UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _____________________
Commission file number 0-19263
SUPREMA SPECIALTIES, INC.
(Exact Name of Registrant as
specified in its charter)
New York 11-2662625
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
510 EAST 35TH STREET
PATERSON, NEW JERSEY 07543
(Address of principal executive offices)
(Zip Code)
(973) 684-2900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
As of May 8, 2000 there were 4,412,193 outstanding shares of the issuer's Common
Stock, $.01 par value.
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
INDEX
No. Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
(unaudited) and June 30, 1999 3
Consolidated Statements of Earnings For The Three
and Nine Month Periods Ended March 31, 2000 and 1999
(unaudited) 4
Consolidated Statements of Cash Flows For the Nine
Month Periods Ended March 31, 2000 and 1999 (unaudited) 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of 8 Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
ITEM 2. Change in Securities and Use of Proceeds 11
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000 June 30, 1999
-------------- --------------
(Unaudited)
----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 356,570 $ 358,214
Accounts receivable, net of allowances
of $570,290 at Mar. 31, 2000 and
$570,290 at June 30, 1999 58,395,077 36,007,542
Inventories 39,287,588 35,918,720
Prepaid expenses and other current assets 540,470 596,023
Deferred income taxes 228,000 228,000
------------- -------------
Total current assets 98,807,705 73,108,499
PROPERTY AND EQUIPMENT, NET 7,521,420 7,085,948
OTHER ASSETS 1,720,532 1,804,528
------------- -------------
$ 108,049,657 $ 81,998,975
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,371,240 $ 12,123,099
Current portion of long-term obligations 594,388 550,761
Mortgage payable - short term 52,536 49,220
Income taxes payable 957,261 1,710,000
Accrued expenses and other current liabilities 1,942,491 2,409,839
------------- -------------
Total current liabilities 14,917,916 16,842,919
DEFERRED INCOME TAXES 1,120,000 1,120,000
REVOLVING CREDIT LOAN 55,297,000 30,441,599
SUBORDINATED DEBT 10,500,000 10,500,000
LONG-TERM CAPITAL LEASES 1,263,920 1,715,327
MORTGAGE PAYABLE - LONG TERM 828,627 868,468
------------- -------------
83,927,463 61,488,313
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000
shares authorized, 4,625,563 and
4,598,897 issued and outstanding at March 31, 2000
and June 30, 1999 46,255 45,988
Additional paid-in capital 11,365,507 11,247,154
Retained earnings 14,153,052 9,613,890
Treasury stock at cost, 213,370 at March 31,2000 and
78,370 at June 30, 1999 (1,442,620) (396,370)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 24,122,194 20,510,662
------------- -------------
$ 108,049,657 $ 81,998,975
============= =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------ -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 75,563,918 $ 45,863,269 $ 202,268,133 $ 127,414,216
Cost of sales 63,472,100 38,157,107 169,021,509 105,657,190
------------- ------------- ------------- -------------
Gross margin 12,091,818 7,706,162 33,246,624 21,757,026
------------- ------------- ------------- -------------
Expenses:
Selling and shipping 6,264,725 3,856,142 16,873,915 10,698,345
General and administrative 1,491,365 971,143 4,418,566 2,944,088
------------- ------------- ------------- -------------
7,756,090 4,827,285 21,292,481 13,642,433
------------- ------------- ------------- -------------
Income from operations 4,335,728 2,878,877 11,954,143 8,114,593
Other income (expense)
Interest expense, net (1,582,001) (1,089,539) (4,259,981) (3,179,169)
------------- ------------- ------------- -------------
(1,582,001) (1,089,539) (4,259,981) (3,179,169)
------------- ------------- ------------- -------------
Earnings Before Income Taxes 2,753,727 1,789,338 7,694,162 4,935,424
Income Taxes 1,132,000 733,000 3,155,000 2,023,000
------------- ------------- ------------- -------------
Net earnings $ 1,621,727 $ 1,056,338 $ 4,539,162 $ 2,912,424
============= ============= ============= =============
EARNINGS PER SHARE OF COMMON STOCK:
Basic earnings per share $ 0.37 $ 0.23 $ 1.02 $ 0.64
============= ============= ============= =============
Diluted earnings per share $ 0.31 $ 0.21 $ 0.88 $ 0.61
============= ============= ============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 4,404,813 4,520,579 4,428,403 4,541,783
Diluted 5,260,097 4,952,330 5,179,986 4,788,054
============= ============= ============= =============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------------------------
2000 1999
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOW FROM OPERATING ACTIVITIES:
Net Earnings $ 4,539,162 $ 2,912,424
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 446,649 431,654
Provision for doubtful accounts -- --
(Increase) decrease in operating assets:
Accounts receivable (22,387,535) (9,795,968)
Inventories (3,368,868) (1,665,150)
Prepaid expenses and other current assets 55,553 (261,052)
Other assets 83,996 138,049
Increase (decrease) in operating liabilities:
Accounts payable (751,859) 1,384,461
Income taxes payable (752,739) 1,400,812
Accrued expenses and other current liabilities (467,348) 10,273
------------ ------------
Net cash used in operating activities (22,602,989) (5,444,497)
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Net payments for purchase of property and equipment (882,121) (958,434)
------------ ------------
Net cash used in investing activities (882,121) (958,434)
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from revolving credit loan 56,640,001 36,317,600
Principal payments of revolving credit loan (31,784,600) (29,204,000)
Principal payments of capital leases (407,780) (390,252)
Principal payments of mortgage (36,525) (35,297)
Proceeds from options 118,620 --
Acquisition of treasury stock (1,046,250) (349,372)
Net cash provided by financing activities 23,483,466 6,338,679
------------ ------------
NET INCREASE (DECREASE) IN CASH (1,644) (64,252)
CASH, BEGINNING OF PERIOD 358,214 489,890
------------ ------------
CASH, END OF PERIOD $ 356,570 $ 425,638
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
INFORMATION:
Cash paid during the period for:
Interest $ 4,261,904 $ 3,179,282
============ ============
Income Taxes $ 3,943,257 $ 630,896
============ ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet as of March 31, 2000, the
unaudited consolidated statements of earnings for the three and nine month
periods ended March 31, 2000 and 1999 and the unaudited consolidated
statements of cash flows for the nine month periods ended March 31, 2000
and 1999 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The balance
sheet for June 30, 1999 is derived from audited financial statements. In
the opinion of management, all adjustments (which include normal recurring
accruals) necessary to present fairly the financial position and the
results of operations and cash flows at March 31, 2000 and for the three
and nine month periods presented, have been included.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from this quarterly
financial statement. The attached financial statements should be read in
connection with the consolidated financial statements and notes thereto
included in the Company's 1999 Annual Report on Form 10-K for the year
ended June 30, 1999.
The results of operations and cash flows for the three and nine months
ended March 31, 2000 are not necessarily indicative of the results to be
expected for the entire fiscal year.
2. INVENTORIES
Inventories are summarized as follows:
March 31, 2000 June 30, 1999
-------------- -------------
Finished goods $ 25,425,825 $25,848,208
Raw materials 12,437,363 9,110,302
Packaging 1,424,400 960,210
------------ -----------
$ 39,287,588 $35,918,720
============ ===========
3. LONG-TERM REVOLVING CREDIT LOAN
In March 2000, the loan agreement between the Company and Fleet Bank, N.A.
that provides the Company with a revolving credit facility (the "Facility")
was amended to increase the Facility to $85,000,000. The commitment for the
revolving credit Facility is through February 15, 2004. The rate of
interest on amounts borrowed under the Facility is the adjusted LIBOR rate,
as defined, plus 175 basis points. 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. Advances under the Facility are limited to 85%
of eligible accounts receivable and 60% of all inventory except packaging
material, as defined in the agreement. The Facility Agreement contains
restrictive financial covenants, including the maintenance of consolidated
net worth, and the maintenance of leverage and fixed charge ratios, as
defined in the agreement, and a restriction on dividends to common
shareholders. As of March 31, 2000 the Company is in compliance with the
covenants under the Facility Agreement. Borrowings under the Facility are
required to be used for working capital purposes.
4. TREASURY STOCK
During the nine months ended March 31, 2000, the Company, in accordance
with its stock repurchase plan, purchased 135,000 shares of its common
stock at a cost of $1,046,250.
6
<PAGE>
5. EARNINGS PER SHARE
The earnings per share for the three and nine month periods ended March 31,
2000 and 1999 were computed by dividing the weighted average number of
shares outstanding into net earnings.
The weighted average number of issued and outstanding common shares used in
the calculation of basic earnings per share for the three and nine month
periods ended March 31, 2000 is based upon the 4,520,527 shares outstanding
at the beginning of the period less a pro-rata portion of the 135,000
shares of treasury stock repurchased during the nine months ended March 31,
2000, as well as the pro-rata portion of 26,666 shares issued upon the
exercise of employee stock options and warrants. Also included in the
weighted average number of common shares are incremental shares
attributable to assumed exercise of options and warrants.
The weighted average number of issued and outstanding common shares used in
the calculation of basic earnings per share for the three and nine month
periods ended March 31, 1999 is based upon the 4,562,800 shares outstanding
at the beginning of the year less a pro-rata portion of the 68,670 shares
of treasury stock repurchased during the nine months ended March 31, 1999.
Also included in the weighted average number of common shares are the
pro-rata portion of 34,430 shares issued upon exercise of warrants granted
to an investment banker in 1994 in connection with the private placement of
Preferred Stock, as well as incremental shares attributable to assumed
exercise of options and warrants.
Basic and diluted earnings per share for three and nine months ended March
31, 2000 and 1999 are calculated as follows:
<TABLE>
<CAPTION>
Three months ended Mar. 31, 2000 Three months ended Mar. 31, 1999
--------------------------------- -----------------------------------
Net Income Shares Per Share Net Income Shares Per Share
---------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings
per share $1,621,727 4,404,813 $ .37 $1,056,338 4,520,579 $ .23
Effect of assumed
conversion of warrants
and employee stock
options 855,284 431,751
---------- --------- -------- ---------- --------- -------
Diluted earnings
Per share $1,621,727 5,260,097 $ .31 $1,056,338 4,952,330 $ .21
Nine months ended Mar. 31, 2000 Nine months ended Mar. 31, 1999
----------------------------------- ----------------------------------
Net Income Shares Per Share Net Income Shares Per Share
---------- --------- ---------- ---------- --------- ---------
Basic earnings
Per share $4,539,162 4,428,403 $ 1.02 $2,912,424 4,541,783 $ .64
Effect of assumed
conversion of warrants
and employee stock
options 751,583 246,271
---------- --------- -------- ---------- --------- -------
Diluted earnings
Per share $4,539,162 5,179,986 $ .88 $2,912,424 4,788,054 $ .61
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in
this report contains statements that are forward-looking, such as
statements relating to plans for future activities. Such forward-looking
information involves important known and unknown risks and uncertainties
that could significantly affect actual results, performance or achievements
of the Company in the future and, accordingly, such actual results,
performance or achievements may materially differ from those expressed or
implied in any forward-looking statements made by or on behalf of the
Company. These risks and uncertainties include, but are not limited to,
those relating to the Company's growth strategy, customer concentration,
outstanding indebtedness, seasonality, expansion and other activities of
competitors, changes in federal or state laws and the administration of
such laws, protection of trademarks and other proprietary rights, and the
general condition of the economy and its effect on the securities markets
and other risks detailed in the Company's other filings with the Securities
and Exchange Commission. The words "believe," "expect," "anticipate,"
"intend," and "plan," and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date the statement
was made.
Results of Operations - Three months ended March 31, 2000 vs. Three months
ended March 31, 1999.
Net sales for the three month period ended March 31, 2000 were
approximately $75,564,000, as compared to approximately $45,863,000 for the
three months ended March 31, 1999, an increase of approximately $29,701,000
or 64.8%. This increase reflects an increase primarily in sales volume for
food service products manufactured by the Company.
The Company's gross margin increased by approximately $4,386,000 from
approximately $7,706,000 in the three month period ended March 31, 1999 to
approximately $12,092,000 in the three month period ended March 31, 2000,
primarily as a result of an increase in the Company's sales volume for food
service products manufactured by the Company. The Company's gross margin as
a percentage of sales decreased to 16.0% in the three month period ended
March 31, 2000 from 16.8% in the three month period ended March 31, 1999.
The decrease in gross margin as a percentage of sales was primarily due to
the lower average selling price for cheese (as a result of the lower
average CME Block Cheddar Market, the commodity index on which bulk cheese
prices are based) during the three months ended March 31, 2000, and to a
lesser extent the shift toward lower margin sales associated with the food
service markets, partially offset by the increase in sales volume.
Selling and shipping expenses increased approximately $2,409,000 from
approximately $3,856,000 for the three month period ended March 31, 1999 to
approximately $6,265,000 for the three month period ended March 31, 2000.
The increase in selling and shipping expenses is primarily due to increases
in advertising and promotional allowances, commission expense and shipping
expenses in support of the Company's revenue growth. As a percentage of
sales, selling and shipping expenses decreased slightly from 8.4% in the
three month period ended March 31, 1999 to 8.3% in the three month period
ended March 31, 2000. The percentage decrease in selling and shipping
expenses is primarily due to the increase in the Company's revenue growth,
which was partially offset by the increases in advertising and promotional
allowances, commission expense and shipping expenses in support of the
Company's revenue growth.
General and administrative expenses increased by approximately $520,000 to
approximately $1,491,000 for the three month period ended March 31, 2000 as
compared to approximately $971,000 for the comparable period in 1999. The
increase in general and administrative expenses is primarily due to an
8
<PAGE>
increase in personnel and other administrative expenses associated with the
Company's revenue growth. As a percentage of sales, general and
administrative expenses decreased slightly from 2.1% in the three month
period ended March 31, 1999 to 2.0% in the three month period ended March
31, 2000. The percentage decrease in general and administrative expenses is
primarily due to the increase in the Company's revenue growth which was
partially offset by the increases in personnel and other administrative
expenses associated with the Company's revenue growth
Net interest expense increased to approximately $1,582,000 for the three
month period ended March 31, 2000 from approximately $1,090,000 for the
three month period ended March 31, 1999. The increase in interest expense
was primarily due to the Company's expanded borrowing requirements
necessary for working capital needs.
The provision for income taxes for the three month period ended March 31,
2000 increased by approximately $399,000 compared to the three month period
ended March 31, 1999 as a result of increased taxable income. The effective
tax rate is relatively consistent between the periods.
Net earnings increased approximately $566,000 to approximately $1,622,000
for the three month period ended March 31, 2000, from approximately
$1,056,000 for the comparable period ended March 31, 1999 due to the
increase in gross margin as a result of increased sales volumes, which was
partially offset by the increases in selling and shipping expenses, general
and administrative expenses and interest expense.
Results of Operations - Nine months ended March 31, 2000 vs. Nine months
ended March 31, 1999.
Net sales for the nine month period ended March 31, 2000 were approximately
$202,268,000 as compared to approximately $127,414,000 for the nine months
ended March 31, 1999, an increase of approximately $74,854,000 or 58.7%.
This increase reflects an increase primarily in sales volumes for food
service products manufactured by the Company.
The Company's gross margin increased by approximately $11,490,000, from
approximately $21,757,000 in the nine month period ended March 31, 1999 to
approximately $33,247,000 in the nine month period ended March 31, 2000,
primarily as a result of an increase in sales volume for food service
products manufactured by the Company. The Company's gross margin as a
percentage of sales decreased from 17.1% in the nine months ended March 31,
1999 to 16.4% for the comparable nine month period in 2000. The decrease in
gross margin as a percentage of sales was primarily due to the lower
average selling price for cheese (as a result of the lower average CME
Block Cheddar Market, the commodity index on which bulk cheese prices are
based) during the nine months ended March 31, 2000, and, to a lesser
extent, the shift toward lower margin sales associated with the food
service markets, which was partially offset by the increase in the sales
volume.
Selling and shipping expenses increased by approximately $6,176,000 from
approximately $10,698,000 for the nine month period ended March 31, 1999 to
approximately $16,874,000 for the nine month period ended March 31, 2000.
The increase in selling and shipping expenses is primarily due to increases
in advertising and promotional allowances, commission expense and shipping
expenses in support of the Company's revenue growth. As a percentage of
sales, selling and shipping expenses decreased slightly from 8.4% in the
nine month period ended March 31, 1999 to 8.3% in the nine month period
ended March 31, 2000. The percentage decrease in selling and shipping
expenses is primarily due to the increase in the Company's revenue growth,
which was partially offset by the increases in advertising and promotional
allowances, commission expense and shipping expenses in support of the
Company's revenue growth.
General and administrative expenses increased by approximately $1,474,000
from approximately $2,944,000 for the nine month period ended March 31,
9
<PAGE>
1999 to approximately $4,418,000 for the comparable period in fiscal 2000.
The increase in general and administrative expenses is primarily a result
of an increase in personnel and other administrative expenses associated
with the Company's revenue growth. As a percentage of sales, general and
administrative expenses decreased slightly to 2.2% for the nine month
period ended March 31, 2000, from 2.3% for the comparable period in 1999,
primarily due to the increase in the Company's revenue growth, which was
partially offset by an increase in personnel and other administrative
expenses.
Net interest expense increased to approximately $4,260,000 for the nine
month period ended March 31, 2000 from approximately $3,179,000 for the
nine month period ended March 31, 1999. The increase was primarily the
result of the Company's expanded borrowing requirements necessary for
working capital needs.
The provision for income taxes for the nine month period ended March 31,
2000, increased by approximately $1,132,000 as compared to the nine month
period ended March 31, 1999 primarily as a result of increased taxable
income. The effective tax rate is relatively consistent between the
periods.
Net earnings increased by approximately $1,627,000 to approximately
$4,539,000 for the nine month period ended March 31, 2000, from
approximately $2,912,000 for the comparable period ended March 31, 1999 due
to the increase in gross margin primarily as a result of increased sales
volumes, which was partially offset by the increases in selling and
shipping expenses, general and administrative expenses and interest
expense.
Financial Position, Liquidity and Capital Resources
At March 31, 2000 the Company had working capital of approximately
$83,900,000, as compared with $56,265,000 at June 30, 1999, an increase of
approximately $27,635,000. The increase in working capital is primarily due
to the increase in accounts receivable and inventory levels in support of
the Company's increased sales volumes, as well as decreases in accounts
payable, income taxes payable and accrued expenses and other current
liabilities, partially offset by decreases in prepaid expenses and other
current assets and other assets.
The Company previously entered into certain capital lease financing
transactions to purchase equipment. At March 31, 2000, the Company had
obligations of approximately $1,858,308 under capital leases.
In March 1996, the Company purchased its Paterson production facility which
it previously had leased. On March 29, 1999, the Company refinanced its
mortgage on its Paterson facility for the principal amount of $929,573. The
seven year note which bears interest at 7.85% per annum is being amortized
at a fifteen year rate and requires a balloon payment at the end of year
seven of approximately $501,000. At March 31, 2000, the Company had
outstanding obligations of approximately $881,163 under the mortgage on the
Paterson facility.
The Company has a bank revolving credit facility, ("the Facility"), that in
March 2000 was amended to increase the bank's potential commitment to
$85,000,000 through February 15, 2004. The rate of interest on amounts
borrowed under the Facility is the adjusted LIBOR rate plus 175 basis
points. The interest rate at March 31, 2000 was 8.3%. The Facility is
collateralized by substantially all existing and acquired assets of the
Company, as defined in the Facility, and is guaranteed by the Company's
subsidiaries, Suprema Specialties West, Inc, and Suprema Specialties
Northeast, Inc. Advances under this Facility are limited to 85% of eligible
accounts receivable, and 60% of most inventory. The Facility Agreement
contains restrictive covenants, including the maintenance of consolidated
net worth and the maintenance of leverage and fixed charge ratios, as
defined in the agreement, and restriction on dividends to common
shareholders. As of March 31, 2000 the Company believes it is in compliance
with these covenants. At March 31, 2000 the Company's total outstanding
10
<PAGE>
debt under the Facility was $55,297,000.
Management believes that with an increase in the Facility to $85,000,000,
the Company has adequate working capital to meet its reasonably foreseeable
cash requirements.
Net cash used in operating activities in the nine month period ended March
31, 2000 was approximately $22,603,000 as compared to $5,444,000 in the
comparable period of the prior year. The use of cash in operations was
primarily the result of increases in accounts receivable and inventories in
support of the Company's increased revenue growth, and decreases in
accounts payable, income taxes payable and accrued expenses and other
current liabilities partially offset by an increase in net earnings as
adjusted for non-cash expenses, and decreases in prepaid expenses and other
current assets and other assets. The cash used in operations was financed
through cash flow from financing activities. Net cash used in investing
activities in the nine month period ended March 31, 2000 was approximately
$882,000, as compared to $958,000 in the nine month period ended March 31,
1999, as a result of continued expenditures for fixed assets including
capital equipment utilized in the Company's California and Ogdensburg, New
York manufacturing facilities. As a result, at March 31, 2000 the Company
had cash of approximately $356,570.
PART II. OTHER INFORMATION
ITEM 2. Change in Securities and Use of Proceeds.
During the Quarter ended March 31, 2000, the Company issued 5,000
shares of its common stock to an individual investor upon exercise of a
warrant previously granted to the individual. The issuance was made in a
private transaction pursuant to the exemption from registration provided by
section 4(2) of the Securities Act of 1933.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibits
Exhibit 10.1 Amendment No. 1 and Assignment Agreement dated as of March 10, 2000
to Third Amendment and Restated Revolving Loan, Guaranty and
Security Agreement among Fleet Bank, N.A., Sovereign Bank,
Mellon Bank, N.A., European American Bank, N.A., PNC Bank, N.A.,
National City Bank, Suprema Specialties, Inc., Suprema
Specialties West, Inc., and Suprema Specialties Northeast, Inc.
Exhibit 27. Financial Data Schedule
Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPREMA SPECIALTIES, INC.
(registrant)
Date: May 12, 2000 By: /s/ Mark Cocchiola
-----------------------------------------
Mark Cocchiola
President &
Chief Executive Officer
Date: May 12, 2000 By: /s/ Steven Venechanos
-----------------------------------------
Chief Financial Officer &
Secretary
12
AMENDMENT NO. 1 AND ASSIGNMENT AGREEMENT
to
THIRD AMENDED AND RESTATED REVOLVING LOAN, GUARANTY AND SECURITY AGREEMENT
This AMENDMENT NO. 1 AND ASSIGNMENT AGREEMENT, dated as of March 10, 2000
(this "Amendment"), is by and among FLEET BANK, NATIONAL ASSOCIATION (as
successor to NatWest Bank N.A. and National Westminster Bank NJ, "Fleet"),
SOVEREIGN BANK ("Sovereign"), MELLON BANK, N.A. ("Mellon" and, together with
Fleet and Sovereign, the "Current Banks"), EUROPEAN AMERICAN BANK ("EAB"), PNC
BANK, NATIONAL ASSOCIATION ("PNC"), NATIONAL CITY BANK ("National City" and,
together with EAB and PNC, the "New Banks") (the Current Banks and the New Banks
are referred to herein individually as a "Bank" and collectively as the
"Banks"), FLEET BANK, NATIONAL ASSOCIATION, as administrative and collateral
agent for the Banks (in such capacity, the "Agent"), SOVEREIGN BANK, as
syndication agent for the Banks (in such capacity the "Syndication Agent"),
MELLON BANK, N.A., as documentation agent for the Banks (in such capacity the
"Documentation Agent"), SUPREMA SPECIALTIES, INC., a New York corporation (the
"Borrower"), SUPREMA SPECIALTIES WEST, INC. ("Suprema West"), a California
corporation and SUPREMA SPECIALTIES NORTHEAST, INC. ("Suprema Northeast"), a New
York corporation (Suprema West and Suprema Northeast are collectively referred
to herein as the "Guarantor").
RECITALS:
A. The Borrower, the Current Banks, the Agent and the Guarantor have
entered into a Third Amended and Restated Revolving Loan, Guaranty and Security
Agreement, dated as of September 23, 1999 (the "Loan Agreement").
B. Each New Bank wishes to become a party to, and make Loans to the
Borrower under, the Loan Agreement as a Bank and the Borrower, the Guarantor,
the Agent and the Current Banks have consented to each New Bank becoming a Bank.
C. Sovereign wishes to become the Syndication Agent under the Loan
Agreement and Mellon wishes to become the Documentation Agent under the Loan
Agreement and the Borrower, the Guarantor, the Agent and the Banks have
consented to Sovereign becoming the Syndication Agent and Mellon becoming the
Documentation Agent.
D. The Borrower, the Guarantor, the Current Banks and the Agent wish to
amend the Loan Agreement to permit an increase to the Commitment, to add the
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New Banks as Bank parties to the Loan Agreement and to otherwise amend the Loan
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration whose receipt and sufficiency are acknowledged, the
Borrower, the Guarantor, the Banks, the Agent, the Syndication Agent and the
Documentation Agent agree as follows:
Section 1. Definitions. Each capitalized term used but not defined in this
Amendment shall have the meaning ascribed to such term in the Loan Agreement.
Section 2. Amendments of Loan Agreement.
(a) The introductory paragraph of the Loan Agreement is amended to read in
its entirety as follows:
THIS THIRD AMENDED AND RESTATED REVOLVING LOAN, GUARANTY AND SECURITY
AGREEMENT dated as of September 23, 1999, as amended by Amendment No. 1 and
Assignment Agreement dated as of March 10, 2000 is by and among FLEET BANK,
NATIONAL ASSOCIATION (as successor to NatWest Bank N.A. and National
Westminster Bank NJ, "Fleet"), having an office at 208 Harristown Road,
Glen Rock, New Jersey 07452, SOVEREIGN BANK ("Sovereign"), having an office
at 901 West Park Avenue, Ocean, New Jersey 07712, MELLON BANK, N.A.
("Mellon"), having an office at Raritan Plaza I, Raritan Center, Edison,
New Jersey 08837, EUROPEAN AMERICAN BANK ("EAB"), having an office at 335
Madison Avenue, New York, New York 10017, PNC BANK, NATIONAL ASSOCIATION
("PNC"), having an office at 1 Garret Mountain Plaza, West Paterson, New
Jersey 07424, NATIONAL CITY BANK ("National City") having an office at 1345
Chestnut Street, 18th Floor, Philadelphia, Pennsylvania 19107 (Fleet,
Sovereign, Mellon, EAB, PNC and National City, together with any other
financial institution that becomes a party hereto, are referred to herein
individually as a "Bank" and collectively as the "Banks"), FLEET BANK,
NATIONAL ASSOCIATION, as administrative and collateral agent for the Banks
hereunder (in such capacity, the "Agent"), having an office at 208
Harristown Road, Glen Rock, New Jersey 07452, SOVEREIGN BANK, as
syndication agent for the Banks (in such capacity the "Syndication Agent")
having an office at 901 West Park Avenue, Ocean, New Jersey 07712, MELLON
BANK, N.A., as documentation agent for the Banks (in such capacity the
"Documentation Agent") having an office at Raritan Plaza I, Raritan Center,
Edison, New Jersey 08837, 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, Monteca, 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
herein as the "Guarantor"). Capitalized terms used herein without
definition shall have the meanings assigned to such terms in Section 1
hereof.
(b) A new definition of "Adjusted Restricted Payments" shall be added to
Section 1 of the Loan Agreement in its correct place alphabetically to read in
its entirety as follows:
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"Adjusted Restricted Payments" means any and all dividends and other
distributions to shareholders of the Borrower and any and all payments by
the Borrower to its shareholders in connection with the Borrower's
repurchase of its outstanding capital stock, excluding, in the case of
payments by the Borrower to its shareholders in connection with its
repurchase of its outstanding capital stock, the first $1,500,000 paid by
the Borrower on account thereof at any time on or after the Effective Date
of Amendment No. 1.
(c) A new definition for "Amendment No. 1" shall be added to Section 1 of
the Loan Agreement in its correct alphabetical order to read in its entirety as
follows:
"Amendment No. 1" means that certain Amendment No. 1 and Assignment
Agreement to this Agreement dated as of March 10, 2000 among the parties
thereto.
(d) The definition of "Borrowing Base" contained in Section 1 of the Loan
Agreement is amended to read in its entirety as follows:
"Borrowing Base" means the sum, as reasonably determined by the Agent,
of (i) 85% of Eligible Receivables, and (ii) 60% of the book value of
Eligible Inventory.
(e) The definition of "Commitment" contained in Section 1 of the Loan
Agreement is amended to read in its entirety 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 (i) $55,000,000 with
respect to the period from the Closing to, but excluding, the Effective
Date of Amendment No. 1 and (ii) $85,000,000 with respect to the period
from the Effective Date of Amendment No. 1 to, but excluding, the
Commitment Expiration Date, as such amounts may be reduced pursuant to
Section 5.2.
(f) The definition of "Commitment Expiration Date" contained in Section 1
of the Loan Agreement is amended to read in its entirety as follows:
"Commitment Expiration Date" means February 15, 2004.
(g) A new definition of "EBITDA" shall be added to Section 1 of the Loan
Agreement in its correct place alphabetically to read in its entirety as
follows:
"EBITDA" means, with respect to the Borrower and its Subsidiaries for
any period, the sum of (i) Consolidated Net Earnings, (ii) interest
expense, (iii) depreciation and amortization and (iv) Federal, state and
local income taxes, in each case of the Borrower and its Subsidiaries on a
consolidated basis for such period, computed in accordance with GAAP.
(h) A new definition of "Funded Debt" shall be added to Section 1 of the
Loan Agreement in its correct place alphabetically to read in its entirety as
follows:
"Funded Debt" means, at any date of determination, the aggregate
funded Indebtedness (computed in accordance with GAAP) and Capitalized
Leases of the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP, on such date.
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(i) The definition of "Lending Rate" contained in Section 1 of the Loan
Agreement is amended to read in its entirety as follows:
"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, .75% in excess of
the Prime Rate and, in the case of Eurodollar Loans for the Interest Period
therein specified, equal to 1.75% in excess of the LIBOR Rate.
(j) A new definition of "Long Term Debt" shall be added to Section 1 of the
Loan Agreement in its correct place alphabetically to read in its entirety as
follows:
"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.
(k) The definition of "Notes" contained in Section 1 of the Loan Agreement
is amended to read in its entirety as follows:
"Notes" means those certain Secured Revolving Notes dated March 10,
2000 made by the Borrower in favor of each institution that was a Bank as
of the date thereof in the aggregate principal amount as to all notes of up
to $85,000,000, which Notes, in the case of Fleet, Sovereign, and Mellon
were given in substitution for certain notes dated December 16, 1998 in the
case of Fleet, July 23, 1999 in the case of Sovereign and September 23,
1999 in the case of Mellon, which notes, in the case of Fleet and Sovereign
were themselves given in substitution for certain notes dated October 19,
1998 and June 30, 1999, but in each case not in cancellation, discharge or
extinguishment of the indebtedness formerly evidenced by such notes,
together with all promissory notes in replacement or substitution thereof
and any all notes made by the Borrower in favor of an institution that
became a Bank after the Effective Date of Amendment No. 1.
(l) The definition of "Required Banks" contained in Section 1 of the Loan
Agreement is amended to read in its entirety as follows:
"Required Banks" means, at any time, Banks having at least 51% of the
aggregate amount of the Commitments and, if the Commitments have been
terminated, Banks having at least 51% of the Loans outstanding at such
time.
(m) A new definition of "Unfunded Capital Expenditures" shall be added to
Section 1 of the Loan Agreement in its correct place alphabetically to read in
its entirety as follows:
"Unfunded Capital Expenditures" means for any period of determination,
Capital Expenditures during such period of determination minus the amount
of increases in Long Term Debt (excluding Loans) less any amount of such
increase in Long Term Debt utilized to satisfy other existing Indebtedness
of the Borrower during such period of determination and minus, without
duplication, offsetting sales of capital equipment during such period of
determination, all computed in accordance with GAAP.
(n) Section 2.1 of the Loan Agreement is amended to read in its entirety as
follows:
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2.1 Commitment; Maximum Credit. Subject to the terms and conditions of
this Agreement, each Bank severally (but not jointly) agrees to make loans
to the Borrower (hereinafter collectively referred to as "Loans" and
individually as a "Loan"), from time to time before the Termination Date,
in such amounts as Borrower may from time to time request, not to exceed at
any time outstanding the amount set opposite the 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, National Association $22,500,000.00
Sovereign Bank $17,500,000.00
Mellon Bank, N.A. $17,500,000.00
National City Bank $10,000,000.00
PNC Bank, National Association $10,000,000.00
European American Bank $ 7,500,000.00
TOTAL $85,000,000.00
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 may 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.
(o) A new Section 9.22 shall be added to the Loan Agreement to read in its
entirety as follows:
9.22 Payments to Suppliers. No payment owing to any party from whom
the Borrower and/or the Guarantor purchases farm products is more than
fifteen (15) days past due.
(p) Section 10.2(c) of the Loan Agreement is amended to read in its
entirety as follows:
(c) within ninety (90) days after each Fiscal Year end of the
Borrower, furnish annual projections for the next succeeding Fiscal Year in
a form reasonably acceptable to the Banks;
(q) Section 10.14 of the Loan Agreement is amended to read in its entirety
as follows:
10.14 Financial Covenants.
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(a) Leverage 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 (x)
total Funded Indebtedness of the Borrower and its Subsidiaries to (y)
EBITDA, in a proportion of not more than (i) 4.75 to 1.00 from March 31,
2000 through and including June 30, 2003 and (ii) 2.90 to 1.00 from July 1,
2003 and at all times thereafter.
(b) Fixed Charge 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 (x)
EBITDA, minus Unfunded Capital Expenditures during the period of
determination, minus taxes paid (and/or required to be paid) during the
period of determination, minus Adjusted Restricted Payments paid during the
period of determination to (y) principal payments made (and/or required to
be made) on account of Long Term Debt during the period of determination,
plus interest paid during the period of determination, in a proportion of
not less than (i) 1.50 to 1.00 from March 31, 2000 through and including
June 30, 2001; (ii) 1.75 to 1.00 from July 1, 2001 through and including
June 30, 2003 and (iii) 2.00 to 1.00 from July 1, 2003 and at all times
thereafter.
(c) Consolidated Net Worth. Maintain at all times Consolidated Net
Worth of not less than $12,807,000, which Consolidated Net Worth
requirement shall be increased each Fiscal Year end commencing with the
Fiscal Year ending June 30, 2000 (and which shall be maintained during each
fiscal quarter of the ensuing Fiscal Year until the end of such Fiscal Year
at which time it shall again increase accordingly and be maintained as
aforesaid) by the greater of (i) 50% of Consolidated Net Earnings for such
Fiscal Year, and (ii) $0.
(r) Section 10.15(i) of the Loan Agreement is amended to read in its
entirety as follows:
(i) the Liens created by, or in connection with, the Fleet Mortgage;
provided, that, the amount of Indebtedness secured thereby shall not
increase from that secured as of the Effective Date of Amendment No. 1
(collectively, the Lines described in clauses (a) through (i) above are
referred to herein as the "Permitted Liens").
(s) Section 10.18 of the Loan Agreement is amended to read in its entirety
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 this preferred stock of the Borrower (if the
issuance of preferred stock is permitted pursuant to Section 10.21(c)
hereof), so long as no Event of Default has occurred), (ii) purchase,
redeem, retire, or otherwise acquire for value any of its stock now or
hereafter outstanding in excess of $3,000,000 in the aggregate for the
Borrower and Guarantor for the period beginning the Effective Date of
Amendment No. 1 through the Commitment Expiration Date, or (iii) make any
distribution of Assets to its stockholders as such, whether in the form of
other Assets or obligations, (iv) allocate or otherwise set apart any sum
for the payment of any dividend (other than lawful dividends to the
Borrower from the Guarantor) or distribution on, or for the purchase,
redemption, or retirement of, any shares of its stock, or (v) make any
other distribution by reduction of capital or otherwise in respect of any
shares of its stock, or (vi) permit the Guarantor to purchase or otherwise
acquire for value any stock of the Borrower in excess of $3,000,000 in the
aggregate for the Borrower and Guarantor for the period beginning the
Effective Date of Amendment No. 1 through the Commitment Expiration Date;
provided, that, the aggregate amount paid under subparagraphs (ii) and (vi)
hereof shall not exceed $3,000,000.
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(t) Section 14.9 of the Loan Agreement is amended to read in its entirety
as follows:
14.9 Agency Fee. In consideration of services rendered hereunder and
pursuant to the other Loan Documents in its capacity as Agent hereunder and
thereunder, the Borrower shall pay to the Agent an annual agency fee equal
to $30,000, with the next such payment being due and payable on March 10,
2000, and subsequent payments due and payable on the anniversary date
thereof.
(u) Section 15.3 of the Loan Agreement is amended to read in its entirety
as follows:
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, National Association
208 Harristown Road
Glen Rock, New Jersey 07452
Attn: Edward J. Waterfield, Senior Vice President
(iii) if to Sovereign, to:
Sovereign Bank
901 West Park Avenue
Ocean, New Jersey 07712
Attn: Edward C. Gurskis, Senior Vice President
(iv) if to Mellon, to:
Mellon Bank, N.A.
Raritan Plaza I
Raritan Center
Edison, New Jersey 08837
Attn: Russ J. Lopinto, Vice President
(v) if to EAB, to:
European American Bank
335 Madison Avenue
New York, New York 10017
Attn: George Stirling, Vice President
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(vi) if to PNC, to:
PNC Bank, National Association
1 Garret Mountain Plaza
West Paterson, New Jersey 07424
Attn: Judy Land, Vice President
(vii) if to National City, to:
National City Bank
1345 Chestnut Street
18th Floor
Philadelphia, Pennsylvania 19107
Attn: Lyle Cunningham, Vice President
or in the case of any party, such other address as such party may, by
written notice, received by the Agent, have designated as its address for
notices and in the case of any institution that became a Bank after the
Effective Date of Amendment No. 1, such address as shall be designated on
its assignment agreement or otherwise in writing to the Agent. 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 sent, in each case if properly addressed to the party to
whom sent, at its address, as aforesaid. The Agent shall be entitled to
reasonably rely upon any telephonic notices purportedly given pursuant to
the terms of this Agreement and the Borrower and the Guarantor shall hold
the Agent harmless from any loss, cost or expense ensuing from any such
reliance.
(v) Section 15.17 of the Loan Agreement is amended to read in its entirety
as follows:
15.17 References in Other Loan Documents. The Borrower and Guarantor
acknowledge and agree that any reference in any Loan Document to "the
Agreement", or words of like import shall mean this Agreement, as amended
from time to time, and any reference in any Loan Document to the Notes, the
Loans, the loans in the amount of $35,000,000 or $55,000,000 (or any other
amount) or words of like import shall mean the Notes and the Loans in the
aggregate principal amount of $85,000,000, as such amount may hereinafter
be increased, extended, amended, modified or restated.
(w) A new Section 15.18 shall be added to the Loan Agreement immediately
after Section 15.17 and shall read in its entirety as follows:
15.18 References to Agent. Except as expressly provided below,
notwithstanding that there is a Syndication Agent and Documentation Agent
for the facility described in this Agreement, each reference in this
Agreement and the other Loan Documents to the "Agent" shall mean solely
Fleet Bank, National Association, in such capacity. Notwithstanding the
foregoing, the exculpatory and indemnification provisions set forth in
Sections 14.2, 14.3 and 14.5 hereof shall accrue and benefit the
Syndication Agent and the Documentation Agent to the same extent as such
provisions accrue to and/or benefit the Agent.
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Section 3. Addition of New Banks; Reallocation of Commitments; Assignments.
(a) Each of the New Banks agrees to be bound as a Bank by the terms and
conditions of the Loan Agreement and the other Loan Documents and to make Loans
to the Borrower in accordance with the terms of the Loan Agreement. Upon the
Effective Date (as hereinafter defined), each New Bank shall be deemed for all
purposes a Bank under the Loan Agreement and the other Loan Documents and shall
be entitled to all of the rights and benefits, and shall have all the
obligations, of a Bank thereunder.
(b) The total amount of each Bank's Commitment pursuant to the Loan
Agreement shall be the amount set forth in Section 2.1 of the Loan Agreement, as
amended by this Amendment.
(c) All Loans of each Bank to the Borrower shall be evidenced by a Note of
the Borrower substantially in the form of Exhibit A to the Agreement (the
"Note"), which Note, in the case of the Current Banks, shall amend and restate
the existing Note payable to such Current Bank.
(d) Upon the Effective Date, the Commitment of each Bank shall be
automatically adjusted to include each New Bank's Commitment.
(e) Each Bank shall hereby assign or assume from each other Bank such
rights, and shall hereby assign or delegate to such other Bank such obligations,
in each case without recourse, representation or warranty except as expressly
provided in this Amendment, as shall cause the outstanding principal balance of
its Loans to be an amount equal to its Percentage of the aggregate amount of all
outstanding Loans (as used herein, a Bank's "Percentage" shall be determined by
dividing the Commitment of such Bank as set forth in Section 2.1 of the Loan
Agreement, as amended by this Amendment, by the total Commitments of all the
Banks as set forth in the definition of Commitment, as amended by this
Amendment). Each such Bank shall make such payments to, and as directed by, the
Agent and the Agent shall make such payments to the Banks in order to cause the
outstanding principal balance of the Loans by each Bank to be an amount equal to
its Percentage of the aggregate amount of all outstanding Loans. The Borrower
hereby agrees that any amount that a Bank so pays to another Bank pursuant to
this Amendment shall be entitled to all rights of a Bank under the Agreement and
such payments to Banks shall constitute Loans held by each such payor Bank under
the Loan Agreement and that each such payor Bank may, to the fullest extent
permitted by law, exercise all of its right of payment (including the right of
set-off) with respect to such amounts as fully as if such payor Bank had
initially advanced the Borrower the amount of such payments.
(f) The Borrower, the Guarantor, the Agent and each of the Current Banks
hereby consents to the addition of each New Bank as a Bank under the Loan
Agreement with a Commitment as set forth in Section 2.1 of the Loan Agreement,
as amended by this Amendment.
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Section 4. Further Agreements of each New Bank. Each New Bank hereby
confirms to and agrees with the Borrower, the Guarantor, the Agent, the
Syndication Agent, the Documentation Agent and the Current Banks as follows:
(a) The Agent and/or the Current Banks have made no representation or
warranty and shall have no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Agreement
or the other Loan Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency, collectibility or value of the Loan
Agreement, the other Loan Documents, and Collateral, or any other instrument or
document furnished pursuant to the Loan Agreement; provided, however, that each
represents and warrants the genuineness of any signature therein purporting to
be its own.
(b) The Agent and/or the Current Banks have made no representation or
warranty and shall have no responsibility with respect to the financial
condition of the Borrower, the Guarantor and its respective Subsidiaries or any
other Person primarily or secondarily liable in respect of any of their
obligations under the Loan Agreement or any of the other Loan Documents, or the
performance or observance by the Borrower, the Guarantor and its respective
Subsidiaries or any other Person primarily or secondarily liable in respect of
their obligations under the Loan Agreement or any of the other Loan Documents or
any other instrument or document furnished pursuant thereto.
(c) Each New Bank confirms that it has received a copy of the Loan
Agreement and the other Loan Documents, together with copies of the most recent
financial statements referred to in the Loan Agreement and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Amendment and the documents, instruments and
agreements executed pursuant hereto or in connection herewith and each New Bank
consents in all respects to each of the matters covered by this Amendment. (d)
Each New Bank will, independently and without reliance upon the other Banks or
the Agent and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Agreement.
(e) Each New Bank appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the Loan Agreement and the
other Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto.
(f) Each New Bank agrees that it will perform in accordance with their
terms all of the obligations that by the terms of the Loan Agreement are
required to be performed by it as a Bank.
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(g) Each New Bank represents and warrants that it is legally authorized to
enter into this Amendment and the documents, instruments and agreements executed
pursuant hereto or in connection herewith.
Section 5. Conforming Amendments. The Loan Agreement, the Loan Documents
and all agreements, instruments and documents executed and delivered in
connection with any of the foregoing, shall each be deemed to be amended and
supplemented hereby to the extent necessary, if any, to give effect to the
provisions of this Amendment, and each Bank is authorized to annex a copy of
this Amendment to its respective Note. Except as so amended hereby, the Loan
Agreement and the other Loan Documents shall remain in full force and effect in
accordance with their respective terms.
Section 6. Acknowledgments, Confirmations and Consent.
(a) The Borrower and the Guarantor each acknowledge and confirm that the
Liens granted pursuant to the Loan Agreement secure the indebtedness,
liabilities and obligations of the Borrower to the Banks and the Agent under the
Notes, under the Loan Agreement as further amended by this Amendment and under
the other Loan Documents, whether or not so stated in such Loan Agreement and/or
other Loan Document, and that the term "Obligations" as used in the Loan
Agreement (or any other terms used in the Loan Agreement to describe or refer to
the indebtedness, liabilities and obligations of the Borrower to the Banks and
the Agent) includes all other indebtedness, liabilities and obligations of the
Borrower under the Loan Agreement as amended by this Amendment and under the
Notes executed in connection with this Amendment.
(b) The Guarantor consents in all respects to the execution by the Borrower
of this Amendment and acknowledges and confirms that the Guarantor continues to
guarantee the full payment and performance of the indebtedness, liabilities and
obligations of the Borrower under the Loan Agreement as further amended by this
Amendment and under the Notes executed in connection with this Amendment as
provided in the Loan Agreement, and remain in full force and effect in
accordance with their respective terms.
Section 7. Representations and Warranties. The Borrower and the Guarantor,
as the case may be, each represents and warrants to the Banks, the Agent, the
Syndication Agent and the Documentation Agent as follows:
(a) After giving effect to this Amendment (i) each of the representations
and warranties set forth in Section 9 of the Loan Agreement is true and correct
in all respects as if made on the date of this Amendment, except for changes in
the ordinary course of business which, either singly or in the aggregate, are
not materially adverse to the business or financial condition of the Borrower or
the Guarantor, and (ii) no Default or Event of Default exists under the Loan
Agreement.
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(b) Each of the Borrower and the Guarantor has the power to execute,
deliver and perform, and has taken all necessary corporate action to authorize
the execution, delivery and performance of, this Amendment and the other
agreements, instruments and documents to be executed by it in connection with
this Amendment. No consent or approval of any Person (except for such consents
as have been obtained) and no consent, license, certificate of need, approval,
authorization or declaration of, or filing with, any governmental authority,
bureau or agency is or will be required in connection with the execution,
delivery or performance by the Borrower or the Guarantor, or the validity or
enforceability of this Amendment and the other agreements, instruments and
documents executed in connection with this Amendment.
(c) The execution, delivery and performance by the Borrower and the
Guarantor of this Amendment and each of the agreements, instruments and
documents executed in connection with this Amendment to which it is a party will
not (i) violate any provision of law, (ii) conflict with or result in a breach
of any order, writ, injunction, ordinance, resolution, decree or other similar
document or instrument of any court or governmental authority, bureau or agency,
domestic or foreign, or the certificate of incorporation or by-laws of the
Borrower or any Guarantor, (iii) create (with or without the giving of notice or
lapse of time, or both) a default under or breach of any agreement, bond, note
or indenture to which the Borrower or any Guarantor is a party or by which any
of them is bound or any of their respective properties or assets is affected, or
(iv) result in the imposition of any Lien of any nature whatsoever upon any of
the properties or assets owned by or used in connection with the business of the
Borrower or any Guarantor, except for the Liens created and granted pursuant to
the Loan Documents.
(d) This Amendment and each of the other agreements, instruments and
documents executed in connection with this Amendment to which the Borrower or
the Guarantor is a party has been duly executed and delivered by the Borrower or
the Guarantor, as the case may be, and constitutes the valid and legally binding
obligation of the Borrower or the Guarantor, as the case may be, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws, now or hereafter in effect, relating to or affecting the enforcement of
creditors' rights generally and except that the remedy of specific performance
and other equitable remedies are subject to judicial discretion; provided,
however, that such laws shall not materially interfere with the practical
realization of the benefits of the Security Documents or the Liens created
thereby, except for: (i) possible delay, (ii) situations which may arise under
Chapter II of the U.S. Bankruptcy Code, II U.S.C. ss.ss. 10 1 et seq., and (iii)
equitable orders of any United States Bankruptcy Court.
(e) Since January 1, 2000, the Borrower has not repurchased any of its
issued and outstanding capital stock.
12
<PAGE>
Section 8. Fees. The Borrower shall pay the following fees and expenses in
connection with this Amendment:
(a) The Borrower shall pay to the Agent for its own account the Agency Fee
required pursuant to Section 14.9 (as amended by this Amendment) and any other
fees set forth in that certain letter agreement between the Agent and the
Borrower dated the date hereof.
(b) The Borrower agrees to pay the Agent upon demand all reasonable
expenses, including reasonable fees of attorneys and paralegals for the Agent,
incurred by the Agent in connection with the preparation, negotiation and
execution of this Amendment and any agreements, instruments and documents
executed or furnished in connection with this Amendment.
Section 9. Consent to Subordinated Note Amendments. By its signature below,
each Bank hereby consents to that certain Amendment to Note Agreement (the
"Amendment to Note Agreement") dated as of March 9, 2000 among Suprema
Specialties, Inc., Albion Alliance Mezzanine Fund, L.P. and the Equitable
Assurance Society of the United States substantially in the form attached to
this Amendment.
Section 10. Miscellaneous.
(a) Except as specifically amended by this Amendment, the Loan Agreement
and each of the other agreements, instruments and documents executed in
connection with the Loan Agreement shall remain in full force and effect in
accordance with their respective terms.
(b) THIS AMENDMENT AND ALL OTHER AGREEMENTS, DOCUMENTS AND INSTRUMENTS
EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY APPLICABLE
TO CONTRACTS EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW
JERSEY BY RESIDENTS OF SUCH STATE.
(c) The provisions of this Amendment are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause, provision or part in such jurisdiction and shall not in any manner
affect such clause, provision or part in any other jurisdiction or any other
clause or provision in this Amendment in any jurisdiction.
(d) This Amendment may be signed in any number of counterparts with the
same effect as if all parties to this Amendment signed the same counterpart.
13
<PAGE>
(e) This Amendment shall be binding upon and inure to the benefit of each
of the Borrower and the Guarantor and their respective successors and to the
benefit of the Agent, the Banks, the Syndication Agent and/or the Documentation
Agent and their respective successors and assigns. The rights and obligations of
each of the Borrower and the Guarantor under this Amendment shall not be
assigned or delegated without the prior written consent of the Agent and the
Banks, and any purported assignment or delegation without such consent shall be
void.
Section 11. Effectiveness of Amendment. This Amendment shall become
effective (the "Effective Date") upon the later of (i) delivery from Borrower to
each Bank of a Note in a face amount equal to such Bank's Commitment (as amended
by this Amendment) which, in the case of the Current Banks, shall be in
replacement of and substitution for its existing promissory note (such new
promissory note, when executed and delivered, shall be deemed one of the Notes
for all purposes of the Agreement) and documents relating thereto, (ii) the
payment of the fees and expenses set forth in Section 8 of this Amendment, (iii)
receipt by the Agent of corporate resolutions and certificates of good standing
with respect to Borrower and such other certificates, instruments, and documents
as the Agent shall reasonably request, (iv) receipt by the Agent of the fully
executed Amendment to Note Agreement and (v) receipt by the Agent of an opinion
of counsel to the Borrower in form and substance reasonably satisfactory to the
Agent.
[Signature Pages Follow]
14
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Banks, the Agent, the Syndication
Agent, the Documentation Agent and the Guarantor have signed and delivered this
Amendment No. 1 as of the date first written above.
SUPREMA SPECIALTIES, INC.,
as Borrower
By /s/ Mark Cocchiola
-------------------------------------
Name: Mark Cocchiola
Title: President
Each of the guarantors indicated below hereby consents to this Amendment
and reaffirms its continuing obligations under its guarantee as set forth in the
Loan Agreement as amended hereby and all the documents, instruments and
agreements executed pursuant thereto or in connection therewith, without offset,
defense or counterclaim (any such offset, defense or counterclaim as may exist
being hereby irrevocably waived by each such guarantor).
SUPREMA SPECIALTIES WEST, INC.,
as a Guarantor
By /s/ Mark Cocchiola
-------------------------------------
Name: Mark Cocchiola
Title: President
SUPREMA SPECIALTIES NORTHEAST, INC.,
as a Guarantor
By /s/ Mark Cocchiola
-------------------------------------
Name: Mark Cocchiola
Title: President
15
<PAGE>
FLEET BANK, NATIONAL ASSOCIATION,
as Agent and as a Bank
By /s/ Frank A. DelCore
-------------------------------------
Name: Frank A. DelCore
Title: President
16
<PAGE>
SOVEREIGN BANK,
as Syndication Agent and as a Bank
By /s/ Owen P. McKenna
-------------------------------------
Name: Owen P. McKenna
Title: Vice President
17
<PAGE>
MELLON BANK, N.A.,
as Documentation Agent and as a Bank
By /s/ Russ J. Lopinto
-------------------------------------
Name: Russ J. Lopinto
Title: Vice President
18
<PAGE>
EUROPEAN AMERICAN BANK,
as a Bank
By /s/ George L. Stirling
-------------------------------------
Name: George L. Stirling
Title: V.P.
19
<PAGE>
PNC BANK, NATIONAL ASSOCIATION,
as a Bank
By /s/ Karen L. Voight
-------------------------------------
Name: Karen L. Voight
Title: Vice President
20
<PAGE>
NATIONAL CITY BANK,
as a Bank
By /s/ Lyle P. Cunningham
-------------------------------------
Name: Lyle P. Cunningham
Title: Vice President
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AT
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 356,570
<SECURITIES> 0
<RECEIVABLES> 58,965,367
<ALLOWANCES> 570,290
<INVENTORY> 39,287,588
<CURRENT-ASSETS> 98,807,705
<PP&E> 7,521,420
<DEPRECIATION> 0
<TOTAL-ASSETS> 108,049,657
<CURRENT-LIABILITIES> 14,917,916
<BONDS> 67,889,547
0
0
<COMMON> 46,255
<OTHER-SE> 24,075,939
<TOTAL-LIABILITY-AND-EQUITY> 108,049,657
<SALES> 202,268,133
<TOTAL-REVENUES> 202,268,133
<CGS> 169,021,509
<TOTAL-COSTS> 169,021,509
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,259,981
<INCOME-PRETAX> 7,694,162
<INCOME-TAX> 3,155,000
<INCOME-CONTINUING> 4,539,162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,539,162
<EPS-BASIC> 1.02
<EPS-DILUTED> .88
</TABLE>
