-end adjustments). Mortgagor shall provide
an itemized statement of capitalized expenses, including, but not limited to,
slotting fees, marketing service agreements and the retail licensing agreement,
which shall be broken out on the prepared balance sheet, and any expenses
related thereto shall be itemized on the prepared income statement. Mortgagor
shall also provide a breakdown of selling, general and administrative expenses.
(iii) as soon as available, but in any event within thirty (30) days after
the end of each month, internally prepared profit and loss statements for each
such month in reasonable detail and certified by the chief financial or
accounting officer of the Mortgagor as having been prepared in accordance with
GAAP (subject to year-end adjustments). For the fiscal year-end and each
quarter-end of the Mortgagor, such internally prepared statements the shall not
be required.
(iv) at the same time as it delivers the financial statements called for by
subparagraphs (i) and (ii), the Mortgagor shall deliver a certificate of the
chief financial or accounting officer of the Mortgagor evidencing a computation
of compliance with the financial covenants referred to in Section 23;
(v) from time to time as requested by the Mortgagee, but no more often than
twice a year, provide the Mortgagee with a written acknowledgment, in form and
substance satisfactory
<PAGE>
to the Mortgagee, from the Mortgagor's and the Guarantor's accountant
acknowledging that the Mortgagee is relying on the accountant's professional
accounting services to the Mortgagor and Guarantor, and the Mortgagor's and
Guarantor's knowledge of the Mortgagee's reliance;
(vi) within ninety (90) days of the fiscal year end of the Mortgagor,
furnish annual projections for the next succeeding Fiscal Year in a form
reasonably acceptable to the Mortgagee;
(vii) furnish such other reports and information as the Mortgagee may
reasonably require; and
(viii) Prior to the acquisition of the whey facility, the Mortgagor's
quarterly financial statements for the period ending March 31, 1996, prepared on
a review basis by BDO Seidman, showing substantial compliance with projections.
Section 23. Financial Covenants. The Mortgagor hereby agrees that, so long
as the Note remains outstanding and unpaid, or any other amount is owing to the
Mortgagee hereunder, the Mortgagor shall comply with all financial covenants set
forth in Section 10.14 of that certain Revolving Loan, Guaranty and Security
Agreement dated February 15, 1994 by and among Mortgagor, as Borrower, Suprema
Specialties West, Inc., as Guarantor and Mortgagee, as amended, as if same were
fully set forth herein.
ARTICLE II. THE MORTGAGOR SHALL BE IN DEFAULT OF THIS MORTGAGE UPON THE
OCCURRENCE OF ANY OF THE FOLLOWING EVENTS (ANY OF WHICH MAY BE REFERRED TO AS AN
"EVENT OF DEFAULT"):
Section 1. Nonpayment. The Mortgagor shall fail to make when due any
payment of principal, interest or other monies as provided in the Note or this
Mortgage within five (5) days after same is due and payable.
Section 2. Breach of Covenants. The Mortgagor shall have failed to perform
any of the terms, covenants, conditions or undertakings contained in this
Mortgage or the Note, other than the nonpayment of money, and such default shall
have remained uncured for the applicable grace periods, if any, provided for
herein or therein.
Section 3. Representations and Warranties. In the event that any
representation or warranty made by the Mortgagor in this Mortgage or the Note or
in any other loan document used in connection herewith shall prove to be false
or misleading in any substantial and material respect on the date as of which
made.
Section 4. Bankruptcy. The Mortgagor shall have applied for or consented to
the appointment of a receiver, custodian, trustee or liquidator of all or a
substantial part of the Mortgagor's assets; or shall generally not be paying the
Mortgagor's debts as they become due; or shall have admitted in writing the
inability to pay the Mortgagor's debts as they mature; or shall have made a
general assignment for the benefit of creditors; or shall have filed a petition
or an answer seeking an arrangement with creditors; or shall have taken
advantage of any insolvency law; or shall have submitted an answer admitting the
material allegations of a petition in any bankruptcy or insolvency proceeding;
or an order, judgment or decree shall have been entered, without the
application, the approval or consent of the Mortgagor by any Court of competent
jurisdiction appointing a receiver, custodian, trustee or liquidator of the
Mortgagor, or a substantial part of the Mortgagor's assets; or a petition in
bankruptcy shall have been filed by or
<PAGE>
against Mortgagor; or if any Order for Relief shall have been entered under the
Federal Bankruptcy Code.
Section 5. Other Foreclosures. In the event that proceedings shall have
been instituted for foreclosure or collection of any mortgage, judgment, or lien
prior, equal to or subordinate to the lien of this Mortgage, affecting the
Mortgaged Premises, and same is not discharged within thirty (30) days thereof.
Section 6. Judgments. In the event one or more final judgments, decrees, or
orders for the payment of money in excess of Fifty Thousand Dollars ($50,000.00)
in the aggregate shall be rendered against the Mortgagor and such judgments,
decrees or orders shall continue unsatisfied and in effect for a period of
thirty (30) consecutive days without being vacated, discharged, satisfied, or
stayed or bonded pending appeal.
Section 7. Other Debt. In the event of an Event of Default by the Mortgagor
in any of the terms or conditions of an Event of Default any agreement covering
the payment of borrowed money (other than trade payables) from any Person
including, but not limited to, the Revolving Loan, Guaranty and Security
Agreement dated February 15, 1994 by and among Mortgagor, as Borrower, Suprema
Specialties West, Inc., as Guarantor and Mortgagee, as amended, or any loan
documents executed in connection therewith, if such a default would permit the
holder of the debt instrument to accelerate the payment of the debt,
irrespective of whether the default is waived or not waived by the holder of the
debt instrument.
Section 8. Default Under Other Loan Documents. In the event of a default or
Event of Default under any other Loan Document.
ARTICLE III. IF ANY EVENT OF DEFAULT SHALL HAVE OCCURRED AND IS CONTINUING
ON THE PART OF THE MORTGAGOR, THE MORTGAGEE MAY TAKE ANY OR ALL OF THE FOLLOWING
ACTIONS, AT THE SAME OR AT DIFFERENT TIMES:
Section 1. Acceleration. The Mortgagee may declare the entire amount of
unpaid principal, together with all accrued and unpaid interest and other moneys
due under this Mortgage, the Note and the other Loan Documents immediately due
and payable, and accordingly accelerate payment thereof notwithstanding contrary
terms of payment stated therein, without presentment, demand or notice of any
kind, all of which are expressly waived, notwithstanding anything to the
contrary contained in the Mortgage and/or the Note.
Section 2. Possession. The Mortgagee may enter upon and take possession of
the Mortgaged Premises; lease and let the said Mortgaged Premises; receive all
the rents, income, issues and profits thereof which are overdue, due or to
become due; and apply the same, after payment of all necessary charges and
expenses, on account of the amounts hereby secured. The Mortgagee is given and
granted full power and authority to do any act or thing which the Mortgagor or
the successors or assigns of the Mortgagor who may then own the Mortgaged
Premises might or could do in connection with the management and operation of
the Mortgaged Premises. This covenant becomes effective either with or without
any action brought to foreclose this Mortgage and without applying at any time
for a receiver of such rents. Should said rents or any part thereof be assigned
without the consent of the holder of this Mortgage, then this Mortgage shall at
the option of the holder hereof become due and payable immediately, anything
herein contained to the contrary notwithstanding.
Section 3. Foreclosure. The Mortgagee may institute an action of mortgage
foreclosure or
<PAGE>
take other action as the law may allow, at law or in equity, for the enforcement
of this Mortgage, and proceed thereon to final judgment and execution of the
entire unpaid balance of the Note including costs of suit, interest and
reasonable attorney's fees. In case of any sale of the Mortgaged Premises by
virtue of judicial proceedings, the Mortgaged Premises may be sold in one parcel
and as an entirety or in such parcels, manner or order as the Mortgagee in its
sole discretion may elect. The failure to make any tenants parties defendant to
a foreclosure proceeding and to foreclose their rights will not be asserted by
the Mortgagor as a defense in any proceeding instituted by the Mortgagee to
collect the obligations secured hereby or any deficiency remaining unpaid after
the foreclosure sale of the Mortgaged Premises.
Section 4. Appointment of Receiver. The Mortgagee may have a receiver of
the rents, income, issues and profits of the Mortgaged Premises appointed
without the necessity of proving either the depreciation or the inadequacy of
the value of the Security or the insolvency of the Mortgagor or any Person who
may be legally or equitably liable to pay moneys secured hereby, and the
Mortgagor and each such Person waives such proof and consents to the appointment
of a receiver.
Section 5. Fair Rental Payments. If the Mortgagor or any subsequent owner
is occupying the Mortgaged Premises or any part thereof, it is hereby agreed
that the said occupants shall pay such reasonable rental monthly (to be applied
on account of the unpaid indebtedness) in advance as the Mortgagee shall demand
for the Mortgaged Premises or the part so occupied, and for the use of personal
property covered by this Mortgage or any chattel mortgage.
Section 6. Excess Monies. The Mortgagee may apply on account of the unpaid
indebtedness evidenced by the Note (including any unpaid accrued interest) owed
to the Mortgagee after a foreclosure sale of the Mortgaged Premises, whether or
not a deficiency action shall have been instituted, any unexpended monies still
retained by the Mortgagee that were paid by Mortgagor to the Mortgagee (i) for
the payment of, or as security for the payment of taxes, assessments, municipal
or governmental rates, charges, impositions, liens, water or sewer rents, or
insurance premiums, if any, or (ii) in order to secure the performance of some
act by the Mortgagor.
Section 7. Remedies at Law or Equity. The Mortgagee may take any of the
remedies otherwise available to it as a matter of law or equity.
ARTICLE IV. MISCELLANEOUS:
Section 1. Cumulative Rights. The rights and remedies herein expressed to
be vested in or conferred upon the Mortgagee shall be cumulative and shall be in
addition to and not in substitution for or in derogation of the rights and
remedies conferred by any applicable law. The acceptance by the Mortgagee of any
payments hereunder after the occurrence of an Event of Default or the failure,
at any one or more times, of the Mortgagee to assert the right to declare the
principal indebtedness due or the granting of any extension or extensions of
time of payment of the Note either to the maker or to any other Person, or
taking of other or additional security for the payment thereof, or releasing any
security, or changing any of the terms of this Mortgage, the Note, the other
Loan Documents, or any other obligation accompanying this Mortgage, or waiver of
or failure to exercise any right under any covenant or stipulation herein
contained shall not in any way affect this Mortgage nor the rights of the
Mortgagee hereunder nor operate as a release from any personal liability upon
the Note or other obligation accompanying this Mortgage, nor under any covenant
or stipulation therein contained, nor under any agreement assuming the payment
of said Note or obligation.
<PAGE>
Section 2. Notices. Unless otherwise indicated differently, all notices,
payments, requests, reports, information or demands which any party hereto may
desire or may be required to give to any other party hereunder, shall be in
writing and shall be personally delivered or sent by facsimile, Federal Express
or other nationally recognized overnight delivery service providing a receipt
for delivery, or first-class certified or registered United States mail, postage
prepaid, return receipt requested, and sent to the party at its address
appearing below or such other address as any party shall hereafter inform the
other party hereto by written notice given as aforesaid:
If to the Mortgagor:
Suprema Specialties, Inc.
510 East 35th Street
P.O. Box 280 Park Station
Paterson, New Jersey 07543-0280
Attn: Mark Cocchiola, President
With a copy to:
Tenzer, Greenblatt & Zunz, P.A.
c/o Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attn: Martin Luskin, Esq.
If to the Mortgagee:
NatWest Bank N.A.
Legal Center
1 Riverfront Plaza, 3rd Floor
Newark, New Jersey 07102
Attn: Edward J. Waterfield, Vice President
With a copy to:
Windels, Marx, Davies & Ives
120 Albany Street Plaza
New Brunswick, New Jersey 08901
Attn: Howard P. Lakind, Esq.
All notices, payments, requests, reports, information or demands so given shall
be deemed effective upon receipt or, if mailed, upon receipt or the expiration
of the third day following the date of mailing, which ever occurs first, except
that any notice of change in address shall be effective only upon receipt by the
party to whom said notice is addressed. A failure to send the requisite copies
does not invalidate an otherwise properly sent notice to the Mortgagor and/or
the Mortgagee.
Section 3. Successors and Assigns. All of the terms, covenants, provisions
and conditions herein contained shall be for the benefit of, apply to, and bind
the successors and assigns of the Mortgagor and the Mortgagee, and are intended
and shall be held to be real covenants running with the land, and the term
"Mortgagor" shall also include any and all subsequent owners and successors in
title of the Mortgaged Premises.
<PAGE>
Section 4. Gender. When such interpretation is appropriate, any word
denoting gender used herein shall include all persons, natural or artificial,
and words used in the singular shall include the plural.
Section 5. Waiver of Right of Redemption. The Mortgagor waives the right of
redemption on any property levied upon under a judgment obtained in proceedings
to collect the indebtedness hereby secured or in proceedings on this Mortgage,
and further waives and releases any and all benefits that may accrue to the
Mortgagor by virtue of any law relating to appraisement, stay of execution or
exemption of the Mortgaged Premises from levy or sale under execution, now or
hereafter in force. A foreclosure sale shall constitute a foreclosure sale of
all interest whatsoever of the Mortgagor in the Mortgaged Premises and the
Mortgagee shall, if it is the purchaser at the sale, hold the Mortgaged Premises
and any part thereof so purchased free of any equity of redemption by reason of
any circumstances whatsoever and not as collateral for any obligation.
Section 6. Severability. The provisions of this Mortgage are severable. In
the event of the unenforceability or invalidity of any one or more of the terms,
covenants, conditions, or provisions of this Mortgage under federal, state, or
other applicable law, such unenforceability or invalidity shall not render any
other of the terms, covenants, conditions, or provisions hereof unenforceable or
invalid. In the event any waiver by Mortgagor hereunder is prohibited by law,
including but not limited to the waiver of exemption from execution, such waiver
shall be and deemed to be deleted herefrom.
Section 7. WAIVER OF AUTOMATIC STAY. THE MORTGAGOR AGREES THAT, IN THE
EVENT THAT THE MORTGAGOR OR ANY OF THE PERSONS, PARTIES, OR ENTITIES
CONSTITUTING THE MORTGAGOR SHALL (I) FILE WITH ANY BANKRUPTCY COURT OF COMPETENT
JURISDICTION OR BE THE SUBJECT OF ANY PETITION UNDER THE BANKRUPTCY CODE; (II)
BE THE SUBJECT OF ANY ORDER FOR RELIEF ISSUED UNDER THE BANKRUPTCY CODE; (III)
FILE OR BE THE SUBJECT OF ANY PETITION SEEKING ANY REORGANIZATION, ARRANGEMENT,
COMPOSITION, READJUSTMENT, LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER ANY
PRESENT OR FUTURE FEDERAL OR STATE ACT OR LAW RELATING TO BANKRUPTCY,
INSOLVENCY, OR OTHER RELIEF FOR DEBTORS; (IV) HAVE SOUGHT OR CONSENTED TO OR
ACQUIESCED IN THE APPOINTMENT OF ANY TRUSTEE, RECEIVER, CONSERVATOR, OR
LIQUIDATOR; OR (V) BE THE SUBJECT OF ANY ORDER, JUDGMENT, OR DECREE ENTERED BY
ANY COURT OF COMPETENT JURISDICTION APPROVING A PETITION FILED AGAINST SUCH
PARTY FOR ANY REORGANIZATION, ARRANGEMENT, COMPOSITION, READJUSTMENT,
LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR FUTURE FEDERAL
OR STATE ACT OR LAW RELATING TO BANKRUPTCY, INSOLVENCY, OR RELIEF FOR DEBTORS,
THE MORTGAGEE SHALL THEREUPON BE ENTITLED, AND THE MORTGAGOR IRREVOCABLY
CONSENTS TO, IMMEDIATE AND UNCONDITIONAL RELIEF FROM ANY AUTOMATIC STAY IMPOSED
BY SECTION 362 OF THE BANKRUPTCY CODE, OR OTHERWISE, ON OR AGAINST THE EXERCISE
OF THE RIGHTS AND REMEDIES OTHERWISE AVAILABLE TO THE MORTGAGEE AS PROVIDED FOR
HEREIN, IN THE NOTE, OR IN ANY OTHER OF THE LOAN DOCUMENTS DELIVERED IN
CONNECTION HEREWITH AND AS OTHERWISE PROVIDED BY LAW, AND THE MORTGAGOR HEREBY
IRREVOCABLY WAIVES ANY RIGHT TO OBJECT TO SUCH RELIEF AND WILL NOT CONTEST ANY
MOTION BY THE MORTGAGEE SEEKING RELIEF FROM THE AUTOMATIC STAY AND THE MORTGAGOR
WILL COOPERATE WITH THE MORTGAGEE, IN ANY MANNER REQUESTED BY THE MORTGAGEE, IN
ITS EFFORTS TO OBTAIN RELIEF FROM ANY SUCH STAY OR OTHER PROHIBITION.
Section 8. WAIVER OF JURY TRIAL. THE MORTGAGOR HEREBY WAIVES ANY AND ALL
RIGHTS THAT IT MAY NOW OR HEREAFTER HAVE UNDER THE LAWS OF THE UNITED STATE OF
AMERICA OR ANY STATE TO A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING EITHER
DIRECTLY OR INDIRECTLY IN ANY ACTION OR PROCEEDING BETWEEN THE MORTGAGEE OR ITS
SUCCESSORS AND ASSIGNS, OUT OF OR IN ANY WAY CONNECTED WITH THIS MORTGAGE, THE
NOTE AND THE OTHER LOAN DOCUMENTS. IT IS INTENDED THAT SAID WAIVER SHALL APPLY
TO ANY AND ALL DEFENSES, RIGHTS,
<PAGE>
AND/OR COUNTERCLAIMS IN ANY ACTION OR PROCEEDING.
Section 9. SERVICE OF PROCESS. THE MORTGAGOR AGREES THAT SERVICE OF PROCESS
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING
OUT OF OR RELATED TO THIS MORTGAGE OR THE RELATIONSHIP ESTABLISHED HEREUNDER MAY
BE DULY EFFECTED UPON IT BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE
PREPAID, TO THE MORTGAGOR AT THE ADDRESS SET FORTH HEREIN.
Section 10. Payment of Attorneys' Fees and Costs. If upon an Event of
Default: (i) this Mortgage or any Loan Document is placed in the hands of an
attorney for collection or enforcement or is collected or enforced through any
legal proceeding; (ii) an attorney is retained to represent Mortgagee in any
bankruptcy, reorganization, receivership, or other proceeding affecting
creditor's rights and involving a claim under this Mortgage or any of the Loan
Documents; (iii) an attorney is retained to protect or enforce the lien of the
Mortgage or any of the Loan Documents; or (iv) an attorney is retained to
represent Mortgagee in any other proceeding whatsoever in connection with this
Mortgage, any of the Loan Documents or any property subject thereto, then
Mortgagor shall pay to Mortgagee all reasonable attorneys' fees, costs, expenses
and disbursements incurred in connection therewith, in addition to all other
amounts due hereunder.
Section 11. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, the Mortgagee is hereby authorized at any
time and from time to time, without notice to the Mortgagor (any such notice
being expressly waived by the Mortgagor), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Mortgagee to or for the
credit or the account of the Mortgagor and relating to the Loan, the Mortgaged
Premises or the Loan Documents against any and all of the obligations of the
Mortgagor now or hereafter existing under this Mortgage, the Note or any other
Loan Document, irrespective of whether or not the Mortgagee shall have made any
demand under this Mortgage, the Note or such other Loan Document and although
such obligations may be unmatured. The Mortgagee agrees promptly to notify the
Mortgagor after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Mortgagee under this Section 11 are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Mortgagee may have.
Section 12. Counterparts. This Mortgage may be executed in any number of
counterparts, each of which shall be deemed an original but such counterparts
shall together constitute but one and the same instrument.
Section 13. Performance. The Mortgagor shall perform and abide by the terms
and covenants herein and the terms and covenants in the Note, all of which are
made a part hereof as though set forth herein at length.
Section 14. Law Governing. All the terms, conditions and covenants
contained in this Mortgage shall be governed by and construed and interpreted in
accordance with the laws of the State of New Jersey.
<PAGE>
Section 15. No Assignment. This Mortgage shall not be assigned by the
Mortgagor without the prior express written consent of the Mortgagee.
Section 16. Modifications in Writing. No provision of this Mortgage may be
waived, changed, amended, modified or discharged orally and no executory
agreement shall be effective to modify or discharge it in whole or in part,
unless it is in writing and signed by the party against whom enforcement of the
waiver, change, amendment, modification or discharge is sought. Any waiver by
the Mortgagee or modification of the terms hereof shall be effective only in the
specific instance and for the specific purpose for which given and,
notwithstanding anything to the contrary herein, all such waivers and
modifications may be given or withheld in the sole judgment of the Mortgagee.
Section 17. Consent by Mortgagee. If the Mortgagor shall request the
Mortgagee's consent or approval pursuant to any of the provisions of this
Mortgage or otherwise, and the Mortgagee shall fail or refuse to give, or shall
delay in giving, such consent or approval, the Mortgagor shall in no event
(other than upon the willful misconduct or bad faith of Mortgagee) make, or be
entitled to make, any claim for damages (nor shall the Mortgagor assert, or be
entitled to assert, any such claim by way of defense, set-off, or counterclaim)
based upon any claim or assertion by the Mortgagor that the Mortgagee
unreasonably withheld or delayed its consent or approval, and the Mortgagor
hereby waives any and all rights that it may have, from whatever source derived,
to make or assert any such claim. The Mortgagor's sole remedy for any such
failure, refusal, or delay shall be an action for a declaratory judgment,
specific performance, or injunction, and such remedies shall be available only
in those instances where the Mortgagee has expressly agreed in writing not to
unreasonably withhold or delay its consent or approval or where, as a matter of
law, the Mortgagee may not unreasonably withhold or delay the same.
Section 18. Joint and Several Liability. If the Mortgagor consists of more
than one Person, the obligations and liabilities of each such Person hereunder
shall be joint and several.
THE MORTGAGOR HEREBY DECLARES THAT THE MORTGAGOR HAS READ THIS MORTGAGE,
HAS RECEIVED A COMPLETELY FILLED IN COPY OF IT WITHOUT CHARGE THEREFOR AND HAS
SIGNED THIS MORTGAGE AS OF THE DATE AT THE TOP OF THE FIRST PAGE.
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed and delivered by its appropriate authorized corporate officers and its
corporate seal to be hereunto affixed and attested, pursuant to the resolution
of its Board of Directors, all on the day and year first above written.
ATTEST: SUPREMA SPECIALTIES, INC.
- -------------------
Steven Venechanos,
Secretary President
<PAGE>
SCHEDULE "A"
ATTACHED TO AND MADE A PART OF THAT
CERTAIN MORTGAGE BY AND BETWEEN
SUPREMA SPECIALTIES, INC.
AS MORTGAGOR, AND
NATWEST BANK N.A.
AS MORTGAGEE, DATED
MARCH 29, 1996
DESCRIPTION OF MORTGAGED PREMISES
<PAGE>
STATE OF NEW JERSEY :
:ss:
COUNTY OF MIDDLESEX :
BE IT REMEMBERED, that on this 29th day of March, 1996, before me, the
subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take
acknowledgements for use in the State of New Jersey, personally appeared Mark
Cocchiola, who I am satisfied is the person who executed the within Mortgage as
the President of Suprema Specialties, Inc., the corporation named therein, and I
having first known to him the contents thereof, he did thereupon acknowledge
that the said Mortgage made by the said corporation and delivered by him as such
officer, is the voluntary act and deed of said corporation, made by virtue of
authority from its Board of Directors, for the uses and purposes therein
expressed.
Martin Luskin, Esq.,
Attorney at law of the State of New Jersey
================================================================================
SECOND 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),
and
SOVEREIGN BANK, 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
December 16, 1998
================================================================================
<PAGE>
SECOND AMENDED AND RESTATED REVOLVING LOAN,
GUARANTY AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED REVOLVING LOAN, GUARANTY AND SECURITY
AGREEMENT dated as of December 16, 1998 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 (Fleet and Sovereign 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 are 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
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, (i) providing
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for an increase of the Commitment to $25,000,000, (ii) extending the Commitment
Expiration Date to November 2, 1999, (iii) modifying certain of the financial
covenants set forth therein and (iv) otherwise amending and restating the terms
and conditions of the Original Loan Agreement to reflect the terms and
conditions set forth in the amendments thereto through the date hereof and
certain other mutually agreeable modifications; and
WHEREAS, the First Restated Loan Agreement as 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 to increase the maximum Commitment by $1,000,000 to $26,000,000, and as
further amended pursuant to a Second Amendment dated as of October 19, 1998 to
(i) temporarily increase the maximum Commitment by $4,000,000 to $30,000,000,
(ii) extend the Commitment Expiration Date to November 2, 2000, and (iii) modify
certain of the financial covenants set forth in the Credit Agreement; and
WHEREAS, the Borrower and the Guarantor have requested that the revolving
credit facility maintained pursuant to the First Restated Loan Agreement be
amended to increase the maximum Commitment by $5,000,000 to $35,000,000; and
WHEREAS, Fleet is agreeable to said amendment provided that Sovereign
agrees to make Loans to the Borrower, on a several basis with Fleet, 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 acknowledged, the terms and conditions of the
First 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
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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.
"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 Second 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.
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"Borrowing Base" means the sum, as reasonably determined by the Agent, of
(i) 80% of Eligible Receivables aged less than 91 days, and (ii) 40% of the book
value of raw materials, work-in-progress and finished goods Inventory, exclusive
of 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; 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 and (ii) the amount
of the Loan requested.
"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.
"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
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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 December 16, 1998.
"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 $35,000,000, as such amount may be
reduced pursuant to Section 5.2.
"Commitment Expiration Date" means November 2, 2000.
"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.
"Consolidated Fixed Charges" means, for any period, the sum of Consolidated
Interest Expense of the Borrower and its Subsidiaries and consolidated Operating
Lease Expense of the Borrower and its Subsidiaries 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.
5
<PAGE>
"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 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.
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"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 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 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
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<PAGE>
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, except to the
extent compliance with the Federal Assignment of Claims Act 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 and 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 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);
8
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(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 ("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.
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"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by the Borrower and/or the Guarantor.
"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.
"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.
10
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"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time.
"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 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.
"Guarantor" means collectively, Suprema Specialties West, Inc., and Suprema
Specialties Northeast, Inc., jointly and severally.
"Guaranty" means the joint and several guaranty of the 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
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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 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.
"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
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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.
(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 2.00% in
excess of the LIBOR Rate.
"Letter of Credit" means that certain irrevocable letter of credit (letter
of credit #JS167748) in a face amount of $400,000 issued by Fleet for the
account of the Borrower and for the benefit of SAFECO.
"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
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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 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 either Bank.
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"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
"Marketing Services Agreements" means any and all other 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.
"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.
"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.
"Mortgage" means that certain Mortgage dated even date herewith given by
the Borrower in favor of the Agent for the benefit of the Banks.
"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
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"Notes" means those certain Secured Revolving Notes dated December 16, 1998
made by the Borrower in favor of the Banks in the aggregate principal amount of
up to $35,000,000, which Notes are given in substitution for the Seventh
Restated Secured Revolving Note dated October 19, 1998 in the aggregate
principal amount of $30,000,000 (the "Restated Note"), but not in cancellation,
discharge or extinguishment of the indebtedness formerly evidenced by the
Restated Note and now evidenced by the Notes.
"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),
whether arising under the Loan Documents or otherwise (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.
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"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 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
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"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.
"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 Agent in its
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.
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"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 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 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 $10,000,000.00
TOTAL $35,000,000.00
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.
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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
Loan requested, which shall not be less than $50,000, 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
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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 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, and (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.
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.
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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) 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 $50,000
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 an 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
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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 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.
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
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hereunder (whether at maturity, by acceleration or otherwise), shall bear
interest, payable on demand, from the due date thereof 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
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excessive interest shall be applied to the reduction of the principal balance of
the Loan and not to the payment of interest. 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-eighth (.125%) 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 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.
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
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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.
SECTION 5: REDUCTIONS OR TERMINATION OF
COMMITMENT; PREPAYMENT
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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.
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;
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(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.
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),
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(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, 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 "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 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 Account. The Borrower agrees to fund the
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
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.
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
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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:
(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
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(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 "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 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:
(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
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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 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 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;
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(iv) apply all monies at any time received from the Borrower upon such part
of the 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
shall have the right to rank first for its full claim and to receive all
payments in respect thereof until its claim has been paid in full and the
Guarantor shall continue to be liable to the Agent for any balance of the
Obligations which may be owing to the Agent 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 Obligations from Borrower, prior to demanding payment from
the Guarantor.
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 Obligations and all other amounts payable
hereunder, (b) be binding
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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 Obligations including, but not limited to, all claims of any
nature or description arising out of or connected with the 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 Obligations due and
payable and although the 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.
SECTION 8: COLLATERAL
8.1 Security Interests. (a) To secure to the Banks the prompt and full
payment of all of the Obligations, and to secure to Fleet reimbursement and
repayment of the Letter of Credit, the Master Agreement Obligations and the
Fleet Mortgage Loan, 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 (subject to 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
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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 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
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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.
(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 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
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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.
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.
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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 whether existing now or hereafter arising, including, without
limitation all accounts held jointly with a third party. Borrower and Guarantor
each authorize the Agent 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 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
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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 Agent's further
security, 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 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
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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;
(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
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(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
(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
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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 Corporate Existence; Compliance with Law. 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.
9.2 Corporate Power; Authorization; Enforceable Obligations. 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).
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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 subject only to
Permitted Liens, if any, and the Agent has and at all times hereafter will have
a 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, 1998 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
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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.
(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
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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, 1998, 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 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
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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 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, 1998 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 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, 1998 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
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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.
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 (B)
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
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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 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 certified by a firm of independent
certified public accountants reasonably satisfactory to the Banks, 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 five (105) 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
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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 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).
Section 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 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);
(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
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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; and
(f) from time to time, provide to the Agent and the Banks the information
described in Section 10.30(b); and
(g) 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
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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 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
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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;
(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 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, 1998. 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.
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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) 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
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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.
10.13 Intentionally Deleted
10.14 Financial Covenants.
(a) Tangible Net Worth. Not permit its Tangible Net Worth as at the fiscal
quarters set forth below to be less than the amount set forth opposite such
fiscal quarter ending:
Fiscal Quarter Ended Minimum Tangible Net Worth
-------------------- --------------------------
12/31/98 $16,583,000
3/31/99 $17,394,000
6/30/99 $18,267,000
9/30/99 $19,159,000
12/31/99 $20,078,000
3/31/00 $21,017,000
6/30/00, $22,003,000
and each quarter thereafter;
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; and provided further, that the aggregate amount of all such reductions
may not exceed $1,600,000.
(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 less Subordinated Debt to consolidated Tangible Net Worth of the
Borrower and its Subsidiaries plus Subordinated Debt in a proportion not more
than 2.00 to 1.00 (total consolidated liabilities to be determined in accordance
with GAAP).
(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
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the current portion of long term debt at such time, plus actual 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 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 at any time, 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. (e) Consolidated Net Worth. Maintain a Consolidated
Net Worth of not less than $10,000,000 plus 50% of Consolidated Net Earnings for
each Fiscal Year commencing with the first Fiscal Year ending after December 31,
1998, but only to the extent that such amount derived from the application of
said percentage is a positive number.
10.15 Limitation on Liens. 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 and existing on the date
hereof 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 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 (collectively, the Liens described in clauses (a)
through (h) above are referred to herein as the "Permitted Liens"); and
(i) Liens to Fleet in connection with any Indebtedness to Fleet, including,
but not limited to, the Fleet Mortgage Loan, and any extensions, renewals and
modifications thereof.
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 of any new wholly owned Subsidiary of the Borrower that
executes and delivers in favor of the Agent a 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.
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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, 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
$1,600,000.00 in the aggregate for the Borrower and Guarantor, or (iii) make any
distribution of Assets to its stockholders as such whether in case, or 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 $1,600,000.00 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;
(ii) loans or advances by the Borrower to shareholders or employees of the
Borrower outstanding on June 30, 1998;
(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;
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(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;
(v) Indebtedness secured by Permitted Liens; and
(vi) Indebtedness incurred in connection with Capitalized Leases and
Equipment Operating Leases.
(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
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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 (1) in its capital structure, except
transactions allowed by Section 10.16 hereof or (2) in any of its businesses or
their objectives, purposes and operations.
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), 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
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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, to be tested annually, for Capital
Expenditures including payments made on account of Capitalized Leases and
Equipment Operating Lease Obligations. 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
--------------- --------------------
6/30/99 $ 8,000,000
6/30/00 $ 2,000,000
; provided, however, if the Capital Expenditure limit for Fiscal Year 1999 is
not fully utilized in such Fiscal Year, the unused balance may be carried
forward to Fiscal Year 2000.
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 Agent: (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,
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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.
(b) Simultaneously with delivery of the same to any holder of the New
Senior Subordinated Notes, the Borrower shall furnish to the Agent 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.
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 Notes;
(2) the Mortgage;
(3) the other Loan Documents;
(4) 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;
(5) an opinion of counsel for Borrower and Guarantor in form and
substance satisfactory to the Agent;
(6) Good Standing Certificates of the Borrower and Guarantor from the
Secretary of States of New Jersey, New York and California, respectively;
(7) 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;
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(8) Borrowing Base Certificate; and
(9) 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 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. Non-payment when due of any
principal of or interest due on the Notes or non-payment of any of Borrower's
Obligations when due and payable or declared due and payable; 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
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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 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
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respect to Indebtedness to any Bank, other than 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
(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; 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
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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 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 and the Letter of Credit
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 and the Letter of Credit 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
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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 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.
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(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 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
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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, 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
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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 Environmental 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 Environmental 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 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
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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,
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, 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
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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.
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
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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
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 2.02 shall be made from the Banks and
each reduction or termination of the amount of the Commitment under Section 2.06
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, the Master Agreement
Obligations and the Letter of Credit in accordance with the outstanding
principal balance, or amounts due under, the Loans, the Master Agreement
Obligations and the Letter of Credit held by the Banks respectively. Upon
payment in full of the Loans, the Master Agreement Obligations and the Letter of
Credit, any recovery received by the Agent from the Borrower or the Guarantors
or from
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its realization on the Collateral shall be applied to the payment of the Fleet
Mortgage Loan.
14.9 Agency Fee. In consideration of service 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 first such payment being due and payable on the date hereof,
and subsequent payments due and payable on the anniversary date of the date of
Closing.
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, the Agent
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 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, the Loan; (iv) amend the definition of the term
"Required Banks" or "Borrowing Base"; or (v) release any Collateral
(collectively, the "Material Changes"). 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 to be taken by Fleet, and the Agent may
unconditionally rely on any such deemed consent in taking any action in
furtherance thereof.
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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
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
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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 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
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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 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
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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.
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.
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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
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
78
<PAGE>
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 (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 executed 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.
79
<PAGE>
15.14 Coordination of Covenants with New Senior Subordinated Notes
Documentation. Without limiting the rights of the Agent pursuant to Section
15.13 hereof, to the extent that there exist a corollary provision in the
Subordinated Debt Documents to Sections 10.14(d), 10.14(e) or Section 10.27(b)
hereof, then such corollary provision of the Subordinated Debt Documents (and
any defined term used therein) shall be deemed incorporated by reference herein,
mutadis mutandis, as if fully set forth herein with the intent that such
corollary provision of the Subordinated Debt Documents (and defined terms) shall
govern, supersede and replace in all respects the corollary provision set forth
and herein (any defined term used herein) and be in all respects binding upon
the Borrower and enforceable by the Agent in accordance with its terms (ii)
until such time as amendment required pursuant to Section 15.13 hereof shall
have been executed and delivered by the Borrower, any More Favorable Provision
set forth in the Subordinated Debt documents (and any defined terms used
therein) shall be deemed incorporated by reference herein, mutadis mutandis, as
if fully set forth herein and in all respects binding upon the Borrower and
enforceable by the Agent in accordance with the terms thereof. In furtherance of
the incorporation by reference contemplated herein, it is hereby acknowledged
that only those provisions of the Subordinated Debt Documents set forth in the
documentation pertaining to the issuance of the New Senior Subordinated Notes
approved by the Agent shall be subject to such incorporation herein and any
subsequent amendment modification or waiver with respect to such provisions in
violation of Section 10.30 shall be ineffective as to, and non-binding upon, the
Agent.
15.15 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. This Agreement
restates in its entity the Original Loan Agreement, and the terms and conditions
of this Agreement supersede and replace the terms and conditions of the Original
Loan Agreement as of the date hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first written above.
80
<PAGE>
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
81
<PAGE>
FLEET BANK, N.A. ("Agent")
By: /s/ Edward J. Waterfield
----------------------------
Name: Edward J. Waterfield
Title: Senior Vice President
FLEET BANK, N.A. ("Fleet")
By: /s/ Edward J. Waterfield
----------------------------
Name: Edward J. Waterfield
Title: Senior Vice President
SOVEREIGN BANK ("Sovereign")
By: /s/ Owen P. McKenna
----------------------------
Name: Owen P. McKenna
Title: Vice President
82
<PAGE>
EXHIBIT A
FORM OF SECURED REVOLVING NOTE
$25,000,000.00 December 16, 1998
FOR VALUE RECEIVED, the undersigned, SUPREMA SPECIALTIES, INC., a
corporation duly organized and existing under the laws of the State of New York
(the "Borrower"), hereby unconditionally promises to pay to the order of
_______________________________ (the "Bank"), at the office of Fleet Bank, N.A.,
as Agent (the "Agent"), having an address at 208 Harristown Road, Glen Rock, New
Jersey 07452, for the account of the Bank, on the Termination Date, the
principal amount of up to _______________________________ ($______________) 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
Second 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:
-------------------------------
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
Date Loan Principal Interest Interest Paid Notation
- ---- ---- --------- -------- ------------- --------
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.
<PAGE>
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
<PAGE>
EXHIBIT C
FORM OF COVENANT COMPLIANCE CERTIFICATE
<PAGE>
SCHEDULE A
UCC Lien Search Report Jurisdictions
A. New Jersey
B. California
C. New York
D. Vermont
<PAGE>
SCHEDULE 8.2
Trademarks
1. Suprema Di Avellino
2. DiLatto
<PAGE>
SCHEDULE 8.3
Tradenames
Suprema
<PAGE>
SCHEDULE 8.4
Location of Inventory and Equipment
1. 510 East 35th Street
Paterson, New Jersey 07543-0280
2. 14253 South Airport Way
Manteca, California 95336
3. 30 Main Street,
Ogdensburg, New York 13669
4. 14293 South Airport Way
Manteca, California 95336
5. Christian Salvesen
1270 Shaw Road
Stockton, California 95205
6. Port Jersey Dist. Services
2 Colony Road
Jersey City, New Jersey 07305
7. Great Lakes of Ohio
9988 Kingman Road
Newbury, Ohio 44065
8. Burris Refrig. Services
3946 Federalsburg Highway
Federalsburg, Maryland 21632
9. ACCEM Warehouse
63-89 Hook Road
Bayonne, New Jersey 07002
10. D.G.B. Warehouse
970-I New Brunswick Avenue
Rahway, New Jersey 07065
11. Columbia Farms, Inc.
16 Sutton Road
Webster, Massachusetts 01570
12. East Coast Storage
1140 Polaris Street
Elizabeth, New Jersey 07201
<PAGE>
13. Nite Hawk
136-142 Rochelle Avenue
Rochelle Park, New Jersey 07662
14. Biazzo
1145 Edgewater Avenue
Ridgefield, New Jersey 07657
15. C&S
Old Ferry Road
Brattleboro, Vermont 05302
<PAGE>
SCHEDULE 8.4(A)
Location of Inventory and Equipment
for which Agent and Banks shall not require
Landlord/Warehouse Waiver
1. Biazzo
1145 Edgewater Avenue
Ridgefield, New Jersey 07657
2. C&S
Old Ferry Road
Brattleboro, Vermont 05302
<PAGE>
SCHEDULE 8.4(B)
Location of Books and Records
510 East 35th Street
Paterson, New Jersey 07543-0280
14253 So. Airport Way
Manteca, California
30 Main Street
Ogdensburg, New York 13669
<PAGE>
SCHEDULE 8.5
Chief Executive Office and Address
510 East 35th Street
Paterson, New Jersey
<PAGE>
SCHEDULE 8.6
Other Places of Business
14253 So. Airport Way
Manteca, California
30 Main Street
Ogdensburg, New York 13669
<PAGE>
SCHEDULE 10.20
Existing Indebtedness
None
================================================================================
MORTGAGE AND SECURITY AGREEMENT
by
SUPREMA SPECIALTIES, INC.
as Mortgagor
to
FLEET BANK, N.A.,
as agent
Dated: December 16, 1998
================================================================================
Record and Return to: Windels, Marx, Davies & Ives
120 Albany Street Plaza
New Brunswick, NJ 08901
Attn: Howard P. Lakind, Esq.
<PAGE>
MORTGAGE
THIS MORTGAGE AND SECURITY AGREEMENT (the "Mortgage"), is made this 16th
day of December, 1998,
BY
SUPREMA SPECIALTIES, INC., a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, having its principal
office at 510 East 35th Street, Paterson, New Jersey 07543-0280 (the
"Mortgagor"),
TO
FLEET BANK, N.A., a national banking association duly organized and validly
existing under the laws of the United States of America, having its principal
office located at 208 Harrison Road, Glen Rock, New Jersey 07452, as agent under
that certain Loan Agreement hereinafter referred to (the "Mortgagee").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Second Amended and Restated Revolving Loan,
Guaranty and Security Agreement dated as of the date hereof among the Mortgagor,
Suprema Specialties West, Inc., Suprema Specialties Northeast, Inc. (Suprema
Specialties West, Inc. and Suprema Specialties Northeast, Inc. are collectively
referred to herein as the "Guarantors"), the Mortgagee and the banks signatory
thereto (the "Banks") (the Second Amended and Restated Revolving Loan, Guaranty
and Security Agreement as same may hereafter, be modified, amended or restated,
is hereinafter referred to as the "Loan Agreement"), the Banks have severally
agreed to make loans to the Mortgagor in the aggregate principal amount of up to
$35,000,000 (the "Loans"), as evidenced by certain Secured Revolving Notes dated
the date hereof made by the Mortgagor in favor of the Banks (the "Notes"); and
WHEREAS, this Mortgage is given and made by the Mortgagor to the Mortgagee
as security for (i) the Loans evidenced by the Notes, (ii) the performance of
the terms, conditions and covenants of the Mortgagor set forth in the Notes, the
Loan Agreement, this Mortgage and the other loan documents executed in
connection therewith (hereinafter collectively referred to as the "Loan
Documents"), and (iii) the payment of all other indebtedness, monetary
obligations, liabilities and duties of any kind of the Mortgagor, direct or
indirect, absolute or contingent, joint or several, due or not due, liquidated
or not liquidated, arising under the Notes, the Loan Agreement, this Mortgage,
and the other Loan Documents.
NOW, THEREFORE, in order to induce the Mortgagee to make the Loans to the
Mortgagor and to secure the payment of the
<PAGE>
indebtedness of the Mortgagor to the Mortgagee evidenced by the Notes made by
the Mortgagor to the order of the Banks and to secure the performance by the
Mortgagor of all of its other obligations and covenants pursuant to the Notes,
the Loan Agreement and the other Loan Documents, and to assure payment of all
other indebtedness, monetary obligations, liabilities and duties of any kind of
the Mortgagor, direct or indirect, absolute or contingent, joint or several, due
or not due, liquidated or not liquidated, arising under the Notes, the Loan
Agreement, this Mortgage, and the other Loan Documents, the Mortgagor has
mortgaged, given, granted, released, assigned, transferred and set over unto the
Mortgagee, and by these presents does hereby mortgage, give, grant, release,
assign, transfer and set over unto the Mortgagee, its successors and assigns
forever, the following described property and rights:
ALL those certain lots, pieces or parcels of land and premises situate,
lying and being in the City of Paterson, County of Passaic, and State of New
Jersey, as more particularly described on SCHEDULE "A" attached hereto and made
a part hereof (the "Premises"); and
TOGETHER with all buildings, structures, and improvements of every nature
whatsoever now or hereafter situated on the Premises (the "Improvements"); and
TOGETHER with all and singular the tenements, hereditaments, rights-of-way,
privileges, liberties, easements, riparian rights, woods, waters, watercourses,
mineral, oil and lights and appurtenances thereunto belonging, or in any wise
appertaining, and the reversion and reversions and remainders, rents, income,
issues and profits thereof; and
TOGETHER with all right, title and interest of the Mortgagor, now owned or
hereafter acquired, in and to any streets, the land lying in the bed of any
streets, roads or avenues, opened or proposed, in front of, adjoining or
abutting the Premises to the center line thereof, and all strips and gores
within or adjoining the Premises, easements and rights-of-way, public or
private, all sidewalks and alleys, now or hereafter used in connection with the
Premises or abutting the Premises; and
TOGETHER with all furniture, fixtures, equipment and other articles of
personal property owned by the Mortgagor and now or hereafter attached to or
used in connection with, or with the operation of, any improvements located on
the Premises, as to which this Mortgage constitutes a security agreement under
the New Jersey Uniform Commercial Code (in addition to and not in lieu of any
other security agreement between the parties), including, without limitation,
all building supplies and materials, furniture, fixtures and equipment; all
furnaces, motors, dynamos, incinerators, machinery, generators, partitions,
elevators, steam
2
<PAGE>
and hot water boilers, heating, air conditioning equipment, wall cabinets,
lighting and power plants, coal and oil burning apparatus, pipes, plumbing,
radiators, sinks, bath tubs, water closets, refrigerators, gas and electrical
fixtures, stoves, ranges, shades, screens, blinds, washing machines, clothes
dryers, dishwashers, freezers, awnings, vacuum cleaning systems, sprinkler
systems or other fire prevention or extinguishing apparatus and materials,
including all accessories, additions, substitutions and replacements thereof,
and all cash and non-cash proceeds thereof, all of which shall be deemed to be
and remain and form a part of the Premises and are covered by the lien of this
Mortgage. If the lien of this Mortgage shall be subject to a conditional bill of
sale, chattel mortgage, or other security interest covering any such property,
then all the right, title and interest of the Mortgagor in and to such property,
together with the benefits of any deposits or payments now or hereafter made
thereon, are and shall be covered by the lien of this Mortgage; and
TOGETHER with any and all awards, damages, payments and other compensation,
and any and all claims therefor and rights thereto, which may result from taking
or injury by virtue of the exercise of the power of eminent domain, or any
damage, improvements, injury or destruction in any manner caused to the Premises
or thereon, or any part thereof; and
TOGETHER with all the estate, right, title, interest, property, possession,
claim and demand whatsoever of the Mortgagor, as well in law as in equity, of,
in and to the same and every part and parcel thereof with the appurtenances
(hereinafter the Premises and all the Improvements, rights, interests and
benefits that go with it as described above shall be collectively referred to as
the "Mortgaged Premises").
TO HAVE AND TO HOLD the above-granted Mortgaged Premises unto the
Mortgagee, its successors and assigns, to its and their own proper use, benefit
and behoof forever.
PROVIDED THAT if the Mortgagor shall well and truly pay, or there shall
otherwise be paid to the Mortgagee, the indebtedness evidenced by the Notes
secured hereby at the time and in the manner provided in the Notes and/or this
Mortgage, and the Mortgagor shall well and truly abide by and comply with each
and every covenant and condition set forth in this Mortgage, the Notes and the
other Loan Documents, then these presents and the lien and interest hereby
transferred and assigned shall cease, terminate and be void. The Mortgagee shall
release the Mortgaged Premises and renounce any other rights granted to it
herein, and shall execute at the request of the Mortgagor a release of this
Mortgage and any other instrument to that effect deemed necessary or desirable,
upon payment and performance being made on the indebtedness and covenants
secured hereby.
3
<PAGE>
This is a Second Mortgage subject and subordinate to that certain Mortgage
dated March 29, 1996 which was recorded in the Office of the Register of Passaic
County on April 17, 1996, in Volume 159, Page 053, et seq., as amended and
modified.
ARTICLE I. THE MORTGAGOR REPRESENTS, WARRANTS, COVENANTS AND AGREES WITH
THE MORTGAGEE AS FOLLOWS:
Section 1. Definitions. In this Mortgage, all words and terms not defined
herein shall have the respective meanings and be construed herein as provided in
the Notes. Any reference to a provision of the Notes shall be deemed to
incorporate that provision as a part hereof in the same manner and with the same
effect as if the same were fully set forth herein.
Section 2. Interpretation and Construction. The provisions of the Notes and
the Loan Agreement shall be applied to this Mortgage in the same manner as
applied therein.
Section 3. Beneficiaries. Nothing herein expressed or implied is intended
or shall be construed to confer upon, or to give to, any person other than the
Mortgagor and the Mortgagee any right, remedy or claim under or by reason
hereof. All covenants, stipulations and agreements herein contained by and on
behalf of the Mortgagor shall be for the sole and exclusive benefit of the
Mortgagee.
Section 4. Indebtedness. The Mortgagor shall pay the indebtedness evidenced
by the Notes and the Loan Agreement and secured by this Mortgage at the time and
in the manner provided for the payment of the same in the Notes and the Loan
Agreement.
Section 5. No Credit for Taxes Paid. The Mortgagor shall not be entitled to
any credit against payments due hereunder by reason of the payment of any taxes,
assessments, water or sewer rent or other governmental charges levied inst the
Mortgaged Premises.
Section 6. Seisin and Warranty. The Mortgagor is seized of an indefeasible
estate in fee simple in the Mortgaged Premises, and Mortgagor warrants the title
to the Mortgaged Premises, subject to those title exceptions set forth in title
commitment no. 96-LT-0016 issued by Stewart Title Guaranty Company, as continued
through the date hereof. The Mortgagor hereby covenants that the Mortgagor shall
(i) preserve such title and the validity and priority of the lien of this
Mortgage and shall forever warrant and defend the same to the Mortgagee against
all lawful claims whatsoever and the claims of all persons or entities
(hereinafter collectively referred to as "Persons") whomsoever claiming or
threatening to claim the same or any part thereof, and (ii) make, execute,
acknowledge and deliver all such further or
4
<PAGE>
other deeds, documents, instruments or assurances, and cause to be done all such
further acts and things as may at any time hereafter be reasonably required by
the Mortgagee to fully protect the lien of this Mortgage.
Section 7. Insurance. (i) The Mortgagor shall obtain, or cause to be
obtained, and shall maintain or cause to be maintained, at all times throughout
the term of this Mortgage, insurance on the Mortgaged Premises in such manner
and against such loss, damage and liability, including liability to third
parties, as is customary with Persons operating properties similar to the
Mortgaged Premises and in the same or similar business and located in the same
or similar areas. Such insurance shall include, without limitation, the
following:
(a) Commercial general liability insurance (including garage liability,
innkeeper's liability, products liability and elevator liability, if applicable)
insuring against any and all liability of the Mortgagor or claims of liability
of Mortgagor arising out of, occasioned by or resulting from any accident or
otherwise resulting in or about the Mortgaged Premises and the adjoining
streets, sidewalks and passageways, including XCU, blanket contractual liability
and completed operations coverage, in such amounts as are usually carried by
Persons operating properties similar to the Mortgaged Premises, but in any event
with a combined single limit of not less than $1,000,000.00 for personal injury
and property damage with respect to any one occurrence, which amount shall be
increased from time to time to reflect what a reasonably prudent Person
operating property similar to the Mortgaged Premises would carry, together with
excess/umbrella liability insurance on a "follow form" basis with minimum limits
of $10,000,000.00;
(b) Loss or damage by perils customarily included under standard "all risk"
policies, including business interruption and rental insurance if applicable,
covering all perils and contingencies as may be required by the Mortgagee,
including a so-called "agreed amount" replacement cost endorsement insuring one
hundred percent (100%) of the replacement cost of the Improvements;
(c) For any period during which construction is being performed on the
Mortgaged Premises, "Builder's All-Risk" coverage policy of fire and hazard
insurance (completed value form) with respect to the Mortgaged Premises,
including vandalism and malicious mischief, which insurance policy shall contain
a replacement cost endorsement;
(d) If the Mortgaged Premises are required to be insured pursuant to the
Flood Disaster Protection Act of 1973 or the National Flood Insurance Act of
1968, and the regulations
5
<PAGE>
promulgated thereunder, because it is located in an area which has been
identified by the Secretary of Housing and Urban Development as a Flood Hazard
Area, then a flood insurance policy covering the Mortgaged Premises in an amount
not less than the outstanding principal balance of the Notes, or the maximum
limit of coverage available, whichever amount is less;
(e) Boiler and machinery insurance covering pressure vessels, air tanks,
boilers, machinery, pressure piping, heating, air conditioning and elevator
equipment, provided that the Mortgaged Premises contains equipment of such
nature.
(ii) Each insurance policy required under this Section 7 shall be written
by insurance companies authorized or licensed to do business in the State of New
Jersey having an Alfred M. Best Company, Inc. rating of A or higher and a
financial size category of not less than XII, and shall be on such forms and
written by such companies as shall be reasonably approved by the Mortgagee. Such
insurance coverage may be effected under overall blanket or excess coverage
policies of the Mortgagor, except as to public liability insurance which may be
effected under combined single limit.
(iii) Each insurance policy required under this Section 7 providing
insurance against loss or damage to property shall be written or endorsed so as
to (a) contain a standard mortgagee or secured party endorsement, as the case
may be, or its equivalent, (b) make all losses payable directly to the
Mortgagee, without contribution, and (c) provide for deductibles reasonably
satisfactory to the Mortgagee.
(iv) Each insurance policy required under this Section 7 and providing
public liability coverage shall be written and endorsed so as to name the
Mortgagee as an additional insured, as its interest may appear.
(v) Each insurance policy required under this Section 7 shall contain a
provision to the effect that such policy shall not lapse or be terminated,
cancelled, altered or in any way limited in coverage or reduced in amount unless
the Mortgagee is notified in writing at least thirty (30) days prior to such
lapse, termination, cancellation, alteration, limitation or reduction. At least
thirty (30) days prior to the expiration of any such policy, the Mortgagor shall
furnish evidence satisfactory to the Mortgagee that such policy has been renewed
or replaced or is no longer required by this Section 7.
(vi) Each insurance policy required under this Section 7 (except flood
insurance written under the federal flood insurance program) shall contain an
endorsement or agreement by the insurer that any loss shall be payable to the
Mortgagee, as its interest
6
<PAGE>
may appear, in accordance with the terms of such policy notwithstanding any act
or negligence of the Mortgagor which might otherwise result in forfeiture of
said insurance and the further agreement of the insurer waiving all rights of
set-off, counterclaim, deduction or subrogation against the Mortgagor (so as not
to interfere with the Mortgagee's rights).
(vii) In the event of loss or damage to the collateral, the proceeds of any
insurance provided hereunder shall be applied as set forth in Section 14 of this
Article I; in the event of a public liability claim, the proceeds of any
insurance provided hereunder shall be applied toward extinguishing or satisfying
the liability and expenses incurred in connection therewith.
(viii) The Mortgagor shall not take out any separate or additional
insurance with respect to the Mortgaged Premises which is contributing in the
event of loss unless it is properly compatible with all of the requirements of
this Section 7.
Section 8. Preservation, Maintenance and Repair. All Improvements which are
presently erected and in the future are to be erected upon the Mortgaged
Premises, shall, at the Mortgagor's own cost and expense, be kept in good and
substantial repair, working order and condition, and the Mortgagor shall from
time to time make, or cause to be made, all necessary and proper repairs,
replacements, improvements and betterments thereto. The Mortgagor shall not
remove, demolish, materially alter or discontinue the use of any material part
of the Mortgaged Premises without the prior express written consent of the
Mortgagee, except that the Mortgagor shall from time to time make such
substitutions, additions, modifications and improvements as may be necessary and
as shall not impair the structural integrity, operating efficiency and economic
value of the Mortgaged Premises. All alterations, replacements, renewals or
additions made pursuant to this Section 8 shall automatically become and
constitute a part of the Mortgaged Premises and shall be covered by the lien of
this Mortgage. The Mortgagor shall not do, and shall not permit to be done, any
act which may in any way impair or weaken the security under this Mortgage.
Section 9. Declaration of No Offset. The Mortgagor represents to the
Mortgagee that the Mortgagor has no knowledge of any offsets, counterclaims or
defenses to the principal indebtedness secured hereby, or to any part thereof,
or the interest thereon, either at law or in equity. The Mortgagor shall, within
fifteen (15) business days upon request by mail, furnish a duly acknowledged
written statement in form reasonably satisfactory to the Mortgagee stating
either that the Mortgagor knows of no offsets or defenses existing against such
indebtedness, or if such offsets or defenses are alleged to exist,
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the nature and extent thereof, and in either case, such statement shall set
forth the amount due hereunder.
Section 10. No Removal of Fixtures. The Mortgagor shall not remove or
suffer to be removed from the Mortgaged Premises any fixtures owned by the
Mortgagor as the term "fixtures" (other than trade fixtures) is defined by the
law in New Jersey presently, or in the future to be incorporated into, installed
in, annexed or affixed to the Mortgaged Premises (unless such fixtures have been
replaced with similar fixtures of equal or greater utility and value or which
have become obsolete).
Section 11. Security Agreement. This Mortgage constitutes a security
agreement under the New Jersey Uniform Commercial Code, and the Mortgagor hereby
grants to the Mortgagee a security interest in all furniture, fixtures,
equipment and personal property and all other machinery, appliances,
furnishings, tools and building materials now owned or hereafter acquired by the
Mortgagor, and installed or to be installed in or on the Mortgaged Premises and
used or to be used in the management or operation of the Mortgaged Premises, and
all substitutions, replacements, additions and accessions thereto, together with
all cash and non-cash proceeds thereof. The Mortgagor shall execute, deliver,
file and refile any financing statements, continuation statements, or other
security agreements that the Mortgagee may require from time to time to confirm
the lien of this Mortgage with respect to such property. Without limiting the
foregoing, the Mortgagor hereby irrevocably constitutes and appoints the
Mortgagee with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority (coupled with an
interest) in the place and stead of such Mortgagor and in the name of such
Mortgagor or in the Mortgagee's own name, for the Mortgagee to execute, deliver
and file such instruments for and on behalf of the Mortgagor. Notwithstanding
any release of any or all of that property included in the Mortgaged Premises
which is deemed "real property", and proceedings to foreclose this Mortgage or
its satisfaction of record, the terms hereof shall survive as a security
agreement with respect to the security interest created hereby and referred to
above until the repayment or satisfaction in full of the obligations of the
Mortgagor as are now or hereafter secured hereby.
Section 12. Taxes. The Mortgagor shall prepare and timely file all federal,
state and local tax returns required to be filed by the Mortgagor and promptly
pay and discharge or cause to be promptly paid and discharged all taxes,
assessments, municipal or governmental rates, charges, impositions, liens and
water and sewer rents or any part thereof, heretofore or hereafter imposed upon
the Mortgagor or in respect of any of the Mortgagor's property and assets before
the same shall become in default, as
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well as all lawful claims which, if unpaid might become a lien or charge upon
such property and assets or any part thereof, except for those taxes,
assessments and other governmental charges then being contested in good faith by
the Mortgagor by appropriate proceedings (provided that such contest shall not
result in a new lien being placed on any of the Mortgagor's properties or assets
or result in any of the Mortgagor's properties or assets being subject to loss
or forfeiture as a result of the nonpayment of such items during the continuance
of said contest) and for which the Mortgagor has maintained adequate reserves or
accrued the estimated liability on the Mortgagor's balance sheets for payment
thereof. The Mortgagor shall submit to the Mortgagee, upon request, an affidavit
signed by the Mortgagor certifying that, to the best of the Mortgagor's
knowledge, all current federal and state information income tax returns have
been filed to date and all real property taxes, assessments, governmental
charges or levies and other lawful claims with respect to the Mortgagor's
properties and assets have been paid to date. Upon the occurrence of an Event of
Default, the Mortgagor shall, at the request of the Mortgagee, in addition to
the regular payment on the Notes, pay into a non-interest bearing account held
by the Mortgagee, at the times when the monthly installment of principal and
interest is payable, an amount equal to one-twelfth (1/12th) of the annual
estimated real estate taxes levied with respect to the Mortgaged Premises so
that funds are available to pay said real estate taxes and assessments when due,
and such sum shall be held by the Mortgagee for the payment of such real estate
taxes and assessments as they become due. If the amount so estimated shall prove
insufficient, then the Mortgagor shall pay the required deficiency upon demand.
Section 13. Change in Laws. During the term of this Mortgage, in the event
of the passage after the date of this Mortgage of any law of the State of New
Jersey, or any other governmental entity, changing in any way the laws now in
force for the taxation of mortgages, or debts secured thereby, for state or
local purposes, or the manner of the operation of any such taxes, so as to
affect the interest of the Mortgagee, then and in such event, the Mortgagor
shall bear and pay the full amount of such taxes, provided that if for any
reason payment by the Mortgagor of any such new or additional taxes would be
unlawful or if the payment thereof would constitute usury or render the Loans or
indebtedness secured hereby wholly or partially usurious under any of the terms
or provisions of the obligation secured hereunder, or this Mortgage, or
otherwise, the Mortgagee may, at the Mortgagee's option, declare the whole sum
secured by this Mortgage, with interest thereon, to be immediately due and
payable, or the Mortgagee may, at the Mortgagee's option, pay that amount or
portion of such taxes as renders the Loans or indebtedness secured hereby
unlawful or usurious, in which event the Mortgagor shall
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concurrently therewith pay the remaining lawful and nonusurious portion or
balance of said taxes.
Section 14. Damage, Destruction and Condemnation.
(i) If all or any part of the Mortgaged Premises shall be damaged or
destroyed, or if title to or the temporary use of the whole or any part of any
of the Mortgaged Premises shall be taken or condemned by a competent authority
for any public use or purpose, there shall be no abatement or reduction in the
amounts payable by the Mortgagor hereunder or under the Notes, and the Mortgagor
shall continue to be obligated to make such payments.
(ii) If the Mortgaged Premises or any part thereof is partially or totally
damaged or destroyed by fire or any other cause, the Mortgagor shall give prompt
written notice thereof to the Mortgagee. Upon the occurrence of such damage or
destruction to the Mortgaged Premises, where the damage to the Mortgaged
Premises exceeds $25,000.00, the Mortgagor shall have no claim against the
insurance proceeds, or be entitled to any portion thereof, and all rights to the
insurance proceeds are hereby assigned to the Mortgagee to be applied on account
of the indebtedness secured hereby that remains unpaid. If the damage exceeds
$25,000.00, the Mortgagee shall have the option, in its sole discretion, either
(a) to settle and adjust any claim under any insurance policies without the
consent of Mortgagor or (b) to allow Mortgagor to settle and adjust such claim
without the consent of Mortgagee; provided that in either case Mortgagee shall,
and is hereby authorized to, collect and receive any such insurance proceeds;
and the expenses incurred by Mortgagee in the adjustment and collection of
insurance proceeds shall be added to the indebtedness hereby, and shall be
reimbursed to Mortgagee upon demand or, in the event and to the extent
sufficient proceeds are available, shall be deducted and retained by Mortgagee
from said insurance proceeds prior to any other application thereof. Each
insurance company which has issued an insurance policy is hereby authorized and
directed to make payment for all losses covered by an insurance policy to
Mortgagee alone, and not to Mortgagee and Mortgagor jointly.
(iii) Mortgagee shall, in its sole discretion, elect to apply the net
proceeds of insurance policies consequent upon any casualty to either (a) to
reduce the indebtedness secured hereby or (b) to reimburse Mortgagor for the
cost of restoring, repairing, replacing or rebuilding (hereinafter collectively
referred to as "Restoring") the loss or damage to the Mortgaged Premises. In the
event Mortgagee elects to use such net proceeds to reimburse Mortgagor for the
costs of Restoring, then such reimbursement shall be subject to the conditions
and in accordance with the provisions of Section 14(viii) hereof. If Mortgagee
elects to apply the net proceeds of insurance to the indebtedness
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secured hereby and such proceeds do not discharge the indebtedness in full, the
entire indebtedness shall become immediately due and payable with interest
thereon at the Default Rate.
(iv) In the event net insurance proceeds are made available to Mortgagor
for the purpose of Restoring the Mortgaged Premises, Mortgagor hereby covenants
to restore, repair, replace or rebuild the Mortgaged Premises, to be of at least
equal value, and of substantially the same character as prior to such loss or
damage, all to be effected in accordance with plans, specifications and
procedures to be first submitted to Mortgagee and subject to Mortgagee's
approval. In the event the insurance proceeds are insufficient to pay the
aforementioned restoration costs in full, then Mortgagor shall pay all costs of
such Restoring which are in excess of such net insurance proceeds.
(v) Any portion of the insurance proceeds remaining after payment in full
of the obligations secured hereby shall be paid to Mortgagor or as ordered by a
court of competent jurisdiction.
(vi) At the written request of Mortgagor, the insurance proceeds held by or
for the benefit of Mortgagee shall be held in an interest bearing account.
(vii) In the event of foreclosure of the Mortgage or other transfer of
title to the Mortgaged Premises in extinguishment of the obligations secured
hereby, all right, title and interest of Mortgagor in and to any insurance
policies then in force shall pass to the purchaser of the Mortgaged Premises in
foreclosure, or the grantee of a deed in lieu of foreclosure, and Mortgagor
hereby appoints Mortgagee its attorney-in-fact with full irrevocable authority
(coupled with an interest), in Mortgagor's name, to assign and transfer all such
policies and proceeds to such purchaser or grantee.
(viii) If Mortgagee elects to apply the net proceeds of insurance policies
to reimburse the costs of Restoring to Mortgagor in accordance with Section
14(iii)(b) and provided no Event of Default has occurred and is then continuing,
the net insurance proceeds held by Mortgagee for Restoring of the Mortgaged
Premises shall be disbursed from time to time upon Mortgagee being furnished
with (a) evidence reasonably satisfactory to it of the estimated cost of
completion of the Restoring, (b) funds (or assurance satisfactory to Mortgagee
that such funds are available) sufficient in addition to the net proceeds of
insurance, to complete and fully pay for the completion of the Restoring and (c)
such architect's certificates, contractors', mechanics' and materialmen's
waivers of lien, contractor's sworn statements, title insurance endorsements,
plats of survey and such other evidence of cost, payment and performance as
Mortgagee may require and approve; and Mortgagee, in any event,
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may require that all plans and specifications for such Restoring be submitted to
and approved by Mortgagee prior to commencement of any work, which consent shall
not be unreasonably withheld or delayed. No payment made prior to the final
completion of the Restoring shall, when added to all previous payments, exceed
ninety percent (90%) of the value of the work performed from time to time, as
such value shall be determined by Mortgagee in its sole and exclusive judgment;
funds received by Mortgagee pursuant to subparagraph (b) above shall be
disbursed prior to disbursement of net insurance proceeds, except as may
otherwise be provided herein; and at all times the undisbursed balance of such
proceeds remaining in the hands of Mortgagee, together with funds deposited or
irrevocably committed to the satisfaction of completion of the Restoring, free
and clear of all liens on proceeds held by Mortgagee after payment of such costs
of Restoring, shall be paid to Mortgagor. If there is an Event of Default while
Mortgagee is holding funds for Restoring, Mortgagee may, at its sole option,
apply such funds against the indebtedness secured hereby, in such order,
proportion and priority as Mortgagee may elect in its sole and absolute
discretion.
(ix) Notwithstanding anything to the contrary contained in this Mortgage,
if the Improvements shall be damaged or destroyed (in whole or in part) by any
one fire or other casualty, Mortgagee shall, in accordance with the provisions
of Section 14(viii) above, make the net amount of all insurance proceeds
received by Mortgagee as a result of such damage or destruction after deduction
of the reasonable costs and expense, if any, in collecting the insurance
proceeds, available for Restoring, provided that: (a) no Event of Default shall
have occurred and shall be continuing under the Mortgage, the Loan Agreement,
the Notes or the other Loan Documents; (b) Mortgagee shall be reasonably
satisfied that the Restoring can be completed on or before one hundred eighty
(180) days after the occurrence of such damage or casualty; (c) the maturity
date of the Notes is not less than 18 months from the date of such damage or
casualty; and (d) Mortgagor shall execute and deliver to Mortgagee a completion
guaranty in form and substance satisfactory to Mortgagee pursuant to the
provisions of which Mortgagor shall guaranty to Mortgagee the lien-free (other
than the lien presently held by Mortgagee) completion by Mortgagor of the
Restoring in accordance with the provisions of this Mortgage.
(x) Any and all awards (the "Awards") heretofore or hereafter made or to be
made to the present, or any subsequent, owner of the Mortgaged Premises, by any
governmental or other lawful authority for the taking by condemnation or eminent
domain, of all or any part of the Mortgaged Premises (including any award from
the United States government at any time after the allowance of a claim
therefor, the ascertainment of the amount thereto, and the issuance of a warrant
for payment thereof), or the proceeds
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from a sale in lieu of such condemnation or eminent domain are hereby assigned
by Mortgagor to Mortgagee, which Awards Mortgagee is hereby authorized to
collect and receive from the condemnation authorities, and Mortgagee is hereby
authorized to give appropriate receipts and acquittance therefor. Mortgagor
shall give Mortgagee immediate notice of the actual or threatened commencement
of any condemnation or eminent domain proceedings affecting all or any part of
the Mortgaged Premises and shall deliver to Mortgagee copies of any and all
papers served in connection with any such proceedings. Mortgagor further agrees
to make, execute and deliver to Mortgagee, at any time upon request, free, clear
and discharged of any encumbrance of any kind whatsoever (except the rights of
holders of any junior mortgage loans expressly consented to in writing by
Mortgagee, provided such rights are expressly subordinate to the rights of
Mortgagee), any and all further assignments and other instruments deemed
reasonably necessary by Mortgagee for the purpose of validly and sufficiently
assigning to Mortgagee all Awards and other compensation heretofore and
hereafter made to Mortgagor for any taking, either permanent or temporary, under
any such proceeding. If any portion of or interest in the Mortgaged Premises is
taken by condemnation or eminent domain, either temporarily or permanently, and
the remaining portion of the Mortgaged Premises is not, in the judgment of
Mortgagee, an architectural and economic unit of the same character and is not
materially less valuable than the same was prior to the taking, then, at the
option of Mortgagee, the entire indebtedness shall immediately become due and
payable. After deducting from the Award for such taking all of its expenses
incurred in the collection and administration of the Award, including reasonable
attorney's fees and disbursements, Mortgagee shall be entitled to apply the net
proceeds towards repayment of such portion of the indebtedness as it deems
appropriate without affecting the lien of the Mortgage. In the event of any
partial taking of the Mortgaged Premises or any interest in the Mortgaged
Premises which in the judgment of Mortgagee leaves the Mortgaged Premises as an
architectural and economic unit of the same character and not materially less
valuable than the same was prior to the taking, and provided no Event of Default
has occurred and is then continuing, the Mortgagee shall apply the Award to
reimburse Mortgagor for the cost of restoration and rebuilding the Mortgaged
Premises in accordance with plans, specifications and procedures which must be
submitted to and approved by Mortgagee, and such Award shall be disbursed in the
same manner as is provided in Section 14 (viii) hereof for the application of
insurance proceeds, provided that any surplus after payment of such costs shall
be applied on account of the indebtedness. If the Award is not applied for the
reimbursement of such restoration costs, the Award shall be applied against the
indebtedness, in such order or manner as Mortgagee shall elect.
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Section 15. Compliance with Laws. The Mortgagor agrees to comply, and to
cause all tenants of all or any portion of the Mortgaged Premises to comply,
with all laws, rules, regulations and ordinances made or promulgated by lawful
authority which are now or may hereafter be applicable to the Mortgaged Premises
within such time as may be required by law.
Section 16. Indemnification. The Mortgagor hereby agrees to and does hereby
indemnify, protect, defend and save harmless the Mortgagee and its trustees,
officers, employees, agents, attorneys and shareholders (the "Indemnified
Parties") from and against any and all losses, damages, expenses or liabilities
of any kind or nature and from any suits, claims or demands, including
reasonable counsel fees incurred in investigating or defending such claim,
suffered by any of them and caused by, relating to, arising out of, resulting
from, or in any way connected with this Mortgage and the transactions
contemplated herein (unless caused by the negligence or willful misconduct of
the Indemnified Parties), including, without limitation, (i) disputes between
any architect, general contractor, subcontractor, materialman or supplier, or on
account of any act or omission to act by the Indemnified Parties in connection
with this Mortgage, or (ii) losses, damages, expenses or liabilities sustained
by the Indemnified Parties in connection with any environmental sampling or
cleanup of the Mortgaged Premises required or mandated by any federal, state or
local law, ordinance, rule or regulation, including, without limitation, the
Environmental Laws, as hereinafter defined. In case any action shall be brought
against an Indemnified Party based upon any of the above and in respect to which
indemnity may be sought against the Mortgagor, the Indemnified Party shall
promptly notify the Mortgagor in writing, and the Mortgagor shall assume the
defense thereof, including the employment of counsel selected by the Mortgagor
and reasonably satisfactory to the Indemnified Party, the payment of all costs
and expenses and the right to negotiate and consent to settlement. Upon
reasonable determination made by the Indemnified Party, the Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof; provided, however, that said Indemnified
Party shall pay the costs and expenses incurred in connection with the
employment of separate counsel. The Mortgagor shall not be liable for any
settlement of any such action effected without the Mortgagor's consent, but if
settled with the Mortgagor's consent, or if there be a final judgment for the
claimant in any such action, the Mortgagor agrees to indemnify and save harmless
the Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. The provisions of this Section 16 shall survive the
termination of this Mortgage and the repayment of the Notes.
Section 17. Assignment of Rents. The Mortgagor hereby absolutely and
unconditionally assigns to the Mortgagee the rents,
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issues and profits arising out of or from the Mortgaged Premises, and the
Mortgagor grants to the Mortgagee the right to enter upon and to take possession
of the Mortgaged Premises for the purpose of collecting the same and to let the
Mortgaged Premises or any part thereof, and to apply the rents, issues and
profits, after payment of all necessary charges and expenses, on account of the
indebtedness secured hereby. This assignment and grant shall continue in effect
until this Mortgage is paid in full and discharged of record. The Mortgagee
hereby waives the right to enter upon and to take possession of the Mortgaged
Premises for the purpose of collecting said rents, issues and profits, and the
Mortgagor shall be entitled to collect, receive, retain and use said rents,
issues and profits until the occurrence of an Event of Default under this
Mortgage, but such right of the Mortgagor may be revoked by the Mortgagee upon
the occurrence of an Event of Default on five (5) days written notice. The
Mortgagor shall not, without the written consent of the Mortgagee, receive or
collect rent from any tenant of the Mortgaged Premises or any part thereof for a
period of more than one (1) month in advance, and in the event of the occurrence
of an Event of Default under this Mortgage, the Mortgagor shall pay monthly in
advance to the Mortgagee or to any receiver appointed to collect said rents,
issues and profits, the fair and reasonable rental value for the use and
occupation of the Mortgaged Premises or of such part thereof as may be in the
possession of the Mortgagor, and upon default in any such payment the Mortgagor
shall vacate and surrender the possession of the Mortgaged Premises to the
Mortgagee or to such receiver. If the Mortgagor does not so vacate and surrender
the Mortgaged Premises then the Mortgagor may be evicted by summary proceedings.
Notwithstanding anything above to the contrary, in the event of a conflict or
inconsistency between this Section 17 and the Absolute Assignment of Leases and
Rents granted the date hereof by Mortgagor to Mortgagee, the terms of the
Absolute Assignment of Leases and Rents shall govern.
Section 18. Advances. Upon the occurrence of an Event of Default by the
Mortgagor under this Mortgage, the Loan Agreement and/or the Notes, the
Mortgagee may at its option remedy such Event of Default, and all payments made
by the Mortgagee to remedy an Event of Default by the Mortgagor (including
reasonable attorney's fees) and the total of any payment or payments due from
the Mortgagor to the Mortgagee which are in default, together with interest
thereon at the Default Rate set forth in the Notes and the Loan Agreement (such
interest to be calculated from the date of such advance to the date of payment
thereof by the Mortgagor), shall be added to the debt secured by this Mortgage
until paid, and the Mortgagor covenants to repay the same to the Mortgagee on
the next interest payment date of the Notes. Any such sums and the interest
thereon shall be a lien on the Mortgaged Premises prior to any other lien
attaching to or accruing subsequent to the lien of this Mortgage. All monies
paid, and all expenses paid or
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incurred, including attorneys' fees and disbursements and other monies advanced
by Mortgagee to protect the Mortgaged Premises and the lien of this Mortgage, or
to complete construction, furnishing and equipping or to rent, operate and
manage the Mortgaged Premises or to pay any such operating costs and expenses
thereof or to keep the Mortgaged Premises operational and useable for their
intended purpose shall be so much additional debt secured by the Mortgage,
whether or not the indebtedness, as a result thereof, shall exceed the original
principal balance set forth herein, and shall become immediately due and payable
on the next interest payment date of the Notes, and with interest thereon at the
Default Rate set forth in the Notes and the Loan Agreement. Inaction of
Mortgagee shall never be considered as a waiver of any right accruing to it on
account of any Event of Default nor shall the provisions of this Section 18 or
any exercise by Mortgagee of its rights hereunder prevent any default from
constituting an Event of Default. Nothing contained herein shall be construed to
require Mortgagee to advance or expend monies for any purpose mentioned herein,
or for any other purpose, and any expenditure of monies or action taken
hereunder shall be at the sole option and discretion of Mortgagee.
Section 19. Transfer or Encumbrance of Mortgaged Premises.
(i) No part of the Mortgaged Premises shall in any manner be further
encumbered, sold, transferred or conveyed, or permitted to be further
encumbered, sold, transferred or conveyed, without the consent of Mortgagee,
which consent may be given or withheld in Mortgagee's sole discretion for any
reason or for no reason. The Mortgaged Premises shall not be encumbered by any
secondary or subordinate liens, including mechanics liens. The provisions of
this Section 19 shall apply to each and every such further encumbrance, sale,
transfer or conveyance, regardless of whether or not Mortgagee has consented to,
or waived by its action or inaction, its rights hereunder with respect to any
such previous further encumbrance, sale, transfer or conveyance.
Any consent by the Mortgagee, or any waiver of any Event of Default, under
this Section 19 shall not constitute a consent to, or waiver of any right,
remedy or power of the Mortgagee upon a subsequent Event of Default under this
Section 19.
(ii) Mortgagor recognizes that Mortgagee is entitled to keep its loan
portfolio at current interest rates by either making new loans at such rates or
collecting assumption fees and/or increasing the interest rate on a loan, the
security for which is purchased by a party other than Mortgagor. Mortgagor
further recognizes that any secondary or junior financing placed upon the
Mortgaged Premises (a) may divert funds which would otherwise be used to pay the
indebtedness secured hereby; (b) could result in the acceleration and
foreclosure by such junior encumbrancer which
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would force Mortgagee to take measures and incur expenses to protect its
security; (c) would detract from the value of the Mortgaged Premises should
Mortgagee come into possession thereof with the intention of selling the same;
and (d) would impair Mortgagee's right to accept a deed in lieu of foreclosure,
as a foreclosure by Mortgagee would be necessary to clear the title to the
Mortgaged Premises. In accordance with the foregoing and for the purposes of (w)
protecting Mortgagee's security, both of repayment and of value of the Mortgaged
Premises; (x) giving Mortgagee the full benefit of its bargain and contract with
Mortgagor; (y) assumption fees; and (z) keeping the Mortgaged Premises free of
subordinate financing liens, Mortgagor agrees that if this Section 19 is deemed
a restraint on alienation, that it is a reasonable one.
Section 20. Environmental Matters. (i) For purposes of this Mortgage, the
following terms shall have following meanings:
"Hazardous Materials" shall mean existing and future asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls or related or similar
materials, petroleum products, explosives, radioactive materials, or any other
hazardous or toxic or harmful materials, wastes and substances or any other
chemical, material, substance or element which is hereinafter defined,
determined, identified, prohibited, limited or regulated by the Environmental
Laws, or any other chemical, material, substance or element which is known to be
harmful to the health or safety of occupants of property or which is hereinafter
defined as a hazardous or toxic substance by any Federal, State, or local law,
ordinance, rule or regulation, including, but not limited to, the Toxic
Substances Control Act (15 U.S.C. 2601 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C. 7401 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. 1801
et seq.), and/or the regulations promulgated in relation thereto, all as the
same may be amended from time to time (hereinafter collectively referred to as
the "Federal Statutes"), the New Jersey Spill Compensation and Control Act, as
amended, N.J.S.A. 58:10-23.11 et seq., the New Jersey Environmental Cleanup
Responsibility Act, as amended by the Industrial Site Recovery Act, and as may
be further amended, N.J.S.A. 13:1K-6 et seq., the New Jersey Leaking Underground
Storage Tank Act, as amended, N.J.S.A. 58:1OA-21 et seq. (hereinafter
collectively referred to as the "State Statutes"), and the regulations
promulgated in relation thereto, all as the same may be amended from time to
time.
"Environmental Laws" shall mean any applicable federal, state or local
laws, rules, regulations, resolutions, ordinances,
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directives or orders (whether now existing or hereafter enacted or promulgated)
or any judicial or administrative interpretation of such laws, rules,
regulations, resolutions, ordinances, directives or orders or any other
applicable determination regarding land, water, air, health, safety or
environment including, for example but not limited to, the Federal Statutes and
the State Statutes.
"Governmental Authority" shall mean any federal, state, and local
government, governing body, agency, court, tribunal, authority, subdivision,
bureau or other recognized body having jurisdiction to enact, promulgate,
interpret, enforce, review or repeal any Environmental Law.
"Environmental Complaint" shall mean any judgment, lien, order, complaint,
notice, citation, action, proceeding or investigation pending before any
Governmental Authority, including, without limitation, any environmental
regulatory body, with respect to or threatened against or affecting the
Mortgagor or relating to its business, assets, property or facilities or the
Mortgaged Premises, in connection with any Hazardous Material or any Hazardous
Discharge or any Environmental Law.
"Hazardous Discharge" shall mean any release of a Hazardous Material caused
by the seeping, spilling, leaking, pumping, pouring, emitting, using, emptying,
discharging, injecting, escaping, leaching, dumping or disposing of any
Hazardous Material into the environment, and any liability for the costs of any
cleanup or other remedial action.
(ii) The Mortgagor covenants, represents and warrants that except as
disclosed in the Phase I Environmental Site Assessment by Melick-Tully and
Associates, Inc. dated July 20, 1994:
(a) to the best of the Mortgagor's knowledge, after due inquiry and
investigation, none of the real property owned or occupied by the Mortgagor and
located in the state in which the Mortgaged Premises is situated, including, but
not limited to the Mortgaged Premises, has ever been used by previous owners,
operators or occupants or the Mortgagor to generate, manufacture, refine,
transport, treat, store, handle or dispose, transfer, produce, process or in any
manner deal with any Hazardous Material,
(b) the Mortgagor has not received a summons, citation, directive, letter
or other communication, written or oral, from any Government Authority
concerning any intentional or unintentional action or omission on the
Mortgagor's part which had resulted in the violation of any Environmental Laws,
as the same may relate to the Mortgaged Premises,
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(c) to the best of the Mortgagor's knowledge, after due inquiry and
investigation, no lien has been attached to any revenues or any real or personal
property owned by the Mortgagor and located in the state where the Mortgaged
Premises are located, including, but not limited to the Mortgaged Premises, for
"Damages" and/or "Cleanup and Removal Costs", as such terms are hereinafter
defined in any Environmental Law, or arising from an intentional or
unintentional act or omission in violation thereof by the Mortgagor or by any
previous owner and/or operator of such real or personal property, including, but
not limited to the Mortgaged Premises,
(d) the Mortgagor has duly complied, and shall continue to comply, with the
provisions of the Environmental Laws governing it, its business, assets,
property, facilities and the Mortgaged Premises, and shall keep the Mortgaged
Premises free and clear of any liens imposed pursuant to such laws,
(e) the Mortgagor shall not, and shall not permit any of its officers,
partners, employees, agents, contractors, licensees, tenants, occupants or
others to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce, process or in any manner deal with any Hazardous
Material on the Mortgaged Premises except in accordance with all Environmental
Laws applicable thereto,
(f) there is not now outstanding any Environmental Complaint issued by any
Governmental Authority to the Mortgagor or relating to the Mortgagor's business,
assets, property, and facilities or the Mortgaged Premises under any
Environmental Law, and there is not now existing any condition which, if known
by the proper authorities, could result in any Environmental Complaint, and that
(g) the Mortgagor has, and will continue to have, all necessary licenses,
certificates and permits under the Environmental Laws relating to the Mortgagor
and its facilities, property, assets, and business, and the Mortgaged Premises
and the foregoing are in compliance with all Environmental Laws.
(h) there are no underground storage tanks on or under the Mortgaged
Premises.
(iii) If the Mortgagor receives any notice of (a) the presence of Hazardous
Materials on the Mortgaged Premises, (b) any violation of or noncompliance with
any Environmental Law, (c) the occurrence of a Hazardous Discharge on or about
any asset, business, facility or property of the Mortgagor or caused by the
Mortgagor, or (d) any Environmental Complaint affecting the Mortgagor or the
Mortgaged Premises or the Mortgagor's operations, assets, business, facilities
or properties, then the Mortgagor
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will give written notice of the foregoing to the Mortgagee within ten (10) days
of receipt thereof and shall (1) promptly comply with the Environmental Laws and
all other laws, regulations, resolutions and ordinances to correct, contain,
cleanup, remove, resolve or minimize the impact of such Hazardous Materials,
Environmental Discharge or Environmental Complaint and (2) shall (A) post a bond
from a surety or (B) cause a lending institution to issue a letter of credit for
the benefit of the Mortgagee, and to any Governmental Authority requiring the
same; the surety or the lending institution, and the form, the substance and the
amount of the bond or letter of credit to be satisfactory to the Mortgagee and
satisfactory to the applicable Governmental Authority, or shall give to the
Mortgagee and the applicable Governmental Authority such other security
satisfactory in form, substance and amount to both the Mortgagee and the
applicable Governmental Authority to assure that the Mortgagor does correct,
contain, cleanup, remove, resolve or minimize the impact of such Hazardous
Materials, Environmental Discharge or Environmental Complaint.
(iv) Without limitation of the Mortgagee's rights under this Mortgage or
applicable law, the Mortgagee shall have the right, but not the obligation, to
exercise any of its rights to cure as provided in this Mortgage or to enter onto
the Mortgaged Premises or to take such other actions as it deems necessary or
advisable to correct, contain, cleanup, remove, resolve or minimize the impact
of, or otherwise deal with, any such Hazardous Material, Hazardous Discharge or
Environmental Complaint upon its receipt of any notice from any person or entity
or Governmental Authority, informing the Mortgagee of such Hazardous Material,
Hazardous Discharge or Environmental Complaint, which if true, could adversely
affect the Mortgagor or any part of the Mortgaged Premises or which, in the sole
opinion of the Mortgagee, could adversely affect its collateral security under
this Mortgage. All reasonable costs and expenses incurred and paid by the
Mortgagee in the exercise of any such rights shall be paid by the Mortgagor to
the Mortgagee upon demand, together with interest from the date that such sum is
advanced, payment made or expense incurred, to and including the date of
reimbursement, computed at the Default Rate. Any such sum paid by the Mortgagee
and the interest thereon shall be a lien on the Mortgaged Premises prior to any
claim, lien, right, title or interest in, to or on the Mortgaged Premises
attaching or accruing subsequent to the lien of this Mortgage, and shall be
deemed to be secured by this Mortgage and evidenced by the Notes.
(v) Upon written request, the Mortgagor shall provide to the Mortgagee the
following information pertaining to all operations conducted in or on the
Mortgaged Premises:
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(a) copies of all licenses, certificates and permits under the
Environmental Laws;
(b) material safety data sheets and maps, diagrams and site plans showing
the location of all storage areas and storage tanks for all Hazardous Materials
or other chemicals in, used at, manufactured at, brought to or stored at the
Mortgaged Premises;
(c) copies of all materials filed with any Governmental Authority;
(d) a description of the operations and processes of the Mortgagor; and
(e) any other information which the Mortgagee may reasonably require.
(vi) Upon reasonable notice to the Mortgagor, the Mortgagee, its officers,
employees, agents and contractors, may enter the Mortgaged Premises to inspect
it and to conduct, complete and take such tests, samples, analyses and other
processes (an "Environmental Survey") as the Mortgagee shall require to
determine the Mortgagor's compliance with this Paragraph and the Environmental
Laws (but not more than once during the term unless Mortgagee reasonably
believes there has been a Hazardous Discharge or an Event of Default has
occurred). The costs, expenses and fees of the Mortgagee of such entry,
inspection, tests, samples, analyses and processes shall be paid and reimbursed
by the Mortgagor upon demand by the Mortgagee. Any such sum paid by the
Mortgagee, with the interest thereon at the rate provided to be paid on the
indebtedness secured by this Mortgage, shall be a lien on the Mortgaged Premises
prior to any claim, lien, right, title or interest in, to or on the Mortgaged
Premises attaching or accruing subsequent to the lien of this Mortgage, and
shall be deemed to be secured by this Mortgage and evidenced by the Notes.
(vii) In addition to those Events of Default specified in this Mortgage,
the occurrence of any of the following events shall constitute a default under
this Mortgage, entitling the Mortgagee to all rights and remedies provided
therefor:
(a) if any Governmental Authority asserts or creates a lien upon any or all
of the Mortgaged Premises by reason of the presence of Hazardous Materials or
the occurrence of a Hazardous Discharge or Environmental Complaint or otherwise,
and the Mortgagor does not, within the earlier of sixty (60) days after the
recording thereof or prior to the institution by such Governmental Authority of
any steps to foreclose such lien, cause such lien to be discharged of record; or
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(b) if any Governmental Authority asserts a claim against the Mortgagor,
the Mortgaged Premises or the Mortgagee for damages or cleanup or remedial costs
related to any Hazardous Materials or any Hazardous Discharge or any
Environmental Complaint; provided, however, such claim shall not constitute a
default if, within fifteen (15) business days of the Mortgagor's receipt of
notice of the foregoing:
(1) the Mortgagor can prove to the Mortgagee's reasonable satisfaction that
the Mortgagor has commenced and is diligently pursuing either: (A) a cure,
remedy or correction of the event which constitutes the basis for the claim, and
is continuing diligently to pursue such cure or correction to completion, in
strict compliance with the Environmental Laws or Environmental Complaint, as
applicable, or (B) proceedings for injunction, a restraining order or other
appropriate emergency relief to prevent such Governmental Authority from
asserting such claim, which relief is granted within thirty (30) days of the
occurrence giving rise to the claim and the injunction, order or emergency
relief is not thereafter dissolved or reversed on appeal; and
(2) in either of the foregoing events, the Mortgagor shall (A) give such
surety or other security, which may be required by and satisfactory to both the
Governmental Authority asserting the claim and to the Title Company, to secure
the proper and complete cure or correction of the event which constitutes the
basis for the claim or, (B) at the Mortgagee's request if no such bond or
security has been given, the Mortgagor shall post a bond from a surety or a
letter of credit issued by a lending institution, with the Mortgagee, the surety
or the lending institution, and the form, substance and amount of the bond or
letter of credit to be reasonably satisfactory to the Mortgagee and to the Title
Company, or shall give to the Mortgagee and the Title Company such other
security satisfactory in form, substance and amount to the Mortgagee and to the
Title Company, to secure the payment for all of the work, labor and services
required to effect a proper and complete cure or correction of the condition
which constitutes the basis for the claim.
(viii) The Mortgagor covenants and agrees, at its sole cost and expense, to
indemnify, protect, and save the Mortgagee harmless against and from any and all
damages, losses, liabilities, obligations, penalties, claims, litigation,
demands, defenses, judgments, suits, proceedings, costs, disbursements or
expenses of any kind or of any nature whatsoever (including, without limitation,
reasonable attorneys' and experts' fees and disbursements) which may at any time
be imposed upon, incurred by or asserted or awarded against the Mortgagee and
arising from or out of:
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(a) the Mortgagor's failure to perform and comply with this Subsection, or
(b) any Hazardous Material, any Hazardous Discharge, any Environmental
Complaint, or any Environmental Law applicable to the Mortgagor, its operations,
business, assets, property or facilities, or the Mortgaged Premises, or
(c) any action against the Mortgagor under this indemnity.
Section 21. Mortgage Secures a Line of Credit. This Mortgage secures the
Loans to the extent of the stated principal amount of this Mortgage plus
interest and other amounts secured hereby. In addition to the other rights
granted to the Mortgagee hereunder and under applicable law and without any
limitation on said rights, this Mortgage secures the indebtedness of the
Mortgagor under the Loan Agreement, which reflects the fact that the parties
thereto reasonably contemplate entering into a series of advances, payments and
re-advances, and that the aggregate amount at any time outstanding by reason of
such series of advance, or advances, payments and re-advances shall not exceed
the maximum amount available pursuant to the Loan Agreement, the stated
principal amount of which plus interest and other amounts which may be advanced
to the Mortgagor thereunder is secured by this Mortgage. This Mortgage shall
secure not only the original indebtedness but also the indebtedness that may be
created by future advances to the Mortgagor by the Mortgagee hereunder made
hereafter, whether such advances are obligatory or are to be made at the option
of the Mortgagee or otherwise, to the same extent and with the same priority
lien as if such future advances had been made at the time this Mortgage is
recorded, although there may be no advances made at the time of the execution
and acknowledgment of this Mortgage, and although there may be no indebtedness
outstanding at the time any advance is made. The total amount of the Loans
secured hereunder may increase or decrease from time to time in accordance
advances, repayments and re-advances made, if any, pursuant to the Loan
Agreement.
ARTICLE II. THE MORTGAGOR SHALL BE IN DEFAULT OF THIS MORTGAGE UPON THE
OCCURRENCE OF ANY OF THE FOLLOWING EVENTS (ANY OF WHICH MAY BE REFERRED TO AS AN
"EVENT OF DEFAULT"):
Section 1. Nonpayment. The Mortgagor shall fail to make when due any
payment of principal, interest or other monies as provided in the Loan Agreement
and/or the Notes or this Mortgage within five (5) days after same is due and
payable.
Section 2. Breach of Covenants. The Mortgagor or any Guarantor shall have
failed to perform any of the terms,
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covenants, conditions or undertakings contained in this Mortgage, the Loan
Agreement or the Notes, other than the nonpayment of money, and such default
shall have remained uncured for the applicable grace periods, if any, provided
for herein or therein.
Section 3. Representations and Warranties. In the event that any
representation or warranty made by the Mortgagor or any Guarantor in this
Mortgage, the Loan Agreement, the Notes or in any other Loan Document used in
connection herewith shall prove to be false or misleading in any substantial and
material respect on the date as of which made.
Section 4. Bankruptcy. The Mortgagor or any Guarantor shall have applied
for or consented to the appointment of a receiver, custodian, trustee or
liquidator of all or a substantial part of the Mortgagor's or any Guarantor's
assets; or shall generally not be paying the Mortgagor's or any Guarantor's
debts as they become due; or shall have admitted in writing the inability to pay
the Mortgagor's or any Guarantor's debts as they mature; or shall have made a
general assignment for the benefit of creditors; or shall have filed a petition
or an answer seeking an arrangement with creditors; or shall have taken
advantage of any insolvency law; or shall have submitted an answer admitting the
material allegations of a petition in any bankruptcy or insolvency proceeding;
or an order, judgment or decree shall have been entered, without the
application, the approval or consent of the Mortgagor or any Guarantor by any
Court of competent jurisdiction appointing a receiver, custodian, trustee or
liquidator of the Mortgagor or any Guarantor, or a substantial part of the
Mortgagor's or any Guarantor's assets; or a petition in bankruptcy shall have
been filed by or against Mortgagor or any Guarantor; or if any Order for Relief
shall have been entered under the Federal Bankruptcy Code.
Section 5. Other Foreclosures. In the event that proceedings shall have
been instituted for foreclosure or collection of any mortgage, judgment, or lien
prior, equal to or subordinate to the lien of this Mortgage, affecting the
Mortgaged Premises, and same is not discharged within thirty (30) days thereof.
Section 6. Judgments. In the event one or more final judgments, decrees, or
orders for the payment of money in excess of Fifty Thousand Dollars ($50,000.00)
in the aggregate shall be rendered against the Mortgagor or any Guarantor and
such judgments, decrees or orders shall continue unsatisfied and in effect for a
period of thirty (30) consecutive days without being vacated, discharged,
satisfied, or stayed or bonded pending appeal.
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Section 7. Other Debt. In the event of an Event of Default by the Mortgagor
or any Guarantor in any of the terms or conditions of an Event of Default any
agreement covering the payment of borrowed money (other than trade payables)
from any Person including, but not limited to, the Loan Agreement, or any Loan
Documents executed in connection therewith, if such a default would permit the
holder of the debt instrument to accelerate the payment of the debt,
irrespective of whether the default is waived or not waived by the holder of the
debt instrument.
Section 8. Default Under Other Loan Documents. In the event of a default or
Event of Default under any other Loan Document.
Section 9. Effectiveness of Guaranties. In the event the guaranties given
by the Guarantors shall cease to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by any Guarantor, or any Guarantor shall deny it has any further
liability or obligation under or shall fail to perform its obligations under
such Guarantor's guaranty.
ARTICLE III. IF ANY EVENT OF DEFAULT SHALL HAVE OCCURRED AND IS CONTINUING
ON THE PART OF THE MORTGAGOR, THE MORTGAGEE MAY TAKE ANY OR ALL OF THE FOLLOWING
ACTIONS, AT THE SAME OR AT DIFFERENT TIMES:
Section 1. Acceleration. The Mortgagee may declare the entire amount of
unpaid principal, together with all accrued and unpaid interest and other moneys
due under this Mortgage, the Loan Agreement, the Notes and the other Loan
Documents immediately due and payable, and accordingly accelerate payment
thereof notwithstanding contrary terms of payment stated therein, without
presentment, demand or notice of any kind, all of which are expressly waived,
notwithstanding anything to the contrary contained in the Mortgage, the Loan
Agreement and/or the Notes.
Section 2. Possession. The Mortgagee may enter upon and take possession of
the Mortgaged Premises; lease and let the said Mortgaged Premises; receive all
the rents, income, issues and profits thereof which are overdue, due or to
become due; and apply the same, after payment of all necessary charges and
expenses, on account of the amounts hereby secured. The Mortgagee is given and
granted full power and authority to do any act or thing which the Mortgagor or
the successors or assigns of the Mortgagor who may then own the Mortgaged
Premises might or could do in connection with the management and operation of
the Mortgaged Premises. This covenant becomes effective either with or without
any action brought to foreclose this Mortgage and without applying at any time
for a receiver of such rents. Should said rents or any part thereof be assigned
without the consent of the holder of this
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Mortgage, then this Mortgage shall at the option of the holder hereof become due
and payable immediately, anything herein contained to the contrary
notwithstanding.
Section 3. Foreclosure. The Mortgagee may institute an action of mortgage
foreclosure or take other action as the law may allow, at law or in equity, for
the enforcement of this Mortgage, and proceed thereon to final judgment and
execution of the entire unpaid balance of the Notes including costs of suit,
interest and reasonable attorney's fees. In case of any sale of the Mortgaged
Premises by virtue of judicial proceedings, the Mortgaged Premises may be sold
in one parcel and as an entirety or in such parcels, manner or order as the
Mortgagee in its sole discretion may elect. The failure to make any tenants
parties defendant to a foreclosure proceeding and to foreclose their rights will
not be asserted by the Mortgagor as a defense in any proceeding instituted by
the Mortgagee to collect the obligations secured hereby or any deficiency
remaining unpaid after the foreclosure sale of the Mortgaged Premises.
Section 4. Appointment of Receiver. The Mortgagee may have a receiver of
the rents, income, issues and profits of the Mortgaged Premises appointed
without the necessity of proving either the depreciation or the inadequacy of
the value of the Security or the insolvency of the Mortgagor or any Person who
may be legally or equitably liable to pay moneys secured hereby, and the
Mortgagor and each such Person waives such proof and consents to the appointment
of a receiver.
Section 5. Fair Rental Payments. If the Mortgagor or any subsequent owner
is occupying the Mortgaged Premises or any part thereof, it is hereby agreed
that the said occupants shall pay such reasonable rental monthly (to be applied
on account of the unpaid indebtedness) in advance as the Mortgagee shall demand
for the Mortgaged Premises or the part so occupied, and for the use of personal
property covered by this Mortgage or any chattel mortgage.
Section 6. Excess Monies. The Mortgagee may apply on account of the unpaid
indebtedness evidenced by the Notes (including any unpaid accrued interest) owed
to the Mortgagee after a foreclosure sale of the Mortgaged Premises, whether or
not a deficiency action shall have been instituted, any unexpended monies still
retained by the Mortgagee that were paid by Mortgagor to the Mortgagee (i) for
the payment of, or as security for the payment of taxes, assessments, municipal
or governmental rates, charges, impositions, liens, water or sewer rents, or
insurance premiums, if any, or (ii) in order to secure the performance of some
act by the Mortgagor.
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Section 7. Remedies at Law or Equity. The Mortgagee may take any of the
remedies otherwise available to it as a matter of law or equity.
ARTICLE IV. MISCELLANEOUS:
Section 1. Cumulative Rights. The rights and remedies herein expressed to
be vested in or conferred upon the Mortgagee shall be cumulative and shall be in
addition to and not in substitution for or in derogation of the rights and
remedies conferred by any applicable law. The acceptance by the Mortgagee of any
payments hereunder after the occurrence of an Event of Default or the failure,
at any one or more times, of the Mortgagee to assert the right to declare the
principal indebtedness due or the granting of any extension or extensions of
time of payment of the Notes either to the maker or to any other Person, or
taking of other or additional security for the payment thereof, or releasing any
security, or changing any of the terms of this Mortgage, the Loan Agreement, the
Notes, the other Loan Documents, or any other obligation accompanying this
Mortgage, or waiver of or failure to exercise any right under any covenant or
stipulation herein contained shall not in any way affect this Mortgage nor the
rights of the Mortgagee hereunder nor operate as a release from any personal
liability upon the Notes or other obligation accompanying this Mortgage, nor
under any covenant or stipulation therein contained, nor under any agreement
assuming the payment of said Notes or obligation.
Section 2. Notices. Unless otherwise indicated differently, all notices,
payments, requests, reports, information or demands which any party hereto may
desire or may be required to give to any other party hereunder, shall be in
writing and shall be personally delivered or sent by facsimile, Federal Express
or other nationally recognized overnight delivery service providing a receipt
for delivery, or first-class certified or registered United States mail, postage
prepaid, return receipt requested, and sent to the party at its address
appearing below or such other address as any party shall hereafter inform the
other party hereto by written notice given as aforesaid:
If to the Mortgagor:
Suprema Specialties, Inc.
510 East 35th Street
P.O. Box 280 Park Station
Paterson, New Jersey 07543-0280
Attn: Mark Cocchiola, President
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With a copy to:
Tenzer, Greenblatt & Zunz, P.A.
c/o Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attn: Martin Luskin, Esq.
If to the Mortgagee:
Fleet Bank, N.A.
208 Harrison Road
Glen Rock, New Jersey 07452
Attn: Michael Vondras
With a copy to:
Windels, Marx, Davies & Ives
120 Albany Street Plaza
New Brunswick, New Jersey 08901
Attn: Howard P. Lakind, Esq.
All notices, payments, requests, reports, information or demands so given shall
be deemed effective upon receipt or, if mailed, upon receipt or the expiration
of the third day following the date of mailing, which ever occurs first, except
that any notice of change in address shall be effective only upon receipt by the
party to whom said notice is addressed. A failure to send the requisite copies
does not invalidate an otherwise properly sent notice to the Mortgagor and/or
the Mortgagee.
Section 3. Successors and Assigns. All of the terms, covenants, provisions
and conditions herein contained shall be for the benefit of, apply to, and bind
the successors and assigns of the Mortgagor and the Mortgagee, and are intended
and shall be held to be real covenants running with the land, and the term
"Mortgagor" shall also include any and all subsequent owners and successors in
title of the Mortgaged Premises.
Section 4. Gender. When such interpretation is appropriate, any word
denoting gender used herein shall include all persons, natural or artificial,
and words used in the singular shall include the plural.
Section 5. Waiver of Right of Redemption. The Mortgagor waives the right of
redemption on any property levied upon under a judgment obtained in proceedings
to collect the indebtedness hereby secured or in proceedings on this Mortgage,
and further waives and releases any and all benefits that may accrue to the
Mortgagor by virtue of any law relating to appraisement, stay of execution or
exemption of the Mortgaged Premises from levy or sale
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under execution, now or hereafter in force. A foreclosure sale shall constitute
a foreclosure sale of all interest whatsoever of the Mortgagor in the Mortgaged
Premises and the Mortgagee shall, if it is the purchaser at the sale, hold the
Mortgaged Premises and any part thereof so purchased free of any equity of
redemption by reason of any circumstances whatsoever and not as collateral for
any obligation.
Section 6. Severability. The provisions of this Mortgage are severable. In
the event of the unenforceability or invalidity of any one or more of the terms,
covenants, conditions, or provisions of this Mortgage under federal, state, or
other applicable law, such unenforceability or invalidity shall not render any
other of the terms, covenants, conditions, or provisions hereof unenforceable or
invalid. In the event any waiver by Mortgagor hereunder is prohibited by law,
including but not limited to the waiver of exemption from execution, such waiver
shall be and deemed to be deleted herefrom.
Section 7. [intentionally omitted]
Section 8. WAIVER OF JURY TRIAL. THE MORTGAGOR HEREBY WAIVES ANY AND ALL
RIGHTS THAT IT MAY NOW OR HEREAFTER HAVE UNDER THE LAWS OF THE UNITED STATE OF
AMERICA OR ANY STATE TO A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING EITHER
DIRECTLY OR INDIRECTLY IN ANY ACTION OR PROCEEDING BETWEEN THE MORTGAGEE OR ITS
SUCCESSORS AND ASSIGNS, OUT OF OR IN ANY WAY CONNECTED WITH THIS MORTGAGE, THE
NOTES AND THE OTHER LOAN DOCUMENTS. IT IS INTENDED THAT SAID WAIVER SHALL APPLY
TO ANY AND ALL DEFENSES, RIGHTS, AND/OR COUNTERCLAIMS IN ANY ACTION OR
PROCEEDING.
Section 9. SERVICE OF PROCESS. THE MORTGAGOR AGREES THAT SERVICE OF PROCESS
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING
OUT OF OR RELATED TO THIS MORTGAGE OR THE RELATIONSHIP ESTABLISHED HEREUNDER MAY
BE DULY EFFECTED UPON IT BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE
PREPAID, TO THE MORTGAGOR AT THE ADDRESS SET FORTH HEREIN.
Section 10. Payment of Attorneys' Fees and Costs. If upon an Event of
Default: (i) this Mortgage or any Loan Document is placed in the hands of an
attorney for collection or enforcement or is collected or enforced through any
legal proceeding; (ii) an attorney is retained to represent Mortgagee in any
bankruptcy, reorganization, receivership, or other proceeding affecting
creditor's rights and involving a claim under this Mortgage or any of the Loan
Documents; (iii) an attorney is retained to protect or enforce the lien of the
Mortgage or any of the Loan Documents; or (iv) an attorney is retained to
represent Mortgagee in any other proceeding whatsoever in connection with this
Mortgage, any of the Loan Documents or any property subject thereto, then
Mortgagor shall pay to Mortgagee all reasonable attorneys' fees, costs,
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expenses and disbursements incurred in connection therewith, in addition to all
other amounts due hereunder.
Section 11. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, the Mortgagee is hereby authorized at any
time and from time to time, without notice to the Mortgagor (any such notice
being expressly waived by the Mortgagor), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Mortgagee to or for the
credit or the account of the Mortgagor and relating to the Loans, the Mortgaged
Premises or the Loan Documents against any and all of the obligations of the
Mortgagor now or hereafter existing under this Mortgage, the Loan Agreement, the
Notes or any other Loan Document, irrespective of whether or not the Mortgagee
shall have made any demand under this Mortgage, the Loan Agreement, the Notes or
such other Loan Document and although such obligations may be unmatured. The
Mortgagee agrees promptly to notify the Mortgagor after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Mortgagee under this
Section 11 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Mortgagee may have.
Section 12. Counterparts. This Mortgage may be executed in any number of
counterparts, each of which shall be deemed an original but such counterparts
shall together constitute but one and the same instrument.
Section 13. Performance. The Mortgagor shall perform and abide by the terms
and covenants herein and the terms and covenants in the Loan Agreement and the
Notes, all of which are made a part hereof as though set forth herein at length.
Section 14. Law Governing. All the terms, conditions and covenants
contained in this Mortgage shall be governed by and construed and interpreted in
accordance with the laws of the State of New Jersey.
Section 15. No Assignment. This Mortgage shall not be assigned by the
Mortgagor without the prior express written consent of the Mortgagee.
Section 16. Modifications in Writing. No provision of this Mortgage may be
waived, changed, amended, modified or discharged orally and no executory
agreement shall be effective to modify or discharge it in whole or in part,
unless it is in writing and signed by the party against whom enforcement of the
waiver, change, amendment, modification or discharge is sought. Any waiver by
the Mortgagee or modification of the terms hereof shall
30
<PAGE>
be effective only in the specific instance and for the specific purpose for
which given and, notwithstanding anything to the contrary herein, all such
waivers and modifications may be given or withheld in the sole judgment of the
Mortgagee.
Section 17. Consent by Mortgagee. If the Mortgagor shall request the
Mortgagee's consent or approval pursuant to any of the provisions of this
Mortgage or otherwise, and the Mortgagee shall fail or refuse to give, or shall
delay in giving, such consent or approval, the Mortgagor shall in no event
(other than upon the willful misconduct or bad faith of Mortgagee) make, or be
entitled to make, any claim for damages (nor shall the Mortgagor assert, or be
entitled to assert, any such claim by way of defense, set-off, or counterclaim)
based upon any claim or assertion by the Mortgagor that the Mortgagee
unreasonably withheld or delayed its consent or approval, and the Mortgagor
hereby waives any and all rights that it may have, from whatever source derived,
to make or assert any such claim. The Mortgagor's sole remedy for any such
failure, refusal, or delay shall be an action for a declaratory judgment,
specific performance, or injunction, and such remedies shall be available only
in those instances where the Mortgagee has expressly agreed in writing not to
unreasonably withhold or delay its consent or approval or where, as a matter of
law, the Mortgagee may not unreasonably withhold or delay the same.
Section 18. Joint and Several Liability. If the Mortgagor consists of more
than one Person, the obligations and liabilities of each such Person hereunder
shall be joint and several.
THE MORTGAGOR HEREBY DECLARES THAT THE MORTGAGOR HAS READ THIS MORTGAGE,
HAS RECEIVED A COMPLETELY FILLED IN COPY OF IT WITHOUT CHARGE THEREFOR AND HAS
SIGNED THIS MORTGAGE AS OF THE DATE AT THE TOP OF THE FIRST PAGE.
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed and delivered by its appropriate authorized corporate officers and its
corporate seal to be hereunto affixed and attested, pursuant to the resolution
of its Board of Directors, all on the day and year first above written.
ATTEST: SUPREMA SPECIALTIES, INC.
By:
- ------------------------ --------------------------
Steven Venechanos, Mark Cocchiola,
Secretary President
31
<PAGE>
SCHEDULE "A"
ATTACHED TO AND MADE A PART OF THAT
CERTAIN MORTGAGE BY AND BETWEEN
SUPREMA SPECIALTIES, INC.
AS MORTGAGOR, AND
NATWEST BANK N.A.
AS MORTGAGEE, DATED
DECEMBER 16, 1998
DESCRIPTION OF MORTGAGED PREMISES
<PAGE>
STATE OF NEW JERSEY :
:ss:
COUNTY OF MIDDLESEX :
BE IT REMEMBERED, that on this 16th day of December, 1998, before me, the
subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take
acknowledgements for use in the State of New Jersey, personally appeared Mark
Cocchiola, who I am satisfied is the person who executed the within Mortgage as
the President of Suprema Specialties, Inc., the corporation named therein, and
he did thereupon acknowledge that the said Mortgage made by the said corporation
and delivered by him as such officer, is the voluntary act and deed of said
corporation, made by virtue of authority from its Board of Directors, for the
uses and purposes therein expressed.
------------------------------
Notary Public
THIRD MODIFICATION AGREEMENT
THIS Third Modification Agreement (the "Third Modification"), made as of
the 16th day of December, 1998, between FLEET BANK, N.A. (formerly know as
NatWest Bank N.A.), a national banking association, having a banking office at
208 Harristown Road, Glen Rock, New Jersey 07452 (the "Bank") and SUPREMA
SPECIALTIES, INC., a New Jersey corporation with its principal office located at
510 East 35th Street, Paterson, New Jersey 07543-0780 (the "Borrower").
W I T N E S S E T H:
WHEREAS, on March 29, 1996, the Bank loaned to the Borrower the sum of
$1,050,000 and the Borrower executed and delivered to the Bank its promissory
note in the sum of ONE MILLION AND FIFTY THOUSAND AND 00/100 DOLLARS (the
"Mortgage Note"), payable as more particularly set forth therein; and
WHEREAS, the Borrower, to secure said indebtedness, on the aforesaid date
made, executed and delivered to the Bank a certain mortgage covering lands and
premises situate, lying and being in the City of Paterson, County of Passaic and
State of New Jersey (the "Premises"), which mortgage was recorded in the Office
of the Register of Passaic County on April 17, 1996, in Volume V159, Page 053,
et seq. (the "Original Mortgage"); and
WHEREAS, pursuant to a Modification Agreement dated as of October 31, 1996,
which modification was recorded in the Office of the Register of Passaic County
on January 17, 1997, in Volume 254 Page 195, et seq., the Original Mortgage was
modified, inter alia, to provide that it secured a portion of a certain term
loan dated October 31, 1996 made by the Bank to the Borrower (the "Term Loan");
and
WHEREAS, pursuant to a Second Modification Agreement dated as of January 5,
1998, which modification was recorded in the Office of the Register of Passaic
County on January 30, 1998 in Volume 267 Page 160 et seq., the Original Mortgage
was modified, inter alia, to (i) delete all references in the Original Mortgage
to the Term Loan and the term note (which had been paid off); and (ii) to
provide that the Original Mortgage secured (a) a certain bridge loan (the
"Bridge Loan") in the principal amount of up to $10,000,000, and (b) certain
revolving credit loans (the "Revolving Credit Loans") in the aggregate principal
amount of up to $25,000,000; and
WHEREAS, the Bank and the Borrower have agreed to further modify the
Original Mortgage to (i) delete all references in the
1
<PAGE>
Original Mortgage to the Bridge Loan (which has been paid off), and the
Revolving Credit Loans (which is being modified and will be secured pursuant to
a certain (second) mortgage and security agreement executed the date hereof),
and (ii) to provide that the Original Mortgage also secures the reimbursement
and repayment obligations of the Borrower under a certain irrevocable letter of
credit (letter of credit #JS167748) in the face amount of $400,000 issued by the
Bank for the account of the Borrower (the "Letter of Credit"); and
WHEREAS, the Original Mortgage as modified through the date hereof is
referred to herein as the "Mortgage"; and
WHEREAS, the Borrower represents that its execution of this Agreement will
inure to its economic benefit and will be in furtherance of its established
purpose;
NOW, THEREFORE, in consideration of the premises, and the sum of One
($1.00) Dollar paid by each of the parties to the other, the receipt whereof is
hereby acknowledged, and for other good and valuable consideration, the parties
hereto covenant and agree as follows:
1. Modifications. The Borrower and the Bank agree to modify the Mortgage as
follows:
(a) The second recital in the Mortgage shall be amended in its entirety as
follows:
"WHEREAS, the Mortgagee has made available to the Mortgagor a certain
irrevocable letter of credit (letter of credit #JS167748) in the face
amount of $400,000 issued by the Mortgagee for the account of the
Mortgagor (the "Letter of Credit");
(b) The third recital shall be deleted in its entirety and the fourth
recital in the Mortgage shall become the third recital and shall be
amended in its entirety to read as follows:
"WHEREAS, this Mortgage is given and made by the Mortgagor to the
Mortgagee as security for (i) the repayment of the indebtedness of the
Mortgagor to the Mortgagee evidenced by the Mortgage Note, (ii) the
reimbursement and repayment and all other obligations under the Letter
of Credit by the Mortgagor, (iii) the performance of the terms,
conditions and covenants of the Mortgagor set forth in the Mortgage
Note, the Letter of
2
<PAGE>
Credit, and the other loan documents executed in connection with any
of the foregoing (hereinafter collectively referred to as the "Loan
Documents"), and (iii) the payment of all other indebtedness, monetary
obligations, liabilities and duties of the Mortgagor under the
Mortgage Note, this Mortgage and the other Loan Documents;"
(c) Section 8 of Article III of the Mortgage relating to the Term Loan is
hereby deleted in its entirety.
2. Existing Documentation. All terms and provisions of the Mortgage shall
remain in full force and effect, except as herein modified.
3. Miscellaneous. This Agreement and the terms and provisions hereof shall
(i) inure to the benefit of and be binding upon the respective parties, their
heirs, successors and assigns and shall (ii) be governed by and construed in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and year first above written or have cause these presents to be signed by
their proper corporate officers and their corporate seals hereto affixed the day
and year first above written.
ATTEST: SUPREMA SPECIALTIES, INC.
By: _______________________ By: _________________________
Steven Venechanos, Mark Cocchiola,
Secretary President
FLEET BANK, N.A.
By: _________________________
Edward J. Waterfield,
Senior Vice President
Record and Return to:
Windels, Marx, Davies & Ives
120 Albany Street Plaza
New Brunswick, New Jersey 08901
Attn: Howard P. Lakind, Esq.
3
<PAGE>
STATE OF NEW JERSEY :
:ss:
COUNTY OF MIDDLESEX :
BE IT REMEMBERED, that on this 16th day of December, 1998, before me, the
subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take
acknowledgments for use in the State of New Jersey, personally appeared Edward
J. Waterfield, who I am satisfied is the person who executed the within
Modification Agreement as a Senior Vice President of Fleet Bank, N.A., the
banking association named therein, and he did thereupon acknowledge that the
said Modification Agreement made by the said banking association and delivered
by him as such officer, is the voluntary act and deed of said banking
association, made by virtue of authority from its Board of Directors, for the
uses and purposes therein expressed.
______________________________
Howard P. Lakind, an attorney
at law of the State of New
Jersey
4
<PAGE>
STATE OF NEW JERSEY :
:ss:
COUNTY OF MIDDLESEX :
BE IT REMEMBERED, that on this 16th day of December, 1998, before me, the
subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take
acknowledgments for use in the State of New Jersey, personally appeared Mark
Cocchiola, who I am satisfied is the person who executed the within Modification
Agreement as President of Suprema Specialties, Inc., the corporation named
therein, and he did thereupon acknowledge that the said Modification Agreement
made by the said corporation and delivered by him as such officer, is the
voluntary act and deed of said corporation, made by virtue of authority from its
Board of Directors, for the uses and purposes therein expressed.
______________________________
Notary Public
5
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING LOAN, GUARANTY AND SECURITY AGREEMENT
THIS FIRST AMENDMENT (this "Amendment") dated as of May 28, 1999 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 (Fleet and Sovereign 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") to that certain SECOND AMENDED AND RESTATED REVOLVING LOAN,
GUARANTY AND SECURITY AGREEMENT dated as of December 16, 1998 (the "Credit
Agreement") by and among Fleet, Sovereign, the Agent, the Borrower and the
Guarantor.
W I T N E S S E T H:
WHEREAS, the Borrower and the Guarantor have requested that the revolving
credit facility maintained pursuant to the Credit Agreement be amended to modify
certain of the covenants and other terms and conditions set forth in the Credit
Agreement; and
WHEREAS, the Banks are agreeable to said amendments and modifications,
subject to terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto hereby agree as follows:
Section 1. Effect of Amendment. This Amendment is an amendment to the
Credit Agreement. Unless the context of this Amendment otherwise requires, the
Credit Agreement and this Amendment shall be read together and shall have effect
as if the provisions of the Credit Agreement and this Amendment were contained
in one agreement. After the effective date of this
<PAGE>
Amendment, references to the Credit Agreement shall mean the Credit Agreement as
amended by this Amendment. Capitalized terms used herein without definition
shall have the respective meanings assigned to such terms in the Credit
Agreement.
Section 2. Amendments to Credit Agreement.
(a) SECTION 10.14(a) of the Credit Agreement is amended and restated in its
entirety to read as follows:
"(a) Tangible Net Worth. Not permit its Tangible Net Worth as at the
fiscal quarters set forth below to be less than the amount set forth
opposite such fiscal quarter ending:
Fiscal Quarter Ended Minimum Tangible Net Worth
-------------------- --------------------------
12/31/98 $16,583,000
3/31/99 $17,394,000
6/30/99 $18,267,000
9/30/99 $19,159,000
12/31/99 $20,078,000
3/31/00 $21,017,000
6/30/00, $22,003,000
and each quarter thereafter;
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) SECTION 10.18 of the Credit Agreement is amended and restated in its
entirety to read as follows:
"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, 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 case, or other Assets or
obligations, (iv) allocate or otherwise set
- 2 -
<PAGE>
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."
(c) SECTION 12.1(c) of the Credit Agreement is amended and restated in its
entirety to read as follows:
"(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);
provided, however, a failure of the Borrower or the Guarantor in the
observance or performance of the covenant set forth in Section
10.14(b) shall not constitute an Event of Default as long as the
Leverage Ratio, tested at the end of a fiscal quarter, is not more
than 2.25 to 1.00, and the Leverage Ratio returns to a ratio of not
more than 2.00 to 1.00 within two fiscal quarters of such occurrence;
or"
Section 3. Representations and Warranties. In order to induce the Agent and
the Banks to enter into this Amendment, the Borrower and the Guarantor makes the
following representations and warranties to the Agent and the Banks, which shall
survive the execution and delivery hereof:
(a) It is a corporation duly incorporated and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power to execute, deliver and perform its obligations under the Credit
Agreement as amended by this Amendment;
(b) The execution and delivery of this Amendment has been authorized by all
necessary corporate action on its part, this Amendment has been duly executed
and delivered by it; and this Amendment and the Credit Agreement, as amended
hereby, constitutes the legal, valid and binding obligations of it enforceable
against it in accordance with its terms subject to applicable bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors rights
- 3 -
<PAGE>
generally, and by general equitable principles (whether enforcement is sought in
proceedings in equity or at law).
(c) Neither the execution and delivery of this Amendment, nor the
consummation by the Borrower and the Guarantor of the transactions herein
contemplated, nor compliance by each with the terms, conditions and provisions
hereof will conflict with or result in a breach of any of the terms, conditions
or provisions of (i) its Certificate of Incorporation or By-Laws; (ii) any
material agreement or instrument to which it is now a party or by which it or
its property is, or may be, bound (except any agreement with the Banks), or
constitute a default thereunder, or result thereunder in the creation or
imposition of any security interest, mortgage, lien, charge or encumbrance of
any nature whatsoever upon any of its properties or assets; (iii) any judgment
or order, writ, injunction or decree of any court to which it is subject; or
(iv) any Requirement of Law;
(d) No action of, or filing with, any governmental or public body or
authority is required to authorize, or is otherwise required in connection with
the execution, delivery and performance of this Amendment (except pursuant to
Section 4(e) hereof);
(e) Without limiting the generality of clause (c) above, (i) the execution
and delivery of this Amendment shall not result in a breach, nor constitute a
default under the terms and conditions of the New Senior Subordinated Notes
(including, without limitation, the terms and conditions of that certain Note
Agreement dated as of March 9, 1998 among the Borrower and the holders of said
notes, and (ii) no consent, waiver or modification is necessary thereunder in
order to execute and deliver this Amendment or for the Borrower to perform its
obligations under this Amendment;
(f) No Event of Default has occurred and is continuing, and no event has
occurred which, with notice, lapse of time or both, would constitute an Event of
Default; and
(g) The representations and warranties set forth in the Credit Agreement
and the other Loan Documents are true and correct as of the date hereof in all
material respects.
Section 4. Conditions Precedent. This Amendment shall not be effective
until the Agent shall have received originals of the following documents and the
following conditions shall have been satisfied in full:
- 4 -
<PAGE>
(a) this Amendment executed by the Banks, the Agent, the Borrower and the
Guarantor; and
(b) the Borrower shall have paid the legal fees and disbursements of
Windels, Marx, Davies & Ives, in respect of matters related to this Amendment;
and
(c) Borrower and Guarantor shall have delivered such other documents,
information, agreements and opinions reasonably required by the Agent and the
Banks.
Section 5. Expenses. The Borrower and the Guarantor shall pay, jointly and
severally, all reasonable expenses of the Agent and the Banks, including,
without limitation, the reasonable legal fees incurred by the Agent and the
Banks as set forth in Section 4(e), in connection with the preparation,
negotiation, execution and delivery and review of this Amendment, and all other
documents and instruments executed in connection with this transaction and all
filing and search fees incurred in connection herewith.
Section 6. References to Credit Agreement. The Credit Agreement is, and
shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects except that after giving effect to this Amendment all
references in the Credit Agreement to "this Agreement," "hereto," "hereof,"
"hereunder" or words of like import referring to the Credit Agreement shall mean
the Credit Agreement, as amended through the date hereof; and all references in
the Note and the other Loan Documents to the Credit Agreement shall mean the
Credit Agreement, as amended hereby.
Section 7. Amendment. This Amendment is limited as written and shall not be
deemed (i) to be an amendment of or a consent under or waiver of any other term
or condition of the Credit Agreement, or any of the various agreements
guarantying or securing the obligations of the Borrower under the Credit
Agreement or (ii) to prejudice any right or rights which the Agent and the Banks
now has or may have in the future under or in connection with the Credit
Agreement or such other agreements except as expressly waived hereby.
Section 8. Security Interests. It is agreed and confirmed that after giving
effect to this Amendment, the security interests granted by the Borrower and the
Guarantor pursuant to the Credit Agreement and the other Loan Documents continue
to secure as a first priority Lien on the Assets described in Section 8.1 of the
Credit Agreement, inter alia, to the Banks the prompt and full payment of all of
the Obligations arising under the Credit Agreement, as amended by this
Amendment, and to secure to Fleet the
- 5 -
<PAGE>
reimbursement and repayment of the Letter of Credit, the Master Agreement
Obligations and the Fleet Mortgage Loan.
Section 9. Guarantor. The Guarantor, by their signatures below, hereby
acknowledge and agree to the changes to the Credit Agreement set forth in this
Amendment. The Guarantor hereby confirms that their joint and several guaranty
as set forth in Section 7 of the Credit Agreement remains in full force and
effect and that the Obligations guaranteed include, without limitation, those
Obligations arising under the Credit Agreement as amended by this Amendment and
that, to secure to the Banks the prompt and full payment and performance of all
of the Obligations, and to secure to Fleet the reimbursement and repayment of
the Letter of Credit, the Master Agreement Obligations and the Fleet Mortgage
Loan, they have jointly and severally granted to the Agent for the ratable
benefit of the Banks, a first priority continuing security interest and Lien in
and to all of the Assets as described in Section 8.1 of the Credit Agreement.
Section 10. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all which when taken together shall constitute one and the same agreement.
Section 11. Governing Law. This Amendment, including the validity thereof
and the rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment as
of the day and year first above written.
SUPREMA SPECIALTIES, INC.
("Borrower")
By:_____________________________
Name: Mark Cocchiola
Title: President
- 6 -
<PAGE>
SUPREMA SPECIALTIES WEST, INC.
("Guarantor")
By:_____________________________
Name: Mark Cocchiola
Title: President
SUPREMA SPECIALITIES NORTHEAST,
INC. ("Guarantor")
By:_____________________________
Name: Mark Cocchiola
Title: President
FLEET BANK, N.A. ("Agent")
By:_____________________________
Name: Edward J. Waterfield
Title: Senior Vice President
FLEET BANK, N.A. ("Fleet")
By:_____________________________
Name: Edward J. Waterfield
Title: Senior Vice President
SOVEREIGN BANK ("Sovereign")
By:_____________________________
Name: Owen P. McKenna
Title: Vice President
- 7 -
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING LOAN,
GUARANTY AND SECURITY AGREEMENT
THIS SECOND AMENDMENT (this "Amendment") dated as of June 30, 1999 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 (Fleet and Sovereign 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") to that certain SECOND AMENDED AND RESTATED REVOLVING LOAN,
GUARANTY AND SECURITY AGREEMENT dated as of December 16, 1998, as amended and
modified by that certain First Amendment to Second Amended and Restated
Revolving Loan, Guaranty And Security Agreement dated as of May __, 1999
(collectively, the "Loan Agreement") by and among Fleet, Sovereign, the Agent,
the Borrower and the Guarantor.
W I T N E S S E T H:
WHEREAS, the Borrower and the Guarantor have requested that the revolving
credit facility maintained pursuant to the Loan Agreement be increased and that
certain of the covenants and other terms and conditions set forth in the Loan
Agreement be amended and modified; and
WHEREAS, Sovereign has agreed to make such additional loan to the Borrower
and the Banks are agreeable to said amendments and modifications, subject to
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto hereby agree as follows:
<PAGE>
Section 1. Defined Terms; Effect of Amendment.
(a) All capitalized terms used herein which are defined in the Loan
Agreement and not otherwise defined herein are used herein as defined therein.
(b) This Amendment is an amendment to the Loan Agreement. Unless the
context of this Amendment otherwise requires, the Loan Agreement and this
Amendment shall be read together and shall have effect as if the provisions of
the Loan Agreement and this Amendment were contained in one agreement. After the
effective date of this Amendment, all references in the Loan Agreement to the
"Agreement", "this Agreement", "hereto", "hereof", "hereunder" or words of like
import referring to the Loan Agreement shall mean the Loan Agreement as amended
by this Amendment, and all references in the Notes and the other Loan Documents
to the Loan Agreement shall mean the Loan Agreement as amended by this
Amendment.
Section 2. Amendments to Loan Agreement.
(a) The following definitions set forth in SECTION 1 of the Loan Agreement
are hereby amended in their entirety to read as follows:
"'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
$38,000,000, as such amount may be reduced pursuant to Section 5.2.
'Notes' means those certain Secured Revolving Notes dated December 16,
1998 and June 30, 1999 made by the Borrower in favor of the Banks in
the aggregate principal amount of up to $38,000,000, which Notes are
given in substitution for certain notes dated October 19, 1998 and
December 16, 1998, but not in cancellation, discharge or
extinguishment of the indebtedness formerly evidenced by such notes."
(b) SECTION 2.1 of the Loan Agreement is amended and restated in its
entirety to read as follows:
"2.1 Commitment; Maximum Credit. Subject to the terms and conditions
of this Agreement, each Bank severally 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
-2-
<PAGE>
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 $13,000,000.00
TOTAL $38,000,000.00
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."
(c) SECTION 10.14(e) of the Loan Agreement is amended and restated in its
entirety to read as follows:
"(e) Consolidated Net Worth. Maintain a Consolidated Net Worth of not
less than $10,000,000, which shall be increased, commencing with the
first Fiscal Year ending after December 31, 1998 (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."
Section 3. Representations and Warranties. In order to induce the Agent and
the Banks to enter into this Amendment, the Borrower and the Guarantor makes the
following representations and warranties to the Agent and the Banks, which shall
survive the execution and delivery hereof:
-3-
<PAGE>
(a) It is a corporation duly incorporated and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power to execute, deliver and perform its obligations under the Loan
Agreement as amended by this Amendment;
(b) The execution and delivery of this Amendment has been authorized by all
necessary corporate action on its part, this Amendment has been duly executed
and delivered by it; and this Amendment and the Loan Agreement, as amended
hereby, constitutes the legal, valid and binding obligations of it enforceable
against it in accordance with its terms subject to 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 in proceedings in equity or
at law).
(c) Neither the execution and delivery of this Amendment, nor the
consummation by the Borrower and the Guarantor of the transactions herein
contemplated, nor compliance by each with the terms, conditions and provisions
hereof will conflict with or result in a breach of any of the terms, conditions
or provisions of (i) its Certificate of Incorporation or By-Laws; (ii) any
material agreement or instrument to which it is now a party or by which it or
its property is, or may be, bound (except any agreement with the Banks), or
constitute a default thereunder, or result thereunder in the creation or
imposition of any security interest, mortgage, lien, charge or encumbrance of
any nature whatsoever upon any of its properties or assets; (iii) any judgment
or order, writ, injunction or decree of any court to which it is subject; or
(iv) any Requirement of Law;
(d) No action of, or filing with, any governmental or public body or
authority is required to authorize, or is otherwise required in connection with
the execution, delivery and performance of this Amendment;
(e) Without limiting the generality of clause (c) above, (i) the execution
and delivery of this Amendment shall not result in a breach, nor constitute a
default under the terms and conditions of the New Senior Subordinated Notes
(including, without limitation, the terms and conditions of that certain Note
Agreement dated as of March 9, 1998 among the Borrower and the holders of said
notes, and (ii) no consent, waiver or modification is necessary thereunder in
order to execute and deliver this Amendment or for the Borrower to perform its
obligations under this Amendment;
-4-
<PAGE>
(f) No Event of Default has occurred and is continuing, and no event has
occurred which, with notice, lapse of time or both, would constitute an Event of
Default; and
(g) The representations and warranties set forth in the Loan Agreement and
the other Loan Documents are true and correct as of the date hereof in all
material respects.
Section 4. Conditions Precedent. This Amendment shall not be effective
until the Agent shall have received originals of the following documents and the
following conditions shall have been satisfied in full:
(a) this Amendment executed by the Banks, the Agent, the Borrower and the
Guarantor;
(b) an opinion of counsel for Borrower and Guarantor in form and substance
satisfactory to the Agent;
(c) Good Standing Certificates of the Borrower and Guarantor from the
Secretary of States of New Jersey, New York and California, respectively;
(d) 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; and
(e) Borrower and Guarantor shall have delivered such other documents,
information, agreements and opinions reasonably required by the Agent and the
Banks.
Section 5. Expenses. The Borrower and the Guarantor shall pay, jointly and
severally, all reasonable expenses of the Agent and the Banks, including,
without limitation, the reasonable legal fees incurred by the Agent and the
Banks in connection with the preparation, negotiation, execution and delivery
and review of this Amendment, and all other documents and instruments executed
in connection with this transaction and all filing and search fees incurred in
connection herewith.
Section 6. Full Force and Effect. Except as expressly modified by this
Amendment, all of the terms and conditions of the Loan Agreement shall continue
in full force and effect, and all parties hereto shall be entitled to the
benefits thereof. This Amendment is limited as written and shall not be deemed
(i) to be an amendment of or a consent under or waiver of any other term or
condition of the Loan Agreement, or (ii) to prejudice any right or rights which
the Agent and/or the Banks now have or may have in the
-5-
<PAGE>
future under or in connection with the Loan Agreement or the other Loan
Documents.
Section 7. Security Interests. It is agreed and confirmed that after giving
effect to this Amendment, the security interests granted by the Borrower and the
Guarantor pursuant to the Loan Agreement and the other Loan Documents continue
to secure as a first priority Lien on the Assets described in Section 8.1 of the
Loan Agreement, inter alia, to the Banks the prompt and full payment of all of
the Obligations arising under the Loan Agreement, as amended by this Amendment,
and to secure to Fleet the reimbursement and repayment of the Letter of Credit,
the Master Agreement Obligations and the Fleet Mortgage Loan.
Section 8. Guarantor. The Guarantor, by their signatures below, hereby
acknowledge and agree to the changes to the Loan Agreement set forth in this
Amendment. The Guarantor hereby confirms that their joint and several guaranty
as set forth in Section 7 of the Loan Agreement remains in full force and effect
and that the Obligations guaranteed include, without limitation, those
Obligations arising under the Loan Agreement as amended by this Amendment and
that, to secure to the Banks the prompt and full payment and performance of all
of the Obligations, and to secure to Fleet the reimbursement and repayment of
the Letter of Credit, the Master Agreement Obligations and the Fleet Mortgage
Loan, they have jointly and severally granted to the Agent for the ratable
benefit of the Banks, a first priority continuing security interest and Lien in
and to all of the Assets as described in Section 8.1 of the Loan Agreement.
Section 9. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all which when taken together shall constitute one and the same agreement.
Section 10. Governing Law. This Amendment, including the validity thereof
and the rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the laws of the State of New Jersey.
-6-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
day and year first above written.
SUPREMA SPECIALTIES, INC.
("Borrower")
By:
----------------------------
Name: Mark Cocchiola
Title: President
SUPREMA SPECIALTIES WEST, INC.
("Guarantor")
By:
----------------------------
Name: Mark Cocchiola
Title: President
SUPREMA SPECIALITIES NORTHEAST,
INC. ("Guarantor")
By:
----------------------------
Name: Mark Cocchiola
Title: President
FLEET BANK, N.A. ("Agent")
By:
----------------------------
Name: Edward J. Waterfield
Title: Senior Vice President
FLEET BANK, N.A. ("Fleet")
By:
----------------------------
Name: Edward J. Waterfield
Title: Senior Vice President
-7-
<PAGE>
SOVEREIGN BANK ("Sovereign")
By:
----------------------------
Name: Owen P. McKenna
Title: Vice President
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING LOAN, GUARANTY AND SECURITY AGREEMENT
THIS THIRD AMENDMENT (this "Amendment") dated as of July 22, 1999 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 (Fleet and Sovereign 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") to that certain SECOND AMENDED AND RESTATED REVOLVING LOAN,
GUARANTY AND SECURITY AGREEMENT dated as of December 16, 1998, as amended and
modified by that certain First Amendment to Second Amended and Restated
Revolving Loan, Guaranty and Security Agreement dated as of May 28, 1999 and by
that certain Second Amendment to Second Amended and Restated Revolving Loan,
Guaranty and Security Agreement dated as of June 30, 1999 (collectively, the
"Loan Agreement") by and among Fleet, Sovereign, the Agent, the Borrower and the
Guarantor.
W I T N E S S E T H:
WHEREAS, the Borrower and the Guarantor have requested that the revolving
credit facility maintained pursuant to the Loan Agreement be increased; and
WHEREAS, Sovereign has agreed to make such additional loan to the Borrower
subject to terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto hereby agree as follows:
Section 1. Defined Terms; Effect of Amendment.
(a) All capitalized terms used herein which are defined in the Loan
Agreement and not otherwise defined herein are used herein as defined therein.
<PAGE>
(b) This Amendment is an amendment to the Loan Agreement. Unless the
context of this Amendment otherwise requires, the Loan Agreement and this
Amendment shall be read together and shall have effect as if the provisions of
the Loan Agreement and this Amendment were contained in one agreement. After the
effective date of this Amendment, all references in the Loan Agreement to the
"Agreement", "this Agreement", "hereto", "hereof", "hereunder" or words of like
import referring to the Loan Agreement shall mean the Loan Agreement as amended
by this Amendment, and all references in the Notes and the other Loan Documents
to the Loan Agreement shall mean the Loan Agreement as amended by this
Amendment.
Section 2. Amendments to Loan Agreement.
(a) The following definitions set forth in SECTION 1 of the Loan Agreement
are hereby amended in their entirety to read as follows:
"'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
$40,000,000, as such amount may be reduced pursuant to Section 5.2.
'Notes' means those certain Secured Revolving Notes dated December 16,
1998 and July __, 1999 made by the Borrower in favor of the Banks in
the aggregate principal amount of up to $40,000,000, which Notes are
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."
(b) SECTION 2.1 of the Loan Agreement is amended and restated in its
entirety to read as follows:
"2.1 Commitment; Maximum Credit. Subject to the terms and conditions
of this Agreement, each Bank severally 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"):
- 2 -
<PAGE>
Name of Bank Amount
------------ ------
Fleet Bank, N.A. $25,000,000.00
Sovereign Bank $15,000,000.00
TOTAL $40,000,000.00
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."
Section 3. Representations and Warranties. In order to induce the Agent and
the Banks to enter into this Amendment, the Borrower and the Guarantor make the
following representations and warranties to the Agent and the Banks, which shall
survive the execution and delivery hereof:
(a) It is a corporation duly incorporated and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power to execute, deliver and perform its obligations under the Loan
Agreement as amended by this Amendment;
(b) The execution and delivery of this Amendment has been authorized by all
necessary corporate action on its part, this Amendment has been duly executed
and delivered by it; and this Amendment and the Loan Agreement, as amended
hereby, constitutes the legal, valid and binding obligations of it enforceable
against it in accordance with its terms subject to 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 in proceedings in equity or
at law).
(c) Neither the execution and delivery of this Amendment, nor the
consummation by the Borrower and the Guarantor of the
- 3 -
<PAGE>
transactions herein contemplated, nor compliance by each with the terms,
conditions and provisions hereof will conflict with or result in a breach of any
of the terms, conditions or provisions of (i) its Certificate of Incorporation
or By-Laws; (ii) any material agreement or instrument to which it is now a party
or by which it or its property is, or may be, bound (except any agreement with
the Banks), or constitute a default thereunder, or result thereunder in the
creation or imposition of any security interest, mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of its properties or assets; (iii)
any judgment or order, writ, injunction or decree of any court to which it is
subject; or (iv) any Requirement of Law;
(d) No action of, or filing with, any governmental or public body or
authority is required to authorize, or is otherwise required in connection with
the execution, delivery and performance of this Amendment;
(e) Without limiting the generality of clause (c) above, (i) the execution
and delivery of this Amendment shall not result in a breach, nor constitute a
default under the terms and conditions of the New Senior Subordinated Notes
(including, without limitation, the terms and conditions of that certain Note
Agreement dated as of March 9, 1998 among the Borrower and the holders of said
notes), and (ii) no consent, waiver or modification is necessary thereunder in
order to execute and deliver this Amendment or for the Borrower to perform its
obligations under this Amendment;
(f) No Event of Default has occurred and is continuing, and no event has
occurred which, with notice, lapse of time or both, would constitute an Event of
Default; and
(g) The representations and warranties set forth in the Loan Agreement and
the other Loan Documents are true and correct as of the date hereof in all
material respects.
Section 4. Conditions Precedent. This Amendment shall not be effective
until the Agent shall have received originals of the following documents and the
following conditions shall have been satisfied in full:
(a) this Amendment executed by the Banks, the Agent, the Borrower and the
Guarantor;
(b) the Secured Revolving Note made by the Borrower in favor of Sovereign
in the aggregate principal amount of up to $15,000,000;
(c) an opinion of counsel for Borrower and Guarantor in form and substance
satisfactory to the Agent;
- 4 -
<PAGE>
(d) Good Standing Certificates of the Borrower and Guarantor from the
Secretary of States of New Jersey, New York and California, respectively;
(e) 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; and
(f) Borrower and Guarantor shall have delivered such other documents,
information, agreements and opinions reasonably required by the Agent and the
Banks.
Section 5. Expenses. The Borrower and the Guarantor shall pay, jointly and
severally, all reasonable expenses of the Agent and the Banks, including,
without limitation, the reasonable legal fees incurred by the Agent and the
Banks in connection with the preparation, negotiation, execution and delivery
and review of this Amendment, and all other documents and instruments executed
in connection with this transaction and all filing and search fees incurred in
connection herewith.
Section 6. Full Force and Effect. Except as expressly modified by this
Amendment, all of the terms and conditions of the Loan Agreement shall continue
in full force and effect, and all parties hereto shall be entitled to the
benefits thereof. This Amendment is limited as written and shall not be deemed
(i) to be an amendment of or a consent under or waiver of any other term or
condition of the Loan Agreement, or (ii) to prejudice any right or rights which
the Agent and/or the Banks now have or may have in the future under or in
connection with the Loan Agreement or the other Loan Documents.
Section 7. Security Interests. It is agreed and confirmed that after giving
effect to this Amendment, the security interests granted by the Borrower and the
Guarantor pursuant to the Loan Agreement and the other Loan Documents continue
to secure as a first priority Lien on the Assets described in Section 8.1 of the
Loan Agreement, inter alia, to the Banks the prompt and full payment of all of
the Obligations arising under the Loan Agreement, as amended by this Amendment,
and to secure to Fleet the reimbursement and repayment of the Letter of Credit,
the Master Agreement Obligations and the Fleet Mortgage Loan.
Section 8. Guarantor. The Guarantor, by their signatures below, hereby
acknowledge and agree to the changes to the Loan Agreement set forth in this
Amendment. The Guarantor hereby confirms that their joint and several guaranty
as set forth in Section 7 of the Loan Agreement remains in full force and effect
and that the
- 5 -
<PAGE>
Obligations guaranteed include, without limitation, those Obligations arising
under the Loan Agreement as amended by this Amendment and that, to secure to the
Banks the prompt and full payment and performance of all of the Obligations, and
to secure to Fleet the reimbursement and repayment of the Letter of Credit, the
Master Agreement Obligations and the Fleet Mortgage Loan, they have jointly and
severally granted to the Agent for the ratable benefit of the Banks, a first
priority continuing security interest and Lien in and to all of the Assets as
described in Section 8.1 of the Loan Agreement.
Section 9. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all which when taken together shall constitute one and the same agreement.
Section 10. Governing Law. This Amendment, including the validity thereof
and the rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
day and year first above written.
SUPREMA SPECIALTIES, INC.
("Borrower")
By:___________________________
Name: Mark Cocchiola
Title: President
SUPREMA SPECIALTIES WEST, INC.
("Guarantor")
By:___________________________
Name: Mark Cocchiola
Title: President
SUPREMA SPECIALITIES NORTHEAST,
INC. ("Guarantor")
By:___________________________
Name: Mark Cocchiola
Title: President
- 6 -
<PAGE>
FLEET BANK, N.A. ("Agent")
By:___________________________
Name: Edward J. Waterfield
Title: Senior Vice President
FLEET BANK, N.A. ("Fleet")
By:___________________________
Name: Edward J. Waterfield
Title: Senior Vice President
SOVEREIGN BANK ("Sovereign")
By:___________________________
Name: Edward C. Gurskis
Title: Senior Vice President
- 7 -
Exhibit 21
Subsidiaries of the Company
1. Suprema Specialties West, Inc.
2. Suprema Specialties Northeast, Inc.
Exhibit 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Suprema Specialties, Inc.
Paterson, New Jersey
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (333-06599) of our report dated August 9, 1999, relating
to the consolidated financial statements and schedule of Suprema Specialties,
Inc. appearing in the Company's Annual Report on Form 10-K for the year ended
June 30, 1999.
(Signed manually)
- -----------------
BDO SEIDMAN, LLP
Woodbridge, New Jersey
September 9, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-K FOR JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 358,214
<SECURITIES> 0
<RECEIVABLES> 36,577,832
<ALLOWANCES> 570,290
<INVENTORY> 35,918,720
<CURRENT-ASSETS> 73,108,499
<PP&E> 9,155,112
<DEPRECIATION> 2,069,164
<TOTAL-ASSETS> 81,998,975
<CURRENT-LIABILITIES> 16,842,919
<BONDS> 0
0
0
<COMMON> 45,988
<OTHER-SE> 20,464,674
<TOTAL-LIABILITY-AND-EQUITY> 81,998,975
<SALES> 176,281,035
<TOTAL-REVENUES> 176,281,035
<CGS> 146,351,545
<TOTAL-COSTS> 18,466,627
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,328,838
<INCOME-PRETAX> 7,134,025
<INCOME-TAX> 2,926,000
<INCOME-CONTINUING> 4,208,025
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,208,025
<EPS-BASIC> .93
<EPS-DILUTED> .86
</TABLE>
