U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TWELVE WEEKS ENDED APRIL 13, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM __________ TO ____________
Commission file number 1-12340
GREEN MOUNTAIN COFFEE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 36-3463683
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
33 Coffee Lane, Waterbury, Vermont 05676
(Address of principal executive offices)
(802) 244-5621
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [ ]
As of May 28, 1996, 3,399,795 shares of common stock of the
registrant were outstanding.
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
<PAGE>
<TABLE>
Part I. Financial Information
Item I. Financial Statements
GREEN MOUNTAIN COFFEE, INC.
Consolidated Balance Sheet
(Dollars in thousands except share data)
<CAPTION>
April 13, 1996 Sept. 30, 1995
-------------- -------------
unaudited
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 516 $ 310
Receivables, less allowances of
$62 at April 13, 1996 and
$63 at September 30, 1995 2,286 2,660
Inventories 2,466 2,766
Other current assets 357 377
Deferred income taxes, net 112 115
----------- ----------
Total current assets 5,737 6,228
Fixed assets, net 8,187 8,127
Other assets, net 359 235
Deferred income taxes, net 842 975
----------- ----------
Total assets $ 15,125 $ 15,565
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 840 $ 618
Current portion of obligation
under capital lease 106 68
Revolving line of credit 485 1,720
Accounts payable 1,867 2,751
Accrued payroll 331 170
Accrued expenses 116 156
----------- ----------
Total current liabilities 3,745 5,483
----------- ----------
Long-term debt 2,878 2,351
----------- ----------
Obligation under capital lease 203 209
----------- ----------
Commitments
Stockholders' equity:
Common stock, $0.10 par value:
Authorized - 10,000,000 shares;
issued and outstanding -
3,399,795 shares at April 13, 1996
and September 30, 1995 340 340
Additional paid-in capital 12,421 12,421
Accumulated deficit (4,462) (5,239)
----------- ---------
Total stockholders' equity 8,299 7,522
----------- ---------
Total stockholders' equity $ 15,125 $ 15,565
----------- ---------
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Operations
(Dollars in thousands except share data)
<CAPTION>
Twelve weeks ended
April 13, 1996 April 8, 1995
-------------- -------------
(unaudited)
<S> <C> <C>
Net sales $ 8,119 $ 6,832
Cost of sales 4,874 4,432
----------- -----------
Gross profit 3,245 2,400
Selling and operating expenses 2,341 2,222
General and administrative expenses 673 660
----------- -----------
Income (loss) from operations 231 (482)
Other expense (10) (23)
Interest expense (106) (92)
----------- -----------
Income (loss) before income taxes 115 (597)
Income tax benefit (expense) (17) 103
----------- -----------
Net income (loss) $ 98 $ (494)
----------- -----------
Net income (loss) per share $ .03 $ (.15)
----------- -----------
Weighted average shares outstanding 3,428,588 3,383,485
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Operations
(Dollars in thousands except share data)
<CAPTION>
Twenty-eight weeks ended
April 13, 1996 April 8, 1995
-------------- -------------
(unaudited)
<S> <C> <C>
Net sales $ 20,263 $ 17,764
Cost of sales 12,108 11,565
----------- ----------
Gross profit 8,155 6,199
Selling and operating expenses 5,385 5,052
General and administrative expenses 1,599 1,348
----------- ----------
Income (loss) from operations 1,171 (201)
Other income (expense) (11) 1
Interest expense (246) (191)
----------- ----------
Income (loss) before income taxes 914 (391)
Income tax benefit (expense) (137) 72
----------- ----------
Net income (loss) $ 777 $ (319)
----------- ----------
Net income (loss) per share $ .23 $ (.09)
----------- ----------
Weighted average shares outstanding 3,427,554 3,383,485
----------- ----------
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Cash Flows
(Dollars in thousands)
Twenty-eight weeks ended
April 13, 1996 April 8, 1995
-------------- -------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 777 $ (319)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 1,043 857
Loss on disposals of fixed assets 31 -
Provision for doubtful accounts 59 55
Decrease (increase) in long-term
deferred income taxes 133 (60)
Increase in other assets (134) -
Changes in working capital:
Receivables 315 (344)
Inventories 300 (238)
Other current assets 20 (54)
Deferred income taxes 3 (10)
Accounts payable (884) (42)
Accrued payroll 161 (7)
Accrued expenses (40) (66)
--------- --------
Net cash provided by (used for)
operating activities 1,784 (228)
--------- --------
Cash flows from investing activities:
Expenditures for fixed assets (977) (910)
Proceeds from disposals of fixed assets 33 -
--------- --------
Net cash used for
investing activities (944) (910)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 1,009 286
Repayment of long-term debt (369) (324)
Net change in revolving line of credit (1,235) 1,428
Repayment of note payable to stockholder - (416)
Principal payments under capital lease
obligation (39) -
--------- ---------
Net cash provided by (used for)
financing activities (634) 974
--------- --------
Net increase (decrease) in cash
and cash equivalents 206 (164)
Cash and cash equivalents at
beginning of period 310 553
--------- --------
Cash and cash equivalents at
end of period $ 516 $ 389
--------- --------
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
</TABLE>
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete consolidated financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) considered necessary for a fair statement of the
interim financial data have been included. Results from operations for the
twelve and twenty-eight week periods ended April 13, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 28, 1996.
For further information, refer to the consolidated financial statements and
the footnotes included in the annual report on Form 10-KSB for Green Mountain
Coffee, Inc. for the year ended September 30, 1995.
Net income (loss) per share is computed based upon the weighted average
number of common and dilutive common equivalent shares outstanding during the
period.
2. Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences,
generally all expected future events other than enactments of changes in the
tax law or rates are considered. Gross deferred tax assets were $1,929,000
and $2,315,000 at April 13, 1996 and September 30, 1995, respectively, and
the Company has established deferred tax asset valuation allowances of
$975,000 and $1,225,000, respectively, at the same dates. The net deferred
tax assets were $954,000 and $1,090,000 at April 13, 1996 and September 30,
1995, respectively.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
General
For the twenty-eight weeks ended April 13, 1996, Green Mountain Coffee,
Inc. (the "Company" or "Green Mountain") derived approximately 76.9% of its
net sales from its wholesale operation. Green Mountain's wholesale opera-
tion sells coffee to supermarkets, restaurants, convenience stores, specialty
stores, hotels, universities and business offices. The Company also operated
twelve retail stores and a direct mail operation, which accounted for approx-
imately 14.0% and 9.1% of net sales, respectively, during the same period.
Cost of sales consists of the cost of raw materials including coffee
beans, flavorings and packaging materials, a portion of the Company's rental
expense, the salaries and related expenses of production and distribution
personnel, depreciation on production equipment and freight and delivery
expenses. Selling and operating expenses consist of expenses that directly
support the sales of the Company's wholesale, retail or direct mail channels,
including media and advertising expenses, a portion of the Company's rental
expense, and the salaries and related expenses of employees directly
supporting sales. General and administrative expenses consist of expenses
incurred for corporate support and administration, including a portion of the
Company's rental expense and the salaries and related expenses of personnel
not elsewhere categorized.
The Company's fiscal year ends on the last Saturday in September. The
Company's fiscal year normally consists of 13 four-week periods with the
first, second and third "quarters" ending 16 weeks, 28 weeks and 40 weeks,
respectively, into the fiscal year. Fiscal 1995, which began on September
25, 1994 and ended on September 30, 1995, consisted of 53 weeks with the
fiscal fourth quarter having 13 weeks instead of the normal 12 weeks.
Twelve weeks ended April 13, 1996 versus twelve weeks ended April 8, 1995
Net sales increased by $1,287,000 or 18.8% from $6,832,000 for the
twelve weeks ended April 8, 1995 (the "1995 period") to $8,119,000 for the
twelve weeks ended April 13, 1996 (the "1996 period"). Coffee pounds sold,
excluding those sold as beverages through the Company's retail stores,
increased by approximately 28% from the 1995 period to the 1996 period.
The difference between the net sales percentage increase and the coffee pounds
sold percentage increase primarily reflects reductions in Green Mountain's
sales prices during fiscal 1996 as a result of lower green coffee costs.
The 1995 period to 1996 period increase in net sales is attributable to
the wholesale area in which net sales increased by $1,365,000 or 27.1% from
$5,042,000 for the 1995 period to $6,407,000 for the 1996 period. This
increase resulted primarily from the growth in the number of wholesale
customer accounts.
Retail net sales increased by $6,000 or 0.6% from $1,039,000 for the 1995
period to $1,045,000 for the 1996 period despite the closing during the
second quarter of fiscal 1995 of three espresso carts located at super-
markets, and the closing on December 15, 1995 of an espresso cart located in
Albany, New York. The three supermarket locations were converted to whole-
sale supermarket accounts with pre-bagged, bulk and/or self-service coffee
beverage displays. Net sales in the direct mail area decreased by $84,000,
or 11.2%, from $751,000 for the 1995 period to $667,000 for the 1996 period.
The decrease in direct mail sales resulted primarily from a shift in strategy
whereby the Company focused its mail order solicitations on catalog customers
who more regularly buy from the Company, and decreased the number of low-
margin product promotions.
Green Mountain's gross profit increased by $845,000 or 35.2% from
$2,400,000 for the 1995 period to $3,245,000 for the 1996 period. This
increase was due primarily to an increase in sales. Gross profit increased
by 4.9 percentage points as a percentage of sales from 35.1% for the 1995
period to 40.0% for the 1996 period. This increase was due primarily to
the mathematical impact of lower coffee sales prices charged to customers in
the 1996 period, since the majority of the green coffee cost decreases have
been passed on to them.
Selling and operating expenses increased by $119,000 or 5.4% from
$2,222,000 for the 1995 period to $2,341,000 for the 1996 period. However,
selling and operating expenses decreased by 3.7 percentage points as a
percentage of sales from 32.5% for the 1995 period to 28.8% for the 1996
period.
General and administrative expenses increased by $13,000 or 2.0% from
$660,000 for the 1995 period to $673,000 for the 1996 period and decreased by
1.4 percentage points as a percentage of sales from 9.7% for the 1995 period
to 8.3% for the 1996 period.
As a result of the foregoing, income from operations increased by
$713,000 from a loss from operations of $(482,000) for the 1995 period to
income from operations of $231,000 for the 1996 period. The income tax
benefit recognized under SFAS 109 was $103,000 for the 1995 period compared
to income tax expense of $17,000 for the 1996 period. Net income increased
by $592,000 from a net loss of $(494,000) for the 1995 period to net income
of $98,000 for the 1995 period.
Twenty-eight weeks ended April 13, 1996 versus twenty-eight weeks ended
April 8, 1995
Net sales increased by $2,499,000 or 14.1% from $17,764,000 for the
twenty-eight weeks ended April 8, 1995 (the "1995 YTD period") to $20,263,000
for the twenty-eight weeks ended April 13, 1996 (the "1996 YTD period").
Coffee pounds sold, excluding those sold as beverages through the Company's
retail stores, increased by approximately 20% from the 1995 YTD period to the
1996 YTD period. The difference between the net sales percentage increase and
the coffee pounds sold percentage increase primarily reflects reductions in
Green Mountain's coffee sales prices during fiscal 1996 as a result of lower
green coffee costs.
The 1995 YTD period to 1996 YTD period increase in net sales is attributable
to the wholesale area in which net sales increased by $2,781,000 or 21.7%
from $12,796,000 for the 1995 YTD period to $15,577,000 for the 1996 YTD
period. The wholesale net sales increase resulted primarily from growth in
the number of wholesale customer accounts.
Retail net sales decreased by $64,000 or 2.2% from $2,903,000 for the
1995 YTD period to $2,839,000 for the 1996 YTD period principally due to the
closing of the four espresso carts discussed above. Net sales in the direct
mail area decreased by $218,000 or 10.6% from $2,065,000 for the 1995 YTD
period to $1,847,000 for the 1996 YTD period primarily due to the shift in
strategy during the 1996 YTD period discussed above.
Green Mountain's gross profit increased by $1,956,000 or 31.6% from
$6,199,000 for the 1995 YTD period to $8,155,000 for the 1996 YTD period.
This increase was due primarily to an increase in sales. Gross profit
increased by 5.3 percentage points as a percentage of sales from 34.9% for
the 1995 YTD period to 40.2% for the 1996 YTD period. This increase was due
primarily to the mathematical impact of lower coffee sales prices charged
to customers in the 1996 YTD period since the majority of the green coffee
cost decreases have been passed on to them.
Selling and operating expenses increased by $333,000 or 6.6% from
$5,052,000 for the 1995 YTD period to $5,385,000 for the 1996 YTD period.
However, selling and operating expenses decreased by 1.8 percentage points
as a percentage of sales from 28.4% for the 1995 YTD period to 26.6% for the
1996 YTD period.
General and administrative expenses increased by $251,000 or 18.6% from
$1,348,000 for the 1995 YTD period to $1,599,000 for the 1996 YTD period and
increased by .3 percentage points as a percentage of sales from 7.6% for the
1995 YTD period to 7.9% for the 1996 YTD period. General and administrative
expenses incurred by the Company during the first quarter of fiscal 1995
reflect the effect of certain cost containment measures in place at that
time. Even with the 1995 YTD period to 1996 YTD period increase in general
and administrative expenses as a percentage of sales, the Company does not
currently anticipate that full-year general and administrative expenses as
a percentage of sales will increase significantly, if at all, over the fiscal
1995 level of 7.6%.
As a result of the foregoing, income from operations increased by
$1,372,000 from a net loss of $(201,000) for the 1995 YTD period to income
from operations of $1,171,000 for the 1996 YTD period. The income tax benefit
recognized under SFAS 109 was $72,000 for the 1995 YTD period compared to
income tax expense of $137,000 for the 1996 YTD period. Net income increased
by $1,096,000 from a net loss of $(319,000) for the 1995 YTD period to
$777,000 in the 1996 YTD period.
Liquidity and Capital Resources
The Company had working capital of $1,992,000 and $745,000 at April 13,
1996 and September 30, 1995, respectively. The Company had net cash provided
by operating activities of $1,784,000 in the 1996 YTD period and net cash used
for operating activities of $(228,000) in the 1995 YTD period, a $2,012,000
improvement. The net cash provided by operating activities in the 1996 YTD
period resulted primarily from the Company's improved profitability during the
period.
The Company had net cash used for financing activities of $(634,000) in the
1996 YTD period, and net cash provided by financing activities of $974,000 in
the 1995 period.
The combined net cash provided by operating and financing activities was used
primarily to fund expenditures for fixed assets. During the 1996 YTD period,
Green Mountain had capital expenditures of $977,000 (net of $180,000 financed
directly by a capital lease and long-term debt), including $396,000 for
equipment on loan to wholesale customers. During the 1995 YTD period, Green
Mountain had capital expenditures of $910,000, including $413,000 for
equipment on loan to wholesale customers.
On April 12, 1996, the Company amended its credit facility with Fleet
Bank-NH (Fleet). Under the revised facility, Green Mountain can borrow up to
$1,500,000 under a five-year term promissory note to be repaid in equal
principal installments. The Company drew down $1,000,000 against such note
on April 12, 1996 and expects to draw down the remaining $500,000 upon
meeting certain financial covenants following the end of the Company's third
fiscal quarter. The interest rate on all term debt under the credit facility
was reduced to the lesser of the Fleet base rate (8.25% at April 13, 1996)
plus 25 basis points or 275 basis points above the LIBOR rate for maturities
of up to one year.
The rate on the Company's revolving line of credit under the Fleet credit
facility was also reduced to the lesser of the Fleet base rate or 250 basis
points above the LIBOR rate for maturities of up to one year. The term of
the revolving line of credit was also extended by one year to February 28,
1998. The outstanding balance on the revolving line of credit at April 13,
1996 was $485,000 with a total availability under the amended borrowing base
formula of $2,656,000.
The average cost of the high-quality arabica coffees the Company
purchases decreased during the 1996 period when compared to the 1995 period
and the Company's overall gross profit margin has improved. The Company has
begun to pass such savings on to its customers through price reductions, and
such price reductions are likely to negatively impact the Company's year-to-
year percentage net sales growth rate.
The Company believes that the cost of green coffee will continue to be
volatile throughout the remainder of fiscal 1996, but expects that its
average cost of green coffee in fiscal 1996 will be less than that
experienced in fiscal 1995, although there can be no assurance that this will
be the case. The Company believes that increases in the cost of green coffee
can generally be passed on to customers or absorbed through more efficient
operations, although there can be no assurance that the Company will be
successful in doing so. Similarly, rapid sharp decreases in the cost of
green coffee could also force the Company to lower sales prices before
realizing cost reductions in its green coffee inventory.
To date, Green Mountain has not encountered any problems with the
availability of the green coffees the Company purchases. The Company believes
that there are adequate sources of supply of top-quality green arabica coffee
beans to meet its needs plans for the foreseeable future. Because Green
Mountain roasts over 25 different types of green coffee beans to produce its
more than 70 different varieties of coffee, if one type of green coffee
bean were to become unavailable or prohibitively expensive, management
believes Green Mountain could substitute another type of coffee, of equal or
better quality, meeting a similar taste profile, in a blend or temporarily
remove that particular coffee from its product line.
The Company had net deferred tax assets of $954,000 at April 13, 1996.
The Company had been profitable in each of the three fiscal years ended
September 26, 1992, the fifteen month period ended September 30, 1989
and the fiscal year ended June 30, 1988. In fiscal 1993 and fiscal 1994, the
Company made investments in production and distribution capacity and
personnel and marketing expenditures in order to position itself for
accelerated growth and the Company reported net losses for those years.
More than half the net loss for fiscal 1993 was attributable to a one-time,
non-cash charge to compensation expense of $1.3 million resulting from
factors related to its initial public offering. The Company was profitable
in the fourth quarter of fiscal 1994, the first and fourth quarters of fiscal
1995, and the first and second quarters of fiscal 1996, and reduced its full-
year net loss by 90.8% from $2,358,000 in fiscal 1994 to $218,000 in fiscal
1995. Accordingly, management believes that the net deferred tax assets are
realizable.
The Company operated at approximately 50-60% of production capacity
during the 1996 period. The Company added five sales people to the greater
Boston and Florida geographic markets during the 1996 period, increasing
the number of people in the Company's direct sales force from fifteen to
twenty. This is the first increase in the size of the sales force since
fiscal 1994, and management intends to continue building the Company's sales
force during the balance of the fiscal year.
Total currently planned capital expenditures in fiscal 1996 are approx-
imately $2,400,000, primarily to fund equipment for loan to wholesale
customers, production equipment and computer hardware and software. However,
the Company is constantly reviewing its capital expenditure needs and the
actual amount may increase or decrease. The Company expects that cash
requirements for fiscal 1996 will be satisfied by net cash provided by
operating activities and bank and other borrowings. The Company presently
does not anticipate that it will seek additional funds from public or private
convertible debt or equity sources in fiscal 1996.
Seasonality
Historically, the Company has experienced lower net sales levels in its
second fiscal quarter following high holiday-related levels in its first
fiscal quarter, especially in its retail and direct mail operations,
resulting in less favorable operating results during the second fiscal
quarter. In addition, quarterly results may be affected by a variety of
other factors, including, but not limited to, general economic trends, the
cost of green coffee, competition, marketing programs, weather and special or
unusual events. Because of the seasonality of the Company's business,
results for any quarter are not necessarily indicative of the results that
may be achieved for the full fiscal year.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.2 (y) Seventh Amendment and First Restatement of
Commercial Loan Agreement, dated April 12, 1996
among Green Mountain Coffee Roasters, Inc., as
borrower, and Fleet Bank-NH, as lender.
10.2 (z) Term Promissory Note, dated April 12, 1996, from
Green Mountain Coffee Roasters, Inc. to Fleet
Bank-NH.
10.2 (aa) Note Modification Agreement, dated April 12, 1996,
to modify Term Promissory Note dated August 11,
1993, from Green Mountain Coffee Roasters, Inc.
to Fleet Bank-NH.
10.10 (g) First Restatement of Security Agreement, dated
April 12, 1996, between Green Mountain Coffee
Roasters, Inc. and Fleet Bank-NH.
11 Computation of net income (loss) per share of
Common Stock.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the twelve weeks
ended April 13, 1996.
<PAGE>
Excludes Exhibits Filed With This 10-QSB
To obtain copies of exhibits, please contact:
Green Mountain Coffee, Inc.
Investor Relations Department
33 Coffee Lane
Waterbury, VT 05676
(802) 244-5621
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GREEN MOUNTAIN COFFEE, INC.
Date: May 28, 1996 By: /s/ Robert P. Stiller
-------------- ----------------------------
Robert P. Stiller, President
and Chief Executive Officer
Date: May 28, 1996 By: /s/ Robert D. Britt
-------------- -----------------------------
Robert D. Britt, Treasurer,
Secretary and Chief
Financial Officer
<PAGE>
FLEET BANK - NH
SEVENTH AMENDMENT
AND
FIRST RESTATEMENT OF
COMMERCIAL LOAN AGREEMENT
THIS SEVENTH AMENDMENT AND FIRST RESTATEMENT OF
COMMERCIAL LOAN AGREEMENT (the "Agreement"), is made as of 12th
day of April, 1996, by and among GREEN MOUNTAIN COFFEE ROASTERS,
INC. (f/k/a Green Mountain Coffee, Inc.), a Vermont corporation
with a principal place of business at 33 Coffee Lane, Waterbury,
Vermont 05676 (the "BORROWER"), and GREEN MOUNTAIN COFFEE
ROASTERS FRANCHISING CORPORATION, a Delaware corporation(the
"Subsidiary"), and FLEET BANK - NH, a BANK organized under the
laws of the State of New Hampshire with an address of NH NA
E02A, 1155 Elm Street, Manchester, New Hampshire 03101 (the "BANK").
RECITALS:
The BANK, the BORROWER, and the Subsidiary are parties
to a certain Commercial Loan Agreement dated October 22, 1992,
said loan agreement having been a amended by a certain letter
agreement dated November 13, 1992, by a certain Amendment to
Commercial Loan Agreement and Loan Documents dated August 11,
1993, by a certain Third Amendment to Loan Agreement and Loan
Documents dated August 31, 1993, by a certain Fourth Amendment
to Commercial Loan Agreement and Loan Documents dated April 7,
1994, by a certain Fifth Amendment to Commercial Loan Agreement
and Loan Documents dated August 15, 1994, and by a certain Sixth
Amendment to Commercial Loan Agreement and Loan Documents dated
March 31, 1995 (collectively, as amended to date, the "Old Loan
Agreement") and certain Loan Documents (as defined in the Old
Loan Agreement and as amended through the date hereof),
including, but not limited to a certain Guaranty Agreement
dated October 22, 1992, as amended to date, of the Subsidiary
(the "Guaranty"), and certain Security Agreements dated October
22, 1992, as amended to date, of each of the BORROWER and the
Subsidiary (collectively, the "Security Agreements"). Pursuant
to the Old Loan Agreement, the BANK has extended to the BORROWER
certain credit facilities. The BORROWER has requested, and the
BANK has agreed, to extend a new term loan in the maximum
principal of up to One Million Five Hundred Thousand Dollars
($1,500,000.00) and, in connection therewith, to make certain
amendments affecting the other credit facilities extended by the
BANK to the BORROWER under the Old Loan Agreement. The BANK,
BORROWER, and the Subsidiary have agreed that it is necessary
and appropriate in connection with such amendments to restate
the Old Loan Agreement in its entirety. Each loan currently
outstanding from the BANK to the BORROWER under the Old Loan
Agreement, and each loan which BANK may, from time to time
hereafter extend to BORROWER is individually referred to herein
as a "Loan" and collectively as the "Loans"). All of the Loans
are, together with all other debts, liabilities and obligations
of BORROWER to the BANK, direct or indirect, absolute or
contingent, now existing or hereafter arising, hereinafter
sometimes collectively referred to as the "Obligations". Each
Loan is or shall be evidenced by a promissory note (individually
a "Note" and collectively the "Notes") and each Loan and all of
the other Obligations are secured pursuant to the Security
Agreements and the other Loan Documents. In connection with the
Loans, the BORROWER has and may hereafter execute certain other documents,
certificates and agreements, all of which are, together with
this Agreement, the Notes, and the Security Agreement and as all
of the same have been and may be hereafter amended, modified,
revised, renewed, or extended, sometimes collectively referred
to herein as the "Loan Documents". Each Loan, whether now
existing or hereafter arising, is made upon and subject to the
terms and conditions set forth in the Note evidencing such Loan,
the Security Agreement, the other Loan Documents, and this
Agreement. The terms, conditions, representations, warranties,
and covenants set forth in this Agreement are in addition to,
and not in limitation of, the terms, conditions,
representations, warranties, and covenants set forth in the
other Loan Documents. In the event of any conflict between the
terms, conditions, representations, warranties, and covenants
contained in the Loan Documents, the term, condition,
representation, warranty, or covenant which confers the
greatest benefit upon the BANK shall control. The determination
as to which term, condition, representation, warranty, or
covenant is more beneficial shall be made by the BANK in its
sole discretion and shall be binding upon the BORROWER. Where
there is more than one BORROWER or guarantor hereunder, all of
the terms, conditions, representations, warranties, and
covenants set forth herein and in the other Loan Documents shall
apply to, be binding upon, and be deemed to be made by each
BORROWER and guarantor, jointly, severally, separately, and
individually.
NOW, THEREFORE, in consideration of the BANK extending the Loans
to the BORROWER as described hereinabove, the BANK, the
BORROWER, and the Subsidiary hereby agree to amend and restate
the Old Loan Agreement in its entirety as follows:
I. REVOLVING LINE OF CREDIT. The BANK shall make available to
the BORROWER a revolving line of credit loan in the maximum
principal amount of up to Three Million Dollars ($3,000,000.00)
(the "Revolving Line of Credit Loan"), as evidenced by the
Revolving Line of Credit Promissory Note made by the BORROWER
payable to the order of the BANK in the maximum principal amount
of up to Three Million Dollars ($3,000,000.00) dated March 31,
1995 (the "Revolving Line of Credit Note"). The Revolving Line
of Credit Loan shall be upon and subject to the terms and
conditions set forth in the Revolving Line of Credit Note, the
other Loan Documents, and this Agreement.
A. Maximum Available Amount. The maximum amount available to
the BORROWER from time to time under the Revolving Line of
Credit Loan shall be the lesser of (1) Three Million Dollars
($3,000,000.00) or (2) an amount equal to the aggregate of (a)
the applicable percentage of the sum of BORROWER's Acceptable
Accounts and (b) the applicable percentage of the value of
BORROWER's Acceptable Inventory, up to a maximum dollar amount,
all as set forth and defined on Schedule A attached hereto.
The maximum amount available to BORROWER under the Revolving
Line of Credit Loan as determined from time to time under the
formula set forth in clauses (2) (a) and (b) above is
hereinafter referred to as the BORROWER'S "Borrowing Base". The
BORROWER agrees that the BANK may, at any time or times, lower
the applicable percentages of Acceptable Accounts and
Acceptable Inventory for purposes of determining the Borrowing
Base to such percentages as the BANK may determine in a
commercially reasonable manner to be appropriate based upon any
material deterioration of the BORROWER's condition, financial or
otherwise, and/or of the value, condition or quality of the
Collateral (as hereinafter defined).
B. Advances. The Revolving Line of Credit Loan shall be
disbursed, advanced, readvanced, and repaid as provided in the
Revolving Line of Credit Note and this Agreement. BORROWER may
request advances orally or in writing from time to time in
accordance with such procedures as the BANK may from time to
time specify in an amount such that the aggregate amounts
outstanding under the Revolving Line of Credit Loan do not
exceed the maximum available amount as determined under Section
I. A. above. The BANK is also authorized by BORROWER to
automatically make advances under and repayments of the
Revolving Line of Credit Loan pursuant to the Revolving Line of
Credit Management provisions of Section I. E. below. The BANK
shall be under no obligation to make any advance (automatic or
otherwise) at any time or times during which an Event of Default
has occurred or is existing under this Agreement or the Loan
Documents, or if any condition exists which, if not cured,
would with the passage of time or the giving of notice, or both,
constitute such an Event of Default. At the time of each
advance and readvance under the Revolving Line of Credit Loan,
BORROWER shall immediately become indebted to the BANK for the
amount thereof. Each such advance or readvance may be credited
by the BANK to any deposit account of BORROWER with the BANK, be
paid to BORROWER, or applied to any Obligation, as the BANK may
in each instance elect. BORROWER authorizes the BANK to charge
any account which BORROWER maintains with the BANK for any
payments which BORROWER may or must make, or customarily makes,
to the BANK from time to time.
C. Review and Repayment. The Revolving Line of Credit Loan
shall be subject to review and, at the sole option and
discretion of the BANK, renewal on February 28, 1998, and, if
renewed, thereafter on each subsequent anniversary of such date
(February 28, 1998, and each anniversary thereof to which the
Revolving Line of Credit Loan is renewed, being a "Review
Date"). IF THE REVOLVING LINE OF CREDIT LOAN IS NOT RENEWED BY
THE BANK AS AFORESAID ON ANY REVIEW DATE, THE ENTIRE AMOUNT OF
OUTSTANDING PRINCIPAL, ACCRUED INTEREST AND OTHER CHARGES
PAYABLE THEREUNDER SHALL BE DUE AND PAYABLE BY BORROWER ON SUCH
REVIEW DATE. BORROWER ACKNOWLEDGES AND AGREES THAT THE BANK HAS
NO OBLIGATION OR COMMITMENT TO RENEW THE REVOLVING LINE OF
CREDIT LOAN ON ANY REVIEW DATE. NOTWITHSTANDING THE FOREGOING,
OR ANY PROVISION OF THE REVOLVING LINE OF CREDIT NOTE, ANY OF
LOAN DOCUMENTS OR HEREIN TO THE CONTRARY, THE REVOLVING LINE OF
CREDIT LOAN SHALL BE A DEMAND OBLIGATION OF BORROWER TO THE
EXTENT THAT THE AMOUNT OUTSTANDING THEREUNDER AT ANY TIME
EXCEEDS THE MAXIMUM AVAILABLE AMOUNT UNDER SUCH REVOLVING LINE
OF CREDIT LOAN AS DETERMINED UNDER SECTION I. A. ABOVE, BUT ONLY
TO THE EXTENT OF THE AMOUNT OUTSTANDING IN EXCESS OF THE MAXIMUM
AVAILABLE AMOUNT.
D. Interest Rate.
(i) Except as provided hereinbelow, the principal balance
outstanding from time to time under the Revolving Line of Credit
Loan, net of amounts subject to a LIBOR based rate of interest
as provided hereinbelow, shall bear interest at a variable
annual rate equal to the BANK's Base Rate. The "Base Rate"
shall be the Base Rate of the BANK as established and changed by
the BANK from time to time whether or not such rate shall be
otherwise published or BORROWER receives notice thereof. The
BORROWER acknowledges that the Base Rate is used for reference
purposes only as an index and is not necessarily the lowest
interest rate charged by the BANK on commercial loans. Each
time the Base Rate changes the interest rate under the Revolving
Line of Credit Loan shall change contemporaneously with such
change in the Base Rate. Interest shall be calculated and
charged daily on the basis of actual days elapsed over a three
hundred sixty (360) day banking year.
(ii) BORROWER may elect from time to time to have amounts
outstanding under the Revolving Line of Credit Loan bear
interest for one or more periods of thirty (30) days each (but
in no event beyond the next Review Date) at a fixed rate (the
"Revolving LIBOR-based Rate") equal to the LIBOR rate (as herein
after defined) plus two and one-half percent (2.5%) per annum.
BORROWER may only elect the Revolving LIBOR-based Rate with
respect to an outstanding principal amount under the Revolving
Line of Credit Loan of not less than Five Hundred Thousand
Dollars ($500,000.00). BORROWER shall notify BANK in writing at
least two (2) banking Days (as hereinafter defined) in advance
of the date upon which the BORROWER desires an election to the
Revolving LIBOR-based Rate to be effective. BORROWER's notice to
BANK as aforesaid shall specify the outstanding amount under
the Revolving Line of Credit Loan that BORROWER desires to bear
interest at the Revolving LIBOR-based Rate and the date such
election is to be effective (which must be a Banking Day). Any
amounts outstanding under the Revolving Line of Credit Loan as
to which BORROWER has elected the Revolving LIBOR-based Rate
shall hereinafter be referred to as a "LIBOR Advance". All
amounts outstanding under the Revolving Line of Credit Loan
which are not subject to the Revolving LIBOR-based Rate shall
bear interest at a variable annual rate equal to the BANK's Base
Rate as provided hereinabove. The term "LIBOR rate" shall mean
the rate as determined by the BANK on the basis of the offered
rates for deposits in U.S. dollars for a thirty (30) day period
which appear on the Telerate page 3750 or Reuter's LIBO page as
of 11:00 a.m. London time on the date that is two (2) Banking
Days preceding the effective date of BORROWER's election of the
Revolving LIBOR-based Rate in respect of a LIBOR Advance. If
such rate does not appear on the Telerate page 3750 or Reuter's
LIBO page, the rate for that date will be determined on the
basis of the offered rates for deposits in U.S. dollars for a
thirty (30) day period which are offered by four major banks in
the London interbank market at approximately 11:00 a.m. London
time on the date that is two (2) Banking Days preceding the
effective date of BORROWER's election of the Revolving LIBOR-
based Rate in respect of a LIBOR Advance. The principal London
office of each of the four major BANKS in the London interbank
market will be requested to provide a quotation of its U.S.
dollar deposit offered rate. If at least two such quotations are
provided, the rate for that date will be the arithmetic mean of
all such quotations. If fewer than two quotations are provided
as requested, the rate for that date will be determined on the
basis of the rates quoted for loans in U.S. dollars to leading
European BANKS for a thirty (30) day period offered by major
BANKS in New York City at approximately 11:00 a.m., New York
City time, on the date that is two (2) Banking Days preceding
the effective date of BORROWER's election of the Revolving LIBOR-
based Rate in respect of a LIBOR Advance. In the event that the
BANK is unable to obtain any such quotation as provided above,
it will be deemed that the LIBOR rate cannot be determined and
that the BORROWER's election for the applicable LIBOR Advance
shall be void. In the event that the Board of Governors of the
Federal Reserve System shall impose a Reserve Percentage on the
BANK with respect to LIBOR deposits of the BANK, then for any
period during which such Reserve Percentage shall apply, the
LIBOR rate shall be equal to the amount determined above divided
by an amount equal to 1 minus the Reserve Percentage actually
maintained by the BANK. For purposes hereof, "Reserve
Percentage" means the rate (expressed as a decimal) at which the
BANK is required to maintain reserves under Regulation D of the
Board of Governors of the Federal Reserve System against
Eurodollar liabilities outstanding. Notwithstanding the
foregoing, if as a result of any change in any foreign or United
States law or regulation (or change in the interpretation thereof)
it is determined by BANK that it is unlawful to maintain a LIBOR
Advance, or if any central BANK or governmental authority (foreign
or domestic) shall assert that it is unlawful to maintain a LIBOR
Advance, then such LIBOR Advance shall terminate and the BORROWER
shall have no further right hereunder to elect the Revolving LIBOR-
based Rate.
If for any reason a LIBOR Advance is terminated or prepaid prior to
the end of the applicable thirty (30) day period for which the
Revolving Libor-based Rate is to be in effect, the BORROWER
shall, upon demand by BANK, pay to BANK any amounts required to
compensate BANK for any losses, costs, or expenses which it may
reasonably incur as a result of such termination or prepayment,
including, without limitation, any losses, costs, or expenses
incurred by reason of the liquidation or redeployment of
deposits or other funds acquired by the BANK to fund or maintain
such LIBOR Advance. For purposes hereof, a "Banking Day" means a
day upon which BANKS are open for business to the general public
in Manchester, New Hampshire, and upon which dealings are
carried on and BANKS are open for business in the London
interbank market.
E. Revolving Line of Credit Management. Set forth on Schedule
A are additional terms and conditions relating to the management
of the Revolving Line of Credit Loan.
F. Purposes. Amounts advanced to BORROWER under the Revolving
Line of Credit Loan shall be used solely for BORROWER's ordinary
working capital requirements and general corporate purposes.
II. EQUIPMENT LINE OF CREDIT. The BANK has heretofore
extended to the BORROWER an Equipment Line of Credit Loan in the
maximum principal amount of up to One Million Five Hundred
Thousand Dollars ($1,500,000.00) (the "Equipment Line of Credit
Loan"). Currently, outstanding principal under the Equipment
Line of Credit Loan is and shall be evidenced by (a) the
Replacement Term Promissory Note made by the BORROWER payable to
the order of the BANK in the principal amount of One Million
Five Hundred Thousand Dollars ($1,500,000.00) dated March 31,
1995 and (b) the Term Promissory Note Tied to Equipment Line of
Credit made by the BORROWER payable to the order of the BANK in
the principal amount of Two Hundred Eighty-five Thousand Seven
Hundred Fourteen Dollars and Thirty-six Cents ($285,714.36)
dated April 3, 1995 (individually and collectively, both of said
notes being referred to as the "Equipment Line of Credit Note").
Effective as of the date hereof, no further advances of
principal shall be made under the Equipment Line of Credit Loan.
Outstanding principal under the Equipment Line of Credit Loan
shall be repaid in accordance with the terms and conditions set
forth in each Equipment Line of Credit Note, the other Loan
Documents, and this Agreement. The interest rate applicable to
principal outstanding from time to time under the Equipment Line
of Credit Loan shall be as follows:
(i) Except as provided hereinbelow, principal outstanding
under the Equipment Line of Credit Loan, if not subject to a
LIBOR based rate of interest as provided hereinbelow, shall bear
interest at a variable rate equal to the BANK's Base Rate (as
defined in hereinabove), plus one quarter of one percent (.25%)
per annum. Each time the Base Rate changes, the interest rate
applicable to outstanding principal under the Equipment Line of
Credit Loan shall change contemporaneously with such change in
the Base Rate. Interest shall be calculated and charged daily
on the basis of actual days elapsed over a three hundred sixty
(360) day Banking year.
(ii) The BORROWER may elect to have the entire outstanding
principal amount under the Equipment Line of Credit Loan bear
interest for one or more periods of thirty (30) days each at a
fixed rate (the "Equipment LIBOR-based Rate") equal to the LIBOR
rate plus two and three quarters percent (2.75%) per annum.
Outstanding principal under the Equipment Line of Credit Loan
which is not subject to a current election to bear interest at
the Equipment LIBOR-based Rate shall bear interest at the Base
Rate plus one quarter of one percent (.25%) per annum. BORROWER
shall make elections to have principal outstanding under the
Equipment Line of Credit Loan subject to the Equipment LIBOR
based Rate in accordance with the procedures set forth above for
the Revolving Line of Credit Loan in Section I. D. (ii) above
and, except as otherwise specifically set forth in this section,
the terms and conditions of Section I. D. (ii) shall apply to
all such elections, and outstanding principal under the
Equipment Line of Credit which is subject to such an election
shall constitute a LIBOR Advance for purposes of Section I. D.
(ii) above.
III. TERM LOANS. The BANK has and shall extend the term loans
to the BORROWER described hereinbelow upon and subject to the
terms and conditions set forth in the other Loan Documents and
this Agreement. The term loans are as follow:
A. Leasehold Improvements Term Loan. Pursuant to the Old Loan
Agreement, the BANK has extended to the BORROWER a term loan in
the original principal amount of up to Six Hundred Twenty-three
Thousand Dollars ($623,000.00) (the "Improvements Term Loan"),
which loan is evidenced by a certain Term Loan Promissory Note
dated August 11, 1993 made by the BORROWER to the BANK in the
principal amount of Six Hundred Twenty-three Thousand Dollars
($623,000.00) (the Improvements Note"). BORROWER shall continue
to make payments of principal and interest as provided under
said Term Loan Promissory Note and this Agreement; provided,
however, that the interest rate applicable to outstanding
principal under the Improvements Term Loan shall be and hereby
is amended to the following:
The interest rate applicable to principal outstanding from time
to time under the Improvements Term Loan shall be as follows:
(i) Except as provided hereinbelow, principal outstanding
under the Improvements Term Loan, if not subject to a LIBOR
based rate of interest as provided hereinbelow, shall bear
interest at a variable rate equal to the BANK's Base Rate (as
defined in hereinabove), plus one-quarter of one percent (.25%)
per annum. Each time the Base Rate changes, the interest rate
applicable to outstanding principal under the Improvements Term
Loan shall change contemporaneously with such change in the Base
Rate. Interest shall be calculated and charged daily on the
basis of actual days elapsed over a three hundred sixty(360)day
Banking year.
(ii) The BORROWER may elect to have the entire amount, or any
portion thereof (in increments of not less than $50,000), of
principal outstanding under the Improvements Term Loan bear
interest for one or more periods of thirty (30) to three hundred
sixty (360) days each (but in any event each such period must be
in increments of thirty (30) days) at a fixed rate (the
"Improvements Term LIBOR-based Rate") equal to the LIBOR rate
plus two and three-quarters percent (2.75%) per annum.
Outstanding principal under the Improvements Term Loan which is
not subject to a current election to bear interest at the
Improvements Term LIBOR-based Rate shall bear interest at the
Base Rate plus onequarter of one percent (.25%) per annum.
BORROWER shall make elections to have outstanding principal
under the Improvements Term Loan subject to the Improvements Term
LIBOR-based Rate in accordance with the procedures set forth above
for the Revolving Line of Credit Loan in Section I. D. (ii)
above and, except as otherwise specifically set forth in this
section, the terms and conditions of Section I. D. (ii)
shall apply to all such elections, and outstanding principal
under the Improvements Term Loan which is subject to such an
election shall constitute LIBOR Advances for purposes of
Section I. D. (ii).
To evidence the foregoing modification of the interest rate
applicable to the Improvements Term Loan, the BORROWER shall
execute and deliver to the BANK a Note Modification Agreement
(Allonge) in form and substance satisfactory to the BANK with
respect to the Improvements Note.
B. New Term Loan. The BANK shall extend to the BORROWER a new
term loan in the maximum principal amount of up to One Million
Five Hundred Thousand Dollars ($1,500,000.00) (the "New Term
Loan"), upon and subject to the terms and conditions set forth
in the Term Promissory Note of even date evidencing the New
Term Loan, the other Loan Documents and this Agreement.
(1) Maximum Amount Advanced. The maximum amount available to
the BORROWER to be advanced under the New Term Loan as of the
date hereof shall be One Million Dollars ($1,000,000.00). Upon
BORROWER certifying to BANK that the BORROWER has achieved
cumulative Net Profits (as defined below) as at either the end
of its third or fourth 1996 fiscal quarters of not less than
ninety (90%) of the Net Profits projected for the 1996 fiscal
year to date as set forth in the BORROWER's fiscal year 1996
budget dated November 2, 1995 a copy of which is attached
hereto as Exhibit III. B. (1), then the remaining Five Hundred
Thousand Dollars ($500,000.00) of principal shall be available
to be advanced at the request of BORROWER under the New Term
Loan.
(2) Repayment. The New Term Loan shall be repaid as provided
in the Term Promissory Note of even date evidencing the New
Term Loan and in this Agreement.
(3) Interest. The interest rate applicable to principal
outstanding from time to time under the New Term Loan shall be
as follows:
(i) Except as provided hereinbelow, principal outstanding
under the New Term Loan, if not subject to a LIBOR based rate
of interest as provided hereinbelow, shall bear interest at a
variable rate equal to the BANK's Base Rate (as defined in
hereinabove), plus one-quarter of one percent (.25%) per annum.
Each time the Base Rate changes, the interest rate applicable
to outstanding principal under the New Term Loan shall change
contemporaneously with such change in the Base Rate. Interest
shall be calculated and charged daily on the basis of actual
days elapsed over a three hundred sixty (360) day banking year.
(ii) The BORROWER may elect to have the entire amount, or
any portion thereof (in increments of not less than $50,000),
of principal outstanding under the New Term Loan bear interest
for one or more periods of thirty (30) to three hundred sixty
(360) days each (but in any event each such period must be in
increments of thirty (30) days) at a fixed rate (the "Term
LIBOR-based Rate") equal to the LIBOR rate plus two and three
quarters percent (2.75%) per annum. Outstanding principal under
the New Term Loan which is not subject to a current election to
bear interest at the Term LIBOR-based Rate shall bear interest
at the Base Rate plus one-quarter of one percent (.25%) per
annum. BORROWER shall make elections to have outstanding
principal under the New Term Loan subject to the Term LIBOR-based
Rate in accordance with the procedures set forth above for the
Revolving Line of Credit Loan in Section I. D. (ii) above and,
except as otherwise specifically set forth in this section, the
terms and conditions of Section I. D. (ii) shall apply to all
such elections, and outstanding principal under the New Term
Loan which is subject to such an election shall constitute
LIBOR Advances for purposes of Section I. D. (ii).
(4) Purposes. Amounts advanced to BORROWER under the New
Term Loan shall be used solely for BORROWER's repayment of
outstanding principal advanced for purposes of funding capital
expenditures under the Revolving Line of Credit Loan and
general corporate purposes.
IV. FEES. In addition to such other fees as are provided in
this Agreement and in the other Loan Documents, BORROWER agrees
to pay the BANK the fees set forth on Schedule B attached hereto.
V. PAYMENTS. All payments made by the BORROWER of principal
and interest on the Loans, and other sums and charges payable
under the Loan Documents, shall be made to the BANK in
accordance with the terms of the respective Loan Documents in
lawful United States of America currency at its office set
forth above, or by the debiting by the BANK of the demand
deposit account(s) in the name of the BORROWER at the BANK, or
in such other reasonable manner as may be designated by the
BANK in writing to the BORROWER. The BORROWER authorizes the
BANK automatically to debit the BORROWER's demand deposit
account as described above and in accordance with the Cash
Management provisions set forth herein below.
VI. SECURITY. Each of the Loans and all other Obligations of
the BORROWER to the BANK, whether now existing or hereafter
arising, shall at all times be secured by perfected security
interests in and liens on the Collateral (as hereinafter
defined), which security interests and liens shall continue
until payment in full of all amounts outstanding under said
Loans and the other Obligations. Additionally, the full and
punctual payment and performance of the Loans and all other
Obligations of BORROWER is guaranteed by the Subsidiary
pursuant to the Guaranties. The term "Collateral" as used
herein shall be deemed to include all property and assets of
the BORROWER and Subsidiary secured, mortgaged, pledged,
assigned, or otherwise encumbered or covered heretofore or
hereafter by any of the Loan Documents, including, but not
limited to the Security Agreements. The BORROWER and the
Subsidiary covenant and agree to take such further actions and
to execute such additional documents as may be necessary from
time to time to enable the BANK to obtain and maintain the
security interests and liens arising under the Loan Documents.
If the Collateral includes accounts and account receivables of
BORROWER, then, in addition to such other rights and remedies
as are provided the BANK under the Loan Documents, the BORROWER
agrees that BANK may communicate with account debtors in order
to verify the existence, amount, and terms of any such accounts
and account receivables. Upon an Event of Default, BANK may
notify account debtors of the BANK's security interest and
require that payments on accounts and account receivables be
made directly to BANK, and upon the request of BANK, BORROWER
shall notify account debtors and indicate on all billings that
payments and returns are to be made directly to BANK. In
furtherance of the foregoing, upon an Event of Default,
BORROWER hereby appoints BANK as attorney irrevocable with full
power to collect, compromise, endorse, sell, or otherwise deal
with the BORROWER's accounts and account receivables or
proceeds thereof and to perform the terms of any contract in
order to create accounts and account receivables in BANK's name
or in the name of BORROWER.
VII. SUBORDINATION AND STANDBY OF DEBT. The BORROWER and
Subsidiary covenant and agree that all existing debt of
BORROWER to Subsidiary and all future debt if permitted
hereunder from BORROWER to Subsidiary, shall be and hereby is,
without need for further writing, made subject and subordinate
to the prior
payment and performance of all the Loans and other Obligations
of BORROWER. The Subsidiary further covenant and agree that
any claims against the BORROWER (or against each other or any
other Subsidiary of the Loans), individually or jointly, to
which the Subsidiary may become entitled (including, without
limitation, claims by subrogation or otherwise by reason of any
payment or performance by the Subsidiary, individually or
jointly, in satisfaction and discharge, in whole or in part, of
his or their obligations under the Guaranty) shall be and
hereby are, without need for further writing, subject and
subordinate to the payment and performance in full of all of
the Loans and other Obligations due the BANK. In furtherance
of the foregoing, the BORROWER and Subsidiary shall provide
such subordinations, certificates, and other documents, and
shall mark its corporate books, records, stock certificates,
and ledgers, as the BANK may reasonably request from time to
time, in form and substance satisfactory to BANK and BANK's
counsel, evidencing the subordination of all debt of BORROWER
to Subsidiary, whether now existing or hereafter arising, in
accordance with the covenants of BORROWER and Subsidiary
hereunder.
VIII. CONTINUING REPRESENTATIONS AND WARRANTIES. The BORROWER
and the Subsidiary, as the case may be, jointly and severally
warrant and represent to the BANK that so long as any of the
Obligations are outstanding:
A. Good Standing. BORROWER and each of the Subsidiary is duly
organized, validly existing, and in good standing under the
laws of its state of organization and is qualified to do
business in all other jurisdictions where the nature of the
business conducted or property owned by BORROWER or the
Subsidiary require it to be so qualified. BORROWER and each of
the Subsidiary has the power to own its properties and to carry
on its business as now being conducted.
B. Authority. BORROWER and Subsidiary have full power and
authority to enter into this Agreement and to borrow under the
Loan Documents, to execute and deliver the Loan Documents and
to incur the obligations provided for herein and in the Loan
Documents, all of which have been duly authorized by all proper
and necessary corporate or other action. The persons executing
the Loan Documents on behalf of the BORROWER and the Subsidiary
have been duly authorized to do so.
C. Binding Agreement. This Agreement and the Loan Documents
constitute the valid and legally binding obligations of the
BORROWER and Subsidiary, enforceable in accordance with their
terms.
D. Litigation. There are no suits or proceedings of any kind
or nature pending or, to the knowledge of the BORROWER and
Subsidiary, threatened against or affecting the BORROWER or the
Subsidiary or their assets which, if adversely determined, would
have a material adverse affect on the financial condition or
business of the BORROWER or the Subsidiary and which have not
been disclosed in writing to the BANK.
E. Conflicting Agreements; Consents. There is no charter,
bylaw, preference stock, or trust provision of the BORROWER or
the Subsidiary, and no provision(s) of any existing mortgage,
indenture, contract or agreement binding on the BORROWER or the
Subsidiary or affecting their property, which would conflict
with, have a material adverse affect upon, or in any way
prevent the execution, delivery, or performance of the terms of
this Agreement or the Loan Documents. Neither the BORROWER nor
the Subsidiary is required to obtain any order, consent,
approval, authorization of any person, entity, or governmental
authority in connection with or as a condition to the
execution, delivery, and performance of this Agreement or the
Loan Documents or the granting of the security interests and
liens in the Collateral.
F. Financial Condition. The financial statements delivered to
the BANK by the BORROWER and the Subsidiary have been and shall
be prepared in accordance with generally accepted accounting
principles, consistently applied, are and will be complete and
correct, and fairly present the financial condition and results
of the BORROWER and the Subsidiary. Other than those
liabilities disclosed in writing to the BANK, there are no
liabilities, direct or indirect, fixed or contingent, of the
BORROWER or the Subsidiary which are not reflected in the
financial statements or in the notes thereto which would be
required to be disclosed therein and there has been no material
adverse change in the financial condition or operations of the
BORROWER or the Subsidiary since the date of such financial
statements.
G. Taxes. BORROWER and Subsidiary have filed all federal,
state and local tax returns required to be filed by them and
have paid all taxes shown by such returns to be due and payable
on or before the due dates thereof.
H. Solvency. The present fair saleable value of the
BORROWER's assets is greater than the amount required to pay
its total liabilities; the amount of the BORROWER's capital is
adequate in view of the type of business in which it is engaged.
I. Full Disclosure. None of the information with respect to
the BORROWER or the Subsidiary which has been furnished to the
BANK in connection with the transactions contemplated hereby is
false or misleading with respect to any material fact, or omits
to state any material fact necessary in order to make the
statements therein not misleading. Notwithstanding the
foregoing, the BANK acknowledges that the future budgets and
financial projections provided by the BORROWER are based upon
good faith assumptions and BORROWER cannot warrant that the
same will be true and accurate.
J. Employee Benefit Plans. To BORROWER's knowledge, all Plans
(as hereinafter defined) which are pension plans as defined in
Section 3(2) of the Employment Retirement Income Security
Act of 1974, as amended ("ERISA"), qualify under Section 401 of
the Internal Revenue Code of 1986 (as amended, the "IRC"), and
all Plans are in compliance with the provisions of the IRC and
ERISA, and have been administered in accordance with their
terms. The term "Plan" means any pension plan, as defined in
Section 3(2) of ERISA and any welfare plan, as defined in
Section 3(1) of ERISA, which is sponsored, maintained or
contributed to by BORROWER or any commonly controlled entity,
or in respect of which BORROWER or a commonly controlled entity
is an "employer" as defined in Section 3(5) of ERISA. To
BORROWER's knowledge, and except with respect to events which
would not have a material adverse affect on BORROWER's business
or financial condition:
(i) Prohibited Transactions. None of the Plans has
participated in, engaged in or been a party to any non-exempt
"prohibited transaction" as defined in ERISA or the IRC, and no
officer, director or employee of BORROWER has committed a
breach of any of the responsibilities or obligations imposed
upon fiduciaries by Title I or ERISA.
(ii) Claims. There are no contested claims, pending or
threatened, involving any Plan which is a pension plan by a
current or former employee (or beneficiary thereof) of
BORROWER, nor is there any reasonable basis to anticipate any
claims involving any such Plan.
(iii) Reporting and Disclosure Requirements. There have
been no violations of any reporting or disclosure requirements
with respect to any Plan and no such Plan has violated
applicable law, including but not limited to ERISA and the IRC.
(iv) "Accumulated Funding Deficiency"; Reportable
Event. No Plan which is a defined benefit pension plan has (a)
incurred an "accumulated funding deficiency" (within the
meaning of Section 412(a) of the IRC), whether or not waived,
(b) been a plan with respect to which a Reportable Event (to
the extent that the reporting of such events to the Pension
Benefit Guaranty Corporation (the "PBGC") within thirty (30)
days of the occurrence has not been waived) has occurred and is
continuing, or (c) been a Plan with respect to which there
exists conditions or events which have occurred presenting a
risk of termination by PBGC.
(v) Multiemployer Plan. No Plan which is a multiemployer
pension plan (as defined in Section 414(f) of the IRC) to which
BORROWER contributes has been a plan with respect to which
BORROWER has received any notification that such Multiemployer
Plan is in reorganization or has been terminated within the
meaning of Title IV of ERISA and no such Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated
within the meaning of Title IV of ERISA. BORROWER has not
withdrawn from, or incurred any withdrawal liability to, any
multiemployer plan.
(vi) COBRA. There has been no violation of the
applicable requirements of Section 4980B of the IRC pertaining
to COBRA continuation coverage with respect to any Plan.
(vii) Employee Welfare Benefit Plans. No Plan which is a
medical, dental, health, disability, insurance or other plan or
arrangement, whether oral or written, which constitutes an
"employee welfare benefit plan" as defined in Section 3(1) of
ERISA, has any unfunded accrued liability or provides benefits
to former employees or retirees (except as may be required by
COBRA).
K. Location of Records. All of the books and records or true
and complete copies thereof relating to the accounts and
contracts of the BORROWER and each of the Subsidiary are and
will be kept at BORROWER's principal place of business located
at the address first set forth above (the "Premises").
L. Compliance with Laws. The BORROWER and the Subsidiary are
in compliance in all material respects with all laws and
governmental rules and regulations applicable to the Collateral
and to their businesses, properties and assets.
M. Hazardous Waste. No Hazardous Waste (as hereinafter
defined) has been generated, stored or treated on any of the
premises occupied by BORROWER, except in compliance with all
applicable laws. No Hazardous Waste has ever been, is being,
is intended to be, or is threatened to be spilled, released,
discharged, disposed, placed or otherwise caused to be found in
the soil or water in, under, or upon any of the premises occupied
by the BORROWER. The BORROWER and the Subsidiary agree to indemnify
and hold the BANK harmless from and against any claims,
damages, liabilities (whether joint or several), losses and
expenses (including, without limitation, attorneys' fees)
incurred by the BANK as a result of the breach of these
representations. For the purpose of this Agreement, the term
"Hazardous Waste" means "hazardous waste", "hazardous
material", "hazardous substance", and "oil" as presently
defined in the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and
Liability Act, the Hazardous Material Transportation Act, the
Federal Water Pollution Control Act, and corresponding state
and local statutes, ordinances, and regulations, as such
statutes, ordinances and regulations may be amended, or as
defined in any federal or state regulation adopted pursuant to
such acts.
N. Title to Collateral. BORROWER and the Subsidiary have and
will at all times have good and marketable title to the
Collateral, free and clear from any liens, security interests,
mortgages, encumbrances, pledges or other right, title or
interest of any other person or entity, except those arising
under the Loan Documents or disclosed to the BANK in the
Security Agreement ("Permitted Encumbrances").
O. Employees. BORROWER and each of the Subsidiary has
complied with all laws relating to the employment of labor,
including any provisions thereof relating to ERISA, wages,
hours, collective bargaining, the payment of social security
and similar taxes, equal employment opportunity, employment
discrimination and occupational safety and health, and is not
liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing.
IX. AFFIRMATIVE COVENANTS. Until payment in full of all
indebtedness under the Loans and the other Obligations, the
BORROWER and the Subsidiary, as the case may be, jointly and
severally agree that, unless the BANK shall otherwise consent
in writing, they will:
A. Prompt Payment. Pay promptly, subject to any applicable
cure or grace period, when due all amounts due and owing to the
BANK.
B. Use of Proceeds. Use the proceeds of the Loans only for
business purposes and will furnish the BANK with such evidence
as it may reasonably require with respect to such use.
C. Financial Statements. Furnish the BANK with such financial
statements of BORROWER and the reports of its parent, Green
Mountain Coffee, Inc., as are described on Schedule B attached
hereto. All such statements shall be prepared on a consistent
basis in a format reasonably acceptable to the BANK.
D. Maintenance of Existence. Take all necessary action to
maintain BORROWER's and each of the Subsidiary legal existence.
E. Maintenance of Business. Do or cause to be done all things
necessary to maintain and preserve BORROWER's and each of the
Subsidiary business.
F. Maintenance of Insurance. Keep all of BORROWER's and each
of the Subsidiary properties (specifically including, but not
limited to, the Collateral) adequately insured against loss or
damage by fire and such other casualties and hazards as the
BANK may specify from time to time; maintain adequate Workman's
Compensation Insurance under applicable laws and Comprehensive
General Public Liability Insurance; and maintain adequate
insurance covering such other risks as the BANK may reasonably
specify from time to time hereafter. All insurance required
hereunder shall be effected by valid and enforceable policies
issued by insurers of recognized responsibility authorized to
transact business within the State of New Hampshire and shall,
inter alia, (1) name the BANK as an additional insured and/or
loss payee, (2) provide that no action of the BORROWER shall
void any such policy as to the BANK, and (3) provide that the
BANK shall be notified in writing of any proposed cancellation
of such policy at least ten (10) days in advance thereof and
will have the opportunity to correct any deficiencies
justifying such proposed cancellation. For the purposes of
this Paragraph, an insurance policy shall be deemed to be
"adequate" if it provides coverage against such risks and in
such amounts as is customarily carried by owners of similar
businesses and properties.
G. Inspection by the BANK. Upon prior reasonable notice
(other than in emergencies when no notice shall be required)
and during normal business hours, permit any person designated
by the
BANK to inspect any of its properties, including its books,
records, and accounts (and including the making of copies
thereof and extracts therefrom) during normal business hours.
BORROWER also agrees that the BANK may conduct regular field
examination audits of the BORROWER's books, records, accounts,
inventory, and other property up to three (3) times during each
of BORROWER's fiscal years and that BORROWER shall pay the BANK
a fee of $350.00 per day for such audits plus all costs and
expenses incurred by BANK in connection with such audits.
H. Prompt Payment of Taxes. Accrue its tax liability
(including withholdings for employee taxes and social security)
in accordance with usual accounting practice and pay or
discharge (or cause to be paid or discharged) as they become
due all taxes, assessments, and government charges upon its
property, perations, income and products (as well as all claims
for labor, materials or supplies), which, if unpaid might
become a lien upon any of its property; provided, that the
BORROWER shall, prior to payment thereof, have the right to
contest such taxes, assessments and charges in good faith by
appropriate proceedings so long as the BANK's interests are
protected by bond, letter of credit, escrowed funds or other
appropriate security.
I. Notification of Default Under This and Other Loan or
Financing Arrangements. Promptly notify the BANK in writing of
the occurrence of any Event of Default under this Agreement or
any other loan or financing arrangement.
J. Notification of Litigation. Promptly notify the BANK in
writing of any litigation that has been instituted or is
pending or threatened which might have a material adverse
affect on its continued operations or financial condition.
K. Notification of Governmental Action. Promptly notify the
BANK in writing of any governmental investigation or proceeding
that has been instituted or is pending or threatened, including
without limitation, matters relating to the federal or state
tax returns of the BORROWER or the Subsidiary, compliance with
the Occupational Safety and Health Act, or proceedings by the
Treasury Department, Labor Department, or Pension Benefit
Guaranty Corporation with respect to matters affecting employee
welfare, benefit or retirement programs.
L. Preservation of the Collateral. Take all reasonably
necessary steps to preserve, protect and defend the Collateral
and keep it in good operating condition and repair (reasonable
wear and tear excepted) and free of unpermitted liens and give
BANK access to and permit it to inspect the Collateral during
all business hours and other reasonable times.
M. Maintenance of Records. Keep adequate records and books of
account, in which complete entries will be made in a manner
reasonably acceptable to the BANK and consistently applied,
reflecting all financial transactions of the BORROWER.
N. Compliance With Laws. Comply in all material respects with
all applicable laws, rules, regulations, and orders, such
compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments, and governmental
charges imposed upon it or upon its property; provided,
however, that BORROWER shall be entitled to contest the same in
good faith so long as such action, in the BANK's sole opinion,
does not have an adverse affect upon the BANK's rights
hereunder or the Collateral.
O. Accounts, Deposits, and Balances. BORROWER shall maintain
its primary operating and deposit accounts with the BANK.
BORROWER shall maintain at all times during which amounts are
outstanding under any of the Loans, a minimum balance in a
demand deposit account with the BANK of fully collected funds
which are not subject to any claims, liens or setoffs (other
than those of the BANK) at least in the amount set forth on
Schedule B attached hereto.
P. Notification of Material Adverse Changes. Promptly notify
the BANK in writing of any conditions or circumstances which
might have a material adverse effect on BORROWER's continued
operations or financial condition.
Q. Additional Financial and Other Covenants. Comply with the
additional financial and other covenants set forth on Schedule
B attached hereto.
X. NEGATIVE COVENANTS. Until payment in full of all
indebtedness under the Loans and the other Obligations, the
BORROWER and the Subsidiary jointly and severally covenant
that the BORROWER and the Subsidiary will not, without the
express prior written consent of the BANK:
A. Nature and Scope of Business. Enter into any type of
business other than that in which it is presently engaged, or
otherwise significantly change the scope or nature of its
business.
B. Additional Indebtedness. Incur indebtedness for borrowed
money (or issue or sell any of its bonds, debentures, notes or
similar obligations) except: (1) borrowings under the Loans; (2)
other Obligations to the BANK; (3) borrowings used to prepay in
full the Obligations; (4) ordinary unsecured trade account
payables; and (5) borrowings up to the aggregate maximum
principal amount of Three Hundred Thousand Dollars ($300,000.00)
in each fiscal year to be used solely to acquire vehicles,
equipment and machinery for use by the BORROWER in the ordinary
course of its business.
C. Liens and Mortgages. Incur, create, assume or suffer to
exist any mortgage, pledge, lien, attachment, charge or other
encumbrance of any nature whatsoever on any of the Collateral,
now or hereafter owned, other than (1) the security interests or
liens granted to the BANK pursuant to the Loan Documents; (2)
deposits under Workmen's Compensation, Unemployment Insurance
and Social Security laws; (3) liens imposed by law, such as
carriers, warehousemen's or mechanic's liens incurred in good
faith in the ordinary course of business, and which do not in
the aggregate have a material adverse effect on the BORROWER's
financial condition or the Collateral; (4) the Permitted
Encumbrances; and (5) purchase money security interests securing
only borrowings permitted under clause (5) of Paragraph B of
this Section X.
D. Capital Structure; Acquisition of Stock. Alter or amend the
BORROWER's capital structure or purchase, redeem or otherwise
acquire for value any of its outstanding capital stock.
E. Ownership; Management. Change the current executive
management of BORROWER limited to Robert P. Stiller and Robert
D. Britt.
F. Places of Business; Location of Collateral. Maintain or
relocate to, open or close, any other place of business or move
any of the Collateral from the Premises, except upon thirty (30)
days prior written notice to the BANK.
XI. CONDITIONS PRECEDENT TO MAKING OF LOANS. The obligation of
the BANK to make any Loan and make disbursements and advances of
the proceeds of the same to the BORROWER is subject to the
satisfaction by the BORROWER or its representatives of the
following conditions precedent with respect to such Loan: (1)
the BORROWER and the Subsidiary have executed and delivered all
of the Loan Documents deemed appropriate and necessary by the
BANK, in form and substance satisfactory to the BANK, including,
but not limited to, the documents described on the Closing
Agenda attached hereto as Schedule C; (2) the BORROWER's and
Subsidiary's warranties and representations as contained herein
and in the Loan Documents shall be accurate and complete and
BANK has received satisfactory evidence of the same, including,
at BANK's option, an opinion of BORROWER's legal counsel to that
effect; and (3) the BORROWER and Subsidiary shall not be in
default under any of the covenants, warranties, representations,
terms, or conditions contained in this Agreement or in the Loan
Documents as of the date of entering into such Loan and as of
the date of each disbursement and advance thereunder.
XII. EVENTS OF DEFAULT; ACCELERATION. The occurrence of any
one or more of the following events shall constitute a default
under this Agreement, each of the Loan Documents, and each of
the Obligations (individually, an "Event of Default", and
collectively, "Events of Default"): (1) if any statement,
representation or warranty made by the BORROWER or Subsidiary in
this Agreement or in any of the Loan Documents, or in connection
with any of the same, or if any financial statement, report,
schedule, or certificate furnished by the BORROWER or Subsidiary
or any of its officers or accountants to the BANK, shall prove
to have been false or misleading when made, or subsequently
becomes false or misleading, in any material respect (as
determined in the BANK's sole discretion); (2) default by the
BORROWER in payment on its due date of any principal or interest
called for under any of the Loans or the Loan Documents, or of other
amounts due under any other of the Obligations, or other event
of default under the Loan Documents or the other Obligations,
provided such default is not cured within any applicable grace
period thereunder; (3) default by the BORROWER in the
performance or observance of any of the provisions, terms,
conditions, warranties or covenants of this Agreement, the Loan
Documents, or any other of the Obligations; (4) the dissolution,
termination of existence, merger or consolidation of the
BORROWER or a sale of BORROWER's business or the Collateral not
in the ordinary course of business; (5) the BORROWER or the
Subsidiary shall (a) apply for or consent to the appointment of
a receiver, trustee or liquidator of it or any of its property,
(b) make a general assignment for the benefit of creditors, (c)
be adjudicated as bankrupt or insolvent, (d) file a voluntary
petition in bankruptcy, or a petition or an answer seeking
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation under any law or statute, or an
answer admitting the material allegations of a petition filed
against it in any proceeding under any such law or statute, or
(e) offer or enter into any composition, extension or
arrangement seeking relief or extension of its debts; (6)
proceedings shall be commenced or an order, judgment or decree
shall be entered, without the application, approval or consent
of the BORROWER, in or by any court of competent jurisdiction,
relating to the BANKRUPTCY, dissolution, liquidation,
reorganization or the appointment of a receiver, trustee or
liquidator of the BORROWER or Subsidiary, or of all or a
substantial part of its assets, and such proceedings, order,
judgment or decree shall continue undischarged or unstayed for a
period of sixty (60) days; (7) BORROWER's inability to pay its
debts as they mature or other act of insolvency, however defined
and determined by the BANK in a commercially reasonable manner;
(8) a judgment for the payment of money exceeding $100,000.00
shall be rendered against the BORROWER and the same shall remain
undischarged for a period of thirty (30) days, during which
period execution shall not be effectively stayed; or (9) if BANK
in good faith and in a commercially reasonable manner otherwise
deems itself insecure within the meaning of New Hampshire RSA
382A:1-208 (as amended).
Upon the occurrence of any Event of Default, the BANK's
commitment to make further Loans under the Loan Documents or any
other agreement with the BORROWER, and to make any advances or
disbursements under any Loan, shall immediately cease and
terminate and, at the election of the BANK, all of the
Obligations of the BORROWER to the BANK, either under this
Agreement, the Loan Documents, or otherwise, will immediately
become due and payable without further demand, notice or
protest, all of which are hereby expressly waived. Thereafter,
the BANK may proceed to protect and enforce its rights, at law,
in equity, or otherwise, against the BORROWER, the Subsidiary,
and any other endorser or Subsidiary of the BORROWER's
Obligations, either jointly or severally, and may proceed to
liquidate and realize upon any of its Collateral in accordance
with the rights of a secured party under the Uniform Commercial
Code, under any other applicable law, under any Loan Documents,
under any other agreement between the BORROWER and the BANK, or
under any agreement between any Subsidiary or endorser of the
BORROWER's Obligations to the BANK, and to apply the proceeds
thereof to payment of the Obligations of the BORROWER to the
BANK in such order and in such manner as the BANK, in its
sole discretion, deems appropriate.
XIII. MISCELLANEOUS PROVISIONS.
A. Entire Agreement; Waivers. This Agreement, the
Schedules hereto, and the Loan Documents together constitute
the entire agreement between the BORROWER, the Subsidiary and
the BANK and no covenant, term, condition or other provision
thereof nor any default in connection therewith may be waived
except by an instrument in writing, signed by the BANK and
delivered to the BORROWER. The BANK's failure to exercise or
enforce any of its rights, powers or privileges under this
Agreement or the Loan Documents shall not operate as a waiver
thereof. In the event of any conflict between the terms,
covenants, conditions and restrictions contained in the Loan
Documents, the term, covenant, condition or restriction which
confers the greatest benefit upon the BANK shall control. The
determination as to which term, covenant, condition or
restriction is more beneficial shall be made by the BANK in its
sole discretion.
B. Remedies Cumulative. All remedies provided under this
Agreement and the Loan Documents or afforded by law shall be
cumulative and available to the BANK until all of the
BORROWER's Obligations to the BANK have been paid in full.
C. Survival of Covenants. All covenants, agreements,
representations and warranties made in this Agreement and in
the Loan Documents shall be deemed to be material and to have
been relied on by the BANK, notwithstanding any investigation
made by the BANK or in its behalf, and shall survive the
execution and delivery of this Agreement and the Loan
Documents. All such covenants, agreements, representations and
warranties shall bind and inure to the benefit of the
BORROWER's, the Subsidiary's, and the BANK's successors and
assigns, whether so expressed or not.
D. Governing Law; Jurisdiction. This Agreement and the Loan
Documents shall be construed and their provisions interpreted
under and in accordance with the laws of the State of New
Hampshire. The BORROWER and the Subsidiary, to the extent they
may legally do so, hereby consent to the jurisdiction of the
courts of the State of New Hampshire and the United States
District Court for the State of New Hampshire for the purpose
of any suit, action or other proceeding arising out of any of
their obligations hereunder or with respect to the transactions
contemplated hereby, and expressly waive any and all objections
they may have to venue in any such courts.
E. Assurance of Execution and Delivery of Additional
Instruments. The BORROWER and Subsidiary agree to execute and
deliver, or to cause to be executed and delivered, to the BANK
all such further instruments, and to do or cause to be done all
such further acts and things, as the BANK may reasonably
request or as may be necessary or desirable to effect further
the purposes of this Agreement and the Loan Documents.
F. Waivers and Assents. The BORROWER, the Subsidiary, and any
other Subsidiary or endorser of the BORROWER's Obligations to
the BANK, hereby waive, to the fullest extent permitted by law,
all rights to marshalling of assets and all rights to demand,
notice, protest, notice of acceptance of this Agreement and the
Loan Documents, notice of Loans made, credit extended,
Collateral received or delivered or other action taken in
reliance hereon and all other demands and notices of any
description with respect both to the Loan Documents and the
Collateral. Each Subsidiary further waives all defenses based
upon suretyship or impairment of collateral and all defenses
which the BORROWER may assert on the Obligations, including,
but not limited to, failure of consideration, breach of
warranty, fraud, payment, statute of frauds, BANKRUPTCY, lack
of legal capacity, statute of limitations, lender liability,
accord and satisfaction, and usury. The BORROWER and Subsidiary
assent to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange or release
of Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payments
thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as the
BANK may deem advisable.
G. No Duty of the BANK With Respect to the Collateral. Except
as may otherwise be specifically required under the Uniform
Commercial Code, the BANK shall have no duty as to the
collection or protection of Collateral or any income thereon,
nor as to the preservation of rights against prior parties, nor
as to the preservation of any rights pertaining thereto, beyond
the safe custody thereof.
H. Election of the BANK. The BANK may exercise its rights
with respect to Collateral without resorting or regard to other
collateral or sources of reimbursement for the Obligations of
BORROWER to the BANK.
I. Assignment. If at any time, by assignment or otherwise,
the BANK transfers its rights in any of the BORROWER's or
Subsidiary's Obligations and its rights in Collateral therefor,
in whole or in part, such transfer shall carry with it the
powers and rights of the BANK under this Agreement, the Loan
Documents, and the Collateral so transferred and the transferee
shall become vested with such powers and rights whether or not
they are specifically referred to in the instrument evidencing
the transfer. If, and to the extent that the BANK retains such
rights and Collateral, the BANK shall continue to have the
rights and powers herein set forth with respect thereto. This
Agreement and the Loan Documents shall be binding upon and
inure to the benefit of the BANK, the BORROWER and the
Subsidiary, their successors, assigns, heirs and personal
representatives; provided, however, the rights and obligations
of the BORROWER and the Subsidiary are not assignable,
delegable or transferable without the consent of the BANK. All
of the rights of the BANK under this Agreement and the Loan
Documents shall inure to the benefit of any participating BANK
or BANKS and its or their successors and assigns.
J. Expenses; Proceeds of Collateral. The BORROWER and the
Subsidiary covenant and agree that they shall pay to the BANK,
on demand, any and all reasonable out-of-pocket expenses,
including reasonable attorneys' fees, court costs, sheriffs'
fees, and other expenses incurred or paid by the BANK in
protecting and enforcing its rights under this Agreement, the
Loan Documents, and the other Obligations, including the costs
of preparation of any amendments, modifications, consents, or
waivers in respect of the Loan Agreements or the Loan
Documents, and all filing, auditing, accounting, and appraisal
fees. After deducting all of said expenses and the reasonable
expenses of retaking, holding, preparing for sale, selling and
the like, the residue of any proceeds of collections or sale of
Collateral shall be applied to the payment of principal of or
interest on Obligations of the BORROWER to the BANK in such
order or preference as the BANK may determine, and any excess
shall be returned to the BORROWER (subject to the provisions of
the Uniform Commercial Code) and the BORROWER shall remain
liable for any deficiency.
K. The BANK's Right of Offset. The BORROWER and the
Subsidiary hereby grant the BANK a continuing security interest
in, and the right to set off against, any deposits or other
sums at any time credited or due from the BANK to the BORROWER or the
Subsidiary, and any securities or other property of the
BORROWER or Subsidiary which at any time are in the possession
of the BANK, for the payment of any Obligations due the BANK.
The BANK may apply or set off such deposits or other sums
against the BORROWER's Obligations whether or not the
Collateral is considered by the BANK to be adequate. The
BORROWER and the Subsidiary expressly grant to the BANK the
right to set off and apply such deposits and sums without
having to resort to recourse to any other Collateral in which
the BANK has a security interest.
L. Notices. All notices, requests, demands and other
communications provided for hereunder shall be in writing
(including telegraphic communication) and shall be either
mailed by certified mail, return receipt requested, or
delivered by overnight courier service, to the applicable party
at the addresses set forth in this Agreement.
M. Savings Clause. Any provision of this Agreement or any of
the Loan Documents which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in
any other jurisdiction.
N. Term of this Agreement and the Loan Documents. This
Agreement and the Loan Documents shall remain in full force and
effect until all of the Obligations have been paid in full, all
of the terms, conditions and covenants under the Loan Documents
have been performed, and all commitments of the BANK advance
funds under any of the Loans have terminated.
O. Interest Rate Provisions. The interest rate provisions of
each of the Obligations are subject to the condition that in no
event shall the amount paid or agreed to be paid to the holder
of such Obligation which is deemed interest under applicable
law exceed the maximum rate of interest on the unpaid principal
balance of such Obligation allowed by applicable law, if any,
(the "Maximum Allowable Rate"). For purposes hereof,
"applicable law" shall mean the law in effect on the date
hereof, except that if there is a change in such law which
results in a higher Maximum Allowable Rate being applicable to
the Obligation subject thereto, then such Obligation shall be
governed by such amended law from and after its effective date.
In the event that fulfillment of any provisions of any
Obligation results in the interest rate thereunder being in
excess of the Maximum Allowable Rate, then amount to be paid
thereunder resulting in an excessive interest rate shall
automatically be reduced to eliminate such excess. If
notwithstanding the foregoing, the holder of such Obligation
receives an amount which under applicable law would cause the
interest rate thereunder to exceed the Maximum Allowable Rate,
the portion thereof which would be excessive shall
automatically be applied to and deemed a prepayment of the
unpaid principal balance under such Obligation and not a
payment of interest.
P. Affirmation of Loan Documents and Obligations. Each of the
BORROWER and the Subsidiary hereby stipulate, admit, agree,
acknowledge, represent, and warrant, that each of the Loan
Documents is valid, binding and enforceable in accordance with
its respective terms, including, without limitation, all demand
features thereof, and that the Obligations are valid, proper,
legal, binding, and enforceable and are absolutely due and
owing without any counterclaim, cause of action, offset,
reduction or defense of any kind as against the BANK, and that
all of the Loan Documents shall continue in full force and effect in
accordance with the terms thereof, except to the extent
otherwise specifically provided under this Agreement.
Q. Affirmation of Mortgages and Security Interests. Each of
BORROWER and the Subsidiary hereby stipulate, admit,
acknowledge, agree, represent and warrant, that the BANK holds
valid, duly, and properly perfected and recorded mortgages and
security interests in all of the Collateral described in the
Loan Documents, and that such mortgages and security interests
are enforceable in accordance with their terms, without offset,
reduction or defense of any kind or nature.
R. Waiver of Jury Trial. THE BORROWER AND EACH OF THE
Subsidiary WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY OF
ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY
OF THE LOAN DOCUMENTS, AND AGREES THAT ANY SUCH DISPUTE SHALL
BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, the BANK, the BORROWER, and the Subsidiary
have executed this Agreement all as of the day and year first
above written.
FLEET BANK-NH
/s/ Catherine A. Consentino By: /s/ Andre P. Pelletier
- --------------------------- ----------------------------------
Witness Andre P. Pelletier, Vice President
GREEN MOUNTAIN COFFEE ROASTERS, INC.
/s/ Betty Omansky By: /s/ Robert D. Britt
- ----------------- ---------------------------------
Witness Robert D. Britt,
Chief Financial Officer
GREEN MOUNTAIN COFFEE ROASTERS
FRANCHISING CORPORATION
/s/ Betty Omansky By: /s/ Robert D. Britt
- ----------------- --------------------------------
Witness Robert D. Britt,
Chief Financial Officer
STATE OF New Hampshire
COUNTY OF Hillsborough
On this, the 12th day of April, 1996, before me, the
undersigned officer, personally appeared Andre P. Pelletier,
who acknowledged himself to be a Vice President of Fleet BANK -
NH, a BANK and that he, as such Vice President, being
authorized so to do, executed the foregoing instrument for the
purposes therein contained on behalf of said BANK.
Before me,
/s/ Catherine Consentino
-----------------------
Justice of the Peace
STATE OF Vermont
COUNTY OF Washington
On this, the 12th day of April, 1996, before me, the
undersigned officer, personally appeared Robert D. Britt, who
acknowledged himself to be the Chief Financial Officer of
Green Mountain Coffee Roasters, Inc., a corporation and that
he, as such officer, being authorized so to do, executed the
foregoing instrument for the purposes therein contained on
behalf of said corporation.
Before me,
/s/ Betty Omansky
-----------------
Notary Public
STATE OF Vermont
COUNTY OF Washington
On this, the 12th day of April, 1996, before me, the
undersigned officer, personally appeared Robert D. Britt, who
acknowledged himself to be the Chief Financial Officer of Green
Mountain Coffee Roasters Franchising Corporation, a corporation
and that he, as such officer, being authorized so to do,
executed the foregoing instrument for the purposes therein
contained on behalf of said corporation.
Before me,
/s/ Betty Omansky
-----------------
Notary Public
<PAGE>
FLEET BANK - NH
COMMERCIAL LOAN AGREEMENT
SCHEDULE A
BORROWING BASE AND CASH MANAGEMENT PROVISIONS
I. Percentages and Definitions for determination of BORROWER's
Revolving Line of Credit Borrowing Base under Section I. A.
Applicable Percentage of Acceptable Accounts: 80%
Applicable Percentage of Acceptable Inventory: 50%, up to
maximum dollar amount attributable to such inventory of
$1,500,000.00
Definition of Acceptable Accounts: The term "Acceptable
Accounts" means those of the BORROWER's accounts and accounts
receivable as the BANK determines to be satisfactory, in the
BANK's sole discretion determined in good faith and in a
commercially reasonable manner. Subject to the foregoing,
"Acceptable Accounts" shall be accounts of the BORROWER: (i)
which arise in the ordinary course of BORROWER's business from
BORROWER's performance of services or sale of goods which have
been performed or sold; (ii) which are not more than sixty (60)
days old from the due date of the invoice; (iii) which are not
evidenced by a promissory note or other instrument; (iv) which
are payable in U.S. Dollars; (v) which are owed by any customer
whose principal place of business is within the United States
or any foreign accounts which are FCIA-insured or secured by a
letter of credit acceptable to the BANK; (vi) which are owed by
any corporation or other entity other than one which is related
to the BORROWER, or is of common ownership with the BORROWER,
or could be treated as a member of the same controlled group of
corporations of which the BORROWER is a member; (vii) which
constitute valid, binding, and enforceable obligations of
account debtors which are not subject to any claim,
counterclaim, set off, credit, allowance, or chargeback; (viii)
as to which the BORROWER has received no notice and has no
knowledge as to whether the account debtor (or any Subsidiary
or endorser thereof) is BANKRUPT or insolvent, or any other
facts which make the collection of the account doubtful; (ix)
which are not owed by any person employed by, or salesman of,
the BORROWER; (x) which do not arise out of the sale by the
BORROWER of goods consigned or delivered to the BORROWER on
"sell or return" terms (whether or not compliance has been made
with Section 2-326 of the UCC); and (xi) which do not arise out
of any sale made on a "bill and hold", dating, or delayed
shipping basis. Accounts payable by BORROWER to any account
debtor shall be netted against accounts due from such debtor.
Definition of Acceptable Inventory: The term "Acceptable
Inventory" shall mean BORROWER's inventory, valued at the lower
of cost on a "first-in/first-out" basis or fair market value,
which is owned for sale in the ordinary course of BORROWER's
business as presently conducted by it and held by BORROWER at
its principal place of business in Waterbury, Vermont or at a
wholesale warehouse facility, and, in all cases, which is
subject to a valid and prior, fully perfected security interest
of BANK, free of all security interests or liens of any other
person.
The following inventory will not, in any event, constitute
Acceptable Inventory:
(a) inventory which is obsolete, not in good condition, not of
merchantable quality or saleable in the ordinary course of
business or which is subject to defects which would affect its
market value;
(b) supplies and packaging materials and labels;
(c) inventory which BANK, in its sole discretion exercised in
good faith, determines to be ineligible because of age, type,
category, or quantity; and
(d) inventory in the possession of any person other than
BORROWER, except to the extent that the BANK has a valid and
prior, fully perfected security interest in inventory held by
any person other than the BORROWER.
BORROWER shall furnish the BANK on at least a quarterly basis
(or more frequently if the BANK should request) with a
Borrowing Base Certificate substantially in the form attached
hereto as Exhibit A-1, which shall be accompanied by aging
reports and inventory summary reports by location and product,
all in a form reasonably acceptable to the BANK.
The acceptance of or characterization by the BANK of any
account as an Acceptable Account or inventory as Acceptable
Inventory shall not be deemed a determination by the BANK as to its
actual value nor in any way obligate BANK to accept any account
arising subsequently from such debtor to be, or to continue to
deem such account to be, an Acceptable Account. All accounts
and inventory of BORROWER whether Acceptable Accounts,
Acceptable Inventory, or not, shall constitute Collateral under
the Security Agreement.
II. Additional Terms and Conditions for Management of
Revolving Line of Credit Loans.
BORROWER desires to use its loan account which indicates the
BORROWER's current indebtedness under the Revolving Line of
Credit Loan (the "Loan Account") and its demand deposit account
with the BANK (the "Demand Deposit Account") to manage
BORROWER's funds and to maintain a desired target balance in
BORROWER's Demand Deposit Account. BORROWER shall from time
to time inform the BANK of the target balance which BORROWER
desires to maintain in its Demand Deposit Account, which shall
in no event be less than any minimum balance (if any) required
under this Agreement. To maintain the desired target balance in
BORROWER's Demand Deposit Account, BORROWER hereby instructs,
authorizes, and directs BANK to charge BORROWER's Demand
Deposit Account to make payments to reduce the debit balance of
BORROWER's Loan Account and to make payment of BORROWER's other
obligations to the BANK, and to make advances under the
Revolving Line of Credit Loan increasing the debit balance in
BORROWER's Loan Account and credit the same to BORROWER's
Demand Deposit Account. Notwithstanding the foregoing,
BORROWER's obligations to pay each Loan are the general
obligations of the BORROWER and shall not be deemed to be
obligations to be satisfied solely from funds in the Demand
Deposit Account or by advances under the Revolving Line of
Credit Loan. BORROWER acknowledges and agrees that the target
balance is only a desired goal based upon estimates and that
the BANK shall have no responsibility for variances from the
target balance as long as all charges, advances and credits are
made in good faith. All credits against BORROWER's
indebtedness indicated in the Loan Account shall be conditional
upon final payment to the BANK of the items giving rise to such
credits. The amount of any item credited against BORROWER's
Loan Account which is not paid or which is charged back against
the BANK for any reason may be charged as a debit to the Loan
Account or may be charged back against the Demand Deposit
Account of BORROWER, and shall be an obligation of the BORROWER
to the BANK in each instance whether or not the item so charged
back or not paid is returned. Notwithstanding any other provision
hereof, no advances shall be made by BANK to BORROWER's Demand Deposit
Account at any time an Event of Default exists under this
Agreement or the Loan Documents, or any condition exists which,
if not cured, would with the passage of time or the giving of
notice, or both, constitute such an Event of Default. Except
in the case of BANK's gross negligence, willful misconduct, or
failure to act in good faith, BANK shall not be liable for any
act done or omitted by it in good faith, or for any mistake in
fact or law, or for anything it may do or refrain from doing in
connection with or as required by this Section II of Schedule
A. In addition, BORROWER will reimburse and indemnify BANK for
any damages, losses, liabilities, claims, costs, or expenses,
of any kind whatsoever and however caused, including, but not
limited to, reasonable attorneys' fees, paid, suffered or
incurred by BANK as a result of any third party claim against
BANK arising out of or in connection with BANK's performance of
the services contemplated by this Section II of Schedule A to
be provided by BANK, except to the extent the same results from
the gross negligence, willful misconduct, or failure to act
in good faith by BANK.
<PAGE>
FLEET BANK - NH
COMMERCIAL LOAN AGREEMENT
SCHEDULE B
ADDITIONAL TERMS AND CONDITIONS
I. Fees Payable by BORROWER
Unused Revolving Line of Credit Commitment Fee: .125% per
annum of daily average of unadvanced amounts under Revolving
Line of Credit Loan (based upon full availability of
$3,000,000.00), determined quarterly and payable in arrears.
New Term Loan Commitment Fee: $15,000.00 Cash Management Fees:
Standard BANK fees per month for target balance management and
additional fee to be determined upon basis of scope of monthly
services (e.g. lockboxes, zero balance account, etc.).
II. Description of Financial Statements to be Delivered:
A. Annual Reports on Form 10-K SB of Green Mountain Coffee,
Inc. as filed with the Securities and Exchange Commission to be
delivered within one hundred twenty (120) days after the end of
each fiscal year, and Quarterly Reports on Form 10-Q SB of
Green Mountain Coffee, Inc. as filed with the Securities and
Exchange Commission to be delivered within forty-five (45) days
after the end of each of the first three (3) fiscal quarters.
B. Annual budgets of the BORROWER and the Subsidiary to be
delivered within sixty (60) days after the beginning of each
fiscal year, prepared in a format reasonably acceptable to the
BANK.
C. For all purposes of the Loan Agreement and the Loan
Documents, unless the context otherwise clearly requires,
references to BORROWER's fiscal quarters shall be deemed to
refer to the fiscal periods normally ending 16, 28, 40, and 52
weeks after the first day of each fiscal year.
III. Minimum Balance in Demand Deposit Account to be
Maintained: Minimum Federal Reserve requirement.
IV. Description of Additional Financial and other Covenants:
A. BORROWER and the Subsidiary shall have a Tangible Capital
Base (as hereinafter defined) on a consolidated basis equal to
at least Seven Million Four Hundred Thousand Dollars
($7,400,000.00) at all times through the next to the last day
of the first quarter of BORROWER's 1997 fiscal year and equal
to at least Eight Million Dollars ($8,000,000.00) as of the
last day of the first quarter of BORROWER's 1997 fiscal year
and at all times thereafter. "Tangible Capital Base" means
total shareholders' equity , plus Permitted Subordinated Debt
(as hereinafter defined), plus deferred tax liabilities, and
less intangible assets (unamortized product development costs,
goodwill, and unamortized debt issuance costs), all as
determined from BORROWER's and the Subsidiary' financial
statements delivered to the BANK in accordance with the
covenants of the BORROWER hereinabove (the "Financial
Statements").
B. BORROWER and the Subsidiary on a consolidated basis shall
have a ratio of Senior Debt (as hereinafter defined) to
Tangible Capital Base of (i) not greater than 1.15:1 as of the
last day of the first quarter of BORROWER's 1996 fiscal year
and thereafter and (ii) not greater than 1:1 as of the last day
of the first quarter of BORROWER's 1997 fiscal year and at all
times thereafter. "Senior Debt" means all indebtedness with
the exception of indebtedness of the BORROWER or the Subsidiary
that is subordinated to the BANK on terms of subordination
acceptable to the BANK ("Permitted Subordinated Debt"), all as
determined from the Financial Statements.
C. BORROWER and the Subsidiary shall maintain on a
consolidated basis Available Cash (as hereinafter defined) of
at least One Million Dollars ($1,000,000.00) at all times.
"Available Cash" means the sum of (a) cash balances in
investment and depository accounts and (b) the amount equal to
the then Borrowing Base as determined in accordance with
Section I. A. of the Loan Agreement less the then outstanding
principal balance of advanced funds under the Revolving Line of
Credit Loan. In the event that the BORROWER and the Subsidiary
at any time fail to maintain Available Cash in the amount
required above, such failure shall not constitute an Event of
Default under the Loan Agreement and the Loan Documents but the
interest rate applicable to each of the Loans shall, at the
option of the BANK, be immediately increased by one-quarter of
one percent (0.25%) per annum. Such increased rates shall
remain in effect until such time as the BORROWER certifies in
writing to the BANK that it is in compliance with the financial
covenants hereunder and under Paragraph E below. Upon BANK's
receipt of such certification the interest rates under each of
the Loans shall immediately and automatically be reduced to the
rates stated in the Loan Documents for such Loans.
D. The BORROWER and the Subsidiary shall have a minimum "Total
Fixed Charge Coverage" (as hereinafter defined) of 1.1:1 as of
the last day of the second quarter of BORROWER's 1996 fiscal
year and as at the end of each fiscal quarter thereafter. For
purposes hereof, "Total Fixed Charge Coverage" shall mean the
ratio of BORROWER's and the Subsidiary' earnings for the
relevant period, before reduction for interest, depreciation,
and amortization expense, but after reduction for cash payment
of income taxes, to the aggregate amount of interest and
current maturities on indebtedness, capital expenditures not
financed by the BANK or third parties, capital lease payments,
and other similar fixed charges payable by BORROWER and the
Subsidiary for such period, all as determined in accordance
with generally accepted accounting principals from BORROWER's
Financial Statements. The relevant periods for purposes of the
determination of Total Fixed Charge Coverage as of the end of
each of BORROWER's fiscal quarters shall be the prior four (4)
fiscal quarters (including the quarter then ending).
E. BORROWER and the Subsidiary shall have on a consolidated
basis Net Profit (as hereinafter defined) for each fiscal
quarter of at least One Thousand Dollars ($1,000.00) beginning
with the third quarter of BORROWER's 1996 fiscal year. "Net
Profit" means net profits as determined in accordance with
generally accepted accounting principals from BORROWER's
Financial Statements. In the event that the BORROWER and the
Subsidiary at any time fail to achieve Net Profits in the
amount required above for any quarter, such failure shall not
constitute an Event of Default under the Loan Agreement and the
Loan Documents but the interest rate applicable to each of the
Loans shall, at the BANK's option, be immediately increased by
one quarter of one percent (0.25%) per annum. Such increased
rates shall remain in effect until such time as the BORROWER
certifies in writing to the BANK that it is in compliance with
the financial covenants hereunder and under Paragraph E below.
Upon BANK's receipt of such certification the interest rates
under each of the Loans shall immediately and automatically be
reduced to the rates stated in the Loan Documents for such Loans.
F. BORROWER shall report and certify to BANK its compliance
with the financial fiscal quarter end on such form or forms as
may from time to time be specified by the BANK.
<PAGE>
TERM PROMISSORY NOTE
$1,500,000.00 Manchester, NH April 12, 1996
FOR VALUE RECEIVED, the undersigned, GREEN MOUNTAIN COFFEE
ROASTERS, INC., a Vermont corporation organized under the laws
of the State of Vermont with a principal place of business at
33 Coffee Lane, Waterbury, Vermont 05676 (the "Borrower"),
hereby promises to pay to the order of FLEET BANK - NH, a bank
organized under the laws of the State of New Hampshire with an
address of NHNA E02A, 1155 Elm Street, Manchester, New
Hampshire 03101 (the "Bank"), at such address, or such other
place or places as the holder hereof may designate in writing
from time to time hereafter, the principal sum of ONE MILLION
FIVE HUNDRED THOUSAND DOLLARS ($1,500,000.00), or so much
thereof as has been advanced by Bank to Borrower, together with
interest as hereinafter provided, in lawful money of the United
States of America.
This Note shall have a term of five (5) years from the date
hereof. Commencing on April 30, 1996, and continuing on the
last day of each month thereafter, the Borrower shall make
sixty (60) consecutive monthly payments of principal, each such
monthly installment to be in an amount sufficient to fully
amortize the then outstanding principal amount hereunder in equal
monthly installments over the remaining term of this Note;
together with monthly payments of accrued and unpaid interest
on the outstanding principal balance at the rate provided
hereinbelow. All remaining outstanding principal and accrued
and unpaid interest shall be due and payable in full on March
30, 2001.
Except as provided hereinbelow, the outstanding principal
balance of this Note shall bear interest at a variable rate
equal to the Bank's Base Rate, so called, plus one-quarter of
one percent (0.25%) per annum. The Base Rate shall be the Base
Rate of the Bank as established and changed by the Bank from
time to time whether or not such rate shall be otherwise
published. Each time the Base Rate changes, the interest rate
hereunder shall change contemporaneously with such change in
the Base Rate. Interest shall be calculated and charged daily
on the basis of actual days elapsed over a three hundred sixty
(360) day banking year. In accordance with and subject to the
limitations of the Loan Agreement (as defined below), the
Borrower may elect to have the entire outstanding principal
balance, or any portion thereof (in increments of not less than
$50,000), of this Note bear interest at the Term LIBOR-based
Rate. The Borrower further acknowledges and agrees that the
interest rate hereunder is subject to increase and decrease
upon the occurrence of certain events as provided in the Loan
Agreement (as hereinafter defined).
This Note is issued under and subject to the terms, conditions,
and limitations of the Seventh Amendment and First Restatement
of Commercial Loan Agreement of even date herewith, entered
into by and between the Borrower and the Bank, and as said agreement
may be further amended from time to time (collectively, as
amended, the "Loan Agreement"). The holder of this Note is
entitled to all of the benefits and rights of the Bank under
the Loan Agreement. However, neither this reference to the
Loan Agreement nor any provision thereof shall impair the absolute
and unconditional obligation of the undersigned to pay the
principal and interest on this Note as herein provided. Any
capitalized term used in this Note which is not otherwise
expressly defined herein shall have the meaning ascribed
thereto in the Loan Agreement.
Upon the occurrence and during the continuance of an Event of
Default specified in the Loan Agreement, or if any monthly
installment of principal or interest under this Note is not
paid when due, or within the applicable grace period, if any,
the principal hereof and all interest accrued and accruing
hereon may be declared to be forthwith due and payable.
The holder may impose upon the undersigned a delinquency charge
of five percent (5%) of the amount of any installment of
principal and/or interest not paid on or before the tenth
(10th) day after such installment is due. The entire principal
balance hereof, together with accrued interest, shall after the
occurrence and during the continuance of an Event of Default
under the Loan Agreement and after maturity hereof, whether by
demand, acceleration or otherwise, bear interest at the then
contract rate of this Note plus an additional five percent (5%)
per annum.
The undersigned agrees to pay on demand all reasonable out-of
pocket costs of collection hereof, including court costs,
service fees, and reasonable attorneys' fees, whether or not
any foreclosure or other action is instituted by the holder in
its discretion.
The word "holder", as used in this Note, shall mean the payee
or endorsee of this Note who is in possession of it, or the
bearer, if this Note is at the time payable to the bearer.
The indebtedness evidenced by this Note is secured by the Loan
Documents as defined in the Loan Agreement.
No delay or omission on the part of the holder in exercising
any right, privilege or remedy shall impair such right,
privilege or remedy or be construed as a waiver thereof or of
any other right, privilege or remedy. No waiver of any right,
privilege or remedy or any amendment to this Note shall be
effective unless made in writing and signed by the holder.
Under no circumstances shall an effective waiver of any right,
privilege or remedy on any one occasion constitute or be
construed as a bar to the exercise of or a waiver of such
right, privilege or remedy on any future occasion. The
acceptance by the holder hereof of any payment after any
default hereunder shall not operate to extend the time of
payment of any amount then remaining unpaid hereunder or
constitute a waiver of any rights of the holder hereof under
this Note.
All rights and remedies of the holder, whether granted herein
or otherwise, shall be cumulative and may be exercised
singularly or concurrently, and the holder shall have, in
addition to all other rights and remedies, the rights and
remedies of a secured party under the Uniform Commercial Code
of New Hampshire. The holder shall have no duty as to the
collection or protection of the Collateral or of any income
thereon, or as to the preservation of any rights pertaining
thereto beyond the safe custody thereof.
Surrender of this Note, upon payment or otherwise, shall not
affect the right of the holder to retain the Collateral as
security for the payment and performance of any other liability
of the undersigned to the holder in accordance with the
provisions of the Loan Documents.
Every maker, endorser, or guarantor of this Note, or the
obligations represented by this Note, waives all
presentment, protest and demand, demand for payment, notice of
dishonor and protest and all other demands and notices in
connection with the delivery, acceptance, performance, default
or enforcement of this Note, and assents to any extension or
postponement of the time of payment or any other indulgence, to
any substitution, exchange or release of Collateral, and/or to
the addition or release of any other party or person primarily
or secondarily liable.
This Note and the provisions hereof shall be binding upon the
undersigned and the undersigned's heirs, administrators,
executors, successors, legal representatives and assigns and
shall inure to the benefit of the holder, the holder's heirs,
administrators, executors, successors, legal representatives
and assigns.
This Note may not be amended, changed or modified in any
respect except by a written document which has been executed by
each party. This Note constitutes a New Hampshire contract to
be governed by the laws of such state and to be paid and
performed therein.
The provisions of this Note are expressly subject to the
condition that in no event shall the amount paid or agreed to
be paid to the holder hereunder and deemed interest under
applicable law exceed the maximum rate of interest on the
unpaid principal balance hereunder allowed by applicable law,
if any, (the "Maximum Allowable Rate"), which shall mean the
law in effect on the date hereof, except that if there is a
change in such law which results in a higher Maximum Allowable
Rate being applicable to this Note, then this Note shall be
governed by such amended law from and after its effective date.
In the event that fulfillment of any provisions of this Note
results in the interest rate hereunder being in excess of the
Maximum Allowable Rate, the obligation to be fulfilled shall
automatically be reduced to eliminate such excess. If
notwithstanding the foregoing, the holder receives an amount
which under applicable law would cause the interest rate
hereunder to exceed the Maximum Allowable Rate, the portion
thereof which would be excessive shall automatically be applied
to and deemed a prepayment of the unpaid principal balance
hereunder and not a payment of interest.
Executed and delivered this 12th day of April, 1996.
GREEN MOUNTAIN COFFEE ROASTERS, INC.
/s/ Betty Omansky By: /s/ Robert D. Britt
- ----------------- --------------------------------------
Witness Robert D. Britt,
Chief Financial Officer
STATE OF Vermont
COUNTY OF Washington, SS.
On this the 12th day of April, 1996, before me, the undersigned
notary or justice, personally appeared Robert D. Britt, who
acknowledged himself to be the Chief Financial Officer of Green
Mountain Coffee Roasters, Inc., a corporation, and that he, as
such authorized officer, being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as such
authorized officer.
/s/ Betty Omansky
--------------------
Notary Public
<PAGE>
FIRST RESTATEMENT OF
SECURITY AGREEMENT
THIS FIRST RESTATEMENT OF SECURITY AGREEMENT (the
"Agreement"), made this 12th day of April, 1996, by and between
GREEN MOUNTAIN COFFEE ROASTERS, INC. (f/k/a Green Mountain Coffee,
Inc.), a Vermont corporation with a principal place of business at
33 Coffee Lane, Waterbury, Vermont 05676 (the "Debtor"), and FLEET
BANK - NH, a bank organized under the laws of the State of New
Hampshire with an address of NHNA E02A, 1155 Elm Street,
Manchester, New Hampshire 03101 (the "Secured Party").
RECITALS:
The Debtor and the Secured Party are parties to a certain
Commercial Loan Agreement dated October 22, 1992, said loan
agreement having been amended by a certain letter agreement dated
November 13, 1992, by a certain Amendment to Commercial Loan
Agreement and Loan Documents dated August 11, 1993, by a certain
Third Amendment to Loan Agreement and Loan Documents dated August
31, 1993, by a certain Fourth Amendment to Commercial Loan
Agreement and Loan Documents dated April 7, 1994, by a certain
Fifth Amendment to Commercial Loan Agreement and Loan Documents
dated August 15, 1994, by a certain Sixth Amendment to
Commercial Loan Agreement and Loan Documents dated March 31,
1995, and as further amended and restated pursuant to a certain
Seventh Amendment and First Restatement of Commercial Loan
Agreement of even date herewith (collectively, as amended and
restated to date, the "Loan Agreement") and certain Loan
Documents (as defined in the Loan Agreement and as amended
through the date hereof), including, but not limited to, a
certain Security Agreement dated October 22, 1992, as amended
to date, of the Debtor (the "Security Agreement"). Pursuant to
the Loan Agreement, the Secured Party has extended to the
Debtor certain credit facilities; and the Debtor has requested,
and the Secured Party has agreed, to extend this day a new term
loan in the maximum principal of up to One Million Five Hundred
Thousand Dollars ($1,500,000.00) and, in connection therewith,
to make certain amendments affecting the other credit
facilities extended by the Secured Party to the Debtor under
the Loan Agreement. The Secured Party and the Debtor have
agreed that it is necessary and appropriate, in connection with
the extension of the new term loan and making such amendments,
to amend and restate the Security Agreement in its entirety.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the willingness of the
Secured Party to make the new term loan to the Debtor, to amend
the Loan Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree that the Security Agreement
shall be and hereby is amended and restated in its entirety as
follows:
1. Security Interest. As security for the Secured Obligations
described in Section 2 hereof, the Debtor hereby grants to the
Secured Party a first priority security interest in and lien on
all of the property described below (hereinafter referred to
collectively as the "Collateral"):
(a) All equipment, including machinery, motor vehicles, office
equipment, furniture, fixtures, along with all other parts,
tools, trade-ins, repairs, accessories, accessions,
modifications, and replacements, whether now owned or
subsequently acquired, constructed, or attached or added to, or
placed in, the foregoing (collectively, the "Equipment");
(b) All inventory, wherever located, including goods,
merchandise and other personal property, held for sale or lease
or furnished or to be furnished under a contract of service, or
constituting raw materials, work in process or materials used
or consumed in the Debtor's business, or consigned to others or
held by others for return to the Debtor, whether now owned or
subsequently acquired or manufactured and wherever located
(collectively, the "Inventory");
(c) All accounts receivable, including, without limitation,
accounts, contracts, contract rights, chattel paper,
instruments, rents, deposits, general intangibles, and any
other obligations of any kind whether now existing or hereafter
arising out of or in connection with the sale or lease of goods
or the rendering of services, and all rights now or hereafter
existing in and to all security agreements, notes, leases,
licenses, franchises, supply agreements, and other contracts
securing or otherwise relating to any such accounts, contracts,
contract rights, chattel paper, instruments, rents, deposits,
general intangibles, or obligations (any and all such accounts,
contracts, contract rights, chattel paper, instruments, rents,
deposits, general intangibles, and obligations being the
"Receivables", and any and all such security agreements, notes,
leases, licenses, franchises, supply agreements, and other
contracts being the "Related Contracts");
(d) All general intangibles, including, but not limited to,
corporate names, trade names, trademarks, trade secrets, books
and records, customer lists, blue prints and plans, computer
programs, tapes and related electronic data, processing
software, and all corporate ledgers;
(e) Any and all additions, accessions, substitutions or
replacements to or for any of the foregoing;
(f) Any and all products and proceeds of any or all of the
foregoing, including, without limitation, cash, cash
equivalents, tax refunds and the proceeds of insurance policies
providing coverage against the loss or destruction of or damage
to any of the Collateral, or any indemnity, warranty, or
guarantee payable by reason of loss or damage to or otherwise
with respect to any of the Collateral (whether or not the
Secured Party is the loss payee thereof);
(g) All of the Debtor's after-acquired property of the kinds
and types described in paragraphs (a) - (f) herein;
(h) All records and data relating to any of the property
described above, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all
of the Debtor's right, title, and interest in and to all
computer software required to utilize, create, maintain and
process any of such records or data or electronic media; and
also in (1) all checks, money, securities, bank accounts,
deposit accounts, and other accounts in the possession of or
held by the Secured Party whether in the name of the Debtor or
in the name of the Secured Party, and (2) all other property
given by the Debtor to the Secured Party pursuant to this
Agreement. The property described in (1) and (2) above are
held in the possession of the Secured Party by agreement of
Debtor and Secured Party. All of the said Collateral (which
throughout this Agreement includes after-acquired Collateral)
is to secure the payment and performance of all of the Secured
Obligations. For purposes of the application of any proceeds
or income resulting from or arising in connection with the
exercise of the Secured Party's rights hereunder with respect
to the Collateral, and after payment from such income or
proceeds of the Secured Obligation described in Section 2(c)
below and all costs and expenses incurred in connection with
the exercise of Secured Party's rights hereunder, the Secured
Party and the Debtor agree as follows: (i) The Revolving Line
of Credit Loan, the Equipment Line of Credit Loan, and the New
Term Loan shall be secured by (A) first priority security
interests in all existing and subsequently acquired Collateral
hereunder other than the "Project Equipment" as defined and
described in the Amendment to Commercial Loan Agreement and
Loan Documents dated August 11, 1993, (B) a third priority
perfected security interest in the Project Equipment, (C) a
third leasehold mortgage of the "Improvements" as defined and
described in the Amendment to Commercial Loan Agreement and
Loan Documents dated August 11, 1993 and leasehold interest in
the "Premises" as defined and described in the Amendment to
Commercial Loan Agreement and Loan Documents dated August 11,
1993, and (D) a third position collateral assignment of
Borrower's leasehold interest in the Premises; and (ii) the
Improvements Term Loan is secured by (A) a first priority
perfected security interest in the Project Equipment, (B) a
first leasehold mortgage of the Improvements and of the
Borrower's leasehold interest in the Premises, (C) a first
position collateral assignment of the Borrower's leasehold
interests in the Premises, and (D) a first priority security
interest in all existing and subsequently acquired Collateral
under the Loan Documents. To the extent that any proceeds or
income remain with respect to any Collateral after satisfaction
of the Secured Obligations entitled to the priorities as to the
application of such proceeds or income with respect to such
Collateral as provided hereinabove, such remaining proceeds or
income may be applied to the other Secured Obligations
hereunder in such order of priority as the Secured Party deems
appropriate. The Secured Party and Debtor acknowledge and agree
that the Project Equipment, Improvements, and Premises are
subject to second priority security interests of the Vermont
Economic Development Authority and the Central Vermont Economic
Development Corporation as more particularly described in
certain intercreditors agreements included among the Loan
Documents.
2. Secured Obligations. The security interest hereby granted
shall secure the following (the "Secured Obligations"):
(a) The Debtor's repayment of the principal amount of all of
the Loans as described and defined in the Loan Agreement,
together with interest, late charges, and any other applicable
charges thereon, to the Secured Party pursuant to and in
accordance with the Loan Documents;
(b) The Debtor's payment or performance of its obligations
under the Loan Agreement and under the other Loan Documents (as
defined, described and identified in the Loan Agreement,
hereinafter the "Loan Documents"), as the same may be amended,
modified, extended, renewed, replaced or restated;
(c) The payment of all other sums with interest and charges
thereon advanced in accordance herewith to protect the
validity, security, and priority of this Agreement, the Loan
Agreement, or the Loan Documents; and (d) Any and all other
indebtedness of Debtor to Secured Party of every kind and
description, direct or indirect, absolute or contingent, due or
to become due, regardless of how they arose or were acquired,
now existing or hereafter arising.
3. Warranties and Representations of the Debtor. Debtor
hereby makes the following representations and warranties which
shall survive the execution and delivery of this Agreement and
shall be continuing representations and warranties as long as
any Secured Obligation remains outstanding:
(a) All representations and warranties made in the Loan
Agreement and the Loan Documents relating to the Debtor and the
Collateral are true, accurate and complete in all material
respects;
(b) The Debtor's principal place of business is located at the
address first set forth above; the Debtor's executive offices
and the office where its books and records are kept and are to
be kept concerning the Receivables, Related Contracts other
Collateral are at the aforesaid address; and the Debtor has no
other places of business except those set forth on Schedule I
hereto;
(c) The Debtor conducts business only under and through the
corporate, business and trade names "Green Mountain Coffee" and
"Green Mountain Coffee Roasters, Inc.".
(d) No material authorization, approval or other action by,
and no notice to or filing with, any governmental authority or
other person is required either (i) for the grant by the Debtor
of the security interests granted hereby or for the execution,
delivery or performance of this Agreement by the Debtor, or
(ii) for the perfection of or the exercise by the Secured Party
of its respective rights and remedies hereunder, except the
filing of financing statements;
(e) The Debtor has good and marketable title to all of the
Collateral pledged by it hereunder, free and clear of any
liens, security interests, encumbrances or interests or claims
of any other person or entity, except those set forth on
Schedule II hereto, and there are no sums owed with respect to
the Collateral other than as disclosed on the Debtor's
financial statements delivered to the Secured Party;
(f) The Secured Party has a valid, perfected first security
interest in all of the Collateral which may be perfected by
filing of financing statements.;
(g) The Debtor has not performed any acts which might prevent
the Secured Party from enforcing any of the material terms and
conditions of this Agreement or which would limit any of them
in any such enforcement;
(h) Schedule III attached hereto sets forth the description
and location of all Collateral not located at the Debtor's
principal place of business, together with a list of the record
owners of and record holders of liens against the real estate
on which such Collateral is located; and
(i) No effective financing statements or other similar
instrument in effect covering all or any part of the Collateral
is on file in any recording office, except as may have been
filed in favor of Secured Party relating to this Agreement.
4. Affirmative Covenants of the Debtor.
(a) The Debtor shall promptly notify and provide the Secured
Party with a complete description of the opening of any new
places of business, the closing of any existing places of
business, the conduct of business under any names or through
any entities other than those set forth herein, the relocation
of any of the Collateral to any new place of business or any
other act which would affect the financing statements filed by
the Secured Party;
(b) The Debtor shall continuously take all steps that are
necessary or prudent to protect the security interests of the
Secured Party in the Collateral;
(c) The Debtor shall defend the Collateral against the claims
and demands of all persons;
(d) The Debtor shall deliver and pledge to the Secured Party,
endorsed or accompanied by instruments of assignment or
transfer satisfactory to the Secured Party, any instruments,
documents, and chattel paper which the Secured Party may
reasonably specify;
(e) The Debtor shall comply, in all material respects, with
all governmental regulations applicable to the Collateral or
any part thereof or to the operation of the Debtor's business;
provided, however, that the Debtor may contest any governmental
regulation in any reasonable manner which shall not in the
reasonable opinion of the Secured Party adversely affect the
Secured Party's rights or the first priority of its security
interest in the Collateral;
(f) The Debtor shall pay promptly when due, all taxes,
assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as
well as all claims of any kind, except that no such charge need
be paid if (i) the validity thereof is being contested in good
faith by appropriate proceedings, (ii) such proceedings do not
involve any danger of the sale, forfeiture or loss of any of
the Collateral or any interest therein; and (iii) such charge
is adequately reserved against in accordance with the generally
accepted accounting principles;
(g) The Debtor shall cause the Equipment to be maintained and
preserved in good condition, repair and working order, and
shall make all repairs, replacements, additions, and other
improvements necessary to maintain the Equipment in such good
condition;
(h) The Debtor shall maintain Inventory sufficient to meet the
needs of its business;
(i) The Debtor shall preserve all beneficial Related Contracts
not otherwise terminated in the ordinary course of Debtor's
business;
(j) The Debtor shall take all commercially reasonable steps
necessary to collect the Receivables;
(k) The Debtor shall assure that (i) no Receivable is or shall
be subject to any defense, offset, counterclaim, discount
(other than ordinary and customary payment discounts), or
allowance, (ii) no agreement under which any deduction,
discount, credit or allowance of any kind may be granted or
allowed shall have been or shall thereafter be made by Debtor
with any account party without the consent of Secured Party,
(iii) all statements made and all unpaid balances appearing in
the invoices, documents, agreements relating to each Receivable
are and shall be true, genuine, and correct in all respects,
and (iv) no Receivable shall be converted to a note or other
instrument unless the same shall be delivered to the possession
of the Secured Party within ten (10) days of the date of
execution of such note or instrument;
(l) The Debtor shall, with respect to any Collateral which
consists of trucks, automobiles, or other motor vehicles, or
any other Collateral required to be titled, upon an Advance
being made under the Equipment Loan with respect to such
Collateral deliver all titles thereto to the Secured Party to
be held by the Secured Party and Debtor shall make, execute,
and deliver any and all applications, and take such other
action to assure that the Secured Party is listed of record as
the first priority and sole lienholder on all title
certificates;
(m) Debtor shall keep accurate and complete records listing
and describing the Collateral, and when requested by Secured
Party, Debtor shall give Secured Party a certificate listing
and describing the Collateral and setting forth the total value
of the Inventory, the total value of the Equipment, the amount
of the Receivables designating how many days the Receivables
are from the date of invoice, the face value of any
instruments, and any other information Secured Party may
request. Secured Party shall have the right at any time to
inspect the Collateral and to audit and make copies of any
records or other writings which relate to the Collateral or the
general financial condition of Debtor. Secured Party may
remove such records and writings for the purpose of having
copies made thereof;
(n) The Debtor shall advise the Secured Party promptly, in
reasonable detail, (i) of any lien, security interest,
encumbrance, or claim made or asserted against any of the
Collateral, (ii) of any material change, substantial loss or
depreciation in the composition of the Collateral, and (iii) of
the occurrence of any other material adverse effect on the
aggregate value, enforceability or collectibility of the
Collateral or on the security interests created hereunder;
(o) The Debtor shall give, execute, deliver and file or record
in the proper governmental offices, any instrument, paper or
document, including, but not limited to, one or more financing
statements under the Uniform Commercial Code, reasonably
satisfactory to the Secured Party, or take any action which the
Secured Party may deem necessary or desirable in order to
create, preserve, perfect, extend, continue, modify, terminate
or otherwise effect any security interest granted pursuant
hereto, or to enable the Secured Party to exercise or enforce
any of its rights hereunder; and
(p) The Debtor shall keep, and stamp or otherwise mark, any of
its documents, instruments and chattel paper and its books and
records relating to any of the Collateral in such manner as the
Secured Party may reasonably require.
5. Negative Covenants of the Debtor. Except as otherwise
provided in the Loan Agreement or in this Agreement, without
the prior written consent of the Secured Party, the Debtor
shall not:
(a) Transfer, sell or assign any of the Collateral other than
in the ordinary course of business;
(b) Allow or permit any other security interest or lien to
attach to any of the Collateral;
(c) File, authorize, or permit to be filed in any jurisdiction
any financing statement relating to any of the Collateral
unless the Secured Party is named as sole secured party;
(d) Permit any of the Collateral to be levied upon under any
legal process;
(e) Permit anything to be done that may materially impair the
value of any of the Collateral or the security therein intended
to be afforded hereby; or
(f) Use the Collateral in violation of any law or in any
manner inconsistent with any policy of insurance thereon.
6. Fixtures. It is the intention of the parties hereto that
none of the Collateral shall become fixtures. Without limiting
the generality of the foregoing, the Debtor will, if requested
by the Secured Party, obtain waivers of lien, in form
satisfactory to the Secured Party, from each mortgagee or
lessor of real property (other than the Secured Party) on which
any of the Collateral is or is to be located.
7. Insurance. Debtor shall, at its own expense, maintain
insurance covering the Collateral against such risks, with such
insurers, in such form, and in such amounts as shall from time
to time be required by Secured Party, but in any event, in such
amounts and with such coverage as is customary in Debtor's type
of business. All insurance policies shall be written so as to
be payable in the event of loss to Secured Party and shall
provide for thirty (30) days' written notice to Secured Party
of cancellation or modification. At the request of Secured
Party, all insurance policies shall be furnished to and held by
Secured Party. Secured Party is hereby appointed as attorney
irrevocable to collect the proceeds of such insurance, to
settle any claims with the insurers in the event of loss or
damage, to endorse settlement drafts and, upon the occurrence
of an Event of Default (as defined hereinbelow), to cancel,
assign, or surrender any insurance policies. If, while any
Secured Obligations are outstanding, any proceeds are paid to
Secured Party under such policies, Secured Party may, at
Secured Party's option, take either or both of the following
actions: (i) apply such proceeds in whole or in part to the
payment or satisfaction of any of the Secured Obligations in
whatever order Secured Party determines; or (ii) pay over such
proceeds in whole or in part to Debtor for the purpose of
repairing or replacing the Collateral destroyed or damaged, any
proceeds so paid over by Secured Party to be secured by this
Agreement.
8. Receivables. Debtor agrees that Secured Party may
communicate with account debtors in order to verify the
existence, amount, and terms of any Receivables. Upon an Event
of Default, Secured Party may notify account debtors of the
security interests established herein and require that payments
on Receivables be made directly to Secured Party, and upon the
request of Secured Party, Debtor shall notify account debtors
and indicate on all billings that payments and returns are to
be made directly to Secured Party. In furtherance of the foregoing,
Debtor hereby appoints Secured Party attorney irrevocable with
full power upon an Event of Default to collect, compromise,
endorse, sell, or otherwise deal with the Receivables or
proceeds thereof and to perform the terms of any contract in
order to create Receivables in Secured Party's name may be, but
need not be, supplemented by separate assignments of
Receivables and contract rights and, if such assignments are
given, the rights and security interests given thereby shall be
in addition to and not in limitation of the rights and security
interests granted by this Agreement.
9. Registered Trademarks. Debtor shall deliver to Secured
Party assignment(s) of all United States registered
trademark(s) of Debtor now or hereafter obtained. Upon an
Event of Default hereunder and in connection with disposition
of the Collateral, the Secured Party or its assignee may file
such assignment(s) with the United States Patent and Trademark
Office, pursuant to an exercise of its security interest
hereunder, to effect a transfer of said trademark(s). Prior to
such time as Secured Party is entitled to exercise its rights
hereunder, the Secured Party shall hold all assignments of
trademarks hereunder in escrow.
10. Events of Default. The following events shall be deemed
"Events of Default" hereunder:
(a) An Event of Default under the Loan Agreement or any of the
Loan Documents;
(b) Any representation or warranty or statement of fact made
to Secured Party at any time by Debtor is false or misleading
or becomes false or misleading in any material respect;
(c) Debtor fails to observe or perform any covenant, warranty,
or agreement required to be observed or performed by it under
this Agreement;
(d) Debtor shall be in default under any obligation undertaken
by Debtor which default has a material adverse effect on the
financial condition of Debtor or on the value of the Collateral;
(e) Uninsured loss, theft, damage, or destruction of any
substantial portion of any of the Collateral; or
(f) Debtor or any guarantor of any of the Secured Obligations
is or becomes insolvent or is involved in any financial
difficulty as evidenced by (i) an assignment, composition, or
similar device for the benefit of creditors, (ii) general
failure to pay debts when due, (iii) attachment or receivership
of assets not dissolved within thirty (30) days, (iv) the
appointment of a custodian, trustee, or receiver for a
substantial portion of any of their respective properties, (v)
the liquidation or sale of all or substantially all of their
respective properties, (vi) the filing by Debtor or any
guarantor of a petition under any Chapter of the United States
Bankruptcy Code or the institution of any other proceeding
under any law relating to bankruptcy, bankruptcy
reorganization, insolvency or relief of Debtors, or (vii) the
filing against Debtor or any guarantor of an involuntary
petition under any Chapter of the United States Bankruptcy Code
or the institution of any other proceeding under any law
relating to bankruptcy, bankruptcy reorganization, insolvency
or relief of debtors where such proceeding is not dismissed
within sixty (60) days from the date on which it is filed or
instituted.
11. Rights and Remedies of Secured Party on Default. Upon the
occurrence of any Event of Default, Secured Party shall have,
by way of example and not of limitation, the following rights and
remedies:
(a) Secured Party may declare the Secured Obligations, or any
of them, to be immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby
expressly waived;
(b) In addition to all other rights and remedies contained in
this Agreement, the Loan Agreement, and in the Loan Documents,
Secured Party may exercise the rights and remedies accorded
Secured Party by the Uniform Commercial Code or by any other
applicable law, all of which rights and remedies shall be
cumulative and non-exclusive to the extent permitted by law;
(c) Secured Party shall have the right to enter and/or remain
upon the Premises of Debtor, or any other place or places where
any of the Collateral is located and kept, without any
obligation to pay rent to Debtor or others, and remove
Collateral therefrom to the premises of the Secured Party or
any agent of Secured Party for such time as Secured Party may
desire in order to maintain, collect, sell and/or prepare the
Collateral for sale, liquidation or collection;
(d) Secured Party may require the Debtor at Debtor's cost to
assemble the Collateral and make it available to Secured Party
at a place designated by Secured Party;
(e) Secured Party may take possession of and use and operate
the Collateral in the manner and for the purposes as set forth
in Section 12 hereinbelow;
(f) Secured Party may sell, lease, or otherwise dispose of the
Collateral as set forth in Section 13 hereinbelow;
(g) Secured Party shall have the right to set-off, without
notice to the Debtor, any and all deposits or other sums at any
time or times credited or due from Secured Party to Debtor,
whether in a special account or other account or represented by
a certificate of deposit (whether or not matured); which
deposit and other sums shall at all times constitute additional
security for the Secured Obligations;
(h) Secured Party may perform any warranty, covenant or
agreement which Debtor has failed to perform under this
Agreement; and
(i) Secured Party may take any other action which Secured
Party deems necessary or desirable to protect the Collateral or
the security interests granted herein.
12. Rights of Secured Party to Use and Operate Collateral.
Upon the occurrence of any Event of Default, but subject to the
provisions of the Uniform Commercial Code or
other applicable law, the Secured Party shall have the right
and power to take possession of all or any part of the
Collateral, and to exclude the Debtor and all persons claiming
under the Debtor wholly or partly therefrom, and thereafter to
hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, the Secured Party may, from
time to time, at the expense of the Debtor, make all such
repairs, replacements, alterations, additions and improvements
to and of the Collateral as the Secured Party may reasonably
deem proper. In any such case, subject as aforesaid, the
Secured Party shall have the right to manage and control the
Collateral and to carry on the business and to exercise all
rights and powers of the Debtor in respect thereto as the Secured
Party shall deem best, including the right to enter into any and
all such agreements with respect to the leasing and/or operation
of the Collateral or any part thereof as the Secured Party may
see fit; and the Secured Party shall be entitled to collect and
receive all rents, issues, profits, fees, revenues and other
income of the same and every part thereof. Such rents, issues,
profits, fees, revenues and other income shall be applied to pay
the expenses of holding and operating the Collateral and of
conducting the business thereof, and of all maintenance, repairs,
replacements, alterations, additions and repairs, replacements,
alterations, additions and improvements, and to make all
payments which the Secured Party may be required or may elect
to make, if any, for taxes, assessments, insurance and other
charges upon the Collateral or any part thereof, and all other
payments which the Secured Party may be required or authorized
to make under any provision of this Agreement (including
reasonable legal costs and attorneys' fees). The remainder of
such rents, issues, profits, fees, revenues and other income
shall be applied to the payment of the Secured Obligations in
such order of priority as the Secured Party in accordance with
the provisions of this Agreement and any surplus shall be
returned to the Debtor. Without limiting the generality of the
foregoing, the Secured Party shall have the right to apply for
and have a receiver appointed by a court of competent
jurisdiction in any action taken by the Secured Party to
enforce their rights and remedies hereunder in order to manage,
protect and preserve the Collateral and continue the operation
of the business of the Debtor and to collect all revenues and
profits thereof and apply the same to the payment of all
expenses and other charges of such receivership including the
compensation of the receiver and to the payment of the Secured
Obligations as aforesaid until a sale or other disposition of
such Collateral shall be finally made and consummated.
13. Rights of Secured Party to Sell Collateral. Upon (10)
days prior written notice by registered or certified mail by
Secured Party to Debtor at the address of the Debtor set forth
above (or at such other address or addresses as the Debtor
shall specify in writing by like notice to the Secured Party)
of the time and place of any intended disposition of
Collateral, then Secured Party shall have the right and power
to sell, assign, lease, or otherwise dispose of the Collateral
from any business premises of the Debtor, either at public
auction or private sale, by liquidation sale or other
disposition, or as if the sale was being made in the ordinary
course of Debtor's business, with or without notice to the
public that the said sale or disposition is for the benefit of
the Secured Party; provided, however, that if the Collateral is
perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, then Secured
Party shall have the right and power to dispose of the
Collateral without prior notice to Debtor and Debtor expressly
waives any rights to notice under such circumstances. The
notices described above shall be deemed to meet any requirement
hereunder or under any applicable law (including the Uniform
Commercial Code) that reasonable notification be given of the
time and place of such sale or other disposition. After
deducting all costs and expenses of collection, storage,
custody, sale or other disposition and delivery (including
reasonable legal costs and attorneys' fees) and all other
charges against the Collateral, the residue of the proceeds of
any such sale or disposition shall be applied to the payment of
the Secured Obligations in accordance with the provisions of
this Agreement and any surplus shall be returned to the Debtor.
In the event the proceeds of any sale, lease or other
disposition of the Collateral hereunder are insufficient to pay
all of the Secured Obligations in full, the Debtor will be liable
for the deficiency, together with interest thereon at the maximum rate
provided in the Loan Agreement and the cost and expenses of
collection of such deficiency, including, without limitation,
reasonable fees of attorneys, experts, and agents, expenses and
disbursements.
14. Attorney-in-Fact. The Secured Party is hereby appointed
the attorney-in-fact, with full power of substitution, of the
Debtor for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instruments
(including, without limitation, financing or continuation
statements, conveyances, assignments, and transfers) which the
Secured Party may deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is
coupled with an interest and is irrevocable. The Debtor shall
indemnify and hold harmless the Secured Party from and against
any liability or damage which it may incur in the exercise and
performance, in good faith, of the Secured Party's powers and
duties as such attorney-in-fact.
15. Waiver, etc. The Debtor hereby waives presentment, demand,
notice, protest and, except as is otherwise provided herein,
all other demands and notices in connection with this Agreement
or the enforcement of the Secured Party's rights hereunder or
in connection with any Secured Obligations or any Collateral.
The Debtor further consents to and waives notice of the
granting of renewals, extensions of time for payment or other
indulgences to the Debtor or to any account debtor in respect
of any Receivable, substitution, release or surrender of any
Collateral, addition or release of persons primarily or
secondarily liable on any Secured Obligation or on any
Receivable or other Collateral, or the acceptance of partial
payments on any Secured Obligation or on any account receivable
or other Collateral and/or the settlement or compromise
thereof. No delay or omission on the part of the Secured Party
in exercising any right hereunder shall operate as a waiver of
such right or of any other right hereunder. Any waiver of any
such right on any one occasion shall not be construed as a bar
to or waiver of any such right on any such future occasion.
16. Termination; Assignments, etc. This Agreement and the
security interest in the Collateral created hereby shall
terminate when all of the Secured Obligations have been paid,
performed, and finally discharged in full. In the event of a
sale or assignment by the Secured Party of all or any of the
Secured Obligations held by it, such Secured Party may assign
or transfer its rights and interests under this Agreement in
whole or in part to the purchaser or purchasers of such Secured
Obligations, whereupon such purchaser or purchasers shall
become vested with all of the powers and rights of such Secured
Party hereunder, and such Secured Party shall thereafter be
forever released and fully discharged from any liability or
responsibility hereunder, with respect to the rights and
interests so assigned.
17. Notices. All notices, requests, demands and other
communications provided for hereunder shall be in writing
(including telegraphic communication) and shall be either
mailed by certified mail, return receipt requested, or
delivered by overnight courier service, to the applicable party
at the addresses first set forth above, or, as to each party,
at such other address as shall be designated by such parties in
a written notice to the other party complying as to delivery
with the terms of this Section. All such notices, requests,
demands and other communication shall be effective on the date
of first attempted delivery.
18. Miscellaneous.
(a) The powers conferred on the Secured Party hereunder are
solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except
for the safe custody of any Collateral in its possession and
the accounting for monies actually received by it hereunder,
the Secured Party shall not have any duty as to any Collateral
or as to the taking of any necessary steps to preserve any
right of it or of the Debtor against other parties pertaining
to any Collateral;
(b) No provision hereof shall be amended except by a writing
signed by the Secured Party and the Debtor;
(c) Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof;
(d) This Agreement shall be binding upon and shall inure to
the benefit of the successors and assigns of the Secured Party
and the Debtor;
(e) No delay, failure to enforce, or single or partial
exercise on the part of the Secured Party in connection with
any of its rights hereunder shall constitute an estoppel or
waiver thereof, or preclude other or further exercises or
enforcement thereof and no waiver of any default hereunder
shall be a waiver of any subsequent default; and
(f) This Agreement shall be governed as to its validity,
interpretation and effect in accordance with the laws of the
State of New Hampshire.
IN WITNESS WHEREOF, the undersigned have set their hands
and seals to this Agreement all as of the day and year first
above written.
GREEN MOUNTAIN COFFEE ROASTERS, INC.
/s/ Betty Omansky By: /s/ Robert D. Britt
- ----------------- ---------------------------------
Witness Robert D. Britt,
Chief Financial Officer
FLEET BANK - NH
/s/ Catherine Consentino By: /s/ Andre P. Pelletier
- ------------------------ ---------------------------------
Witness Andre P. Pelletier, Vice President
STATE OF Vermont
COUNTY OF Washington
On this the 12th day of April, 1996, before me, the
undersigned notary or justice, personally appeared Robert D.
Britt, who acknowledged himself to be the Chief Financial
Officer of Green Mountain Coffee Roasters, Inc, a corporation,
and that he, as such authorized officer, being authorized so to do,
executed the foregoing instrument for the purposes therein contained,
by signing the name of the corporation by himself as such
authorized officer.
/s/ Betty Omansky
-----------------
Notary Public
STATE OF New Hampshire
COUNTY OF Hillsborough
On this the 12th day of April, 1996, before me, the undersigned
notary or justice, personally appeared Andre P. Pelletier, who
acknowledged himself to be a Vice President of Fleet Bank - NH,
a bank, and that he, as such authorized officer, being
authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the
corporation by himself as such authorized officer.
/s/ Catherine A. Consentino
--------------------------
Justice of the Peace
<PAGE>
NOTE MODIFICATION AGREEMENT
(ALLONGE)
THIS NOTE MODIFICATION AGREEMENT is dated as of April 12th, 1996,
between GREEN MOUNTAIN COFFEE ROASTERS, INC. (f/k/a Green Mountain
Coffee, Inc.), a Vermont corporation with a principal place of business
at 33 Coffee Lane, Waterbury, Vermont 05676 (the "Borrower") and FLEET
BANK-NH, a New Hampshire bank with an address at Mail Stop NHNA E02A,
1155 Elm Street, Manchester, New Hampshire (the "Bank").
PREAMBLE
--------
The Borrower executed and delivered to the Bank its Term Loan
Promissory Note dated August 11, 1993, in the original
principal amount of Six Hundred Twenty-three Thousand Dollars
($623,000.00) (the "Note"). The Bank and the Borrower have
agreed to a change the variable interest rate applicable to
outstanding principal under the Note.
Accordingly, in consideration for the premises contained herein
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and
the Bank agree as follows (all terms used herein shall have the
meanings given in the Note unless expressly defined herein):
1. Interest Rate. Effective as of the date hereof, the
interest rate on the Note is reduced from a variable rate equal
to the Bank's Base Rate plus one and one-quarter percent
(1.25%) per annum to a variable rate equal to the Bank's Base
Rate plus one-quarter percent (.25%) per annum. The Borrower
may also elect a LIBOR based rate of interest to apply to
outstanding principal under the Note, all in accordance with
and subject to the terms and conditions of the Seventh
Amendment and First Restatement of Commercial Loan Agreement of
even date herewith, entered into by and between the Borrower
and the Bank, and as said agreement may be further amended from
time to time (collectively, as amended, the "Loan Agreement").
2. No other Change. Except as expressly modified herein,
the terms of the Note remain unchanged and are in full force
and effect. In no event shall this Note Modification Agreement
constitute a novation or discharge of the Note or the
indebtedness evidenced thereby.
3. References. All references to the "Note" in any
agreements, mortgages, or instruments securing or otherwise
pertaining to the indebtedness evidenced by the Note or
otherwise referring to the Note shall be deemed to refer to the
Note as hereby modified.
4. Collateral. The Note, as hereby modified, continues
to be secured pursuant to the Loan Documents as defined in the
Loan Agreement.
5. Allonge. An original counterpart of this Agreement has
been attached to the Note and shall constitute an allonge to
the Note such that the Note and this Agreement shall constitute
a single instrument.
IN WITNESS WHEREOF, the Bank and the Borrower have executed and
delivered this Note Modification Agreement as of the day and
year first above written.
BANK:
FLEET BANK - NH
/s/ Catherine Consentino By: /s/ Andre P. Pelletier
- ------------------------ ----------------------------------
Witness Andre P. Pelletier, Vice President
BORROWER:
GREEN MOUNTAIN COFFEE ROASTERS, INC.
/s/ Betty Omansky By: /s/ Robert D. Britt
- ----------------- ---------------------------------
Witness Robert D. Britt, Chief Financial Officer
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH, SS.
On this the 12th day of April, 1996, before me, the
undersigned notary or justice, personally appeared Andre P.
Pelletier, who acknowledged himself to be a Vice President of Fleet
Bank - NH, and that he, as such authorized officer, being
authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the bank by
himself as such authorized officer.
/s/ Catherine A. Consentino
---------------------------
Justice of the Peace
STATE OF Vermont
COUNTY OF Washington, SS.
On this the 12th day of April, 1996, before me, the
undersigned notary or justice, personally appeared Robert D. Britt,
who acknowledged himself to be the Chief Financial Officer of Green
Mountain Coffee Roasters, Inc., a corporation, and that he, as such
authorized officer, being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing
the name of the corporation by himself as such authorized officer.
/s/ Betty Omansky
-----------------
Notary Public
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
Exhibit 11
Computation of New Income (Loss) Per Share
<CAPTION>
Twenty-eight weeks Twelve weeks
ended ended
April 13, April 8, April 13, April 8,
1996 1995 1996 1995
--------- ----------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) $ 777,000 $ (319,000) $ 98,000 $(494,000)
--------- ---------- ---------- ---------
Primary weighted common
shares outstanding:
Common stock 3,399,795 3,383,485 3,399,795 3,383,485
Stock options 27,759 - 28,793 -
--------- --------- --------- ---------
Weighted average shares 3,427,554 3,383,485 3,428,588 3,383,485
--------- --------- --------- ---------
Net income (loss) per share $ .23 $ (.09) $ .03 $ (.15)
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet dated 4/13/96 and the Statement of Operations for the twenty-
eight weeks ended 4/13/96 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> APR-13-1996
<CASH> 516
<SECURITIES> 0
<RECEIVABLES> 2348
<ALLOWANCES> 62
<INVENTORY> 2466
<CURRENT-ASSETS> 5737
<PP&E> 14482
<DEPRECIATION> 6295
<TOTAL-ASSETS> 15125
<CURRENT-LIABILITIES> 3745
<BONDS> 3081
0
0
<COMMON> 340
<OTHER-SE> 7959
<TOTAL-LIABILITY-AND-EQUITY> 15125
<SALES> 20263
<TOTAL-REVENUES> 20263
<CGS> 12108
<TOTAL-COSTS> 12108
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 246
<INCOME-PRETAX> 914
<INCOME-TAX> 137
<INCOME-CONTINUING> 777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 777
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
