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 December 31, 1996
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 0-19824
Nutrition Management Services Company
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2095332
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
Box 725 Kimberton Road, Kimberton, PA 19442
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (610) 935-2050
-----------------------------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if change since
last report.
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 / /.
2,806,069 shares of Registrant's Class A Common Stock, without par value, and
100,000 shares of Registrant's Class B Common Stock, without par value, are
outstanding as of February 14, 1997.
<PAGE>
INDEX
Part I. Financial Information Page No.
--------------------- --------
Consolidated Balance Sheets as of
December 31, 1996 and June 30, 1996 2 - 3
Consolidated Statements of Operations for the
Three and Six Months Ended December 31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1996 and 1995 5
Notes to Financial Statements 6 - 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 10
Part II. Other Information 11
Signatures 12
1
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,319,626 $ 3,026,607
Accounts receivable, less allowance for doubtful
accounts of $441,428 and $362,065, respectively 5,907,990 5,863,105
Unbilled revenue 310,392 273,132
Notes and leases receivable 144,790 823,602
Advances to employees 225,655 257,415
Deferred income taxes 387,183 387,183
Prepaid expenses 401,669 32,371
Inventory and other 331,009 374,850
----------- -----------
Total current assets 12,028,314 11,038,265
Property and equipment, net of accumulated
depreciation of $810,804 and $663,250, respectively 5,473,282 4,450,309
Other assets:
Restricted cash 146,827 146,827
Long-term accounts receivable, net of allowance
for doubtful accounts of $57,509 and $57,509,respectively 50,815 50,815
Deferred income taxes 112,000 112,000
Investment in contracts, net of accumulated
amortization of $1,107,912 and $937,263,respectively 598,577 769,226
Lease receivable 242,195 289,882
Advances to employees -- 5,000
Deferred costs and other 87,524 100,028
----------- -----------
Total assets $18,739,534 $16,962,352
=========== ===========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
2
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
------------ ------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 4,154,104 $ 5,042,025
Accrued expenses 482,052 397,054
Accrued payroll and related expenses 504,137 471,806
Current portion of long-term debt 896,667 896,667
Accrued income taxes 117,252 45,063
Other 496,880 349,013
------------ ------------
Total current liabilities 6,651,092 7,201,628
Long-term debt, net of current portion 5,371,430 3,267,808
Other 227,470 262,824
Commitments and Contingencies -- --
Stockholders' equity:
Undesignated preferred stock - no par,
2,000,000 shares authorized, none outstanding -- --
Common stock:
Class A - no par, 10,000,000 shares authorized;
3,012,500 shares issued, 2,806,069 and 2,810,569
shares outstanding, respectively 3,826,926 3,826,926
Class B - no par, 100,000 shares authorized,
issued and outstanding 48 48
Retained earnings 3,137,852 2,838,934
------------ ------------
6,964,826 6,665,908
Less: Treasury stock (Class A common: 206,431 and 201,931
shares, respectively) - at cost (475,284) (435,816)
------------ ------------
Total stockholders' equity 6,489,542 6,230,092
------------ ------------
Total liabilities and stockholders' equity $ 18,739,534 $ 16,962,352
============ ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
3
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 8,428,595 $ 8,850,795 $ 16,980,682 $ 18,097,147
Operating costs and expenses:
Cost of services provided 6,747,298 7,213,174 13,811,055 14,749,721
General and administrative expenses 1,343,811 1,656,351 2,605,989 3,310,532
------------ ------------ ------------ ------------
Income from operations 337,486 (18,730) 563,638 36,894
Other income:
Other income (expense) 63,645 118,693 140,181 192,503
Interest expense (70,434) (74,610) (146,710) (128,124)
------------ ------------ ------------ ------------
Income before income taxes 330,697 25,353 557,109 101,273
Provision for income taxes 156,272 7,735 258,191 43,083
------------ ------------ ------------ ------------
Net income $ 174,425 $ 17,618 $ 298,918 $ 58,190
============ ============ ============ ============
Earnings per common share $ 0.06 $ 0.01 $ 0.10 $ 0.02
============ ============ ============ ============
Weighted average shares outstanding 2,942,933 2,975,000 2,945,059 2,975,000
============ ============ ============ ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
4
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
December 31,
1996 1995
----------- -----------
Operating activities:
Net income $ 298,918 $ 58,190
Adjustments to reconcile net income to net
cash provided/(used in) operating activities:
Depreciation and amortization 318,203 318,509
Deferred income taxes -- (15,000)
Provision for doubtful accounts 90,000 65,000
Gain on sale of assets -- (13,184)
Amortization of unearned interest income (20,833) (23,555)
Changes in assets and liabilities:
Accounts receivable (134,885) (452,503)
Inventory (49,123) 59,379
Prepaid expenses (369,298) (2,532)
Accrued income receivable (37,260) (189,827)
Deferred costs 105,468 --
Notes receivable 678,812 187,776
Accounts payable (887,921) 883,335
Accrued expenses 84,998 (115,660)
Accrued/prepaid income taxes 72,189 (192,342)
Other 180,198 (57,905)
----------- -----------
Total adjustments 30,548 451,491
----------- -----------
----------- -----------
Net cash provided/(used in) operating activities 329,466 509,681
----------- -----------
Investing activities:
Proceeds from sale of marketable securities -- 1,813,249
Advances to employees and officers 36,760 (68,601)
Repayments - mortgage to related party -- 55,577
Deferred costs -- 169,527
Payment of lease receivable 68,520 78,976
Security deposits -- 10,000
Purchase of property and equipment (1,170,527) (843,631)
----------- -----------
----------- -----------
Net cash (used in)/provided by investing activities (1,065,247) 1,215,097
----------- -----------
Financing activities:
Proceeds of long-term debt 2,551,956 125,000
Repayments of long-term debt (448,334) (448,333)
Other (74,822) 120,862
-----------
----------- -----------
Net cash provided/(used in) financing activities 2,028,800 (202,471)
----------- -----------
Net increase (decrease) in cash 1,293,019 1,522,307
Cash and cash equivalents at begin-
ning of period 3,026,607 1,444,558
----------- -----------
Cash and cash equivalents at end
of period $ 4,319,626 $ 2,966,865
=========== ===========
Supplemental cash flow information:
Interest paid $ 146,680 $ 198,324
Income taxes paid $ 184,034 $ 263,870
See Notes to Unaudited Consolidated Financial Statements.
5
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared
in accordance with generally accepted accounting principles for interim
financial information for quarterly reports on Form 10-Q and, therefore, do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. However,
all adjustments which, in the opinion of management are necessary for fair
presentation of the financial statements, have been included. The results
of operations for the interim periods presented are not necessarily
indicative of the results which may be expected for the entire fiscal year
ending June 30, 1997. The financial information presented should be read in
conjunction with the Company's financial statements which were filed under
Form 10-K.
2. Earnings Per Common Share
Earnings per common share amounts are based on the weighted average number
of shares of common stock outstanding during the three and six month
periods ending December 31,1996. Shares issued in connection with the
employee stock purchase plan were included as common stock equivalents.
Stock options and warrants did not impact earnings per share each quarter
as they were anti-dilutive.
3. New Financing and Credit Facilities
On December 26,1996, the Company completed a $7,500,000 financing
arrangement with its primary bank, CoreStates Financial Corporation.
Included in these arrangements was a $4,000,000 unsecured 3-year revolving
credit facility which can be used for general corporate purposes, and
$3,500,000 in standby letters of credit which were used to guarantee a
$2,500,000 taxable, 20-year Industrial Revenue Bond financing for the
Company's subsidiary, the Collegeville Inn Conference and Training Center
and a $1,000,000 tax-exempt, 20-year Industrial Revenue Bond financing for
the Company's subsidiary, Apple Fresh Foods Limited. The new revolving
credit replaced a $2,900,000 line of credit. The Bonds were issued through
the Montgomery County (PA) Industrial Development Authority. The net
proceeds of the Collegeville financing were designated for payment of
construction expenditures of that facility, part of which had been
previously funded by the Company and for which the Company was reimbursed.
The net proceeds of the Apple Fresh Foods financing were designated for the
purchase of cook chill food preparation equipment.
4. Redeemable Warrants
In connection with the public offering on January 29, 1992, there were
warrants outstanding to purchase 1,150,000 shares of the Company's Class A
Common Stock. Effective January 28, 1992, each registered warrant holder
was entitled to purchase from the Company one share of Class A Common Stock
of the Company at the exercise price of $6.00 (120% of the initial public
offering price of a Unit) per share. These warrants expired on January 28,
1997.
6
<PAGE>
5. Litigation
In the normal course of its business, the Company is exposed to asserted
and unasserted claims. In the opinion of management, the resolution of
these matters will not have a material adverse affect on the Company's
financial position, results of operations or cash flows.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto.
Results of Operations
Revenues for the quarter ended December 31, 1996 decreased by $422,200 or 4.8%
to $8,428,595, compared to revenues of $8,850,795 in the corresponding quarter
last year. Revenues for the six month period ended December 31,1996 were
$16,980,682, a decrease of 6.2% compared to the corresponding period in 1995.
These decreases are the result of three accounts being sold to a non-contracted
nursing home chain, the loss of an account at the end of the first quarter last
year, and another at the end of the first quarter this year.
Gross Profit for the current quarter amounted to $1,681,297 and 19.9%
of revenues for an increase of $43,676 and 1.3% of revenue compared to the
second quarter last year. For the period, Gross Profit totaled $3,169,627 or
18.7% of revenues, compared to $3,347,426 or 18.5% for the same period last
year.
General and administrative expenses for the current quarter were 15.9%
of revenue, compared to 18.7% of revenue for the same quarter last year, a
decrease of $312,540 or 2.8% of revenue. For the six month period, general and
administrative expenses were 15.3% of revenue, compared to 18.3% for the same
period last year. The expense reductions realized this year are the result of
last year's increased expenses associated with the start-up of two major
customers and the installation of a company-wide computer network.
Other income (expense) for the three month period totaled ($6,789)
compared to $44,083 for the same period last year. For the six months ended
December 31,1996, other income (expense) was ($6,529) compared to $64,379 for
the corresponding period last year. The prior year's three and six month periods
were favorably impacted by $43,472 due to the gain on the sale of equipment.
Net income after taxes for the quarter ended December 31, 1996 was
$174,425 compared to $17,618 for the corresponding quarter last year, an
increase of 890%. Earnings per share for the current quarter were $0.06 as
compared to $0.01 for the same quarter last year. For the six month period ended
December 31, 1996, net income was $298,918 as compared to $58,190 for the
corresponding period last year, an increase of 414%. Earnings per share for the
six month period were $0.10 as compared to $0.02 for the corresponding period
last year.
8
<PAGE>
Liquidity and Capital Resources
At December 31, 1996, the Company had working capital of $5,377,222.
Operating Activities. Cash generated by operations for the six months ended
December 31, 1996 was $329,466 compared to $509,681 in cash generated by
operations for the six months ended December 31, 1995. The primary factors
affecting the $329,466 in cash provided in this category were: (1) net income
(less depreciation and amortization) of $617,121, (2) pay-off of $639,910 note
from Meritcare Ventures Inc., (3) reduction in accounts payable of ($887,921),
and (4) prepaid interest expense of ($369,298) associated with the new financing
arrangements (see Note #3 on Page 6).
Investing Activities. Investing activities during the current six month
period consumed $1,065,247 in cash compared to $1,215,097 provided by similar
activities in the same period last year. Investing activities for the current
period included capital expenditures of $1,151,947 for the Collegeville Inn &
Conference Center. The prior year's activity provided cash of $1,813,249 from
the sale of marketable securities, partially off-set by capital expenditures of
$779,933 at the Collegeville Inn & Conference Center. The Company expects to
spend up to $2,000,000 through the remainder of the current fiscal year and the
completion of the project.
Financing Activities. During the six months ended Decmber 31, 1996,
financing activities generated $2,028,800 in cash compared to $202,471 in cash
consumed by similar activities in the same period last year. New Financing and
Credit Facilities (see Note #3 on Page 6) arranged with the Company's primary
bank, CoreStates Financial Corporation, was responsible for $2,551,956 of this
activity off-set by repayment of $448,334 in long term debt.
Capital Resources. The Company has certain credit facilities with its
bank including a line of credit and three term loans. As of December 31, 1996,
the Company had $1,470,447 available on its line of credit. The Company is
current with all its obligations to its Bank and has met all financial covenants
in its loan documents.
A substantial portion of the Company's revenues are dependent upon the
payment of its fees by customer healthcare facilities, which, in turn, are
dependent upon third-party payers such as state governments, Medicare and
Medicaid. Delays in payment by third-party payers, particularly state and local
governments, may lead to delays in collection of accounts receivable.
The Company has no material commitments for capital expenditures (aside
from the Collegeville Inn & Conference Center) and believes that its cash from
operations, existing balances, and available credit line are adequate for the
near term to satisfy the needs of its operations and to fund its continued
growth. However, if the need arose, the Company would seek to obtain capital
from such sources as continuing debt financing or equity financing.
9
<PAGE>
Forward Looking Statements
This form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. Investors are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the adequacy of the Company's cash from operations, existing
balances and available credit line. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this Form 10-Q
will prove to be accurate. In light of significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders
On December 20,1996, the Registrant held its Annual Meeting of
Shareholders at which time six directors were elected to serve
for one-year terms. The tabulation of results with respect to
each nominee was as follows:
Joseph V. Roberts, For - 2,781,851, Withheld - 850
Kathleen A. Hill, For - 2,781,851, Withheld - 850
Kenneth D. Bleakley For - 2,781,851, Withheld - 850
Michael Gosman For - 2,781,851, Withheld - 850
Jane Scaccetti Fumo For - 2,781,851, Withheld - 850
Samuel M. Shipley For - 2,781,851, Withheld - 850
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.14 Loan Agreement between CORESTATES BANK, N.A.
and NUTRITION MANAGEMENT SERVICES COMPANY,
The Collegeville Conference & Training
Center, Inc. and Apple Fresh Foods Limited.
Dated as of December 26, 1996.
(b) Reports on Form 8-K None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Nutrition Management Services Company
/s/ Joseph V. Roberts
-----------------------------
Joseph V. Roberts
Chairman and Chief Executive
Officer
/s/ Francis J. Ford
------------------------------
Francis J. Ford
Controller (Principal Financial Officer)
Date: February 14, 1997
12
LOAN AGREEMENT
between
CORESTATES BANK, N.A.
and
NUTRITION MANAGEMENT SERVICES COMPANY,
THE COLLEGEVILLE INN
CONFERENCE & TRAINING CENTER, INC.
and
APPLE FRESH FOODS LIMITED
Dated as of December 26, 1996
<PAGE>
TABLE OF CONTENTS
Article Page
- ------- ----
I. Definitions....................................................... 1
II. Credit Accommodations............................................. 7
2.1 The Revolving Credit.................................... 7
2.2 Term Loans.............................................. 9
2.3 First Term Loan......................................... 10
2.4 Second Term Loan........................................ 10
2.5 Third Term Loan......................................... 11
2.6 Prepayment and Repayment................................ 11
2.7 Loan Account............................................ 12
2.8 Payments and Computations............................... 12
2.9 Existing Documents Superseded........................... 12
2.10 Requirements of Law..................................... 12
III. Representations and Warranties of the Borrowers...................... 13
3.1 Corporate Existence; Authorization...................... 13
3.2 Compliance with Laws and Other Agreements............... 14
3.3 No Conflict; Governmental Approvals..................... 14
3.4 Financial and Other Information Regarding
Borrowers.............................................. 14
3.5 Taxes................................................... 15
3.6 Encumbrances and Guaranties............................. 15
3.7 Material Adverse Changes................................ 15
3.8 Margin Securities....................................... 15
3.9 ERISA................................................... 15
3.10 Pending Litigation...................................... 16
3.11 Valid, Binding and Enforceable.......................... 16
3.12 Environmental Matters................................... 16
3.13 No Untrue Statements.................................... 17
3.14 Subsidiaries............................................ 17
3.15 Priority of Security Interests.......................... 17
IV. Conditions Precedent to the Bank's Obligations.................... 18
4.1 Documents to be Delivered by the Borrowers
at Closing............................................. 18
4.2 Conditions Precedent to Making Loans.................... 19
V. Affirmative Covenants of the Borrowers............................ 19
5.1 Use of Proceeds......................................... 19
5.2 Financial Statements.................................... 19
5.3 Ordinary Course of Business; Records.................... 20
5.4 Information for the Bank................................ 20
5.5 Insurance............................................... 21
5.6 Maintenance............................................. 21
5.7 Taxes................................................... 21
5.8 Leases.................................................. 22
5.9 Corporate Existence; Certain Rights; Laws............... 22
5.10 Notice of Litigation or Other Proceedings............... 22
5.11 Indebtedness............................................ 22
- 1 -
<PAGE>
5.12 Notice of Events of Default............................. 22
5.13 ERISA................................................... 22
5.14 Deposit Accounts........................................ 23
5.15 Management.............................................. 23
5.16 Financial Covenants..................................... 23
5.17 Compliance with Environmental Laws...................... 23
5.18 Asset Purchase.......................................... 23
5.19 Further Actions......................................... 24
5.20 Release of Liens........................................ 24
VI. Negative Covenants................................................ 25
6.1 Fundamental Corporate Changes........................... 25
6.2 Merger, Consolidation, Business Acquisitions............ 25
6.3 Indebtedness............................................ 25
6.4 Guaranties.............................................. 26
6.5 Sales and Lease-Backs................................... 26
6.6 Loans, Investments...................................... 26
6.7 Change in Business...................................... 27
6.8 Sale or Discount of Receivables......................... 27
6.9 ERISA................................................... 27
6.10 Restricted Payments..................................... 27
6.11 Compliance with Federal Reserve Board
Regulations............................................ 27
VII. Events of Default.................................................... 28
7.1 Borrowers' Failure to Pay............................... 28
7.2 Breach of Covenants or Conditions....................... 28
7.3 Defaults in Other Agreements............................ 28
7.4 Agreements Invalid...................................... 28
7.5 False Warranties; Breach of Representations............. 29
7.6 Judgments............................................... 29
7.7 Bankruptcy or Insolvency of the Borrowers............... 29
7.8 Change in Control....................................... 30
VIII. Remedies.......................................................... 30
8.1 Further Advances; Acceleration; Setoff.................. 30
8.2 Further Remedies; Confession of Judgment................ 30
IX. Miscellaneous..................................................... 31
9.1 Remedies Cumulative; No Waiver.......................... 31
9.2 Notices................................................. 31
9.3 Costs, Expenses and Attorneys' Fees..................... 33
9.4 Survival of Covenants................................... 33
9.5 Counterparts; Effectiveness............................. 33
9.6 Headings................................................ 33
9.7 Payment Due On A Day Other Than a Business Day.......... 33
9.8 Judicial Proceedings.................................... 33
9.9 Governing Law........................................... 34
9.10 Integration............................................. 34
9.11 Amendment and Waiver.................................... 34
9.12 Successors and Assigns.................................. 34
9.13 Severability of Provisions.............................. 35
9.14 Consent to Jurisdiction and Service of Process.......... 35
9.15 Indemnification......................................... 35
- 2 -
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of December 26, 1996,
is between CORESTATES BANK, N.A., a national banking association (the "Bank"),
and NUTRITION MANAGEMENT SERVICES COMPANY, a Pennsylvania corporation
("Nutrition Management"), THE COLLEGEVILLE INN CONFERENCE & TRAINING CENTER,
INC. a Pennsylvania corporation ("Collegeville"), and APPLE FRESH FOODS LIMITED,
a Pennsylvania corporation ("Apple Fresh"; together with Collegeville and
Nutrition Management, the "Borrowers" and individually, a "Borrower").
BACKGROUND
Nutrition Management and the Bank are parties to a Loan Agreement
dated July 13, 1993, as amended on March 10, 1995 (the "Existing Loan
Agreement") pursuant to which the Bank extended a revolving credit to Nutrition
Management in the amount of $2,900,000, a term loan in the amount of $3,200,000
and a term loan in the amount of $500,000, and a promissory note dated November
16, 1994 in the amount of $395,000, (the "Existing Loans"), as evidenced by
promissory notes of Nutrition Management to the Bank in the aggregate amount of
$6,995,000 (the "Existing Notes"; together with the Existing Loan Agreement, and
all other documents and instruments executed in connection therewith, the
"Existing Loan Documents").
Pursuant to the terms hereof, the Borrowers under this Agreement
have requested the Bank to provide the Borrowers with a new revolving credit
facility in the amount of $4,000,000 and to refinance the other Existing Loans
in replacement of the Existing Loan Documents, and the Bank is willing to do so
on the terms and subject to the conditions set forth herein.
ARTICLE I
DEFINITIONS
Terms used herein without definition that are defined in the
Uniform Commercial Code shall have the meanings ascribed to them therein, unless
the context requires otherwise. The following terms shall have the following
meanings in this Agreement:
"Account" shall have the meaning given to that term in the Uniform
Commercial Code and, in addition, shall include any right to payment for goods
sold or leased or services rendered which is evidenced by an instrument or
chattel paper.
"Adjusted Prime Rate" shall mean (i) the Prime Rate plus one-half
of one percent (0.50%) until the Bank receives the Borrowers' financial
statements for the fiscal year ending June 30, 1997 and (ii) for the twelve
months commencing on the first day of the month after the Bank's receipt of such
statements and
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<PAGE>
for every twelve month period thereafter, the interest rate for the ensuing
fiscal year shall be based on the Borrowers' Consolidated Debt Service Coverage
Ratio (as defined in Schedule 5.16 hereto) as follows:
Consolidated
Debt Service Coverage Ratio Adjusted Prime Rate
<1.00:1.00 Prime + .75%
1.00:1.00 through 1.15:1.00 Prime + .375%
>1.15:1.00 Prime
"Affiliate" shall mean any Subsidiary of any Borrower and any
Person or entity that, now or hereafter, directly or indirectly through one or
more intermediaries, controls, is controlled by or is under common ownership or
control with any Borrower. For purposes of this definition, the terms "control,"
"controls" and "controlled" shall refer to the power to determine the management
or policies of a Person, whether resulting from an official position or capacity
with such Person, direct or indirect beneficial ownership of at least twenty
percent (20%) of the voting securities or other equity interests of such Person,
or otherwise.
"Agreement" shall mean this agreement, together with all exhibits,
amendments, modifications and supplements hereto.
"Apple Fresh" shall have the meaning given such term in the initial
paragraph of this Agreement.
"Asset Purchases" shall have the meaning set forth in Section
2.1(a) of this Agreement.
"Assignment of Agreement" shall mean that agreement dated March 10,
1995, as amended on the date hereof, together with all amendments,
modifications, exhibits, and schedules thereto as may be in effect from time to
time.
"Bank" shall have the meaning specified in the initial paragraph of
this Agreement, together with its successors and assigns.
"Borrowers" shall have the meaning set forth in the initial
paragraph of this Agreement, together with their successors and assigns, and
"Borrower" shall mean any one of such Borrowers.
"Business Day" shall mean any day upon which the Bank is open for
business at its main office in Philadelphia, Pennsylvania.
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<PAGE>
"Capital Lease" shall mean any lease of property which, in
accordance with GAAP, should be capitalized on the lessee's balance sheet.
"Capital Lease Obligation" shall mean the amount of the liability
which, according to GAAP, should be capitalized or disclosed with respect to a
Capital Lease.
"Closing" shall mean the execution and delivery to the Bank of all
of the documents and instruments required by the terms of Section 4.1 of this
Agreement.
"Closing Date" shall mean the date on which the Closing
takes place.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall mean any property in which the Bank is granted a
security interest or mortgage.
"Collegeville" shall have the meaning set forth in the
initial paragraph of this Agreement.
"Default" shall mean any fact, condition or event which with the
giving of notice or lapse of time, or both, would be an Event of Default.
"Default Rate" shall mean the Adjusted Prime Rate plus two percent
(2%).
"Encumbrance" shall mean, as to any Person, any mortgage, lien,
pledge, charge, security interest or other similar encumbrance in or on, or any
interest or title of any vendor, lessor, lender to, or other secured party of
the Person under any conditional sale or other title retention agreement or
Capital Lease with respect to, any property or asset of the Person.
"Environmental Laws" shall mean the Federal Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
{{ 9601, et. seq., the Federal Resource Conservation and Recovery
Act, 42 U.S.C. {{ 6901 et. seq., the Hazardous Materials
Transportation Act, 49 U.S.C. {{ 1801, et. seq., all other
federal, state and local environmental or health laws applicable
to each Borrower or its business, operations or assets now or
hereafter enacted, and all rules, regulations, orders and
publications adopted or promulgated pursuant thereto from time to
time.
"ERISA" shall mean the Federal Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
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"Escrow Security Agreement" shall mean the agreement between
Nutrition Management as debtor and the Bank as secured party, dated the same
date as this Agreement, by which Nutrition Management shall, subject to the
terms thereof, grant security interests in certain of its assets to the Bank,
together with all amendments, modifications, exhibits, and schedules thereto as
may be in effect from time to time.
"Event of Default" shall have the meaning set forth in Article VII
of this Agreement.
"Existing Loan Documents" shall have the meaning set forth in the
preamble of this Agreement.
"Financial Statements" shall have the meaning set forth in Section
3.4(a) of this Agreement.
"First Term Loan" shall have the meaning given such term in Section
2.3 of this Agreement.
"First Term Note" shall have the meanings given such term in
Section 2.3 of this Agreement.
"GAAP" shall mean generally accepted accounting principles, as in
effect at the time of application to the provisions hereof.
"Guaranty" shall mean any guaranty or agreement to be a surety or
other contingent liability (other than any endorsement for collection or deposit
in the ordinary course of business), with respect to any obligation of another
Person.
"Hazardous Materials" shall mean all materials of any kind which
are flammable, explosive, toxic, radioactive or otherwise hazardous to animal or
plant life or the environment, including, without limitation, "hazardous
wastes," "hazardous substances" and "contaminants," as such terms are defined by
Environmental Laws.
"Indebtedness" shall mean any obligation for borrowed money,
including, without limitation: (a) any obligation owed for all or any part of
the purchase price of property or other assets or for the cost of property or
other assets constructed or of improvements thereto, other than accounts payable
included in current liabilities and incurred in respect of property purchased or
assets constructed in the ordinary course of business; and (b) any Capital Lease
Obligation.
"Judgment" shall have the meaning set forth in Section 7.6
of this Agreement.
"Loan Account" shall have the meaning given such term in Section
2.4 of this Agreement.
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"Loan Documents" shall mean this Agreement, the Notes, the Security
Agreement, the Mortgage, the Escrow Security Agreement, the Assignment of
Agreement and all agreements, amendments, certificates, financing statements,
schedules, reports, notices, and exhibits now or hereafter executed or delivered
in connection with any of the foregoing, as may be in effect from time to time,
including, without limitation, any documents delivered to the Bank pursuant to
Section 5.18 of this Agreement in connection with Collateral.
"Loans" shall mean the Revolving Credit Loans and the Term
Loans, the First Term Loan, the Second Term Loan and the Third
Term Loan.
"Mortgage" shall mean that Mortgage, Assignment of Leases and
Security Agreement from Collegeville to the Bank, dated the same date of this
Agreement, together with all amendments, modifications, exhibits and schedules
thereto as may be in effect from time to time.
"Non-Approval Loan" shall have the meaning given such term in
Section 2.1(a) of this Agreement.
"Notes" shall mean the Revolving Credit Note and Term Loan Notes,
if any, the First Term Note, the Second Term Note, the Third Term Note, and all
replacements, amendments, extensions and renewals thereof.
"Nutrition Management" shall have the meaning given such term in
the initial paragraph of this Agreement.
"Obligations" shall mean the obligations of the Borrowers:(a) to
pay the principal, interest, commitment fees and any other liabilities of the
Borrowers to the Bank under this Agreement and the other Loan Documents in
accordance with the terms thereof;(b) to satisfy all of the other liabilities of
any of Borrowers to the Bank under any agreement in existence between the Bank
and any Borrower on the date hereof, whether now existing or hereafter incurred,
whether or not evidenced by any note or other instrument, matured or unmatured,
direct, absolute or contingent, joint or several, including any extensions,
modifications, renewals thereof and substitutions therefor;(c) to repay the Bank
all amounts advanced by the Bank hereunder on behalf of the Borrowers,
including, but without limitation, advances for principal or interest payments
to prior secured parties, mortgagors or lienors, or for taxes, levies,
insurance, rent, wages, repairs to or maintenance or storage of any Collateral;
and (d) to reimburse the Bank, upon request, for all of the Bank's expenses and
costs payable under Section 9.3 hereof.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
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"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, court or governmental or political subdivision or agency thereof.
"Prime Rate" shall mean the floating annual rate of interest that
is publicly announced from time to time by the Bank as the "Prime Rate" and is
used by the Bank as a reference base with respect to interest rates charged to
borrowers. The determination and statement of the Prime Rate shall not in any
way preclude the Bank from making loans to other borrowers at rates which are
higher or lower than the Prime Rate.
"Revolving Credit" shall mean the revolving credit from the Bank to
the Borrowers established pursuant to Section 2.1 of this Agreement.
"Revolving Credit Commitment" shall have the meaning set forth in
Section 2.1 of this Agreement.
"Revolving Credit Loans" shall mean the loans made by the Bank to
the Borrowers pursuant to the Revolving Credit.
"Revolving Credit Note" shall have the meaning set forth in Section
2.1 of this Agreement, together with all replacements, amendments and renewals
thereof.
"Second Term Loan" shall have the meaning given such term in
Section 2.4 of this Agreement.
"Second Term Note" shall have the meaning given such term in
Section 2.4 of this Agreement.
"Security Agreement" shall mean the agreement between Collegeville
and Apple Fresh as debtor and the Bank as secured party, dated the same date as
this Agreement, by which each of Collegeville and Apple Fresh shall, subject to
the terms thereof, grant security interests in certain of its assets to the
Bank, together with all amendments, modifications, exhibits, and schedules
thereto as may be in effect from time to time.
"Subsidiary" shall mean, as to any designated corporation, any
corporation, the outstanding shares of which having sufficient voting power (not
depending on the happening of a contingency) to elect at least a majority of the
members of its board of directors, are at the time owned by the designated
corporation.
"Term Loans" and "Term Loan" shall have the meaning given such term
in Section 2.2(a) of this Agreement.
"Term Loan Note" shall have the meaning set forth in Section 2.2(c)
of this Agreement.
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"Termination Date" shall have the meaning set forth in Section 2.1
of this Agreement.
"Third Term Loan" shall have the meaning given such term in Section
2.5 of this Agreement.
"Third Term Note" shall have the meaning given such term in Section
2.5 of this Agreement.
"Uniform Commercial Code" shall mean the Uniform
Commercial Code of Pennsylvania as codified at 13 Pa. C.S.A. {101
et seq., as in effect on the date of this Agreement.
ARTICLE II
CREDIT ACCOMMODATIONS
2.1 The Revolving Credit. The Bank shall make available to the
Borrowers, commencing on the Closing Date, a Revolving Credit in the maximum
principal amount of $4,000,000 (the "Revolving Credit Commitment"), upon the
terms and conditions set forth herein.
(a) Advances. At any time and from time to time during the
period commencing on the Closing Date and ending on December 31, 1998 (the
"Termination Date"), upon the request of the Borrowers, the Bank shall provide
to the Borrowers a loan or loans to be used by the Borrowers for (i) working
capital and/or (ii) the acquisition of existing contracts or lines of business
directly related to the food service operations of the Borrowers whether by the
purchase of assets or stock or by merger, consolidation or a similar transaction
(the "Asset Purchases", each an "Asset Purchase"). As a condition to making any
Revolving Credit Loan for an Asset Purchase, the Borrowers shall deliver to the
Bank at least thirty (30) Business Days prior to the proposed requested funding
date all documentation required by the Bank for its review and written approval
with respect to any Asset Purchase as set forth in Section 5.18 of this
Agreement, provided however, the Borrowers shall be permitted to borrow two
advances up to $1,500,000 each for Asset Purchases without the prior written
approval of the Bank (each, a "Non-Approval Loan"). At any time cumulative
advances under the Revolving Credit for Asset Purchases exceed $1,000,000, the
Borrowers shall be required to convert such advances to a Term Loan in
accordance with Section 2.2 of this Agreement. The Bank shall not be required to
make a Non-Approval Loan under the Revolving Credit for the purpose of financing
an Asset Purchase more than thirty (30) days after payment has been made by the
Borrowers for such Asset Purchase.
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The Borrowers may use the Revolving Credit during the period
referred to in the preceding sentence by borrowing, repaying and reborrowing in
accordance with the terms of this Agreement. The aggregate outstanding principal
under the Revolving Credit at any time shall not exceed the Revolving Credit
Commitment. If, at any time, the aggregate outstanding principal under the
Revolving Credit exceeds the Revolving Credit Commitment, then, without any
requirement of demand or notice from the Bank, the Borrowers shall immediately
pay to the Bank the amount of such excess.
On or before December 31, 1997, and on or before each successive
December 31, thereafter, if applicable, the Bank shall notify the Borrowers of
the Bank's decision, in its sole discretion, to extend the Termination Date of
the Revolving Credit for one year or to terminate the Revolving Credit on the
then existing Termination Date. Upon notice to the Borrowers by the Bank of its
decision to extend the Termination Date for one year and the written acceptance
by the Borrowers, the Borrowers shall execute, upon request of the Bank, all
such documents required by the Bank for the extension of such Termination Date.
Upon the Termination Date, unless the same has been extended by written
agreement between the Bank and the Borrowers, the Bank's commitment to make
Revolving Credit Loans shall terminate, all Revolving Credit Loans shall
immediately mature, and all Obligations under the Revolving Credit shall be
immediately due and payable in full, except to the extent that the Borrowers
shall have exercised the right under this Agreement to convert such Loans to one
or more Term Loans pursuant to Section 2.2 hereof. The aggregate outstanding
principal of all Revolving Credit Loans and Term Loans extended by the Bank in
accordance with Section 2.2 hereof at any time shall not exceed Four Million
Dollars ($4,000,000). The Revolving Credit shall be subject to review and, at
the sole discretion of the Bank, renewal by the Bank on or before the
Termination Date.
(b) Interest. Subject to Section 2.2(b) hereof, interest
shall accrue on the aggregate outstanding principal under the Revolving Credit
at an annual rate equal at all times to the Adjusted Prime Rate and shall be
payable monthly on the first day of each month, commencing February 1, 1997, and
shall change simultaneously and automatically upon any change in the Prime Rate.
(c) Revolving Credit Note. The obligations of the
Borrowers to repay the aggregate outstanding principal under the Revolving
Credit and to pay accrued interest thereon to the Bank shall be evidenced by a
promissory note, in form and substance satisfactory to the Bank, to be executed
and delivered to the Bank concurrently with the execution and delivery of this
Agreement (the "Revolving Credit Note").
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(d) Unused Commitment Fee. In addition to the interest
payable by the Borrowers to the Bank in respect of the Revolving Credit, the
Borrowers shall pay to the Bank on a quarterly basis beginning April 1, 1997, a
fee equal to one-half of one percent (.50%) per annum on the amount, if any, by
which the average Revolving Credit Loans during a calendar quarter, including
any Term Loans, are less than $4,000,000. Such fee shall be computed for the
actual number of days elapsed and on the basis of a year of 360 days, and shall
be payable quarterly in arrears as billed by the Bank.
2.2 Term Loans.
(a) Generally. Subject to the terms and conditions of this
Agreement, at any time or times on or before notification to the Borrowers by
the Bank of the Bank's election to not extend the Termination Date, and provided
no Default or Event of Default shall exist under this Agreement, the Borrowers
shall have the right to request a loan for a term of years for an Asset Purchase
or to convert all or a part of the outstanding principal balance of any
Revolving Credit Loan made in connection with an Asset Purchase under the
Revolving Credit into a loan for a term of years ("Term Loan"). The Borrowers
shall not be permitted to request a Term Loan hereunder that would be a
Non-Approval Loan more than thirty (30) days after payment has been made by the
Borrowers for such Asset Purchase. The Borrowers may exercise their right of
conversion by giving the Bank notice thereof not less than ten Business Days
prior to the date on which such conversion is requested to take effect. The
maximum term which the Borrowers may elect pursuant to such right of conversion
shall be the lesser of (i) five years, or (ii) the weighted average number of
years over which GAAP permits the purchased contracts to be amortized. The
Borrowers shall repay the outstanding principal balance of each Term Loan in
approximately equal consecutive monthly installments of principal commencing on
the first day of the first calendar month of the term thereof and continuing
throughout the entire term thereof in accordance with the provisions of each
respective Term Loan Note.
(b) Interest. Interest shall accrue on the outstanding
principal of each Term Loan at the Adjusted Prime Rate. Interest shall be
payable monthly on the first day of each month together with each payment of
principal, in accordance with the terms of each Term Loan Note, and shall change
simultaneously and automatically upon any change in the Prime Rate. Upon request
of the Borrowers, made concurrently with any request for a Term Loan, the Bank
shall quote a fixed rate of interest, if available, for any Term Loan which the
Borrowers may elect in lieu of the Adjusted Prime Rate.
(c) Term Loan Notes. The obligations of the Borrowers to
repay the aggregate outstanding principal of each Term Loan and to pay accrued
interest thereon to the Bank shall
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be evidenced by a separate promissory note, substantially in the form of Exhibit
2.2(c) hereto, to be executed and delivered to the Bank on the Conversion Date
with respect to such Term Loan (each such note, a "Term Loan Note" and
collectively, the "Term Notes").
2.3 First Term Loan.
(a) Generally. The Bank shall make available to the
Borrowers on the Closing Date a term loan (the "First Term Loan") in the amount
of $773,671.47, for the purpose replacing the existing note under the Existing
Loan Documents dated July 13, 1993. The Borrowers shall repay the outstanding
principal of the First Term Loan in fourteen (14) equal, consecutive, monthly
installments of $53,333.33 each on the fifth day of each month beginning January
5, 1997, and a final installment of all remaining principal on March 5, 1998.
(b) Interest. Interest shall accrue on the outstanding
principal of the First Term Loan at an annual rate equal to seven and one-half
percent (7.5%) and shall be payable monthly on the first day of each month
beginning January 5, 1997.
(c) First Term Note. The obligations of the Borrowers to
repay the aggregate outstanding principal under the First Term Loan and to pay
accrued interest thereon shall be evidenced by a promissory note, in form and
substance satisfactory to the Bank, to be executed and delivered to the Bank
concurrently with the execution and delivery of this Agreement (the "First Term
Note").
2.4 Second Term Loan.
(a) Generally. The Bank shall make available to the
Borrowers on the Closing Date a term loan (the "Second Term Loan") in the amount
of $281,249.93 for the purpose of replacing the existing note under the Existing
Loan Documents dated March 10, 1995. The Borrowers shall repay the outstanding
principal of the Second Term Loan in twenty-six (26) equal, consecutive, monthly
installments of $10,416.67 each, on the tenth day of each month beginning
January 10, 1997, and a final installment of all remaining principal on March
10, 1999.
(b) Interest. Interest shall accrue on the outstanding
principal of the Second Term Loan at an annual rate equal to nine and one-half
percent (9.50%) and shall be payable monthly on the first day of each month
beginning January 10, 1997.
(c) Second Term Note. The obligations of the Borrowers to
repay the aggregate outstanding principal under the First Term Loan and to pay
accrued interest thereon shall be evidenced by a promissory note, in form and
substance
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satisfactory to the Bank, to be executed and delivered to the Bank concurrently
with the execution and delivery of this Agreement (the "Second Term Note").
2.5 Third Term Loan.
(a) Generally. The Bank shall make available to the
Borrowers on the Closing Date a term loan,(the "Third Term Loan") in the amount
of $131,666.72, for the purpose of replacing the existing note under the
Existing Loan Documents dated November 16, 1994. The Borrowers shall repay the
outstanding principal of the Third Term Loan in eleven (11) equal, consecutive,
monthly installments of $10,972.22 each, on the first day of each month
beginning January 1, 1997, and a final installment of all remaining principal on
December 1, 1997.
(b) Interest. Interest shall accrue on the outstanding
principal of the Third Term Loan at an annual rate equal to eight and one-half
percent (8.50%) and shall be payable monthly on the first day of each month
beginning January 1, 1997.
(c) Third Term Note. The obligations of the Borrowers to
repay the aggregate outstanding principal under the Term Loan and to pay accrued
interest thereon shall be evidenced by a promissory note, in form and substance
satisfactory to the Bank, to be executed and delivered to the Bank concurrently
with the execution and delivery of this Agreement (the "Third Term Note").
2.6 Prepayment and Repayment. The Borrowers may make a prepayment
of principal of any Loan accruing interest at the Adjusted Prime Rate at any
time without penalty. Prepayment of any amounts of principal of any Loan bearing
interest at a fixed rate shall not be permitted unless accompanied by the
following prepayment premium equal to the amount, if any, by which the aggregate
present value of scheduled principal and interest payments eliminated by the
prepayment exceeds the principal amount being prepaid. Said present value shall
be calculated by application of a discount rate determined by Bank in its
reasonable judgment to be the yield-to-maturity at the time of prepayment on
U.S. Treasury securities having a maturity which most closely approximates the
final maturity date of the principal balance then outstanding. The determination
of the foregoing prepayment premium by the Bank shall be final, binding and
conclusive upon the Borrower, except to the extent of any manifest error in
computation or transmission. All prepayments of the Loans shall be accompanied
by the payment of accrued interest on the amount of such prepayment to the date
thereof. Subject to the above prepayment premium, the Borrowers may make
payments and prepayments of the Loans in whole or in part at any time and from
time to time upon notification to the Bank not later than 10:00 a.m.
Philadelphia time one Business Day prior to the date of the proposed prepayment.
Each such notice shall set
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forth (i) the date, which shall be a Business Day, on which the proposed
prepayment is to be made; (ii) to which Loan such prepayment is to be applied;
and (iii) the total amount of such prepayment which shall be in the amount equal
to the lesser of the entire remaining principal balance of the Loan, or $500,000
or a multiple thereof. Such notice, once given to the Bank, shall be
irrevocable.
2.7 Loan Account. The Bank shall maintain on its books the account
or accounts previously established by the Borrowers with the Bank (collectively,
the "Loan Account") to which it shall charge all Loans to or for the benefit of
the Borrowers pursuant to the terms of this Agreement, including, without
limitation, all advances to the Borrowers under the Revolving Credit and the
proceeds of all Term Loans, and to which it shall credit, in accordance with the
terms hereof, each payment made by the Borrowers. The records of the Bank with
respect to the Loan Account shall be presumed to correctly evidence the
outstanding principal balance of all Loans under this Agreement, except to the
extent that the Borrowers prove any error in such records.
2.8 Payments and Computations. All amounts payable by the Borrowers
to the Bank under this Agreement or the Notes shall be paid directly to the Bank
in immediately available funds at the address of the Bank set forth in Section
9.2 hereof or at such other address of which the Bank shall give notice to the
Borrowers pursuant to Section 9.2 hereof. All computations of interest hereunder
shall be made by the Bank on the basis of a year of 360 days for the actual
number of days elapsed. All payments under each of the Notes shall be applied
first to the payment of interest due and payable thereunder and then to the
reduction of the outstanding principal balance thereof.
2.9 Existing Documents Superseded. On the Closing Date, the
Existing Loan Documents shall be superseded by this Agreement, the Notes and the
other instruments evidencing or securing the Loans as provided for in this
Agreement, except that the security interests granted thereunder shall be
continued by the Loan Documents executed on the date hereof and that Nutrition
Management hereby agrees that the Assignment of Agreement dated March 10, 1995
shall be hereby deemed amended to provide security for the obligations under the
Loan Documents executed on the date hereof.
2.10 Requirements of Law. In the event that after the date hereof,
any change in any law, regulation or treaty or in the interpretation or
application thereof or compliance by the Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority, agency or instrumentality:
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(a) subjects or shall subject the Bank to any tax of any
kind whatsoever with respect to this Agreement, the Loans made hereunder or
changes the basis of taxation of payments to the Bank of principal, commitment
fee, interest or any other amount payable hereunder (except for changes in taxes
on or measured by the overall net income of the Bank);
(b) imposes, modifies or holds or shall impose, modify or
hold applicable any reserve, special deposit, compulsory loan or similar
requirement in respect of this Agreement or the Loans (or any category of assets
or extensions of credit in which this Agreement and the Loans are included)
against assets held by, or deposits or other liabilities in or for the account
of, advances or loans by, or other credit extended by, or any other acquisition
of funds by, any office of the Bank, which reserve, special deposit, compulsory
loan or similar requirement is not otherwise included in determination of the
interest rate hereunder;
(c) imposes or shall impose on the Bank any other
condition;
and the result of any of the foregoing is to, directly or indirectly, increase
the cost to the Bank of making renewing or maintaining advances or extensions of
credit or to reduce any amount receivable thereunder for the category of Loans
made under this Agreement then, in any such case, the Borrowers shall promptly
pay the Bank, upon its request, any additional amounts necessary to compensate
the Bank for such additional cost or reduced amount receivable. If the Bank
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall promptly notify the Borrowers of the event by reason of which it has
become so entitled. The good faith determination as to any additional amounts
payable pursuant to the foregoing sentence by the Bank shall be conclusive in
the absence of manifest error.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
In order to induce the Bank to execute and deliver this Agreement
and to make the Loans available to the Borrowers, each Borrower represents and
warrants to the Bank that, as of the date hereof:
3.1 Corporate Existence; Authorization. Each Borrower is duly
incorporated, organized and existing and in good standing in the state of its
incorporation set forth on Schedule 3.1 of this Agreement, and is duly qualified
as a foreign corporation and authorized to do business in all other
jurisdictions wherein the nature of its business or property makes such
qualification necessary, and has the corporate power to own its properties and
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to carry on its business as now conducted. The execution, delivery and
performance of this Agreement and the Loan Documents have been duly authorized
by all necessary corporate proceedings on the part of each Borrower.
3.2 Compliance with Laws and Other Agreements. Each Borrower is in
compliance in all material respects with all laws, rules, regulations,
judgments, decrees, orders, agreements and requirements which affect in any
material way the Borrower, its assets or the operation of its business and no
Borrower has received, and has no knowledge of, any order or notice of any
governmental investigation or of any violation or claim of violation in any
material respect of any law, regulation, judgment, decree, order, agreement, or
other governmental requirement.
3.3 No Conflict; Governmental Approvals. The execution, delivery,
and performance of this Agreement and each of the Loan Documents will not (i)
conflict with, violate, constitute a default under, or result in a breach of any
provision of any applicable law, rule, regulation, judgment, decree, order,
instrument or other agreement, or (ii) conflict with or result in a breach of
any provision of the certificate or articles of incorporation or by-laws of any
Borrower. No authorization, permit, consent or approval of or other action by,
and no filing, registration or declaration with, any governmental authority or
regulatory body is required to be obtained or made by any Borrower for the due
execution, delivery and performance of this Agreement or any of the Loan
Documents, except such as have been duly obtained or made prior to the Closing
Date and are in full force and effect as of the Closing Date (copies of which
have been delivered to the Bank on or before the Closing Date).
3.4 Financial and Other Information Regarding Borrowers.
(a) The Borrowers have delivered to the Bank true, correct
and complete copies of the consolidated balance sheet of Nutrition Management
and its subsidiaries as of September 30, 1996, and related statements of income
and cash flows for the period then ended. Those financial statements ("Financial
Statements") present fairly the consolidated financial position of Nutrition
Management and its subsidiaries as of September 30, 1996 and the consolidated
results of the operations of the Borrower and its subsidiaries for the period
then ended in conformity with GAAP.
(b) The Borrowers have no Indebtedness other than as shown
in the most recent Financial Statements.
(c) No Borrower has any "investment" (as such term is
defined under GAAP), whether by stock purchase, capital contribution, loan,
advance, purchase of property or otherwise, in any Person, other than as shown
in the Financial Statements.
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3.5 Taxes. To the best knowledge of the Borrowers, none of the
Borrowers is delinquent in payment of any income, property or other tax paid on
a normal and customary on-going basis, except for any delinquency in the payment
of a tax which is contested in good faith by the Borrowers and for which
appropriate reserves have been established in accordance with GAAP.
3.6 Encumbrances and Guaranties.
(a) All properties and assets of each Borrower are owned
by such Borrower free and clear of all Encumbrances except (i) those for taxes
or other government charges either not yet delinquent or the nonpayment of which
is permitted by Section 3.5 of this Agreement; (ii) those not arising in
connection with Indebtedness that do not materially impair the use or value of
the properties or assets of the Borrower in the conduct of its businesses; (iii)
Encumbrances whose release and termination is evidenced by the Borrowers
delivery to the Bank of appropriate documents on the Closing Date; (iv)
Encumbrances permitted by the Loan Documents; and (v) Encumbrances set forth on
Schedule 6.3 of this Agreement.
(b) None of the Borrowers is obligated under any Guaranty,
except in favor of the Bank.
3.7 Material Adverse Changes. Since September 30, 1996, there has
not been any material adverse change in the business, operations, properties or
financial position of any Borrower. None of the Borrowers knows of any fact
(other than matters of a general economic or political nature) which materially
adversely affects, or, so far as any Borrower can now reasonably foresee, will
materially adversely affect, the business, operations, properties or financial
position of any Borrower or the performance by any Borrower of its obligations
under this Agreement and the other Loan Documents.
3.8 Margin Securities. None of the assets of the Borrowers include
any "margin securities" within the meaning of Regulations G or U of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207, 221), and none of the
Borrowers have any present intention of acquiring any margin security.
3.9 ERISA. The provisions of each employee benefit plan as defined
in Section 3(3) of ERISA ("Plan") maintained by each Borrower complies in all
material respects with all applicable requirements of ERISA and of the Code, and
with all applicable rulings and regulations issued under the provisions of ERISA
and the Code setting forth those requirements. No reportable event, as defined
in Section 4043 of ERISA, has occurred with respect to any Plan; no Plan to
which Section 4021 of ERISA applies has been terminated; no Plan has incurred
any liability to PBGC as provided in Section 4062, 4063 and 4064 of ERISA; no
Plan has
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been involved in any prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code; and there are no unfunded liabilities with
respect to any Plan which are not disclosed in the Financial Statements. None of
the Borrowers has any Plan subject to ERISA.
3.10 Pending Litigation. There are no actions, suits, proceedings
or investigations pending, or, to the knowledge of any Borrower, threatened
against or affecting any Borrower, before any court, arbitrator or
administrative or governmental body which, in the aggregate, might adversely
affect any action taken or to be taken by any Borrower under this Agreement and
the other Loan Documents or which, in the aggregate, might materially adversely
affect the business, operations, properties or financial position of any
Borrower, or the ability of any Borrower to perform its obligations under this
Agreement and the other Loan Documents.
3.11 Valid, Binding and Enforceable. This Agreement and the Loan
Documents have been duly and validly executed and delivered by the parties
thereto (other than the Bank) and constitute the valid and legally binding
obligations of such parties enforceable in accordance with their respective
terms, except as enforcement of this Agreement and the other Loan Documents may
be limited by bankruptcy, insolvency, fraudulent conveyance or other laws of
general application relating to or affecting the enforcement of creditors'
rights and except as enforcement is subject to general equitable principles.
3.12 Environmental Matters.
(a) To the best of each Borrower's knowledge, each
Borrower has performed all of its obligations under, has obtained all necessary
approvals, permits, authorizations and other consents required by, and is not in
material violation of, any Environmental Laws.
(b) No Borrower has received any notice, citation,
summons, directive, order or other communication, written or oral, from, and no
Borrower has knowledge of the filing or giving of any such notice, citation,
summons, directive, order or other communication by, any governmental or
quasi-governmental authority or agency or any other Person concerning the
presence, generation, treatment, storage, transportation, transfer, disposal,
release or other handling of any Hazardous Materials within, on, from, related
to, or affecting any real property owned or occupied by any Borrower.
(c) To the best of each Borrower's knowledge, after
reasonable inquiry, no real property owned or occupied by any Borrower has ever
been used, either by any Borrower or any of its predecessors in interest, to
generate, treat, store, transport,
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transfer, dispose of, release or otherwise handle any Hazardous Material, in
violation of any applicable Environmental Laws.
(d) To the best of each Borrower's knowledge, after due
inspection, there are no Hazardous Materials within, on or under any real
property owned or occupied by any Borrower in violation of any applicable
Environmental Laws.
3.13 No Untrue Statements. Neither this Agreement, the Loan
Documents nor any other document, certificate or statement furnished or to be
furnished by any Borrower or by any other party to the Bank in connection
herewith, to the best knowledge of any Borrower, contains, or at the time of
delivery will contain, any untrue statement of a material fact or omits or will
omit to state a material fact necessary in order to make the statements
contained herein and therein not misleading.
3.14 Subsidiaries. Nutrition Management owns no shares of stock or
other equity interest, directly or indirectly, in any Person, other than
Collegeville and Apple Fresh, and up to $100,000 of equity interests in any
other Person. The Subsidiaries own no shares of stock or other equity interest,
directly or indirectly, in any Person. After the Closing, the Borrowers shall
own no stock or other equity interest in any Person, other than as provided
above in this paragraph and as otherwise permitted to be acquired under the
terms of this Agreement.
3.15 Priority of Security Interests. Collegeville and Apple Fresh
represent and warrant that the Security Agreement, upon the filing of financing
statements in the appropriate governmental offices, will create valid first
perfected security interests in the personal property of Collegeville and Apple
Fresh described therein as collateral for all the Obligations subject to no
prior Encumbrances. Nutrition Management represents and warrants that the Escrow
Security Agreement, upon the filing of financing statements in the appropriate
governmental offices, will create valid first perfected security interests in
the personal property of Nutrition Management described therein as collateral
for all the Obligations subject to no prior Encumbrances. The Bank hereby agrees
that the Escrow Security Agreement and the financing statements delivered to the
Bank on the Closing Date pursuant to Section 4.1(c) of this Agreement shall be
held in escrow by the Bank and shall not be filed or acted upon until an Event
of Default exists under this Agreement, in which case the Bank may enforce such
Escrow Security Agreement and perfect its interest therein to the fullest extent
permissible under the law.
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ARTICLE IV
CONDITIONS PRECEDENT TO THE BANK'S OBLIGATIONS
The Bank's obligations hereunder are conditioned upon the
satisfaction by the Borrowers of the following conditions precedent:
4.1 Documents to be Delivered by the Borrowers at
Closing. The Borrowers shall deliver or cause to be delivered to
the Bank at the Closing the following:
(a) This Agreement duly executed by each Borrower;
(b) The Revolving Credit Note duly executed by each
Borrower;
(c) The First Term Note, the Second Term Note and the
Third Term Note duly executed by each Borrower;
(d) The Escrow Security Agreement duly executed by the
Borrowers, together with such Uniform Commercial Code financing statements and
other documents as the Bank may reasonably require to be executed by the
Borrowers;
(e) The Security Agreement duly executed by each of
Collegeville and Apple Fresh, together with such Uniform Commercial Code
financing statements and other documents as the Bank may reasonably require to
be executed by the Borrowers;
(f) The Mortgage duly executed by Collegeville;
(g) A certificate of the Secretary or an Assistant
Secretary of each Borrower dated the Closing Date including (i) copy of each
Borrower's Articles and Certificate of Incorporation, together with a
certificate (dated as of the Closing Date), of the secretary of each Borrower to
the effect that such Articles and Certificate of Incorporation are true and
correct copies thereof and have not been amended since the date thereof; (ii)
copy of the by-laws of each Borrower and copies of resolutions duly adopted by
each Borrower authorizing the transactions contemplated by this Agreement, duly
certified by the secretary of each Borrower; (iii) certificate, dated as of the
Closing Date, of each Borrower's corporate secretary or assistant secretary as
to the incumbency and signatures of the officers executing the Loan Documents
and each other document to be delivered pursuant hereto; and (iv) certificates
of authority or good standing for the Borrower from it jurisdiction of
incorporation and any other jurisdiction where the Borrower is qualified to do
business;
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(h) A copy of each and every authorization, permit,
consent, and approval of and other action by, and notice to and filing with,
every governmental authority and regulatory body which is required to be
obtained or made by each Borrower for the due execution, delivery and
performance of this Agreement and the other Loan Documents; and
(i) The opinion of Stradley, Ronon, Stevens & Young, LLP
dated as of Closing Date, in form and substance reasonably satisfactory to the
Bank and its counsel.
4.2 Conditions Precedent to Making Loans. The Bank shall
not be obligated to make any Loan hereunder unless:
(a) As of the date of the proposed advance, no Event of
Default or Default has occurred;
(b) The representations and warranties contained in
Article IV are true and correct on the date of the proposed advance, except that
the representations and warranties in Section 3.4 shall refer to the financial
statements most recently supplied to the Bank pursuant to Section 5.2 of this
Agreement;
(c) No material adverse change has occurred in the
financial condition of any Borrower since the date hereof; and
(d) The Borrowers have delivered to the Bank, upon the
Bank's request, a certificate executed by the chief executive officer of the
Borrowers confirming the statements made in paragraphs (a), (b) and (c) above.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE BORROWERS
Each Borrower hereby covenants and agrees that from the date hereof
and until satisfaction in full of the Obligations, unless the Bank shall
otherwise consent in writing, each Borrower shall do the following:
5.1 Use of Proceeds. Use the proceeds of the borrowings hereunder
only for the purposes specified in Sections 2.1 and 2.2 of this Agreement,
unless otherwise agreed in writing by the Bank and the Borrowers.
5.2 Financial Statements. Furnish to the Bank:
(a) within ninety (90) days after the end of each fiscal
year, the consolidated financial statements of the Borrowers, including a
balance sheet, statement of income, and statement of cash flows. Such financial
statements shall present fairly the financial condition of the Borrowers as of
the close of such year and the results of their operations and their cash
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flows during such year on a consolidated basis, in accordance with GAAP, and
shall be audited and accompanied by an unqualified opinion, satisfactory in form
and substance to the Bank, of an independent public accountant acceptable to the
Bank, together with the accountant prepared consolidating financial statements,
and the 10K of the Borrowers for such fiscal year;
(b) within ninety (90) after each fiscal year end of the
Borrowers, a financial forecast for the following fiscal year of the Borrowers
on a monthly basis;
(c) promptly upon receipt thereof, a copy of each other
report submitted to the Borrowers by their independent public accountants, in
connection with any annual, interim or special audit report made by them of the
financial condition of the Borrowers;
(d) within forty-five (45) days after the end of each
fiscal quarter (i) a management prepared consolidated and consolidating balance
sheet, statement of income and statement of cash flows for Nutrition Management,
Apple Fresh and Collegeville, which shall present fairly the financial position
of the Borrowers as of the end of such quarter and the results of their
operations during such quarter on a consolidated and consolidating basis, in
accordance with GAAP, (ii) the 10Q of the Borrowers for such quarter; and (iii)
a compliance letter with respect to the absence of any Default or Event of
Default and with respect to the financial covenants set forth in Schedule 5.16
of this Agreement, to be certified by the chief financial officer of the
Borrowers;
(e) within fifteen (15) days after the end of each
quarter, the accounts receivable aging reports of the Borrowers as of the last
day of such quarter, certified by the chief financial officer of the Borrowers;
(f) with reasonable promptness, all such other data and
information in respect of the condition, operations and affairs of the Borrowers
as the Bank may reasonably request from time to time.
5.3 Ordinary Course of Business; Records. Except as permitted by
this Agreement, conduct its business only in the ordinary course and keep
accurate and complete books and records of its assets, liabilities and
operations consistent with sound business practices and in accordance with GAAP.
5.4 Information for the Bank. Make available during normal business
hours for inspection by the Bank or its designated representatives any of its
books and records when reasonably requested by the Bank to do so, and furnish
the Bank any information reasonably requested regarding its operations, business
affairs and financial condition within a reasonable time
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after the Bank gives notice of its request therefor. In particular, and without
limiting the foregoing, each Borrower shall permit, during normal business
hours, representatives of the Bank's Audit Department to make such periodic
inspections of the Borrower's books, records and assets as such representatives
deem necessary and proper.
5.5 Insurance. Carry insurance at all times in financially sound
and reputable insurers, against such liabilities and hazards as are usually
insured against by business entities of established reputation engaged in like
businesses and similarly situated, including, without limitation, fire (flood,
if applicable) and extended coverage, and such other insurance as the Bank may
from time to time reasonably require, and pay all premiums on the policies for
all such insurance when and as they become due and take all other actions
necessary to maintain such policies in full force and effect at all times. The
Borrowers shall from time to time, upon request by the Bank, promptly furnish or
cause to be furnished to the Bank evidence, in form and substance satisfactory
to the Bank, of the maintenance of all insurance required to be maintained
hereby, including, without limitation, such originals or copies as the Bank may
request of policies, certificates of insurance, riders and endorsements relating
to such insurance and proof of premium payments. The Borrowers shall cause each
hazard insurance policy to provide, and the insurer issuing each such policy to
certify to the Bank, that (a) if such insurance be proposed to be canceled or
materially changed for any reason whatsoever, such insurer will promptly notify
the Bank and such cancellation or change shall not be effective for 30 days
after receipt by the Bank of such notice, unless the effect of such change is to
extend or increase coverage under the policy; (b) the Bank shall be named as
lender loss payee with respect to personal property and mortgagee with respect
to real property; and (c) the Bank will have the right, at its election, to
remedy any default in the payment of premiums within 30 days of notice from the
insurer of such default. The foregoing covenants regarding insurance are in
addition to, and not intended to supersede, those covenants regarding insurance
set forth in the Security Agreement. In the event and to the extent of any
conflict between the provisions of this Agreement and the provisions of the
Security Agreement regarding the insuring of Collateral, the provisions of the
Security Agreement with respect thereto shall govern.
5.6 Maintenance. Maintain its equipment, real property and other
properties in good condition and repair (normal wear and tear excepted) and pay
and discharge the cost of repairs thereto or maintenance thereof.
5.7 Taxes. Pay all taxes, assessments, charges and levies imposed
upon it or on any of its property, or which it is required to withhold and pay
over, and provide evidence of payment thereto to the Bank if the Bank so
requests, except where
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contested in good faith by lawful and appropriate proceedings and where adequate
reserves therefor have been set aside on its books; provided, however, that the
Borrowers shall pay all such taxes, assessments, charges and levies forthwith
whenever foreclosure on any lien which attaches to any security for the
obligations of any Borrower appears imminent.
5.8 Leases. Pay all rent or other sums required by every lease to
which the Borrower is a party as the same becomes due and payable, perform all
its obligations as tenant or lessee thereunder except where contested in good
faith by lawful and appropriate proceedings and where adequate reserves therefor
have been set aside; and keep all such leases at all times in full force and
effect during the terms thereof.
5.9 Corporate Existence; Certain Rights; Laws. Do all things
necessary to preserve and keep in full force and effect in each jurisdiction in
which it conducts business the business existence, licenses, permits, rights,
patents, trademarks, trade names and franchises of the Borrower and comply with
all present and future laws, ordinances, rules, regulations, judgments, orders
and decrees which affect in any material way the Borrower, its assets or the
operation of its business.
5.10 Notice of Litigation or Other Proceedings. Give prompt notice
to the Bank of the existence of(i) any dispute, (ii) the institution of any
litigation, administrative proceeding or governmental investigation involving
the Borrower, or (iii) the entry of any judgment, decree or order against or
involving the Borrower, any of the foregoing (i), (ii) or (iii) in an amount in
excess of $250,000, or (iv) any event which might affect the enforceability of
this Agreement or any of the other Loan Documents.
5.11 Indebtedness. Pay or cause to be paid when due (or within
applicable grace periods) all Indebtedness of the Borrower.
5.12 Notice of Events of Default. Give prompt notice to the Bank if
the Borrower becomes aware of the occurrence of any Event of Default or Default,
or of the failure of the Borrower to observe or perform any of the conditions or
covenants to be observed or performed by it under this Agreement or any of the
other Loan Documents.
5.13 ERISA. Maintain each Plan in compliance in all material
respects with all applicable requirements of ERISA and of the Code and with all
applicable rulings and regulations issued under the provisions of ERISA and of
the Code. As promptly as practicable (but in any event not later than ten days)
after the Borrower receives from the PBGC a notice of intent to terminate any
Plan or to appoint a trustee to administer any Plan, after the Borrower has
notified the PBGC
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that any reportable event, as defined in Section 4043 of ERISA, with respect to
any Plan has occurred, or after the Borrower has provided a notice of intent to
terminate to each affected party, as defined for purposes of Section 4041(a)(2)
of ERISA, with respect to any Plan, a certificate of the chief executive officer
of the Borrower shall be furnished to the Bank setting forth the details with
respect to the events resulting in such reportable event, as the case may be,
and the action which the Borrower proposes to take with respect thereto,
together with a copy of the notice of intent to terminate or to appoint a
trustee from the PBGC, of the notice of such reportable event or of the
Borrower's notice of intent to terminate, as the case may be.
5.14 Deposit Accounts. Use the Bank as its primary depository
institution to the extent reasonably feasible unless otherwise agreed in writing
by the Bank; and notify the Bank, in writing and on a continuing basis, of all
deposit accounts and certificates of deposit (including the numbers thereof)
maintained with or purchased from other banks and other financial institutions.
The Borrowers hereby agree to consider using the Bank's asset management
affiliates as investment managers for all short term investments, provided such
affiliates deliver proposals competitive with those of non-affiliated asset
managers, provided any cash or investments at the Bank's asset management
affiliates shall not be considered collateral for the Borrowers' Obligations to
any extent greater than if there were being managed by entities not affiliated
with the Bank.
5.15 Management. Furnish to Bank within five (5) days of any
election or appointment of officers or directors, written notice of any change
in the persons who from time to time become officers and directors of the
Borrower and retain executive management personnel at all times satisfactory to
the Bank, it being understood that present management is satisfactory and that
Joseph Roberts must be Chairman and Chief Executive Officer of Nutrition
Management.
5.16 Financial Covenants. Maintain the financial covenants set
forth on Schedule 5.16 attached hereto and made a part hereof.
5.17 Compliance with Environmental Laws. Comply fully with all
Environmental Laws and not use any property which it owns or occupies to
generate, treat, store, transport, transfer, dispose of, release or otherwise
handle any Hazardous Material, except in compliance with all Environmental Laws.
5.18 Asset Purchases. Except as permitted by Section 2.1(a) of this
Agreement, deliver to the Bank concurrently with any request for a Revolving
Credit Loan or Term Loan to finance the cost of an Asset Purchase:
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(a) copies of all due diligence performed by the Borrowers
with respect to such purchase, if requested by the Bank, provided however that
the Borrowers shall in all cases provide the Bank with an environmental
assessment with respect to any real property purchases;
(b) financial information on the impact of the acquisition
on the financial condition of the Borrowers including, without limitation, a
twelve month management prepared pro forma financial statement and statement of
cash flows for the Borrowers reflecting the acquisition, and such other
financial information as the Bank may reasonably request;
(c) all documents required, to the satisfaction of the
Bank and its counsel, to grant the Bank a first priority security interest under
the Uniform Commercial Code as security for such Loan in the fixed assets
acquired (and in the fixed assets of any corporation the stock of which is
acquired) including, without limitation, machinery and equipment (including,
without limitation, fixtures, office equipment and furniture), accessions and
proceeds of any of the foregoing;
(d) all documents required, to the satisfaction of the
Bank and its counsel, to grant the Bank a first lien in any real property
acquired, including, without limitation, title insurance; and
(e) evidence of insurance on all assets required in
accordance with the provisions of Section 5.5 of this Agreement;
provided however, that the Bank may request the Borrowers to deliver to the Bank
any of the above after the funding of any Non-Approval Loan and that if
collateral is delivered by Nutrition Management to the Bank under subsection (c)
or (d) above, such collateral shall be held in escrow in accordance with Section
3.15 of this Agreement.
5.19 Further Actions. Cooperate and join with the Bank, at its own
expense, in taking all such further actions as the Bank, in its sole judgment,
shall deem necessary to effectuate the provisions of the Loan Documents and to
perfect or continue the perfected status of all Encumbrances granted to the Bank
pursuant to the Loan Documents, including, without limitation, the execution,
delivery and filing of financing statements, amendments thereto and continuation
statements.
5.20 Release of Liens. Within thirty (30) days from the date
hereof, deliver to the Bank uniform commercial code searches of record
evidencing the termination of those uniform commercial code financing statements
and judgments of record set forth on Schedule 5.20 of this Agreement.
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ARTICLE VI
NEGATIVE COVENANTS
Each Borrower hereby covenants and agrees that from the Closing
Date until satisfaction in full of the Obligations, it will not do any one or
more of the following without first obtaining the written consent of the Bank,
which consent shall not be unreasonably withheld:
6.1 Fundamental Corporate Changes.
(a) Enter into or effect any merger, consolidation, share
exchange, division, conversion, reclassification, recapitalization,
reorganization or other transaction of like effect, or dissolve, or permit any
change in the ownership of the capital stock of Collegeville or Apple Fresh;
(b) Sell, transfer, lease or otherwise dispose of all or
any part of its assets or any significant product line or process (except for
inventory in the ordinary course of business) in excess of $250,000, in any one
fiscal year in the aggregate for the Borrowers, except that no such disposition
may be made with respect to the equipment of Apple Fresh permanently fixed on
the property of Collegeville;
(c) Have any Subsidiary, except that Nutrition Management
may have Collegeville and Apple Fresh, and any other Subsidiary provided such
Subsidiary joins in this Agreement and agrees to be bound by the terms hereof.
6.2 Indebtedness. Incur, create, assume or have any Indebtedness
except:
(a) The Loans;
(b) Not more than $250,000 of Indebtedness in the
aggregate for the Borrowers in any one fiscal year constituting either Capital
Lease Obligations or Indebtedness under agreements for the installment purchase
of equipment (excluding leases with customers), provided that such Indebtedness
does not exceed 100% of the net purchase price of such equipment; and
(c) Indebtedness set forth on Schedule 6.2 of this
Agreement.
6.3 Encumbrances. Create or allow any Encumbrances to be on or
otherwise affect any of its property or assets except:
(a) Encumbrances in favor of the Bank;
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(b) Encumbrances for taxes, assessments and other
governmental charges incurred in the ordinary course of business which are not
yet due and payable;
(c) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation or to participate in any
fund in connection with workmen's compensation, unemployment insurance or other
social security obligations;
(d) Good faith pledges or deposits made in the ordinary
course of business to secure performance of tenders, contracts (other than for
the repayment of Indebtedness) or leases or to secure statutory obligations or
surety, appeal, indemnity, performance or other similar bonds required in the
ordinary course of business;
(e) Liens of mechanics, materialmen, warehousemen,
carriers or other similar liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable;
(f) Encumbrances securing Indebtedness permitted under
Section 6.2(b), provided that (i) no other covenants of this Agreement are
thereby violated and (ii) no equipment other than the equipment so acquired
secures such Indebtedness;
(g) Encumbrances disclosed on Schedule 6.3 and Schedule
5.20 of this Agreement.
In addition to the foregoing, no Borrower shall execute a negative
pledge agreement or otherwise enter into an agreement with any Person which
prohibits or otherwise restricts the Borrower's ability to create or allow any
Encumbrance to be on or otherwise affect any of its properties, other than
pursuant to this Agreement.
6.4 Guaranties. Make any Guaranty, except in favor of the Bank.
6.5 Sales and Lease-Backs. Sell, transfer or otherwise dispose of
any property, real or personal, now owned or hereafter acquired, with the
intention of directly or indirectly taking back a lease on such property.
6.6 Loans, Investments. Purchase, invest in, or make any loan in
the nature of an investment in the stocks, bonds, notes or other securities or
evidence of Indebtedness of any Person, except as permitted in Section 3.14 of
this Agreement, or make any loan or advance to or for the benefit of any Person
except for short term investments that have been approved by the Board of
Directors pursuant to such investment policy attached hereto
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as Schedule 6.6 to this Agreement, which policy shall not be modified in any way
without the prior written consent of the Bank.
6.7 Change in Business. Discontinue any substantial part, or change
the nature of, its business or enter into any new business unrelated to the
present businesses conducted by it.
6.8 Sale or Discount of Receivables. Sell any notes receivable or
accounts receivable, with or without recourse, except in the normal course of
business.
6.9 ERISA.
(a) Terminate any Plan maintained by the Borrower to which
Section 4021 of ERISA applies;
(b) Allow the value of the benefits guaranteed under Title
IV of ERISA to exceed the value of assets allocable to such benefits;
(c) Incur a withdrawal liability within the meaning of
Section 4201 of ERISA.
6.10 Restricted Payments. Declare or pay any dividend, or make any
distributions of cash or property, to holders of any shares of its capital
stock, or, directly or indirectly, redeem or otherwise acquire any such shares,
except for repurchases as treasury stock or redemptions of stock held by
employees, or any option, warrant or right to acquire any such shares; provided
that Nutrition Management may declare and may pay dividends and Collegeville and
Apple Fresh may pay dividends to Nutrition Management during any fiscal year,
provided no Event of Default or Default has occurred and is continuing at the
time of such declaration or payment and provided further that the payment of
such dividend will not cause the occurrence of an Event of Default or Default.
6.11 Compliance with Federal Reserve Board Regulations. (i) Use any
of the proceeds of the Loans, directly or indirectly, for the purposes of
purchasing or carrying any "margin security" within the meaning of Regulations G
or U of the Board of Governors of the Federal Reserve System (12 C.F.R. 207,
221), (ii) use any of the proceeds of the Loans, directly or indirectly, for the
purpose of purchasing, carrying or trading in any securities under such
circumstances as to involve the Borrowers in a violation of Regulation X of such
Board (12 C.F.R. 224), or (iii) take or permit to be taken any other action
which would result in the Loans or the consummation of any of the other
transactions contemplated hereby being violative of such regulations or any
other regulation of such Board.
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ARTICLE VII
EVENTS OF DEFAULT
An event of default ("Event of Default") under this Agreement shall
be deemed to exist if any one or more of the following events occurs and is
continuing, whatever the reason therefor:
7.1 Borrowers' Failure to Pay. The Borrowers fail to pay any amount
of principal, interest, fees or other sums as and when due under this Agreement
or any of the Loan Documents, whether upon stated maturity, acceleration, or
otherwise and have not remedied and fully cured such failure to pay within ten
(10) Business Days after the date such payment is so due.
7.2 Breach of Covenants or Conditions. The Borrowers fail to
perform or observe any other term, covenant, agreement or condition contained in
this Agreement or any of the other Loan Documents or is in violation of or
non-compliance with any provision of this Agreement or any of the Loan
Documents, and have not remedied and fully cured such non-performance,
non-observance, violation of or non-compliance within thirty (30) days after the
Bank has given written notice thereof to the Borrowers; provided, however, that
if such default is not fully cured after fifteen (15) Business Days from the
Bank's written notice, at the option of the Bank, the Bank's obligations to make
further Loans to the Borrowers shall be suspended.
7.3 Defaults in Other Agreements. Any Borrower fails to perform or
observe any term, covenant, agreement or condition contained in, or there shall
occur any default under or as defined in any agreement of such Borrower (i) with
the Bank which shall not be remedied within the period of time (if any) within
which the applicable agreement permits such default to be remedied unless such
default is waived by the Bank or exercised as a matter of law, or (ii) in any
other agreement applicable to any Borrower or by which it is bound, involving a
liability of such Borrower to a Person other than the Bank in the amount of
$500,000 or more which shall not be remedied within the period of time (if any)
within which such other agreement permits such default to be remedied, unless
such default is waived by the other party thereto or excused as a matter of law,
and the potential payment of which under this subparagraph (ii) would cause a
breach of a financial covenant contained in Section 5.16 of this Agreement and
such breach is not cured within thirty (30) days.
7.4 Agreements Invalid. The validity, binding nature of, or
enforceability of any material term or provision of any of the Loan Documents is
disputed by, on behalf of, or in the right or name of any Borrower or any
material term or provision of any
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such Loan Document is found or declared to be invalid, avoidable, or
non-enforceable by any court of competent jurisdiction.
7.5 False Warranties; Breach of Representations. Any warranty or
representation made by any Borrower in this Agreement or any other Loan Document
or in any certificate or other writing delivered under or pursuant to this
Agreement or any other Loan Document, or in connection with any provision of
this Agreement or related to the transactions contemplated hereby shall prove to
have been false or incorrect or breached in any material respect on the date as
of which made.
7.6 Judgments. A final judgment or judgments is entered, or an
order or orders of any judicial authority or governmental entity is issued
against any Borrower (such judgment(s) and order(s) hereinafter collectively
referred to as "Judgment") (i) for payment of money, which Judgment, in the
aggregate, exceeds Five Hundred Thousand Dollars ($500,000) at any one time and
the potential payment of which would cause a breach of a financial covenant
contained in Section 5.16 of this Agreement and such breach is not cured within
thirty (30) days; or (ii) for injunctive or declaratory relief which would have
a material adverse effect on the ability of any Borrower to conduct its
business, and such Judgment is not discharged or execution thereon or
enforcement thereof stayed pending appeal, within thirty days after entry or
issuance thereof, or, in the event of such a stay, such Judgment is not
discharged within thirty days after such stay expires.
7.7 Bankruptcy or Insolvency of the Borrowers.
(a) Any Borrower becomes insolvent, or generally fails to
pay, or is generally unable to pay, or admits in writing its inability to pay,
its debts as they become due or applies for, consents to, or acquiesces in, any
appointment of a trustee, receiver or other custodian for such Borrower, or a
substantial part of its property, or makes a general assignment for the benefit
of creditors.
(b) Any Borrower commences any bankruptcy, reorganization,
debt arrangement, or other case or proceeding under any state or federal
bankruptcy or insolvency law, or any dissolution or liquidation proceeding.
(c) Any bankruptcy, reorganization, debt arrangement, or
other case or proceeding under any state or federal bankruptcy or insolvency
law, or any dissolution or liquidation proceeding, is involuntarily commenced
against or in respect of any Borrower or an order for relief is entered in any
such proceeding, and such proceeding is not dismissed within forty-five (45)
days after the commencement thereof.
- 29 -
<PAGE>
(d) A trustee, receiver, or other custodian is appointed
for any Borrower or a substantial part of such Borrower's property.
7.8 Change in Control. The occurrence of an event such that, or
entering into an agreement whereby, Joseph Roberts shall fail to own and control
the voting of more than 50% of the shares of capital stock of Nutrition
Management which are entitled to vote for the election of directors.
ARTICLE VIII
REMEDIES
8.1 Further Advances; Acceleration; Setoff.
(a) Upon the occurrence of any one or more Events of
Default, the Bank may, in its sole discretion, refuse to make any further
advances or Loans to the Borrowers;
(b) Automatically upon the occurrence of any Event of
Default described in Section 7.7 of this Agreement, and in the sole discretion
of the Bank upon the occurrence of any other Event of Default, the unpaid
principal balance of all Loans, all interest and fees accrued and unpaid
thereon, and all other amounts and Obligations payable by the Borrowers under
this Agreement and the other Loan Documents shall immediately become due and
payable in full, all without protest, presentment, demand, or further notice of
any kind to the Borrowers, all of which are expressly waived by the Borrowers.
8.2 Further Remedies; Confession of Judgment.
(a) Upon the occurrence of any one or more Events of
Default, the Bank may proceed to protect and enforce its rights under this
Agreement and the other Loan Documents by exercising such remedies as are
available to the Bank in respect thereof under applicable law, either by suit in
equity or by action at law, or both, whether for specific performance of any
provision contained in this Agreement or any of the other Loan Documents or in
aid of the exercise of any power granted in this Agreement or any of the other
Loan Documents, including without limitation, enforcement of the Escrow Security
Agreement and all rights granted in connection therewith in accordance with
Section 3.15 of this Agreement.
(b) EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS THE BANK, BY ITS ATTORNEY, OR BY THE PROTHONOTARY OR CLERK OF ANY COURT
OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE
PERMITTED BY LAW, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME
THEREAFTER, TO APPEAR FOR IT AND CONFESS AND ENTER JUDGMENT AGAINST IT IN FAVOR
- 30 -
<PAGE>
OF THE BANK IN ANY JURISDICTION IN WHICH THE BORROWER OR ANY OF ITS PROPERTY IS
LOCATED FOR THE AMOUNT OF ALL OBLIGATIONS, TOGETHER WITH COSTS OF SUIT AND WITH
ACTUAL COLLECTION COSTS (INCLUDING REASONABLE ATTORNEYS' FEES NOT TO EXCEED
$25,000), WITH OR WITHOUT DECLARATION, WITHOUT STAY OF EXECUTION AND WITH
RELEASE OF ALL ERRORS AND THE RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING
SO THIS AGREEMENT OR A COPY VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT.
EACH BORROWER HEREBY WAIVES AND RELEASES ALL RELIEF FROM ANY AND ALL
APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY STATE NOW IN FORCE OR HEREAFTER
ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED BY THE EXERCISE
THEREOF, AND SHALL CONTINUE UNTIL THE OBLIGATIONS ARE FULLY PAID, PERFORMED,
DISCHARGED AND SATISFIED.
BEING FULLY AWARE OF ITS RIGHTS TO PRIOR NOTICE AND
HEARING ON THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST IT BY THE
BANK UNDER THIS AGREEMENT BEFORE JUDGMENT CAN BE ENTERED AND BEFORE ASSETS OF
THE BORROWER CAN BE GARNISHED AND ATTACHED, EACH BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THESE RIGHTS AND EXPRESSLY AGREES AND
CONSENTS TO THE BANK, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME
THEREAFTER, ENTERING JUDGMENT AGAINST THE BORROWER BY CONFESSION AND ATTACHING
AND GARNISHING THE BANK ACCOUNTS AND OTHER ASSETS OF THE BORROWER, WITHOUT PRIOR
NOTICE OR OPPORTUNITY FOR A HEARING. EACH BORROWER ACKNOWLEDGES THAT IT HAS HAD
THE ASSISTANCE OF LEGAL COUNSEL IN THE REVIEW AND EXECUTION OF THIS AGREEMENT
AND FURTHER ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THE FOREGOING PROVISIONS
CONCERNING CONFESSION OF JUDGMENT HAVE BEEN FULLY EXPLAINED TO THE BORROWER BY
SUCH COUNSEL.
ARTICLE IX
MISCELLANEOUS
9.1 Remedies Cumulative; No Waiver. The rights, powers and remedies
of the Bank provided in this Agreement and the other Loan Documents are
cumulative and not exclusive of any right, power or remedy provided by law or
equity, and no failure or delay on the part of the Bank in the exercise of any
right, power, or remedy shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power, or remedy preclude other or further
exercise thereof, or the exercise of any other right, power or remedy.
9.2 Notices. Every notice and communication under this Agreement or
any of the other Loan Documents shall be in writing and shall be given by either
(i) hand-delivery, (ii) first class mail (postage prepaid), (iii) reliable
overnight commercial courier (charges prepaid), or (iv) telecopy or other means
of electronic transmission, if confirmed promptly by any of the
- 31 -
<PAGE>
methods specified in clauses (i), (ii) and (iii) of this sentence, to the
following addresses:
If to any Borrower:
Nutrition Management Services Company
P.O. Box 725
Kimberton Road
Kimberton, PA 19442
Attn: Joseph Roberts, Chief Financial Officer
Frank Ford
Kathleen Hill
Fax: (610) 935-8287
With a copy to:
Stradley, Ronon, Stevens & Young, LLP
30 Valley Stream Parkway
Great Valley Corporate Center
Malvern, PA 19355
Attn: Ann Cuddy Roda, Esquire
Fax: (610) 640-1965
If to the Bank:
CoreStates Bank, N.A
Great Valley Corporate Center
55 Valley Stream Parkway
Suite 200
Malvern, PA 19355
Attn: Michael R. Bailey, Vice President
Fax: (610) 251-5929
With a copy to:
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103
Attn: Dianne A. Meyer, Esquire
Fax: (215) 979-1020
Notice given by telecopy or other means of electronic transmission
shall be deemed to have been given and received when sent. Notice by overnight
courier shall be deemed to have been given and received on the date scheduled
for delivery. Notice by mail shall be deemed to have been given and received
three (3) calendar days after the date first deposited in the United States
Mail. Notice by hand delivery shall be deemed to have been given and received
upon delivery. A party may change its address by giving written notice to the
other party as specified herein.
- 32 -
<PAGE>
9.3 Costs, Expenses and Attorneys' Fees. Whether or not the
transactions contemplated by this Agreement and the other Loan Documents are
fully consummated, each Borrower shall promptly pay (or reimburse, as the Bank
may elect) all out-of-pocket costs and expenses which the Bank has incurred or
may hereafter reasonably incur in connection with the negotiation, preparation,
reproduction, interpretation and enforcement of this Agreement and the other
Loan Documents, the collection of all amounts due hereunder and thereunder, and
any amendment, modification, consent or waiver which may be hereafter requested
by the Borrower or otherwise required. Such costs and expenses shall include,
without limitation, the fees and disbursements of counsel to the Bank, the costs
of searches of public records, costs of filing and recording documents with
public offices, and similar costs and expenses incurred by the Bank. Upon the
occurrence of an Event of Default, such costs shall also include the reasonable
fees of any accountants, consultants or other professionals retained by the
Bank. Each Borrower's reimbursement obligations under this Section shall survive
any termination of this Agreement.
9.4 Survival of Covenants. This Agreement and all covenants,
agreements, representations and warranties made herein and in any certificates
delivered pursuant hereto shall survive the making of the Loans and the
execution and delivery of the Notes and, subject to the provisions of 9.15
hereof, shall continue in full force and effect until all of the Obligations
have been fully paid, performed, satisfied and discharged.
9.5 Counterparts; Effectiveness. This Agreement may be executed in
any number of counterparts and by the different parties on separate
counterparts. Each such counterpart shall be deemed to be an original, but all
such counterparts shall together constitute one and the same Agreement. This
Agreement shall be deemed to have been executed and delivered when the Bank has
received counterparts hereof executed by all parties listed on the signature
page(s) hereto.
9.6 Headings. The headings of sections have been included herein for
convenience only and shall not be considered in interpreting this Agreement.
9.7 Payment Due On A Day Other Than A Business Day. If any payment
due or action to be taken under this Agreement or any Loan Document falls due or
is required to be taken on a day which is not a Business Day, such payment or
action shall be made or taken on the next succeeding Business Day and such
extended time shall be included in the computation of interest.
9.8 Judicial Proceedings. Each party to this Agreement agrees that
any suit, action or proceeding, whether claim or counterclaim, brought or
instituted by any party hereto or any successor or assign of any party, on or
with respect to this
- 33 -
<PAGE>
Agreement or the dealings of the parties with respect hereto, shall be tried
only by a court and not by a jury. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. Further, each party waives any right it may have to claim or
recover, in any such suit, action or proceeding, any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. EACH BORROWER ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THAT THE BANK WOULD NOT
EXTEND CREDIT TO THE BORROWERS IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT
A PART OF THIS AGREEMENT.
9.9 Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws of the Commonwealth of Pennsylvania.
9.10 Integration. This Agreement and the other Loan Documents
constitute the sole agreement of the parties with respect to the subject matter
hereof and thereof and supersede all oral negotiations and prior writings with
respect to the subject matter hereof and thereof.
9.11 Amendment and Waiver. No amendment of this Agreement, and no
waiver of any one or more of the provisions hereof shall be effective unless set
forth in writing and signed by the parties hereto.
9.12 Successors and Assigns.
(a) Generally. This Agreement (i) shall be binding upon
each Borrower and the Bank and their respective successors and assigns, and (ii)
shall inure to the benefit of each Borrower and the Bank and its respective
successors and assigns, provided, however, that no Borrower may assign its
rights hereunder or any interest herein without the prior written consent of the
Bank, and any such assignment or attempted assignment by such Borrower shall be
void and of no effect with respect to the Bank. The Bank shall give the
Borrowers prior written notice of any assignment by the Bank and such assignment
shall not result in any charges or expenses to the Borrowers not already
contained in the Loan Documents..
(b) Participations. The Bank may from time to time sell or
otherwise grant participations in the Loans and the Notes, and the holder of any
such participation, if the participation agreement so provides, (i) shall, with
respect to its participation, be entitled to all of the rights of the Bank and
(ii) may exercise any and all rights of setoff or banker's lien with respect
thereto, in each case as fully as though the Borrowers were directly indebted to
the holder of such participation in the amount of such participation. The Bank
may disclose to prospective participants such information regarding
- 34 -
<PAGE>
the affairs of the borrowers as the Bank possesses. The Bank shall give notice
to the Borrowers of the grant of such participations; however, the failure to
give such notice shall not affect any of the Bank's rights hereunder. In
connection with any participation, the Bank agrees that it shall continue to
deal with the Borrower as if no participation has occurred and such
participation shall not result in any charges or expenses to the Borrowers not
already contained in the Loan Documents.
9.13 Severability of Provisions. Any provision in this Agreement that
is held to be inoperative, unenforceable, voidable, or invalid in any
jurisdiction shall, as to that jurisdiction, be ineffective, unenforceable, void
or invalid without affecting the remaining provisions in any other jurisdiction,
and to this end the provisions of this Agreement are declared to be severable.
9.14 Consent to Jurisdiction and Service of Process. Each Borrower
irrevocably appoints each of its executive officers as its attorneys upon whom
may be served any notice, process or pleading in any action or proceeding
against it arising out of or in connection with any of the Loan Documents; and
each Borrower hereby (i) consents that any action or proceeding against it be
commenced and maintained in any court within the County of Montgomery, County of
Philadelphia, County of Chester or in the United States District Court for the
Eastern District of Pennsylvania by service of process on any such officer; (ii)
agrees that the courts of the County of Montgomery, County of Philadelphia,
County of Chester and the United States District Court for the Eastern District
of Pennsylvania shall have jurisdiction with respect to the subject matter
hereof and the person of the Borrower and the Collateral; and (iii) waives any
objection that such Borrower may now or hereafter have as to the venue of any
such suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. Notwithstanding the foregoing, the Bank, in its absolute
discretion may also initiate proceedings in the courts of any other jurisdiction
in which any Borrower may be found or in which any of its properties or
Collateral may be located.
9.15 Indemnification
(a) If, after receipt of any payment of all or any part of
the Obligations, the Bank is compelled to surrender such payment to any Person
or entity for any reason (including, without limitation, a determination that
such payment is void or voidable as a preference or fraudulent conveyance, an
impermissible setoff, or a diversion of trust funds), then this Agreement and
the other Loan Documents shall continue in full force and effect, and the
Borrowers shall be liable for, and shall indemnify, defend and hold harmless the
Bank with respect to the full amount so surrendered.
(b) Each Borrower shall indemnify, defend and hold
harmless the Bank with respect to any and all claims, expenses,
- 35 -
<PAGE>
demands, losses, costs, fines or liabilities of any kind, including reasonable
attorneys' fees and costs, arising from or in any way related to (i) acts or
conduct of the Borrower or any under, pursuant to or related to this Agreement
and the other Loan Documents, (ii) Borrower's breach or violation of any
representation, warranty, covenant or undertaking contained in this Agreement or
the other Loan Documents, and (iii) Borrower's failure to comply with any or all
laws, statutes, ordinances, governmental rules, regulations or standards,
whether federal, state, or local, or court or administrative orders or decrees,
including without limitation those resulting from any Hazardous Materials or
dangerous environmental condition within, on, from, related to or affecting any
real property owned or occupied by the Borrower, unless resulting from the acts
or conduct of the Bank constituting gross negligence or willful misconduct.
(c) The provisions of this section shall survive the
termination of this Agreement and the other Loan Documents and shall be and
remain effective notwithstanding the payment of the Obligations, the
cancellation of any of the Notes, the release of any Encumbrance securing the
Obligations or any other action which the Bank may have taken in reliance upon
its receipt of such payment. Any cancellation of any of the Notes, release of
any Encumbrance or other such action shall be deemed to have been conditioned
upon any payment of the Obligations having become final and irrevocable.
- 36 -
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have caused this
Agreement to be executed by its duly authorized officer on the date first above
written.
Attest: NUTRITION MANAGEMENT SERVICES
COMPANY
________________________ By:____________________________
Title:__________________ Title:_________________________
THE COLLEGEVILLE INN CONFERENCE
Attest: & TRAINING CENTER, INC.
________________________ By:____________________________
Title:__________________ Title:_________________________
Attest: APPLE FRESH FOODS LIMITED
________________________ By:____________________________
Title:__________________ Title:_________________________
CORESTATES BANK, N.A.
By:____________________________
Title:_________________________
- 37 -
<PAGE>
SCHEDULE 5.16
FINANCIAL COVENANTS
This Schedule is a part of the Loan Agreement dated December 26,
1996 between CoreStates Bank, N.A. and the Borrowers.
A. Consolidated Quick Ratio -- Borrowers shall have a
Consolidated Quick Ratio at all times of not less than 1.00:1.00, measured at
the end of each fiscal quarter.
B. Consolidated Debt Service Coverage Ratio-- The Borrowers
shall have a Consolidated Debt Service Coverage Ratio at all times measured at
the end of each fiscal quarter on a rolling four quarters basis of not less
than:
a. 1.00:1.00 for the Fiscal Year 1997;
b. 1.125:1.00 for the Fiscal Year 1998; and
c. 1.15:1.00 for the Fiscal Year 1999, and thereafter.
If the Consolidated Debt Service Coverage Ratio is less than 1.00:1.00 during
Fiscal Year 1997, the Borrowers must have cash and marketable securities as of
the date of such Consolidated Debt Service Coverage Ratio in an amount equal to
the amount by which the denominator exceeds the numerator in the calculation
thereof.
C. Consolidated Tangible Net Worth--The Borrowers shall have a
Consolidated Tangible Net Worth measured at the end of each fiscal quarter of
not less than:
a. $5,250,000 for the Fiscal Year 1997;
b. $5,600,000 for the Fiscal Year 1998; and
c. $6,000,000 for the Fiscal Year 1999, and thereafter.
D. Ratio of Consolidated Total Liabilities to Consolidated
Tangible Net Worth. The Borrowers shall have a ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth measured at the end of each
fiscal quarter of not more than:
a. 3.00:1.00 for the Fiscal Year 1997;
b. 2.75:1.00 for the Fiscal Year 1998; and
c. 2.50:1.00 for the Fiscal Year 1999, and thereafter.
- 38 -
<PAGE>
E. Debt Service Coverage Ratio. Collegeville and Apple Fresh
shall have a Debt Service Coverage Ratio at the end of each fiscal quarter on a
rolling four quarters basis of not less than:
(i) 1.125:1.00 for Fiscal Year 1998;
(ii) 1.15:1.00 for Fiscal Year 1999, and thereafter.
For purposes hereof, Debt Service Coverage Ratio shall mean the
following ratio with respect to Collegeville and Apple Fresh on a combined
basis:
EBIT(1-tax rate) + depreciation + amortization
----------------------------------------------------
interest expense(1-tax rate) + Current Maturities of
Long Term Debt
For purposes of this Schedule, all capitalized terms used herein
and not otherwise defined shall have the meanings given to them, respectively,
in the Loan Agreement, and the following terms shall have the following
meanings:
"Consolidated Current Liabilities" shall mean, at any time, all
liabilities which, in accordance with GAAP, should be classified as current
liabilities of the Borrowers on a consolidated basis.
"Consolidated Debt Service Coverage Ratio" shall mean the
following ratio with respect to the Borrowers on a consolidated basis:
EBIT, plus interest income (1-tax rate) + depreciation
+ amortization
------------------------------------------------------
interest expense(1-tax rate) + Current Maturities of
Long Term Debt
"Consolidated Net Income" shall mean, for any period, the net
income (after the deduction of federal and state income taxes) of the Borrowers
on a consolidated basis, determined in accordance with GAAP.
"Consolidated Quick Ratio" shall mean, at any time, the ratio of
cash, cash equivalents, and accounts receivable of the Borrowers on a
consolidated basis to Consolidated Current Liabilities.
"Consolidated Tangible Net Worth" shall mean, at any time,
aggregate Stockholders' Equity plus aggregate Subordinated Indebtedness, less
all intangible assets of the Borrowers (other than investments in contracts and
other intangible assets resulting from an Asset Purchase) including, without
limitation, organization costs, securities issuance costs, unamortized debt
discount and expense, goodwill, excess of purchase costs over net assets
acquired, patents, trademarks, trade names, copyrights, trade secrets, knowhow,
licenses, franchises, research and development expenses, amounts owing from
officers and/or Affiliates and any amount reflected as treasury stock.
"Current Maturities of Long Term Debt" shall mean at the time of
measurement, all Indebtedness coming due during the next twelve months.
- 39 -
<PAGE>
"Consolidated Total Liabilities" shall mean, at any time, all
liabilities which, in accordance with GAAP, should be classified as liabilities
of the Borrowers on a consolidated basis.
"Fiscal Year" shall mean with respect to any period of measure
the period beginning July 1 of any year and ending June 30 of the following
year.
"Subordinated Indebtedness" shall mean, at any time, all
Indebtedness of the Borrowers subordinated to the Obligations on terms
satisfactory to the Bank.
"Stockholders' Equity" shall mean, at any time, stockholders'
equity of the Borrowers on a consolidated basis as determined in accordance with
GAAP.
- 40 -
<PAGE>
Schedule 5.20
Uniform Commercial Code Financing Statement and Judgments of Record
- 41 -
<PAGE>
Schedule 6.2
Indebtedness
None
- 42 -
<PAGE>
Schedule 6.3
Encumbrances
None
- 43 -
<PAGE>
Schedule 6.6
Investment Policy
- 44 -
<PAGE>
Nutrition Management Services Company
Policy on Short Term Investments
The excess cash which is not needed for the day to day operations of
the Company shall be invested in short term, investment-grade securities. Short
term shall mean instruments which have a maturity of less than 360 days.
Investment Grade Securities shall mean investment instruments that have been
rated either Baa or BBB or higher by Moody's, Standard and Poor's, Duff and
Phelps or Fitch Investors Service. In the case of Commercial Paper, investment
grade securities must have an A-1 or P-1 rating.
Securities issued by the United States or federally sponsored credit
agencies that have the full faith and credit of the U.S. Government shall be
considered investment grade.
Certificates of Deposits of Banks shall be limited to banks that are
rated A or better.
Bankers Acceptances shall be confirmed by an A or better rated bank.
The Company may invest in Repurchase Agreements provided that the
underlying collateral is rated A or better.
The Company may not invest in any mutual fund unless the individual
fund are approved by the Board of Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S 10-Q FOR THE PERIOD
ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,319,626
<SECURITIES> 0
<RECEIVABLES> 5,907,990
<ALLOWANCES> (441,428)
<INVENTORY> 423,972
<CURRENT-ASSETS> 12,028,314
<PP&E> 5,473,282
<DEPRECIATION> (810,804)
<TOTAL-ASSETS> 18,739,534
<CURRENT-LIABILITIES> 6,651,092
<BONDS> 0
0
0
<COMMON> 3,826,926
<OTHER-SE> 2,662,568
<TOTAL-LIABILITY-AND-EQUITY> 18,739,534
<SALES> 16,980,682
<TOTAL-REVENUES> 16,980,682
<CGS> 13,811,055
<TOTAL-COSTS> 16,417,044
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146,710
<INCOME-PRETAX> 557,109
<INCOME-TAX> 258,191
<INCOME-CONTINUING> 298,918
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 298,918
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
