<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
-----------------
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition from ___________________ to ________________________
Commission file number 0-4979
------
SQUARE INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
NEW YORK 13-2610905
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
921 Bergen Avenue, Jersey City, New Jersey 07306
- ------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 798-0090
--------------
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the issuer was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. Yes ___X___ No ______
Shares of Common Stock outstanding at September 30, 1995: 1,166,356
<PAGE>
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PART I. Page No.
--------
Consolidated Balance Sheets -
September 30, 1995 (unaudited) and December 31,
1994 (audited) 3
Consolidated Statements of Operations - for
the nine and three months ended September 30, 1995
and 1994 (unaudited) 5
Consolidated Statements of Cash Flows for
the nine months ended September 30, 1995 and 1994
(unaudited) 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Results of
Operations and Financial Condition 13
PART II.
Other Information 17
SIGNATURES 18
2
<PAGE>
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited) (Audited)
----------- ---------
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 1,793,000 $ 1,226,000
Trade and other receivables 786,000 781,000
Prepaid expenses 1,582,000 1,660,000
Other current assets 549,000 555,000
Prepaid and refundable income taxes 292,000 353,000
----------- -----------
Total current assets 5,002,000 4,575,000
----------- -----------
Property, Equipment and Improvements, net 24,766,000 25,067,000
----------- -----------
Other Assets:
Deferred expenses (net of amortization) 2,295,000 890,000
Security deposits and other assets 2,410,000 1,932,000
----------- -----------
4,705,000 2,822,000
----------- -----------
$34,473,000 $32,464,000
=========== ===========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited) (Audited)
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable $ 1,159,000 $ 830,000
Accrued expenses 4,523,000 4,400,000
Accrued local rent tax (Note 4) 1,232,000 1,189,000
Current portion of long-term debt (Note 2) 652,000 1,210,000
Other liabilities 231,000 479,000
---------- ----------
Total current liabilities 7,797,000 8,108,000
---------- ----------
Deferred Rent 2,856,000 2,433,000
---------- ----------
Long-Term Debt - less current portion (Note 2) 18,692,000 17,059,000
---------- ----------
Deferred Taxes 174,000 174,000
---------- ----------
Security Deposits - Customers 292,000 257,000
---------- ----------
Stockholders' Equity:
Common stock, $.01 par value;
authorized 2,000,000 shares;
issued, 1,218,389 shares and 1,205,689 shares 12,000 12,000
Common stock, subscribed 12,500 shares as
of December 31, 1994 -0- 119,000
Additional paid-in capital 3,278,000 3,158,000
Retained earnings 1,825,000 1,529,000
Less:
Treasury stock at cost, 52,033 shares as of
September 30, 1995 and 12,837 shares as of
December 31, 1994 (236,000) (59,000)
Notes receivable for common stock subscribed -0- (119,000)
Cumulative translation adjustment (217,000) (207,000)
----------- -----------
4,662,000 4,433,000
----------- -----------
$34,473,000 $32,464,000
=========== ===========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months Ended For The Three Months Ended
September 30, September 30,
------------------------- ---------------------------
1995 1994 1995 1994
------ ------ ------ -----
<S> <C> <C> <C> <C>
Parking service revenue $45,328,000 $44,093,000 $14,624,000 $14,768,000
Service station revenue 3,071,000 2,984,000 1,100,000 1,041,000
---------- ---------- ----------- -----------
Total revenues 48,399,000 47,077,000 15,724,000 15,809,000
---------- ---------- ----------- -----------
Costs and expenses:
Cost of parking services 37,103,000 38,702,000 11,799,000 12,653,000
Operating costs - service station 3,112,000 3,029,000 1,086,000 1,057,000
General and administrative expenses 5,455,000 5,244,000 1,894,000 1,754,000
Provision for local rent tax (Note 4) 45,000 45,000 15,000 15,000
Interest 1,518,000 1,317,000 498,000 470,000
Write-off of assets 316,000 478,000 316,000 -0-
---------- ---------- ---------- ----------
Total costs and expenses 47,549,000 48,815,000 15,608,000 15,949,000
---------- ---------- ---------- ----------
Earnings (Loss) from Parking and
Service Station Operations 850,000 (1,738,000) 116,000 (140,000)
Provision (Benefit) For Income Taxes
(Note 6) 554,000 (587,000) 174,000 (47,000)
--------- ---------- -------- ---------
Net Earnings (Loss) $ 296,000 $ (1,151,000) $ (58,000) $ (93,000)
========= ============= ========== ==========
Earnings (Loss) Per Share (Note 5) $ 0.23 $ (0.96) $ (0.05) $ (0.08)
========= ============= ========== ==========
Computation of Shares -
Weighted average of common stock
outstanding and subscribed (Note 5) 1,262,474 1,192,809 1,166,356 1,192,852
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months Ended
September 30,
--------------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings (loss) $ 296,000 $(1,151,000)
Adjustments to reconcile net earnings (loss) to net cash provided by
(used in) operating activities:
Amortization of:
Deferred expenses 31,000 26,000
Lease acquisition costs 13,000 76,000
Excess of cost over fair market value
of net assets acquired -0- 103,000
Depreciation and amortization 1,159,000 1,264,000
Write-off of assets 316,000 478,000
Equity adjustment for foreign currency translations (10,000) (19,000)
Increase (decrease) in cash from
changes in assets and liabilities:
Trade and other receivables (5,000) 120,000
Prepaid expenses and other current assets 20,000 (97,000)
Prepaid and refundable income taxes 61,000 (486,000)
Deferred expenses, net (1,439,000) (32,000)
Security deposits and other assets (491,000) (216,000)
Accounts payable, accrued expenses,
accrued local rent tax and other liabilities 247,000 684,000
Deferred rent 423,000 (221,000)
Security deposits - customers 35,000 31,000
--------- ---------
Net cash provided by (used in) operating activities 656,000 560,000
--------- ---------
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months Ended
September 30,
-----------------------------
1995 1994
----------- ----------
<S> <C> <C>
Cash Flows From Investing Activities:
Additions to land, buildings, equipment
and improvements $(1,165,000) $(774,000)
----------- ----------
Net cash used in investing activities (1,165,000) (774,000)
----------- ----------
Cash Flows From Financing Activities:
Proceeds from borrowings 2,223,000 4,015,000
Payments and current maturities on long-term debt (1,148,000) (3,370,000)
Proceeds from exercise of stock options and warrants 1,000 1,000
----------- ----------
Net cash provided by financing activities 1,076,000 646,000
----------- ----------
Net Increase in Cash 567,000 432,000
Cash, Beginning of Period 1,226,000 623,000
----------- ----------
Cash, End of Period $1,793,000 $1,055,000
=========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $1,181,000 $1,131,000
Income taxes, net of refunds received $819,000 $(108,000)
</TABLE>
Supplemental Schedule of Noncash Financing Activities:
An officer/stockholder satisfied the balance of his note receivable to the
Company, including accrued interest of $57,637, which note had been issued in
connection with the exercise of a warrant to purchase shares of common stock by
transferring 39,196 shares of common stock to the Company. The market value of
the stock at the date of the transfer was $176,382. As a result, the Company
issued to the officer/stockholder 12,500 shares of common stock.
See notes to financial statements
7
<PAGE>
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1 - The accompanying consolidated balance sheet as of September 30,
1995 and the consolidated statements of operations for the nine and
three months ended September 30, 1995 and 1994 and the consolidated
statements of cash flows for the nine months ended September 30, 1995
and 1994, respectively, are unaudited, but in the opinion of the
Company, all adjustments (consisting of normal recurring accruals)
necessary to present fairly the results of operations for such periods
have been made. The financial statements should be read in conjunction
with the Annual Report on Form 10K of the Company, for the period
ended December 31, 1994.
The Company changed, effective December 31, 1994, its fiscal year end
from the last day in February to December 31st. As a result, the
comparative 1994 financial statements have been restated to conform to
current period presentation.
The accompanying consolidated financial statements include the
accounts of a foreign subsidiary and all domestic subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
The results of operations for the nine and three months ended
September 30, 1995 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2 - Long-term debt consisted of the following:
<TABLE>
Interest Rate September 30, 1995
------------- ------------------
<S> <C> <C>
Bank Loan:
Facility I Prime + 2% 11,753,000
Facility II Prime + 2% 1,688,000
Notes Payable to Officers 10.25% 500,000
Notes Payable 7.25% - 10% $ 1,221,000
Mortgages Payable 7% - 11% 4,182,000
----------
19,344,000
Less current portion 652,000
----------
$18,692,000
===========
</TABLE>
8
<PAGE>
NOTE 2 - (continued)
Facility I provides for a line of credit of $12,800,000, and is
subject to the aggregate face amount of outstanding letters of credit
plus unpaid drawings not exceeding $1,500,000. Facility II is a term
loan that was payable in consecutive quarterly payments of $225,425.
On October 31, 1995, Amendment No. 10 to the Company's bank loan
agreement was executed. The amendment provides for an extension of the
maturity dates of the Facility I principal to June 30, 1998 with
respect to $61,900, to September 30, 1998 with respect to $150,000 and
to December 31, 1998 with respect to $11,541,100 and extends the
quarterly installment payment dates for Facility II to calendar
quarters ending in the period June 30, 1996 to June 30, 1998. The
amendment provides for prepayment of principal to the extent of 50% of
the Company's cash flow above designated levels. The amendment also
provides that commencing November 1, 1995 interest is to be paid at
the rate of 4% per annum with the balance of the interest rate (the
Bank's prime plus 2% per annum) to be accrued and deferred. The
portion deferred will be paid or forgiven depending on the Company
achieving reductions in its operating expenses from those for the year
ended December 31, 1994 as follows: if the amount of the reduction as
of December 31, 1995 is at least $500,000, the amounts deferred during
November and December 1995 will be forgiven; if the amount of the
reduction as of December 31, 1996 is at least $600,000, the amounts
deferred during 1996 will be forgiven; and if the amount of the
reduction as of December 31, 1997 is at least $700,000, the amounts
deferred during 1997 and 1998 will be forgiven. The failure to achieve
the designated level of reduction for any period will result in the
obligation to pay the amount deferred during the applicable period.
Debt covenants under the Credit Agreement as amended, include a
limitation on indebtedness under mortgage obligations and financial
covenants as to maintenance of minimum net worth, total liabilities to
net worth and operating cash flow ratios.
On June 28, 1995 two principal officers loaned $500,000 to the Company
with interest payable at the same rate as the Facility I loan. As a
condition of Amendment No. 10, the officers agreed to a revision of
their loans, changing the terms from demand loans to loans to be
repaid following the payment of the Facility loans with provisions for
prepayment to the extent of 50% of the principal payments paid to the
Bank under the credit agreement after the Bank has received post -
October 31, 1995 principal payments of at least $1,000,000 and for the
deferral of the interest in excess of 3.99% per annum (the loan
interest rate to December 31, 1995 is 10.25% and prime plus 2%
thereafter) until the Facility loans have been paid in full.
9
<PAGE>
Under their amended loan agreement, they surrendered their rights to
collateral which was to be provided under the original loan agreement
and subordinated their loans to the Company's obligations under the
Credit Agreement. In consideration of the original extension of the
loans and the foregoing amendment, the Company issued to each of the
officers a five year non-transferable Warrant to purchase 75,000
shares of the Company's Common Stock at a price of $6.40 per share,
the average of the closing sales prices of the Common Stock on NASDAQ
for June 28, 1995, and the two immediately prior days in which trades
were effected in the stock.
The consolidated Balance Sheet as of September 30, 1995 gives
retroactive effect to Amendment No. 10 to the Company's credit
facility agreement and the amendment of the loan agreement with two
principal officers of the Company.
Certain subsidiaries of the Company periodically acquire land/or
buildings with a view to their future use in whole or in part as
parking facilities. The properties are generally purchased subject to
long-term mortgages. The mortgages vary in their payment terms and
interest rates, some requiring only the payment of interest during the
first five years.
The mortgages payable are collateralized by the underlying assets
which have a book value of $6,076,200. The two facility loans are
collateralized by the stock of subsidiaries of the Company, except
those whose stock may not be pledged because of prohibitions in leases
and mortgages.
Aggregate maturities on long-term debt are as follows:
Year Ending September 30,
-------------------------
1996 $ 652,000
1997 1,002,000
1998 920,000
1999 12,654,000
2000 3,838,000
Remainder 278,000
---------
$19,344,000
===========
10
<PAGE>
NOTE 3 - FOREIGN OPERATIONS (CANADA)
Summarized information relating to the Canadian operation is as
follows:
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Total assets $634,000 $589,000
Total liabilities 1,456,000 1,231,000
Deficiency in assets (822,000) (642,000)
</TABLE>
For the nine month periods ended September 30, 1995 and September 30,
1994, net loss for the Canadian operation was $178,000 and $220,000,
respectively.
NOTE 4 - The Company received notices of determination from a municipal local
authority for commercial rent tax which relate to the period June 1,
1978 through May 31, 1987 assessing the Company, net of payments, an
aggregate of $907,005. The Company believes that the provision, which
covers these assessments, possible future assessments, and related
expenses through September 30, 1995, is adequate.
NOTE 5 - EARNINGS PER SHARE
Earnings (loss) per share has been computed using the weighted average
number of shares of common stock outstanding and subscribed and the
dilutive effect, if any, of common stock equivalents outstanding.
Common stock equivalents were not included in the computation of loss
per share for the nine months ended September 30, 1994 and for the
three months ended September 30, 1995 and 1994 since their effect was
anti-dilutive.
NOTE 6 - INCOME TAXES
The provision for income taxes of $554,000 for the nine month period
ended September 30, 1995 is based on the effective tax rate expected
for the year and includes (i) federal income taxes, (ii) income taxes
of state and local jurisdictions for which the Company's operations
were profitable and for which no net operating loss benefit is
available, (iii) minimum corporate taxes for certain subsidiaries and
(iv) an adjustment during the three-months ended September 30, 1995
for under-accruals in prior periods for federal and state income taxes
for prior periods. No changes have been made to the deferred tax asset
valuation allowances since Management is not able to conclude that
realization of these deferred tax assets is more likely than not as a
result of the Company's earnings history. Reductions to the valuation
allowance will be recorded when, in the opinion of management, the
11
<PAGE>
Company's ability to generate taxable income for a period of time is
more certain.
The income tax benefit of $587,000 for the nine month period ended
September 30, 1994 reflects the benefit applicable to the loss for the
period less minimum corporate taxes for certain subsidiaries.
NOTE 7 - CONTINGENCIES
Litigation:
Various lawsuits against the Company have arisen in the course of the
Company's business. In certain of these matters, large and/or
indeterminate amounts are sought. In the opinion of the Company, any
uninsured ultimate liability which could result from such litigation
would not have a material adverse effect on the Company's financial
position or the results of its operations.
Letters of Credit:
As of September 30, 1995, the Company's contingent debt amounted to
approximately $1,025,500 under standby Letters of Credit issued
pursuant to terms of its line of credit (Facility I).
NOTE 8 WRITE-OFF OF ASSETS
During the nine months ended September 30, 1995 and 1994, the Company
wrote off leasehold acquisition costs, deferred expenses, fixed
assets, and other miscellaneous charges relating to certain locations.
12
<PAGE>
SQUARE INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations
The improved operating results recorded for the 1994 fiscal year (the
10 months ended December 31, 1994) continued into the current year. Parking
service revenues for the nine months ended September 30, 1995 (the "1995
Nine-Month Period") were greater by $1,235,000 (2.8%) than those for the
nine-months ended September 30, 1994 (the "1994 Nine-Month Period"). For the
three months ended September 30, 1995 (the "1995 Three-Month Period") parking
service revenues which were $144,000 (1.0%) less than those for the three months
ended September 30, 1994 (the "1994 Three-Month Period") would also have been
higher but for a $562,000 payment made to the Company during 1994 in settlement
of a dispute as to a parking location. The principal reason for the continued
improvement was a net increase in parking capacity of approximately 2,400 cars
which was effected during the nine months ended September 30, 1995 and increased
patronage largely due to mild winter weather in the regions in which the Company
operates as compared with one of the most severe winters in the Company's
history in 1994 which caused a sharp curtailment of traffic near the Company's
parking locations.
The Company achieved a reduction of parking operating costs of
$1,599,000 (4.1%) between the nine-month comparative periods and $854,000 (6.7%)
between the three-month comparative periods, which resulted in reductions as
percentages of parking revenues from 87.8% to 81.9% between the nine-month
comparative periods and from 85.7% to 80.7% between the three-month comparative
periods. The lower costs were principally due to economies in operations,
primarily staff reductions, and a net reduction of two in the number of parking
locations operated by the Company, including termination of unprofitable
locations which were responsible in part for the $478,000 of asset write-offs in
the 1994 Nine-Month Period, partially offset by a modest increase in labor costs
resulting from two labor agreements the Company executed during nine months
ended September 30, 1995. Two additional labor agreements are expected to be
executed by December 31, 1995 and to result in a further modest increase in
labor costs.
The Company's gasoline station operation remained marginal due to the
intense competition which adversely affects the industry and the area in which
the Company's station is located. Revenues increased, primarily as a result of
increased gasoline prices, by $87,000 (2.9%) between the comparative nine-months
periods and $59,000 (5.7%) between the comparative three-month periods.
Operation of the station produced losses for the 1995 and 1994 Nine- Month
Periods of ($41,000) and ($45,000), respectively, and a slight operating profit
13
<PAGE>
of $14,000 for the three months ended September 30, 1995 as compared to an
operating loss of ($16,000), for the three months ended September 30, 1994.
General and administrative expenses increased by $211,000 (4.0%)
between the nine- month comparative periods and $140,000 (8.0%) between the
three-month comparative periods. The increases reflect principally modest
increases in salaries and travel expenses and the cost incurred with respect to
a proposed real estate transaction which was terminated, partially offset by
reductions due to the fewer locations under supervision and operating economies.
As a result, such costs as a percentage of parking revenues (gasoline station
operations require insignificant amounts of such expenses) increased from 11.9%
to 12.0% between the nine-month periods and from 11.9% to 13.0% between the
three-month periods.
The increases in interest expense of $201,000 (15.3%) and $28,000
(6.0%), respectively, between the nine-month and three-month comparative periods
were primarily the result of the higher interest rates caused by increases in
the rate provided by amendments effected in June and October 1994 to the
Company's credit facility, increases in the prime rate, and, with respect to the
three-month comparative periods, increased borrowings.
For the three months ended September 30, 1995, the Company effected a
write-off of unamortized assets of $316,000 related to certain unprofitable
locations as compared to asset write-offs of $478,000 taken during January and
February, 1994.
The 65.2% provision for income taxes for the 1995 Nine Month Period,
and the provision of $174,000 despite pre-tax earnings of $116,000 for the 1995
Three Month Period are due principally to (i) minimum corporate income taxes
imposed by the state and City of New York and the states of Pennsylvania and New
Jersey, (ii) the non-deductibility for income tax purposes of the loss suffered
by the Company's Canadian operations ($178,000 and $73,000, respectively for the
nine and three- month periods), (iii) income taxes in jurisdictions in which the
Company's operations were profitable and for which no net operating loss was
available and (iv) an adjustment during the three-months ended September 30,
1995 for under-accruals in prior periods for federal and state income taxes for
prior periods.
Liquidity and Capital Resources
As of September 30, 1995, the Company had a decrease of $738,000 in its
working capital deficit ($2,795,000) from the working capital deficit
($3,533,000) as of December 31,1994, principally as a result of the extension of
the maturity dates of the Company's Facility II loan installments provided by
the amendment to the credit agreement discussed below.
Operating activities provided net cash of $656,000 for the 1995
Nine-Month Period as compared to $560,000 for the 1994 Nine-Month Period; the
difference principally the result of the materially better operating results,
partially offset by a material increase in deferred expenses, principally due to
adjustments of rents.
14
<PAGE>
Additions to land, buildings, equipment and improvements amounted to
$1,165,000 net for the 1995 Nine-Month Period, a $391,000 increase in the net
amount expended or accrued during the 1994 Nine-Month Period for this purpose.
The Company anticipates capital expenditures of not more than $1,500,000 for
the full year ending December 31, 1995, to be financed from the Company's
operations, borrowings and joint ventures with equity co-venturers.
The Company derived net cash from financing activities of $1,076,000
and $646,000 respectively, during the 1995 Nine-Month Period and the 1994
Nine-Month Period, with the difference principally resulting from loans of
$500,000 from its officers in July 1995 and lower loan payments during the 1995
Nine-Month Period.
As a result of the foregoing, the Company increased its cash balances
by $567,000 as compared with an increase of $432,000 for the 1994 Nine-Month
Period.
On October 31, 1995 the Company's credit agreement with its Bank lender
was amended to provide more favorable terms with respect to principal payments,
interest payments and the financial covenants. The maturity dates of the
Facility I credit loan principal were extended to June 30, 1998 with respect to
$61,900, September 30, 1998 with respect to $150,000 and December 31, 1998 with
respect to the balance, which as of September 30, 1995, amounted to $11,540,753,
and the quarterly installment payment dates for the Facility II term loan in the
aggregate principal amount of $1,688,100 were deferred to the calendar quarters
ending in the period June 30, 1996 to June 30, 1998. The amendment provides for
prepayment of principal to the extent of 50% of the Company's cash flow above
designated levels. The amendment also provides that commencing November 1, 1995
interest is to be paid at the rate of 4% per annum, with the balance of the
interest rate (the Bank's prime plus 2% per annum) to be accrued but deferred.
The portion deferred will be paid or forgiven depending on the Company achieving
reductions in its operating expenses from those for the year ended December 31,
1994 as follows: if the amount of the reduction as of December 31, 1995 is at
least $500,000, the amounts deferred during November and December 1995 will be
forgiven; if the amount of the reduction as of December 31, 1996 is at least
$600,000 the amounts deferred during 1996 will be forgiven; and if the amount of
the reduction as of December 31, 1997 is at least $700,000, the amounts deferred
during 1997 and 1998 will be forgiven. The failure to achieve the designated
level of reduction for any period will result in the obligation to pay the
amount deferred during the applicable period at the end of such period.
As a condition of the amendment to the credit agreement, Messrs.
Lowell Harwood and Sanford Harwood, respectively Chairman and Assistant
Chairman, entered into an amendment of their loan agreement with the Company
relating to loans by them in the aggregate amount of $500,000, changing them
from demand loans to loans to be repaid following the payment of the Facility
loans with provisions for prepayment to the extent of 50% of the principal
payments paid to the Bank under the credit agreement after the Bank has received
post - October 31, 1995 principal payments of at least $1,000,000 and for the
deferral of the interest in excess of 3.99% per annum (the loan interest rate
after December 31, 1995 is the Bank's prime rate plus 2%) until the Facility
15
<PAGE>
loans have been paid in full. Under their amended loan agreement, they
surrendered their rights to collateral which was to be provided under the
original loan agreement and subordinated their loans to the Company's
obligations under the credit agreement.
The Company believes that funds generated from its operations and
additional mortgage loans with respect to properties acquired or developed will
be sufficient to finance its capital and operational requirements for the 12
months ended September 30, 1996.
16
<PAGE>
Part II - Other Information
Item 5. Other Information
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition" for information with respect to (i) Amendment No. 10
executed on October 31, 1995 to the Company's Credit Agreement with NatWest Bank
N.A. (the "Bank") extending the maturity dates of the Company's Facility I and
Facility II loans, providing for a deferral and possible forgiveness of the loan
interest in excess of 4% per annum and modifying the financial covenants; and
(ii) an amendment to the loan agreement between the Company and Messrs. Lowell
Harwood, Chairman, and Sanford Harwood, Assistant Chairman, Secretary and
Director, making their demand loans in the aggregate amount of $500,000 payable
after the Facility loans have been paid in full, subject to prepayments of 50%
of the loan principal payments to the Bank after the Bank has received after
October 31, 1995 principal loan payments in the amount of $1,000,000, deferring
that portion of the loan interest in excess of 3.99% per annum to the date the
Facility Loans have been paid in full (the interest rate after December 31, 1995
is the Bank's prime rate plus 2%), subordinating the loans to the Company's
obligations to the Bank and eliminating the Company's obligation to collaterize
the loan.
In consideration of the original extension of the loans and the
foregoing amendment, the Company issued to each of Messrs. Lowell and Sanford
Harwood a five year non-transferable Warrant to purchase 75,000 shares of the
Company's Common Stock at a price of $6.40 per share, the average of the closing
sales prices of the Common Stock on NASDAQ for June 28, 1995, the date of the
original loan agreement and the two immediately prior days in which trades were
effected in the stock.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10(a) Copy of Amendment No. 10, dated October 31, 1995 to the Credit
Agreement between the Company and NatWest Bank N.A..
10(b) Copy of Amendment, dated October 31, 1995, to the Loan Agreement
between the Company and Lowell Harwood and Sanford Harwood.
10(c) Form of Warrant, dated October 31, 1995, issued to each of
Lowell Harwood and Sanford Harwood.
27. Financial Data Schedule
b) No reports on Form 8-K have been filed during the quarter ended
September 30, 1995.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SQUARE INDUSTRIES, INC.
s/ Sanford Harwood
--------------------------------------
Sanford Harwood
Assistant Chairman
s/ John Kowal
--------------------------------------
John Kowal
Controller and Chief Financial Officer
Dated: November 13, 1995
18
<PAGE>
Exhibit 10(a)
AMENDMENT NO. 10 TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 10 TO CREDIT AGREEMENT (this "Amendment No. 10"),
dated as of October 31, 1995, is by and among NatWest Bank N.A. (as successor to
National Westminster Bank USA, the "Bank"), Square Industries, Inc., a New York
corporation (the "Borrower"), and 808 Square Corp., a New York corporation ("808
Corp.").
RECITALS:
WHEREAS, the Bank, the Borrower and 808 Corp. have previously entered
into that certain Credit Agreement dated July 5, 1988, as amended by Amendment
No. 1 thereof dated July 26, 1988, Amendment No. 2 thereof dated as of February
28, 1990, Amendment No. 3 thereof dated April 18, 1990, Amendment No. 4 thereof
dated as of April 30, 1990, Amendment No. 5 thereof dated as of February 28,
1991, Amendment No. 6 thereof dated June 4, 1992, Amendment No. 7 thereof dated
as of February 28, 1993, Amendment No. 8 thereof dated as of February 28, 1994
and Amendment No. 9 thereof dated as of October 11, 1994 (as amended, the
"Credit Agreement"), pursuant to which the Bank agreed to make loans to and
issue letters of credit for the account of the Borrower and 808 Corp.;
WHEREAS, the obligations of the Borrower and 808 Corp. under the
Credit Agreement are guaranteed by certain subsidiaries of the Borrower (the
"Subsidiary Guarantors");
WHEREAS, the Borrower and 808 Corp. desire that the Credit Agreement
be amended in certain respects;
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<PAGE>
WHEREAS, the Bank is willing to amend the Credit Agreement upon the
terms and subject to the conditions of this Amendment No. 10; and
WHEREAS, capitalized terms not defined herein shall have the meanings
ascribed to such terms in the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1 AMENDMENTS
Subject to the satisfaction of the conditions contained in Article 5
hereof, effective as of the Tenth Amendment Effective Date (as defined below),
the Credit Agreement is hereby amended as follows:
1.01. Article 1 of the Credit Agreement is hereby amended by:
(a) Deleting the definition of "Credit Loan Termination Date" in its
entirety and replacing it with the following:
""Credit Loan Termination Date" - December 31, 1998"
(b) Deleting the definition of "Excess Cash Flow" in its entirety and
replacing it with the following:
""Excess Cash Flow" - for any fiscal year or calendar quarter
of the Borrower, the Cash Flow in excess of the Projected Cash Flow for
such fiscal year or quarter set forth or reflected in the Borrower's
financial projections attached as Exhibit 2.5(e) hereto ("Projected
Cash Flow"). For each calendar quarter during 1997 and during 1998 the
Projected Cash Flow shall be set forth on a schedule to be prepared by
the Borrower and delivered to the Bank at least 30 days prior to the
relevant calendar quarter, provided however, that the Projected Cash
Flows for the four calendar quarters of each of 1997 and 1998 do not
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<PAGE>
exceed the Projected Cash Flow for that year as set forth in Exhibit
2.5(e)."
(c) Adding thereto the following definitions in the appropriate
alphabetical order:
""Amendment No. 10" - Amendment No. 10 To Credit Agreement
dated as of the Tenth Amendment Closing Date by and among the
Borrower, 808 Corp. and the Bank."
""Cash Flow" - for any quarter or fiscal quarter or any fiscal
year of the Borrower and its subsidiaries, the net cash flow as
determined in accordance with generally accepatable accounting
principles including paid interest on Indebtedness less the sum of (i)
principal payment on Indebtedness, (ii) capital expenditures, (iii)
lease renewal and replacement costs, and (iv) real estate and income
tax payments."
""Projected Cash Flow" - for any fiscal quarter, as defined
under "Excess Cash Flow.""
""Tenth Amendment Closing Date" - October 31, 1995."
1.02. Subsection 2.1(a) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(a) The Borrower and the Bank acknowledge and agree that as
of the Tenth Amendment Closing Date the Borrower has outstanding loans
(individually, a "Credit Loan" and collectively the "Credit Loans") in
the aggregate principal amount of $11,758,452.70 and outstanding
Letters of Credit in the aggregate face amount of $1,025,000.00, owing
to the Bank and which shall continue to be outstanding pursuant to the
terms and conditions of this Agreement and the other Loan Documents.
The Borrower and the Bank further acknowledge and agree that the
Commitment of the Bank has terminated as of the Tenth Amendment Closing
Date and the Bank is no longer obligated to made or advance any
additional Credit Loans or Letters of Credit, provided that any Letter
of Credit existing on the Tenth Amendment Closing Date may, at the
option of the Borrower so long as no Default or Event of Default has
occurred and is continuing, be extended to a date prior to the Credit
Loan Termination Date."
1.03. Subsection 2.1(b) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
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<PAGE>
"(b) The Borrower and the Bank acknowledge and agree that as
of the Tenth Amendment Closing Date the Borrower has outstanding a term
loan (the "Square Term Loan") in the aggregate principal amount of
$1,688,100.00 owing to the Bank which shall continue to be outstanding
pursuant to the terms and conditions of this Agreement and the other
Loan Documents."
1.04. Subsection 2.1(d) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(d) Subject to the terms of this Agreement, the Credit Loans
may be repaid at any time and from time to time, in whole or in part,
without premium or penalty, and any amount so repaid may not be
reborrowed."
1.05. Subsection 2.1(e) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(e) [intentionally omitted]"
1.06. Subsection 2.5(e) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(e) Not later than twenty one (21) days after each fiscal
quarter of the Borrower, the Borrower shall repay the Credit Loans in
an amount equal to fifty percent (50%) of any Excess Cash Flow, if any,
for such fiscal quarter. Any such repayments shall be applied to the
remaining scheduled principal installments of the Credit Loans in the
inverse order of maturity. In the event the Borrower's Cash Flow in any
fiscal quarter is less than the Projected Cash Flow for such fiscal
quarter (any such difference being referred to as a "Cash Flow
Deficit"), the Borrower may carry forward the Cash Flow Deficit to any
succeeding fiscal quarters and apply such Cash Flow Deficit to reduce
the Excess Cash Flow for any such succeeding fiscal quarter."
1.07. Subsection 2.8(a) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(a) The Borrower shall pay to the Bank the principal amount
of the Credit Loans on the dates and in the amounts as follows:
Payment Date Amount
------------ ------
June 30, 1998 $61,900.00
September 30, 1998 $150,000.00
December 31, 1998 $11,546,552.70 or the then outstanding
principal amount of the
Credit Loans"
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<PAGE>
1.08. Subsection 2.8(b) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(b) The Borrower shall pay to the Bank the principal amount
of the Square Term Loan on the dates and in the amounts as follows:
Payment Date Amount
------------ ------
June 30, 1996 $250,000.00
September 30, 1996 $250,000.00
December 31, 1996 $250,000.00
March 31, 1997 $250,000.00
June 30, 1997 $150,000.00
September 30, 1997 $150,000.00
December 31, 1997 $150,000.00
March 31, 1998 $150,000.00
June 30, 1998 $ 88,100.00"
1.09. Subsection 2.9(a) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(a) The Borrower and the Bank acknowledge and agree that as
of the Tenth Amendment Closing Date the aggregate amount of accrued and
unpaid interest on the Credit Loans is $514,006.79 (the "Credit Loan
Prior Interest"), that $191,900.79 of the Credit Loan Prior Interest
has been paid by the Borrower to the Bank on the Tenth Amendment
Closing Date and that the Borrower will pay to the Bank the unpaid
portion the Credit Loan Prior Interest on the dates and in the amounts
as follows:
Payment Date Amount
January 31, 1996 $107,369.00
February 28, 1996 $107,369.00
March 31, 1996 $107,368.00
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<PAGE>
Commencing on November 1, 1995, the unpaid principal amount of the
Credit Loans shall accrue interest for the period commencing on
November 1, 1995 until the Credit Loans shall be paid in full, unless
adjusted as provided below, at a rate per annum equal to the Prime Rate
plus two percent (2.0%) (the "Existing Rate").
Borrower shall engage an independent consultant who is
acceptable to the Bank (the "Consultant") (the firm of Ballenger,
Budetti and Associates LLP is acceptable to the Bank) to determine
whether reductions in the operating and general and administrative
costs of the Borrower and its subsidiaries (collectively for purposes
of this Section 2.9(a) and Section 2.9(b), the "Borrower") of $500,000
(the "Threshold Amount") or more have been effected from those
incurred in 1994. The determination shall be in the form of a
comparison of the annualized (i) costs of operations for the quarter
ended December 31, 1994 for the parking locations operated by the
Borrower during that quarter (the "1994 Locations") and (ii) general
and administrative expenses of the Borrower for the quarter ended
December 31, 1994 as compared (a) with respect to calendar 1995, the
annualized costs of operations of the 1994 Locations and general and
administrative costs of the Borrower during the quarter ended December
31, 1995; (b) with respect to 1996, the annualized costs of operations
of the 1994 Locations and general and administrative costs of the
Borrower during the quarter ended December 31, 1996 and (c) with
respect to 1997, the annualized costs of operations of the 1994
Locations and general and administrative costs of the Borrower during
the quarter ended December 31, 1997. The comparison shall take into
consideration inter alia, payroll costs, including overtime, and the
discontinuation or termination of unprofitable 1994 Locations, but
shall not include with respect to general and administrative expenses,
extraordinary items and the costs incurred with respect to the
negotiation and execution of Amendment No. 10 and the costs incurred,
including the commitment fee, in seeking and negotiating a proposed
secured loan from Greyrock Capital Group Co., Inc.
On the last day of each month, commencing on November 30,
1995, the Borrower shall pay the Bank accrued interest on the unpaid
principal amount of the Credit Loans at a rate per annum equal to four
(4.0%) (the "Current Pay Rate"), with the unpaid portion of the
accrued interest for each month to be deferred (such portion of
deferred and unpaid interest, the "Deferred Interest") until paid or
forgiven as provided below. In the event that the reduction in the
operating costs and general and administrative expenses for calendar
1995 as determined above is at least the Threshold Amount, then (i)
the amount of Deferred Interest for the period from November 1, 1995
to December 31, 1995 shall be forgiven and shall no longer be payable
by the Borrower and (ii) the unpaid principal amount of the Credit
Loans shall accrue interest for the period commencing as of January 1,
1996 until the Credit Loans shall be paid in full, unless adjusted as
provided below, at a rate per annum equal to the Prime Rate (the
"Reduction Rate"), with accrued interest payable by the Borrower to
the Bank on the last day of each month at the Current Pay Rate and
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<PAGE>
with the unpaid portion of the accrued interest for each month being
deferred as Deferred Interest until paid or forgiven as provided
below; provided, however, that if the cost reduction was less than the
Threshold Amount, then (A) no adjustment to the Existing Rate shall
occur and (B) all Deferred Interest for the period from November 1,
1995 to December 31, 1995 shall be due and payable in full on the last
day of the month in which the determination by the Consultant is
delivered to the Bank. During 1996 the Borrower shall continue to pay
accrued interest on the last day of each month at the Current Pay
Rate, with any Deferred Interest from and after January 1, 1996 being
paid or forgiven as provided below. In the event that the reduction in
the operating costs and general and administrative expenses for 1996
as determined above is at least the Threshold Amount plus $100,000,
then (i) the amount of Deferred Interest for the period from January
1, 1996 to December 31, 1996 shall be forgiven and shall no longer be
payable by the Borrower and (ii) the unpaid principal amount of the
Credit Loans shall accrue interest for the period commencing as of
January 1, 1997 until the Credit Loans shall be paid in full, unless
adjusted as provided below, at the Reduction Rate, with accrued
interest payable by the Borrower to the Bank on the last day of each
month at the Current Pay Rate and with the unpaid portion of the
accrued interest for each month being deferred as Deferred Interest
until paid or forgiven as provided below; provided, however, that if
the cost reduction is less than the Threshold Amount plus $100,000,
then (A) the unpaid principal amount of the Credit Loans shall accrue
interest for the period commencing as of January 1, 1997 until the
Credit Loans shall be paid in full, unless adjusted as provided below,
at the Existing Rate and (B) all Deferred Interest for the period from
January 1, 1996 to December 31, 1996 shall be due and payable in full
on the last day of the month in which determination by the Consultant
was delivered to the Bank. During 1997 and 1998, the Borrower shall
continue to pay accrued interest on the last day of each month at the
Current Pay Rate, with any Deferred Interest from and after January 1,
1997 being paid or forgiven as provided below. In the event that the
reduction in the operating costs and general and administrative
expenses for 1997 as determined above is a least the Threshold Amount
plus $200,000, then the amount of Deferred Interest for the period
from January 1, 1997 until the Credit Loans shall be paid in full
shall be forgiven and shall no longer be payable by the Borrower;
provided, however, that if the cost reduction is less than the
Threshold Amount plus $200,000, then (A) the unpaid principal amount
of the Credit Loans shall accrue interest for the period commencing as
of January 1, 1998 until the Credit Loans shall be paid in full at the
Existing Rate, (B) all Deferred Interest from the period from January
1, 1997 to December 31, 1997 shall be due and payable in full on the
last day of the month in which the determination by the Consultant was
delivered to the Bank and (C) during 1998 the Borrower shall continue
to pay accrued interest on the last day of each month at the Current
Pay Rate, with any Deferred Interest from and after January 1, 1998
being payable in full on December 31, 1998."
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<PAGE>
1.10. Subsection 2.9(b) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(b) The Borrower and the Bank acknowledge and agree that as of the
Tenth Amendment Closing Date the aggregate amount of accrued and unpaid interest
on the Square Term Loan is $49,490.19 (the "Square Term Loan Prior Interest"),
that $17,500.19 of the Square Term Loan Prior Interest has been paid by the
Borrower to the Bank on the Tenth Amendment Closing Date and that the Borrower
will pay to the Bank the unpaid portion the Square Term Loan Prior Interest on
the dates and in the amounts as follows:
Payment Date Amount
------------ ------
January 31, 1996 $10,663.00
February 28, 1996 $10,663.00
March 31, 1996 $10,664.00
Commencing on November 1, 1995, the unpaid principal amount of the
Square Term Loan shall accrue interest for the period commencing on
November 1, 1995 until the Square Term Loan shall be paid in full,
unless adjusted as provided below, at a rate per annum equal to the
Prime Rate plus two percent (2.0%) (the "Existing Rate"). On the last
day of each month, commencing on November 30, 1995, the Borrower shall
pay the Bank accrued interest on the unpaid principal amount of the
Square Term Loan at a rate per annum equal to four (4.0%) (the "Current
Pay Rate"), with the unpaid portion of the accrued interest for each
month to be deferred (such portion of deferred and unpaid interest, the
"Deferred Interest") until paid or forgiven as provided below.
In the event that the reduction in the cost of operations and
general and administrative expenses of the Borrower for calendar 1995
from those for calendar 1994 as determined in Section 2.9(a) is at
least the Threshold Amount, then (i) the amount of Deferred Interest
for the period from November 1, 1995 to December 31, 1995 shall be
forgiven and shall no longer be payable by the Borrower and (ii) the
unpaid principal amount of the Square Term Loan shall accrue interest
for the period commencing as of January 1, 1996 until the Square Term
Loan shall be paid in full, unless adjusted as provided below, at a
rate per annum equal to the Prime Rate (the "Reduction Rate"), with
accrued interest payable by the Borrower to the Bank on the last day of
each month at the Current Pay Rate and with the unpaid portion of the
accrued interest for each month being deferred as Deferred Interest
until paid or forgiven as provided below; provided, however, that if
the amount of the cost reduction is less than the Threshold Amount,
then (A) no adjustment to the Existing Rate shall occur and (B) all
Deferred Interest for the period from November 1, 1995 to December 31,
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<PAGE>
1995 shall be due and payable in full on the last day of the month in
which the determination by the Consultant is delivered to the Bank.
During 1996 the Borrower shall continue to pay accrued interest on the
last day of each month at the Current Pay Rate, with any Deferred
Interest from and after January 1, 1996 being paid or forgiven as
provided below. In the event the reduction in the cost of operations
and general and administrative expenses of the Borrower for calendar
1996 from those for calendar 1994 as determined in Section 2.9(a) is at
least the Threshold Amount plus $100,000, then (i) the amount of
Deferred Interest for the period from January 1, 1996 to December 31,
1996 shall be forgiven and shall no longer be payable by the Borrower
and (ii) the unpaid principal amount of the Square Term Loan shall
accrue interest for the period commencing as of January 1, 1997 until
the Square Term Loan shall be paid in full, unless adjusted as provided
below, at the Reduction Rate, with accrued interest payable by the
Borrower to the Bank on the last day of each month at the Current Pay
Rate and with the unpaid portion of the accrued interest for each month
being deferred as Deferred Interest until paid or forgiven as provided
below; provided, however, that if the amount of the cost reduction is
less than the Threshold Amount plus $100,000, then (A) the unpaid
principal amount of the Square Term Loan shall accrue interest for the
period commencing as of January 1, 1997 until the Square Term Loan
shall be paid in full, unless adjusted as provided below, at the
Existing Rate and (B) all Deferred Interest for the period from January
1, 1996 to December 31, 1996 shall be due and payable in full on the
last day of the month in which the determination by the Consultant is
delivered to the Bank. During 1997 and 1998, the Borrower shall
continue to pay accrued interest on the last day of each month at the
Current Pay Rate, with any Deferred Interest from and after January 1,
1997 being paid or forgiven as provided below. In the event the
reduction in the cost of operations and general and administrative
expenses of the Borrower for calendar 1997 from those for calendar 1994
as determined in Section 2.9(a) is at least the Threshold Amount plus
$200,000, then the amount of Deferred Interest for the period from
January 1, 1997 to December 31, 1998 shall be forgiven and shall no
longer be payable by the Borrower; provided, however, that if the
amount of the cost reduction is less than the Threshold Amount plus
$200,000, then (A) the unpaid principal amount of the Square Term Loan
shall accrue interest for the period commencing as of January 1, 1998
until the Square Term Loan shall be paid in full at the Existing Rate,
(B) all Deferred Interest for the period from January 1, 1997 to
December 31, 1997 shall be due and payable in full on the last day of
the month in which the determination by the Consultant is delivered to
the Bank and (C) the Borrower shall continue to pay accrued interest on
the last day of each month at the Current Pay Rate, with any Deferred
Interest from and after January 1, 1998 being payable in full on
December 31, 1998."
1.11. Subsection 2.9(c) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(c) [Intentionally omitted]"
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<PAGE>
1.12. Subsection 2.9(e) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(e) Except as provided in the next sentence, accrued interest
on each Loan shall be payable (i) as provided in Subsections 2.9(a) and
(b) hereof and (ii) upon the payment of each Loan (but only on the
principal paid). Interest which is payable at the Post-Default Rate
shall be payable on demand of the Bank."
1.13. Subsection 2.10(a) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it with the following:
"(a) The Credit Loans and the reimbursement obligations of the
Borrower with respect to the Letters of Credit outstanding on the
Tenth Amendment Closing Date shall be evidenced by a single promissory
note of the Borrower (as amended, amended and restated, and
supplemented from time to time, the "Credit Note") in substantially
the form of Exhibit A to Amendment No. 10, payable to the order of the
Bank in the principal amount of $12,783,452.70 and otherwise duly
completed."
1.14. Subsection 2.10(c) of the Credit Agreement is hereby amended by
deleting such Subsection in its entirety and replacing it as follows:
"(c) The Square Term Loan shall be evidenced by a single
promissory note of the Borrower (as amended, amended and restated, and
supplemented from time to time, the "Square Term Note") in
substantially the form of Exhibit B to Amendment No. 10, payable to the
order of the Bank in a principal amount of $1,688,100.00 and otherwise
duly completed."
1.15. Section 6.9 of the Credit Agreement is hereby amended by deleting
such Section in its entirety and replacing it with the following:
"Section 6.9 Financial Covenants.
Have or maintain with respect to the Borrower and its
consolidated Subsidiaries (determined on a consolidated basis):
(a) Net Worth at all times during the periods set forth below
in the amounts not less than the amount set forth below opposite each
such period:
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Period Minimum Net Worth
------ -----------------
10/1/95-12/31/95 $4,200,000
1/1/96-3/31/96 $4,000,000
4/1/96-6/30/96 $4,200,000
7/1/96-9/30/96 $4,100,000
10/1/96-12/31/96 $4,300,000
1/1/97-3/31/97 $4,100,000
4/1/97-6/30/97 $4,400,000
7/1/97-9/30/97 $4,200,000
10/1/97-12/31/97 $4,200,000
1/1/98-3/31/98 $4,500,000
4/1/98-12/31/98 $4,500,000
(b) A ratio of Total Liabilities to Net Worth at all times
during the periods set forth below at not more than the ratio set forth
below opposite each such period:
Period Minimum Ratio
------ -------------
10/1/95-12/31/95 6.75 to 1
1/1/96-3/31/96 7.00 to 1
4/1/96-6/30/96 6.75 to 1
7/1/96-9/30/96 7.00 to 1
10/1/96-12/31/96 6.50 to 1
1/1/97-3/31/97 6.75 to 1
4/1/97-6/30/97 6.50 to 1
7/1/97-9/30/97 6.75 to 1
10/1/97-12/31/97 6.40 to 1
1/1/98-3/31/98 6.60 to 1
4/1/98-12/31/98 6.30 to 1
(c) At the end of each fiscal quarter ending during the
periods set forth below, the Operating Cash Flow Ratio for the
immediately preceding four fiscal quarters at not less than the
following:
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<PAGE>
Minimum Operating Cash Flow Ratio:
Period Ratio
------ -----
10/1/95-12/31/95 1.00 to 1
1/1/96-3/31/96 1.00 to 1
4/1/96-6/30/96 1.00 to 1
7/1/96-9/30/96 1.00 to 1
10/1/96-12/31/96 1.00 to 1
1/1/97-3/31/97 1.00 to 1
4/1/97-6/30/97 1.00 to 1
7/1/97-9/30/97 1.00 to 1
10/1/97-12/31/97 1.00 to 1
1/1/98-3/31/98 1.00 to 1
4/1/98-12/31/98 1.00 to 1
1.16. Article 6 of the Credit Agreement is hereby amended by adding a
new Section 6.14 at the end thereof as follows:
"Section 6.14 New York Mortgage.
Pay to the Bank on or before June 30, 1996 all mortgage
recording taxes which are payable upon the recording of the mortgage
covering the property owned by 47th Street Parking Associates located
at 131-135 East 47th Street, New York, New York (the "47th Street
Mortgage"), and provide the Bank with a mortgagee's title insurance
policy or policies, which shall be issued to the Bank in form and by a
company or companies satisfactory to the Bank insuring that the 47th
Street Mortgage constitutes a valid, direct first mortgage lien, in an
aggregate principal amount of not less than $3,000,000 of the Loans
upon the fee simple title of 47th Street Parking Associates, and
execute and deliver, or cause to be executed and delivered, such other
agreements, instruments and documents as the Bank may reasonably
require to effect the purposes of the 47th Street Mortgage; provided,
however, that if an Event of Default occurs on or prior to June 30,
1996, the Bank may record the 47th Street Mortgage and all of the
foregoing costs and expenses (including, without limitation, mortgage
recording tax and title insurance costs) shall be immediately due and
payable by the Borrower."
1.17. Section 7.1 of the Credit Agreement is hereby amended by adding
a new subsection (f) at the end thereof as follows:
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<PAGE>
"(f) Indebtedness of the Borrower in an aggregate principal
amount not to exceed $500,000 owing to Lowell Harwood and Sanford
Harwood; provided that (i) such Indebtedness be evidenced by the
promissory notes (the "Shareholder Notes") dated the Tenth Amendment
Closing Date, copies of which have been delivered, and are in form and
substance satisfactory, to the Bank pursuant to Amendment No. 10, (ii)
such Indebtedness is subordinated to the Obligations pursuant to the
subordination agreement (the "Subordination Agreement") dated as of the
Tenth Amendment Closing Date and executed pursuant to Amendment No.
10."
1.18. Section 7.11 of the Credit Agreement is hereby amended by adding
at the end thereof the following:
"or modify, amend, supplement or terminate, or agree to
modify, amend, supplement or terminate the Shareholder Notes or the
Subordination Agreement"
1.19. The Credit Agreement is hereby amended by attaching Exhibit
2.5(e) thereto in the form of Exhibit 2.5(e) to this Amendment No. 10.
ARTICLE 2 AMENDED AND RESTATED NOTES
2.01. Simultaneously with the execution and delivery of this Amendment
No. 10, the Borrower shall execute and deliver to the Bank a Fifth Amended and
Restated Credit Note in the form of Exhibit A attached hereto in substitution
for, and in fifth restatement of, the indebtedness evidenced by the Credit Note.
Upon the execution of the Fifth Amended and Restated Credit Note and delivery
thereof by the Borrower to the Bank, the Bank shall mark the existing Credit
Note "Amended and Restated by Substitution of Amended and Restated Credit Note"
and shall return it to the Borrower. All interest accrued and unpaid on the
existing Credit Note through the date of execution and delivery of the Fifth
Amended and Restated Credit Note shall be evidenced by and payable under the
Fifth Amended and Restated Credit Note.
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<PAGE>
2.02. Simultaneously with the execution and delivery of this Amendment
No. 10, the Borrower shall execute and deliver to the Bank a First Amended and
Restated Square Term Note in the form of Exhibit B attached hereto in
restatement of, the indebtedness evidenced by the Square Term Note. Upon the
execution of the First Amended and Restated Square Term Note and delivery
thereof by the Borrower to the Bank, the Bank shall mark the existing Square
Term Note "Amended and Restated by Substitution of Amended and Restated Square
Term Note" and shall return it to the Borrower. All interest accrued and unpaid
on the existing Square Term Note through the date of execution and delivery of
the First Amended and Restated Square Term Note shall be evidenced by and
payable under the First Amended and Restated Square Term Note.
ARTICLE 3 ACKNOWLEDGMENTS AND CONFIRMATIONS
3.01. Each of the Borrower and 808 Corp. acknowledges and confirms
that:
(a) the Liens granted pursuant to the Security Documents secure,
without limitation, the Indebtedness, liabilities and obligations of the
Borrower to the Bank under this Amendment No. 10 and the Fifth Amended and
Restated Credit Note and the First Amended and Restated Square Term Note
(collectively, the "Restated Notes"), whether or not so stated in the Security
Documents, and that the term "Obligations" or "Liabilities" as used in the
Security Documents (or any other term used therein to refer to the Indebtedness,
liabilities and obligations of the Borrower to the Bank) includes, without
limitation, Indebtedness, liabilities and obligations to the Bank under the
Credit Agreement, as amended by this Amendment No. 10, and the Restated Notes;
(b) all references in the Credit Agreement, the Security Documents, the
other Loan Documents and in any other agreements, instruments and documents
executed and delivered pursuant to any of the foregoing to the "Credit
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<PAGE>
Agreement" and, in the case of the Credit Agreement to "this Agreement", shall
be deemed to refer to the Credit Agreement, as amended hereby; and
(c) all references in the Credit Agreement, the Security Documents, the
other Loan Documents and in any other agreement, instrument or document executed
and delivered pursuant to any of the foregoing to the "Notes" shall be deemed to
refer to the Restated Notes.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
4.01. The Borrower and 808 Corp. each represents and warrants to the
Bank that:
(a) each of the representations and warranties set forth in Article 3
of the Credit Agreement is true in all respects as of the date hereof and with
the same effect as though made on the date hereof, and is hereby incorporated
herein in full by reference as if fully restated herein in
its entirety, except for changes in the ordinary course of business, which are
not, either singly or in the aggregate, materially adverse to the business or
financial condition of the Borrower and its Subsidiaries taken as a whole;
(b) it has the power and authority to execute, deliver and perform
this Amendment No. 10, the Restated Notes and the other documents and
instruments executed pursuant hereto (collectively, the "Amendment Documents");
(c) it has taken all necessary action, corporate or otherwise, to
authorize the execution, delivery and performance of the Amendment Documents;
and
(d) the Amendment Documents constitute the valid and legally binding
obligations of the Borrower and 808 Corp. to the extent a party thereto, each
enforceable in accordance with their respective terms.
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<PAGE>
ARTICLE 5 CONDITIONS
5.01. The effectiveness of the amendments contained in Article 1 of
this Amendment No. 10 shall be subject to the satisfaction of the following
conditions:
(a) The Bank shall have received: (i) the duly executed and delivered
Restated Notes, (ii) a legal opinion from counsel to the Borrower, 808 Corp. and
the Subsidiary Guaranters in form and substance satisfactory to the Bank, (iii)
a Subordination Agreement in the form of Exhibit C attached hereto duly executed
and delivered by all parties thereto, (iv) copies of promissory notes executed
by and delivered by the Borrower in favor of Lowell Harwood and Sanford Harwood
in form and substance satisfactory to the Bank, (v) mortgage modifications duly
executed and delivered by the Borrower and the Subsidiaries of the Borrower with
respect to each existing mortgage which secures the Obligations and title
insurance endorsements with respect thereto as requested by the Bank, all in
form and substance satisfactory to the Bank, and (vi) a duly executed mortgage
in form and substance satisfactory to the Bank with respect to the property
owned by 47th Street Parking Associates and located at 131-135 East 47th Street,
New York, New York;
(b) The Borrower shall have paid to the Bank past due interest in the
amount of $209,400.98; and
(c) The Borrower shall have paid to the Bank all legal fees and
disbursements incurred by the Bank in connection with the preparation,
negotiation and execution of this Amendment No. 10 and any documents,
instruments and agreements required hereby.
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<PAGE>
ARTICLE 6 MISCELLANEOUS; NO WAIVER
6.01. The provisions of Article 10 of the Credit Agreement shall
govern this Amendment No. 10 with respect to the subject matter set forth
therein. THIS AMENDMENT NO. 10, THE RESTATED NOTES, THE SECURITY DOCUMENTS, THE
CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS ACKNOWLEDGED, AMENDED AND
CONFIRMED HEREBY, AND ALL OTHER DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED
IN CONNECTION HEREWITH AND THEREWITH, SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
6.02. Whether or not the transactions contemplated by this Amendment
No. 10 are consummated, the Borrower will pay all fees and out-of-pocket
expenses of the Bank incurred in connection with such transactions, including
all reasonable fees and disbursements of legal counsel to the Bank.
6.03. Except as specifically amended herein, the Credit Agreement and
each of the other Loan Documents shall remain in full force and effect in
accordance with their respective terms.
6.04. This Amendment No. 10 may be signed in any number of
counterparts which, when taken together, shall constitute one and the same
document.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Amendment No. 10
on the date first above written.
NATWEST BANK N.A.
By:___________________________
Title:________________________
SQUARE INDUSTRIES, INC.
By:___________________________
Title:________________________
808 SQUARE CORP.
By:___________________________
Title:________________________
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<PAGE>
The undersigned Subsidiary Guarantors of all or a portion of the
obligation under, arising out of, or relating to the Credit Agreement and the
other Loan Documents, including without limitation, the Notes, hereby consent to
the execution and delivery of this Amendment No. 10 and confirm and agree that
our respective Guarantees shall remain in full force and effect and shall not be
released or otherwise modified.
Dated: October 31, 1995
306 West 44 Corp.
Park/Fly, Inc.
47th Street Parking, Inc.
Square Philadelphia Corp.
Square Juniper Corp.
810 Square Corp.
6&30 Garage Corp.
Square Brighton Corp., Inc.
Second Avenue Commercial, Inc.
Square 43rd Corp.
Public Square Parking Corp.
Leslie Craig Corp.
643 Broad Street Corp.
808 Square Corp.
Gailgal Holding Corp.
Reboy Development Corp.
Marbern Industries, Inc.
S.P. Parking, Inc.
Square Plus Operating of New Jersey, Inc.
Elzab Development Corp.
Square Plus Operating Corp.
Square 30th St. Corp.
400 Square Garage Corp.
161 St. Parking Corp.
112 W. 25th St. Square Corp.
12th & Sansom Parking Corp.
[signatures continue on following page]
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<PAGE>
[signatures continued from previous page]
Square Fulton Corp.
Square Liberty Corp.
714 Smithfield Corp.
Pennsylvania Square Corp.
Square Alpha Corp.
Square Cadman Corp.
Broad Newark Corporation
125 Halsey Corp.
Broad Newark Urban Renewal Corporation
By:___________________________
Title:_________________________
47th Street Parking Associates
By: 47th Street Parking, Inc.,
General Partner
By:___________________________
Title:_________________________
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<PAGE>
The undersigned hereby consent to the execution and delivery of this
Amendment No. 10 and confirm and agree that our respective Pledge Agreements
shall remain in full force and effect as modified hereby.
Dated: October 31, 1995
SQUARE INDUSTRIES, INC.
By:___________________________
Title:_________________________
SQUARE PLUS OPERATING CORP.
By:___________________________
Title:_________________________
SQUARE PLUS OPERATING OF
NEW JERSEY, INC.
By:___________________________
Title:_________________________
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<PAGE>
EXHIBIT 2.5(e)
Financial Projections
22
<PAGE>
Exhibit A to
Amendment No. 10
FIFTH AMENDED
AND
RESTATED CREDIT NOTE
$12,783,452.70 As of October 31, 1995
New York, New York
FOR VALUE RECEIVED, SQUARE INDUSTRIES, INC., a New York corporation
(the "Borrower"), hereby promises to pay to the order of NATWEST BANK N.A. (the
"Bank") on such dates as provided in the Credit Agreement referred to below at
the Applicable Lending Office of the Bank, the principal sum of Twelve Million
Seven Hundred Eighty-Three Thousand Four Hundred Fifty-Two Dollars and Seventy
Cents ($12,783,452.70) (or such lesser amount as shall equal the aggregate
principal amount of the Credit Loans and reimbursement obligations with respect
to Letters of Credit outstanding from time to time made by the Bank under the
Credit Agreement referred to below), in lawful money of the United States of
America and in immediately available funds, and to pay interest thereon in like
money and funds, for the period commencing on the date of such Credit Loan or
reimbursement obligations until such Credit Loan or reimbursement obligations is
paid in full, at the rates per annum and on the dates hereinafter provided.
This Note is the Credit Note referred to in the Credit Agreement,
dated July 5, 1988 (as amended from time to time the "Credit Agreement"),
between the Borrower, 808 Square Corp. and the Bank and evidences Credit Loans
made by the Bank thereunder. This Note is entitled to certain security as
further described in the Credit Agreement. Capitalized terms used in this Note
have the respective meanings assigned to them in the Credit Agreement.
This Note shall bear interest from the date of each Credit Loan made
by the Bank until such Credit Loan shall be paid in full, at a rate per annum
(computed on the basis of a year of 360 days and actual days elapsed, including
the first day but excluding the last in the period for which payable) as
provided in the Credit Agreement. Notwithstanding the foregoing, the Borrower
shall pay interest on the unpaid principal balance of any Credit Loan and any
unpaid reimbursement obligation with respect to any Letter of Credit, and on any
interest payable hereunder (to the extent permitted by law) which shall not be
paid in full when due (whether at stated maturity, by acceleration or
otherwise), for the period commencing on the due date thereof until the payment
in full at the applicable Post-Default Rate. Except as provided in the next
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<PAGE>
sentence, accrued interest on the principal amount of this Note shall be payable
as provided in the Credit Agreement. Interest payable at the Post-Default Rate
shall be payable on demand of the Bank.
Anything in this Note or the Credit Agreement to the contrary
notwithstanding, the obligation of the Borrower to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be made to the Bank to the extent that the Bank's receipt thereof
would not be permissible under the law or laws applicable to the Bank limiting
the rates of interest which may be changed or collected by the Bank. Any such
payments of interest which are not made as a result of the limitations referred
to in the preceding sentence shall be made by the Borrower on the earliest
Payment Date or Dates on which the receipt thereof would be permissible under
the laws applicable to the Bank limiting the rates of interest which may be
charged or collected by the Bank. Such deferred interest shall not bear
interest.
The Borrower hereby expressly authorizes the Bank, at the option of
the Bank, to record on the schedule annexed to this Note (or on a supplemental
schedule thereto) the principal amount and date of each Credit Loan made by the
Bank under the Credit Agreement and the amount of each payment and prepayment of
principal of each such Credit Loan received by the Bank, provided however, that
failure to make any such notation shall not affect the rights of the Bank or the
obligations of the Borrower hereunder or under the Credit Agreement in respect
of such Credit Loans. The amount of each Credit Loan made by the Bank under the
Credit Agreement and the amount of each payment and prepayment of principal of
each such Credit Loan received by the Bank shall be determined by the notations
on the schedule annexed to this Note or by the ledgers and records maintained by
the Bank.
Upon the occurrence and continuance of an Event of Default, the entire
unpaid balance of the principal hereof an accrued interest hereon shall
immediately become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note has been executed and delivered in New York, New York and
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of New York.
SQUARE INDUSTRIES, INC.
By:__________________________
Title:_________________________
-24-
<PAGE>
SCHEDULE TO FIFTH AMENDED AND RESTATED
CREDIT NOTE MADE BY SQUARE INDUSTRIES, INC.
AND PAYABLE TO THE ORDER OF
NATWEST BANK N.A.
<TABLE>
<CAPTION>
Date
of Principal Date of Principal
Notation Amount Principal Amount Paid Balance
Loan of Loan Payment or Prepaid Outstanding Made By
- ---- ------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
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<PAGE>
Exhibit B to
Amendment No. 10
FIRST AMENDED
AND
RESTATED SQUARE TERM NOTE
$1,688,100.00 As of October 31, 1995
New York, New York
FOR VALUE RECEIVED, SQUARE INDUSTRIES, INC., a New York corporation
(the "Borrower"), hereby promises to pay to the order of NATWEST BANK N.A. (the
"Bank") on such dates as provided in the Credit Agreement referred to below at
the Applicable Lending Office of the Bank, the principal sum of One Million Six
Hundred Eighty- Eight Thousand One Hundred Dollars ($1,688,100.00), in lawful
money of the United States of America and in immediately available funds, and to
pay interest thereon in like money and funds, for the period commencing on the
date of such Square Term Loan until such Square Term Loan is paid in full, at
the rates per annum and on the dates hereinafter provided.
This Note is the Square Term Note referred to in the Credit Agreement,
dated July 5, 1988 (as amended from time to time the "Credit Agreement"),
between the Borrower, 808 Square Corp. and the Bank and evidences Square Term
Loans made by the Bank thereunder. This Note is entitled to certain security as
further described in the Credit Agreement. Capitalized terms used in this Note
have the respective meanings assigned to them in the Credit Agreement.
This Note shall bear interest from the date hereof until such Square
Term Loan shall be paid in full, at a rate per annum (computed on the basis of a
year of 360 days and actual days elapsed, including the first day but excluding
the last in the period for which payable) as provided in the Credit Agreement.
Notwithstanding the foregoing, the Borrower shall pay interest on the unpaid
principal balance of the Square Term Loan and on any interest payable hereunder
(to the extent permitted by law) which shall not be paid in full when due
(whether at stated maturity, by acceleration or otherwise) for the period
commencing on the due date thereof until the payment in full at the applicable
Post-Default Rate. Except as provided in the next sentence, accrued interest on
the principal amount of this Note shall be payable as provided in the Credit
Agreement. Interest payable at the Post-Default Rate shall be payable on demand
of the Bank.
-26-
<PAGE>
Anything in this Note or the Credit Agreement to the contrary
notwithstanding, the obligation of the Borrower to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be made to the Bank to the extent that the Bank's receipt thereof
would not be permissible under the law or laws applicable to the Bank limiting
the rates of interest which may be changed or collected by the Bank. Any such
payments of interest which are not made as a result of the limitations referred
to in the preceding sentence shall be made by the Borrower on the earliest
Payment Date or Dates on which the receipt thereof would be permissible under
the laws applicable to the Bank limiting the rates of interest which may be
charged or collected by the Bank. Such deferred interest shall not bear
interest.
The Borrower hereby expressly authorizes the Bank, at the option of
the Bank, to record on the schedule annexed to this Note (or on a supplemental
schedule thereto) the amount of each payment and prepayment of principal of the
Square Term Loan received by the Bank, provided however, that failure to make
any such notation shall not affect the rights of the Bank or the obligations of
the Borrower hereunder or under the Credit Agreement in respect of the Square
Term Loan. The amount of the Square Term Loan made by the Bank under the Credit
Agreement and the amount of each payment of principal of the Square Term Loan
received by the Bank shall be determined by the notations on the schedule
annexed to this Note or by the ledgers and records maintained by the Bank.
Upon the occurrence and continuance of an Event of Default, the entire
unpaid balance of the principal hereof an accrued interest hereon shall
immediately become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note has been executed and delivered in New York, New York and
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of New York.
SQUARE INDUSTRIES, INC.
By:__________________________
Title:_________________________
-27-
<PAGE>
SCHEDULE TO FIRST AMENDED AND RESTATED
SQUARE TERM NOTE MADE BY SQUARE INDUSTRIES, INC.
AND PAYABLE TO THE ORDER OF
NATWEST BANK N.A.
<TABLE>
<CAPTION>
Date
of Principal Date of Principal
Notation Amount Principal Amount Paid Balance
Loan of Loan Payment or Prepaid Outstanding Made By
- ---- ------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
-28-
<PAGE>
Exhibit C to
Amendment No. 10
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made as of October
31, 1995 by and among Square Industries, Inc., a New York corporation (the
"Borrower"), 808 Square Corp., a New York corporation ("808 Corp."), NatWest
Bank N.A. (the "Bank") and Lowell Harwood and Sanford Harwood (collectively, the
"Creditors").
RECITALS:
WHEREAS, the Borrower, 808 Corp. and the Bank are parties to that
certain Credit Agreement dated as of July 5, 1998, as amended (the "Credit
Agreement") pursuant to which the Bank has made certain financial accommodations
to the Borrower and 808 Corp. on the terms and conditions set forth therein;
WHEREAS, as a condition to entering into Amendment No. 10 to Credit
Agreement dated as of the date hereof, the Bank has required that the Creditors
enter into this Agreement; and
WHEREAS, the Creditors are entering into this Agreement to induce the
Bank to enter into Amendment No. 10 to Credit Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Each capitalized term used herein and not otherwise
defined herein shall have the meaning ascribed to it by the Senior Credit
Agreement. When used herein, the following terms shall have the meanings
indicated:
"Post-Petition Interest" shall mean interest accruing in
respect of Senior Indebtedness after the commencement of any
bankruptcy, insolvency, receivership or similar proceedings by or
against the Borrower at the rate applicable to such Senior Indebtedness
pursuant to the Senior Credit Agreement, whether or not such interest
is allowed as a claim enforceable against the Borrower in any such
proceeding and any other interest that would have accrued but for the
commencement of such proceedings.
"Senior Credit Agreement" means the Credit Agreement, as from
time to time amended, supplemented restated, modified, refunded,
refinanced or replaced.
"Senior Indebtedness" shall mean the Obligations and all
indebtedness, obligations and liabilities of every kind and nature now
existing or hereafter arising, of the Borrower and/or 808 Corp. under,
in connection with, or evidenced by, the Senior Credit Agreement
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<PAGE>
and the other Loan Documents, including, without limitation, all
principal, premium (if any), interest (including Post-Petition
Interest), fees, costs, expenses, indemnities and liabilities provided
for therein, and any renewals, extensions, modifications and refundings
of any of the foregoing; provided, however, that the aggregate amount
of Senior Indebtedness for purposes of this Agreement shall not exceed
$16,000,000.
"Subordinated Indebtedness" means all principal, interest,
fees and all other amounts from time to time owing by the Borrower to
one or more of the Creditors pursuant to the promissory notes dated as
of the date hereof and executed by the Borrower in favor of the
Creditors, and any renewals, extensions, modifications and refundings
of any of the foregoing (the "Subordinated Notes"). Subordinated
Indebtedness shall also include any and all principal, interest, fees
and all other amounts owing with respect to any loans advanced by one
or more of the Creditors to the Borrower or any of its subsidiaries
after the date hereof without the prior written consent of the Bank and
for which a separate subordination agreement in the form of this
Agreement has not been executed and delivered by the Creditors and the
Borrower.
References to a "holder of Subordinated Indebtedness" shall be deemed references
to the Creditors and any assignee or successor of any of them with respect to
Subordinated Indebtedness.
2. Subordination Provisions.
(a) Subordination. The Borrower, for itself and its
successors, covenants and agrees, and each holder of the Subordinated
Indebtedness by such holder's execution hereof or acceptance of any
Subordinated Indebtedness, likewise covenants and agrees, that the
payment of the Subordinated Indebtedness is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in
right of payment to the prior payment in full in cash of all Senior
Indebtedness. For all purposes hereof, a payment or distribution on
account of the Subordinated Indebtedness may consist of cash, property
or securities, by set-off or otherwise, and a payment or distribution
on account of the Subordinated Indebtedness shall include, without
limitation, any redemption, purchase or other acquisition of the
Subordinated Indebtedness.
(b) Distribution on Dissolution, Liquidation and
Reorganization. Upon any distribution of assets of the Borrower, upon
any foreclosure, dissolution, winding up or liquidation of the
Borrower, whether voluntary or involuntary, or upon any reorganization,
readjustment, arrangement or similar proceeding relating to the
Borrower, or any of its property, and whether in bankruptcy, insolvency
or receivership proceedings or otherwise:
(i) the holders of all Senior Indebtedness
shall be entitled to receive payment in full in cash
of the Senior Indebtedness before the holder or
holders of the Subordinated Indebtedness are entitled
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<PAGE>
to receive any payment with respect to the
Subordinated Indebtedness; and
(ii) any payment or distribution of assets
of the Borrower of any kind or character, whether in
cash, property or securities, to which the holder or
holders of the Subordinated Indebtedness would be
entitled except for the provisions hereof shall be
paid by the liquidating trustee or agent or other
person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of
Senior Indebtedness (or to the agent for such
holders) to the extent necessary to make payment in
full of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or
distribution to the holders of such Senior
Indebtedness.
If any holder of Subordinated Indebtedness does not
file a proper claim or proof of debt in the form required in any
proceeding referred to above prior to thirty (30) days before the
expiration of the time to file such claim in such proceeding, then the
holder of any such Senior Indebtedness is hereby irrevocably appointed
the agent and attorney-in-fact (in its own name or in the name of any
holder of any Subordinated Indebtedness or otherwise), but shall have
no obligation, to execute, verify, deliver and file any such proofs of
claim, consents, assignments or other instruments for or on behalf of
such holder. Each holder of the Subordinated Indebtedness agrees that
while it shall retain the right to vote its claim and otherwise act in
any bankruptcy, insolvency or similar proceedings related to the
Borrower (including, without limitation, the right to vote to accept or
reject any plan of partial or complete liquidation, reorganization,
arrangement, composition or extension), such holder will not take any
acts or vote in any way so as to contest the enforceability of the
subordination provisions set forth herein.
(c) Default Under Senior Indebtedness. No payment or
distribution of any kind or character shall be made by the Borrower on
account of the Subordinated Indebtedness if, at the time of such
payment or distribution, there shall exist a default in the payment of
the principal of, premium, if any, or interest on, or any other amount
owing with respect to Senior Indebtedness or a Default or Event of
Default has occurred and is continuing. The Borrower may resume
payments in respect of the Subordinated Indebtedness (including any
missed payments) when such Default or Event of Default shall have been
cured or waived in writing by the applicable entity in accordance with
the terms of the Senior Credit Agreement, or all of the Senior
Indebtedness shall have been paid in full in cash.
(d) Payment Remittance. In the event that,
notwithstanding the foregoing, any payment or distribution of assets of
the Borrower, or any payment by or on behalf of, of any kind or
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<PAGE>
character, whether in cash, property or securities, prohibited by any
of the foregoing paragraphs 2(b) or 2(c) shall be paid to or received
by any holder of Subordinated Indebtedness, then and in such event such
payment or distribution shall be held in trust for the benefit of the
holders of Senior Indebtedness and paid over and delivered forthwith to
the holders of Senior Indebtedness (or to the agent for such holders),
for application to the payment of all Senior Indebtedness remaining
unpaid until all such Senior Indebtedness shall have been paid in full
in cash.
(e) Subrogation. If any amount payable in respect of
the Subordinated Indebtedness is paid over to the holders of Senior
Indebtedness, then subject to the payment in full in cash of all Senior
Indebtedness, the holder or holders of the Subordinated Indebtedness
shall be subrogated to the rights of the holders of Senior Indebtedness
to receive payments or distributions of cash, property or securities of
the Borrower applicable to Senior Indebtedness until the principal of
and interest on the Subordinated Indebtedness shall be paid in full in
cash and, for the purposes of such subrogation, no such payments or
distributions to the holders of Senior Indebtedness of cash, property
or securities otherwise distributable to the holder or holders of the
Subordinated Indebtedness shall, as between the Borrower, its creditors
other than the holders of Senior Indebtedness, and the holder or
holders of the Subordinated Indebtedness, be deemed to be a payment by
the Borrower to or on account of Senior Indebtedness.
(f) Standstill. During any period in which a payment
or distribution of assets of the Borrower is prohibited by paragraph
2(b) or 2(c) above, no holder of any Subordinated Indebtedness shall
take any action to accelerate, collect or otherwise exercise any right
or remedy in respect of such Subordinated Indebtedness other than the
filing of such documents as may be necessary to preserve the rights of
such holder relative to such Subordinated Indebtedness in any
proceeding referenced in paragraph 2(b) above.
(g) Payments Permitted. Nothing contained herein
shall affect the obligation of the Borrower to make, or prevent the
Borrower from making, at any time except as provided in paragraph 2(b)
or 2(c) above, payments of principal of or interest on the Subordinated
Indebtedness, in each case as required by the terms of the Subordinated
Notes as in effect on the date hereof and subject also to such
limitations as to the amount, timing or source of any such payments
imposed by the Senior Credit Agreement.
(h) Reliance re Identification of Persons. Upon any
distribution of assets of the Borrower or payments by or on behalf of
the Borrower referred to herein, the holders of the Subordinated
Indebtedness shall be entitled to rely upon any order or decree of a
court of competent jurisdiction in which any proceedings of the nature
referred to in paragraph 2(a) hereof are pending and upon a certificate
of the debtor in possession, bankruptcy trustee, liquidating trustee or
agent or other Person making any distribution to the holders of the
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<PAGE>
Subordinated Indebtedness for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Borrower, the amount thereof
or payable thereon, and all other facts pertinent thereto.
(i) Waiver and Consent. Each holder of the
Subordinated Indebtedness waives any and all notice of the acceptance
of these provisions or of the creation, renewal, extension or accrual,
now or at any time in the future, of any Senior Indebtedness or of the
reliance of the holders of the Senior Indebtedness on these provisions.
Each holder of the Subordinated Indebtedness acknowledges and agrees
that (i) the subordination provisions set forth herein shall be
specifically enforceable against such Persons by the holders of the
Senior Indebtedness, and (ii) without notice to or further assent by
it, the Senior Indebtedness may from time to time, in whole or in part,
be renewed, extended, increased, refunded or released by the holders
thereof, as they may deem advisable, the credit agreements and any
other instruments or documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated.
(j) Subordination Unaffected by Certain Events. The
rights set forth herein of the holders of the Senior Indebtedness as
against each holder of the Subordinated Indebtedness shall remain in
full force and effect without regard to, and shall not be impaired or
affected by:
(i) any act or failure to act on the part of the
Borrower or 808 Corp.;
(ii) any extension or indulgence in respect of any
payment or prepayment of the Senior Indebtedness or any part thereof or
in respect of any other amount payable to any holder of the Senior
Indebtedness; or
(iii) any amendment, modification or waiver of, or
addition or supplement to, or deletion for, or compromise, release,
consent or other action in respect of, any of the terms of any Senior
Indebtedness or any other agreement which may be made relating to any
Senior Indebtedness; or
(iv) any exercise or nonexercise by any holder of
Senior Indebtedness of any right, power, privilege or remedy under or
in respect of such Senior Indebtedness or the Subordinated Indebtedness
or any waiver of any such right, power, privilege or remedy or any
default in respect of such Senior Indebtedness or the Subordinated
Indebtedness, or any receipt by any holder of Senior Indebtedness of
any security, or any failure by such holder to perfect a security
interest in, or any exchange, sale, release or surrender by such holder
of, any security for the payment of such Senior Indebtedness; or
(v) any merger or consolidation of the Borrower or
any of its Subsidiaries into or with any of its Subsidiaries or into or
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<PAGE>
with any other Person, or any sale, lease or transfer of any or all of
the assets of the Borrower or any of its Subsidiaries to any other
Person; or
(vi) the absence of any notice to, or knowledge by,
any holder of the Subordinated Indebtedness of the existence
or occurrence of any of the matters or events set forth in the
foregoing clauses (i) through (v).
(k) Reinstatement of Subordination. The obligations
of each holder of the Subordinated Indebtedness under the subordination
provisions set forth herein shall continue to be effective, or be
reinstated, as the case may be, as to any payment in respect of any
Senior Indebtedness that is rescinded or must otherwise be returned by
the holder of such Senior Indebtedness upon the occurrence or as a
result of any proceeding, all as though such payment had not been made.
(l) Legend. The Creditors shall cause each document
or instrument creating or evidencing Subordinated Indebtedness to bear
the following legend:
"The obligations of the Borrower hereunder are
subordinated to certain Senior Indebtedness to the extent and
on the terms set forth in that certain Subordination Agreement
dated as of October 31, 1995 by and among Square Industries,
Inc., 808 Square Corp., NatWest Bank N.A., Lowell Harwood and
Sanford Harwood, as such agreement is from time to time
amended."
3. Amendment of Documents. Prior to the payment in full in cash of the
Senior Indebtedness and notwithstanding anything to the contrary in the
Subordinated Notes, the Borrower and the Creditors shall not amend, modify or
supplement the Subordinated Notes in violation of Section 7.11 of the Credit
Agreement or of any successor provision in any Senior Credit Agreement.
4. Sale or Transfer. In the event of any proposed sale, assignment,
disposition or other transfer of all or any portion of the Subordinated
Indebtedness, the holder thereof, prior to the consummation of any such action,
shall cause the transferee thereof to execute and deliver to the holders of
Senior Indebtedness (or the agent for such holders) an agreement substantially
identical to this Agreement, providing for the continued subordination, to the
extent set forth herein, of the portion of the Subordinated Indebtedness so
transferred to the Senior Indebtedness, as provided herein and for the continued
effectiveness of all of the rights of the holders of the Senior Indebtedness
with respect to such transferred Subordinated Indebtedness. Notwithstanding the
failure to execute and/or deliver any such agreement, the subordination of the
Subordinated Indebtedness to the Senior Indebtedness effected hereby shall
survive any sale, assignment, disposition or other transfer of all or any
portion of the Subordinated Indebtedness.
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<PAGE>
5. Miscellaneous. (a) Subject to paragraph 2(h) above, the provisions
of this Agreement are solely for the purpose of defining the relative rights of
the holders of Subordinated Indebtedness and Creditors on the one hand and the
holders of Senior Indebtedness on the other, and shall not be deemed to create
any rights or priorities in any other Person, including without limitation, the
Borrower.
(b) This Agreement may be amended only by a written instrument
signed by the Bank and the Creditors. No waiver of any term or provision of this
Agreement shall be effective unless it is in writing and signed by the party
against whom such waiver is sought to be enforced. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. This Agreement may be signed in one or more counterparts
which, when taken together, shall constitute one and the same document.
(c) Any notices provided for hereunder shall be given in accordance
with Section 9.9 of the Credit Agreement, and, in the case of the Creditors,
shall be addressed to such Creditors in care of the Borrower in accordance with
Section 9.9 of the Credit Agreement.
(d) If any provision of this Agreement shall be prohibited by or be
invalid under applicable law, such provision shall be deemed ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
(e) The paragraph headings used in this Agreement are for
convenience only and shall not effect the interpretation of any of the
provisions hereof.
(f) THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW
YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SQUARE INDUSTRIES, INC.
By: ________________________
Title: _____________________
808 SQUARE CORP.
By: ________________________
Title: _____________________
NATWEST BANK N.A.
By: ________________________
Title: _____________________
----------------------------
LOWELL HARWOOD
----------------------------
SANFORD HARWOOD
<PAGE>
Exhibit 10(b)
AMENDMENT TO LOAN AGREEMENT
Agreement dated October 31, 1995 between Square Industries, Inc. a New
York corporation (the "Borrower") and Messrs. Lowell Harwood and Sanford Harwood
(collectively the "Lenders") amending the Loan Agreement dated June 28, 1995
among the Borrowers and the Lenders.
WHEREAS, the Borrower simultaneous herewith is entering into Amendment
No. 10, dated October 31, 1995 to its Credit Agreement with NatWest Bank NA,
formerly National Westminster Bank, USA (the "Bank") originally dated July 6,
1988 and as amended thereafter from time to time (the "Credit Agreement") which
relate to two loans, the Facility I Loan in the outstanding principal amount of
approximately $11,730,000 and the Facility II Loan in the outstanding principal
amount of approximately $1,688,000, to provide inter alia, for an extension of
the final maturity date of the Facility I Loan to December 31, 1998 and of the
Facility II Loan to June 30, 1998 and a reduction of the interest payable with
respect to both loans subject to the satisfaction of certain conditions to be
set forth in the Amendment No. 10 to the Credit Agreement (the Credit Agreement
as amended is hereinafter referred to as the "Credit Agreement".)
WHEREAS, the Credit Agreement provides that the terms of the loans
extended by the Lenders be revised in accordance with the terms set forth
hereinafter (the "Agreement Amendment")set forth.
IT IS HEREBY AGREED that:
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<PAGE>
1. The amount of funds to be advanced by the Lenders to the Borrower
shall not exceed the amount advanced by them as of the date hereof, which
exclusive of interest accrued on advances extended, amount to an aggregate of
$500,000 by both Lenders, or $250,000 by each Lender (the "Harwood Loans").
2. A. The rate of interest payable by the Borrower to the Lenders on
the Harwood Loans shall be as follows:
i. From the date the Harwood Loans were advanced through December 31,
1995, 10.25% per annum.
ii. From January 1, 1996 to payment in full of the principal of the
Harwood Loans, the rate of interest payable by the Borrower to the Bank pursuant
to the Credit Agreement.
iii. After the date of payment in full of both the Facility I and
Facility II (the "Bank Loans Repayment Date"), the rate thereafter equivalent to
the highest rate of interest then payable by the Borrower with respect to any
loans then outstanding from any bank or investment banking institution having an
outstanding principal amount of at least of $100,000 or, if no such loan is
outstanding, at the prime rate of the Bank.
B. Interest shall be paid as follows:
i. Accrued unpaid interest calculated at the rate of 3.99% per annum
from the date or dates of the Harwood Loans shall be paid on the date hereof,
with payment of the balance of the amount accrued through the date hereof to be
paid on the Bank Loans Repayment Date.
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<PAGE>
ii. Accrued interest commencing with the date hereof shall be paid
monthly in arrears at the rate of 3.99% per annum with the balance of the
accrued and unpaid interest to be paid on the Bank Loans Repayment Date.
3. As long as either Facility Loan remains outstanding, the principal
of the Harwood Loans shall not be payable until the Bank has received principal
payments after October 31, 1995 aggregating $1,000,000 on either or both
Facility Loans. Principal payments of the Harwood Loans shall be made thereafter
to the extent of 50% (25% for each Lender) of the amount of principal of
Facility Loans paid by the Borrower in excess of the foregoing $1,000,000 with
payment to be made to the Lenders within two business days of the date of
payment of the Facility Loan or Loans principal.
4. Each Lender hereby agrees to deliver to Borrower the Note previously
issued by Borrower to him under the Loan Agreement in exchange for the Note in
the form of Exhibit A hereto executed by the Borrower.
i. The obligations of the Borrower hereunder are subordinated to
certain Senior Indebtedness to the extent and on the terms set forth in that
certain Subordination Agreement dated as of October 31, 1995 by and among Square
Industries, Inc., 808 Square Corp., NatWest Bank N.A., and the Lenders as such
agreement is from time to time amended.
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<PAGE>
5. The obligation of the Borrower under the original Loan Agreement to
provide collateral for the loans is hereby terminated.
SQUARE INDUSTRIES, INC.
By: ---------------------------------
Brett Harwood, President
---------------------------------
Lowell Harwood
---------------------------------
Sanford Harwood
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<PAGE>
EXHIBIT A to EXHIBIT 10(b)
The obligations of the Borrower hereunder are subordinated to certain
Senior Indebtedness to the extent and on the terms set forth in that certain
Subordination Agreement dated as of October 31, 1995 by and among Square
Industries, Inc., 808 Square Corp., NatWest Bank N.A., the Lender and Sanford
Harwood as such agreement is from time to time amended.
NOTE
$250,000 As of June 28, 1995, as Amended October 31, 1995
Jersey City, New Jersey
FOR VALUE RECEIVED, SQUARE INDUSTRIES, INC., a New York Corporation
(the "Borrower"), hereby promises to pay the order of LOWELL HARWOOD (the
"Lender"), the principal sum of Two Hundred Fifty Thousand Dollars ($250,000),
in lawful money of the United States of America and in immediately available
funds, and to pay interest on the unpaid principal amount the Loan, like money
and funds, for the period commencing on the date or dates the Loan was advanced
to the Borrower by the Lender until such Loan is paid in full, at the rates per
annum and on the dates set forth in the Agreement.
This Note is the Note referred to in the Loan Agreement, dated June 28,
1995 among the Borrower, Lender and Sanford Harwood, as amended by the Amendment
to Loan Agreement dated October 31, 1995 among such parties (collectively the
"Agreement"). Capitalized terms used in this Note have the respective meanings
assigned to them in the Agreement.
This Note shall bear interest from the date or dates the Loan was
advanced to the Borrower by the Lender until such Loan shall be paid in full, at
the rate or rates per annum (computed on the basis of a year of 360 days and
actual days elapsed, including the first day but excluding the last in the
period for which payable) specified in the Agreement with payment of interest to
be made in accordance with the Agreement.
Payment of the principal shall be subject to the payment after October
31, 1995 of at least $1,000,000 of principal of loans extended by National
Westminster Bank, USA (the "Bank") pursuant to the Credit Agreement dated July
6, 1988 and as amended from time to time between the Bank and the Borrower and
certain of its subsidiaries with payment of principal thereafter to be an amount
equal to 50% of the amount of loan principal paid to the Bank in excess of the
foregoing $1,000,000.
Anything in this Note or the Agreement to the contrary notwithstanding,
the obligation of the Borrower to make payments of interest shall be subject to
the limitation that payments of interest shall not be required to be made to the
Lender to the extent that the Lender's receipt thereof would not be permissible
under the law or laws applicable to the Lender limiting the rates of interest
which may be charged or collected by the Lender. Any such payments of interest
which are not made as a result of the limitations referred to in the preceding
sentence shall be made by the Borrower on the earliest payment date on which the
receipt thereof would be permissible under the laws applicable to the Lender
limiting the rates of interest which may be charged or collected by the Lender.
Such deferred interest shall not bear interest.
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<PAGE>
This Note has been executed and delivered in Jersey City, New Jersey,
and shall be governed by, and construed and interpreted in accordance with, the
laws of the State of New Jersey.
SQUARE INDUSTRIES, INC.
By:
---------------------------
Brett Harwood, President
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<PAGE>
EXHIBIT 10(c)
VOID AFTER 5:00 P.M., NEW YORK TIME, ON OCTOBER 31, 2000 OR IF NOT A
BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON THE
NEXT FOLLOWING BUSINESS DAY, UNLESS EXTENDED BY SQUARE INDUSTRIES,
INC., AS PROVIDED HEREIN.
No.
------
WARRANT TO PURCHASE
75,000 SHARES OF COMMON STOCK
TRANSFER RESTRICTED -- SEE SECTION 6.01
WARRANT TO PURCHASE
COMMON STOCK OF
SQUARE INDUSTRIES, INC.
This certifies that, for value received, Harwood
(the "Warrant Holder") is entitled to purchase from Square Industries, Inc., a
corporation incorporated under the laws of the State of New York (the
"Company"), subject to the terms and conditions hereof, at any time on or after
9:00 A.M., New York time, on November 1, 1995, and before 5:00 P.M., New York
time, on October 31, 2000 (or, if such day is not a Business Day, as defined
herein, at or before 5:00 P.M., New York time, on the next following Business
Day) the number of fully paid and non-assessable shares of Common Stock (par
value $.01) of the Company (the "Common Stock") stated above at the Exercise
Price (as defined herein). The Exercise Price and the number of shares
purchasable hereunder are subject to adjustment as provided below.
ARTICLE 1
Definitions
Section .. (1)The term "Warrant Holder" as used herein means
the person or entity named above or any person or entity in whose name this
Warrant shall be registered upon the books to be maintained by the Company for
that purpose.
(2) The term "Business Day" as used herein shall mean a day
other than a Saturday, Sunday or other day on which banks in the State of New
York are authorized by law to remain closed.
(3) The term "Exercise Price" as used herein means $6.40 as
such price may be adjusted from time to time pursuant to Article III.
<PAGE>
(4) The term "Expiration Date" as used herein means 5:00 P.M.,
New York time, on October 31, 2000.
(5) The term "Warrant Shares" as used herein means the shares
of Common Stock, or other securities deliverable upon exercise of the Warrant.
ARTICLE II
Duration and Exercise of Warrant
Section 2.01. Subject to provisions of Section 4.01 hereof,
this Warrant may be exercised at any time after 9:00 A.M., New York time, on
November 1, 1995, and before 5:00 P.M., New York time, on October 31, 2000 (or,
if such day is not a Business Day, at or before 5:00 P.M., New York time, on the
next following Business Day). If this Warrant is not exercised at or before 5:00
P.M., New York time, on the Expiration Date it shall become void, and all rights
hereunder shall thereupon cease.
Section 2.02. (1) The Warrant Holder may exercise this
Warrant, in whole or in part, upon surrender of this Warrant with the
Subscription Form hereon duly executed, to the Company at its corporate office
at 921 Bergen Avenue, Jersey City, New Jersey 07306, together with the full
Warrant Price for each share of Common Stock to be purchased in lawful money of
the United States, or by certified check, bank draft or postal or express money
order payable in United States Dollars to the order of the Company and upon
compliance with and subject to the conditions set forth herein.
(2) Upon receipt of this Warrant with the Subscription Form
duly executed and accompanied by payment of the aggregate Warrant Price for the
shares of Common Stock for which this Warrant is then being exercised, the
Company will cause to be issued certificates for the total number of whole
shares of Common Stock for which this Warrant is being exercised in such
denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder.
(3) In case the Warrant Holder shall exercise this Warrant
with respect to less than all of the shares of Common Stock that may be
purchased under this Warrant, the Company will execute a new Warrant for the
balance of the shares of Common Stock that may be purchased upon exercise of
this Warrant and deliver such new Warrant to the Warrant Holder. The Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would,
except for the provisions of this Section 4.04, be entitled under the terms of
this Warrant to receive a fraction of a share upon the exercise of this
Warrant, the Company shall, upon the exercise of this Warrant and receipt of
the Warrant Price, issue the largest number of whole shares purchasable upon
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<PAGE>
exercise of this Warrant. The Company shall not be required to make any cash or
other adjustment in respect of such fraction of a share to which the Warrant
Holder would otherwise be entitled. The Warrant Holder, by the acceptance of
the Warrant, expressly waives his right to receive a certificate of any
fraction of a share or a fractional Warrant upon exercise hereof.
(4) The Company covenants and agrees that it will pay when due
and payable any and all taxes which may be payable in respect of the issue of
this Warrant, or the issue of any Warrant Shares upon the exercise of this
Warrant. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in issuance or delivery of this
Warrant or Warrant Shares in a name other than that of the Warrant Holder at the
time of surrender, and until the payment of such tax, shall not be required to
issue such Warrant Shares.
ARTICLE III
Adjustment of Shares of Common Stock
Purchasable and of Exercise Price
Section 3.01. The Exercise Price at which Common Stock shall
be purchasable shall be as set forth in Section (a) hereof, or, after adjustment
as provided in this Section (f), shall be such price as so adjusted.
Section 3.02. The Exercise Price shall be subject to
adjustments from time to time as follows:
(1) Except as hereinafter provided, in case the Company shall
at any time after the date hereof issue or sell any shares of Common Stock
(including shares held in the Company's treasury) for a consideration per share
less than the Exercise Price in effect immediately prior to the issuance or sale
of such shares, or without consideration, then, and thereafter successively upon
each issuance or sale, the Exercise Price in effect immediately prior to each
such issuance or sale shall forthwith be reduced to a price determined by
dividing:
(a) an amount equal to (i) the total number of shares of
Common Stock outstanding immediately prior to such issuance or sale multiplied
by the Exercise Price in effect immediately prior to such issuance or sale, plus
(ii) the consideration, if any, received by the Company upon such issuance or
sale, by
(b) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
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<PAGE>
For the purposes of any computation to be made in accordance with the provisions
of this clause (1), the following provisions shall be applicable:
(i) In case of the issuance or sale of shares or Common Stock
for a consideration part or all of which shall be cash, the amount of the cash
received by the Company for such shares (or, if shares of Common Stock are
offered by the Company for subscription, the subscription price, or, if shares
of Common Stock shall be sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price) before
deducting therefrom any compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or others performing
similar services or any expenses incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company or as provided in
(iv) or on conversion or exchange of other securities of the Company) of shares
of Common Stock for a consideration part or all of which shall be other than
cash, the amount of the consideration therefor other than cash shall be deemed
to be the value of such consideration, as determined in good faith by the Board
of Directors of the Company, at or about, but as of, the date of the adoption of
the resolution authorizing such issuance, irrespective of accounting treatment.
The reclassification of securities other than Common Stock into securities
including Common Stock shall be deemed to involve the issuance for a
consideration other than cash of such Common Stock immediately prior to the
close of business on the date fixed for the determination of security holders
entitled to receive such Common Stock.
(iii) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the date following the date
fixed for the determination of stockholders entitled to receive such dividend or
other distribution and without consideration.
(iv) In the event of a merger, consolidation or acquisition of
assets by the Company, the consideration received by the Company for the
securities issued by the Company shall be deemed to equal the cash and "market
value" of the securities issued by the Company. "Market value" of securities
issued shall be the lesser of the market value of the securities on the date
an agreement in principle with respect to such merger, consolidation or
purchase is reached among the parties or on the date the agreement of
consolidation, merger or purchase is executed.
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<PAGE>
(v) The number of shares of Common Stock at any time
outstanding shall not include any shares then owned or held by or for the
account of the Company, but shall include the aggregate number of shares
deliverable in respect of the options, rights and convertible and exchangeable
securities referred to in the next succeeding clause (2) at all times while such
options, rights or securities remain outstanding and unexercised, unconverted or
unexchanged, as the case may be, and therefore to the extent such options,
rights or securities have been exercised, converted or exchanged.
(2) In case the Company shall at any time after the date
hereof issue options or rights to subscribe for shares of Common Stock
(including shares held in the Company's treasury), or issue any securities
convertible into or exchangeable for shares of Common Stock, for a consideration
per share less than the Exercise Price in effect immediately prior to the
issuance of such options or rights or convertible or exchangeable securities, or
without consideration, the Exercise Price in effect immediately prior to the
issuance of such options or rights or securities shall be reduced to a price
determined by making a computation in accordance with the provisions of clause
(1) of this Subsection, provided that:
(a) the aggregate maximum number of shares of Common Stock
deliverable under such options or rights shall be considered to have been
delivered at the time such options or rights were issued, and for a
consideration equal to the minimum purchase price per share of Common Stock
provided for in such options or rights, plus the cash consideration (determined
in the same manner as consideration received on the issue or sale of Common
Stock), if any, received by the Company for such options or rights;
(b) in no event shall any consideration be deemed to have been
received by the Company in connection with any amounts deemed for financial
statement purposes assignable to any option or rights to purchase shares of
Common Stock of the Company as "original issue discount".
(c) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or exchange for any such securities shall be
considered to have been delivered at the time of issuance of such securities,
and for a consideration equal to the consideration (determined in the same
manner as consideration received on the issue or sale of Common Stock) received
by the Company for such securities, plus the consideration, if any, to be
received by the Company upon the exchange or conversion thereof; and
(d) on the expiration of such options or rights, or the
termination of such right to convert or exchange, the Exercise Price shall
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<PAGE>
forthwith be readjusted to such Exercise Price as would have obtained had the
adjustments made upon the issuance of such options, rights or convertible or
exchangeable securities been made upon the basis of the delivery of only the
number of shares of Common Stock actually delivered upon the exercise of such
options or rights or upon conversion or exchange of such securities.
(3) In case the Company shall at any time subdivide or combine
the outstanding shares of Common Stock, the Exercise Price shall forthwith be
proportionately decreased in the case of sub-division or increased in the case
of combination to the nearest one cent. Any such adjustment shall become
effective at the close of business on the date that such subdivision or
combination shall become effective.
(4) Within a reasonable time after the close of each quarterly
fiscal period of the Company during which the Exercise Price has been adjusted
as herein provided, the Company shall mail to each Holder a certificate signed
by the Chairman of the Board of Directors, the President or a Vice President of
the Company and by the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary of the Company, showing in detail in the facts requiring
all such adjustments occurring during such period and the Exercise Price after
each such adjustment; provided, however, that if at any time the Exercise Price
is adjusted as herein provided in an amount equal to or exceeding five cents
($.05), the Company shall forthwith cause such certificate to be mailed with
respect to such adjustment, after which the Company's obligations to give notice
of such adjustment shall cease.
Notwithstanding anything contained herein to the contrary, no
adjustment of the Exercise Price other than pursuant to (3) above, shall be
made:
(i) If the amount of such adjustment shall be less than five
cents ($.05), but in such case any adjustment that would otherwise be required
then to be made shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any adjustment
so carried forward, shall amount to not less than five cents ($.05).
(ii) In connection with the issuance or sale of Common Stock
upon the exercise of options or rights or upon the conversion or exchange of
convertible or exchangeable securities in any case where the adjustment provided
in this Subsection was made upon the issuance of such options, rights, or
convertible or exchangeable securities by reason of the provisions of clause (2)
of this Subsection.
(iii) By reason of the grant of any options and issuance of
any shares under the Company's Stock Option Plan, as amended from time to time.
Section 3.03. In the event that the number of outstanding
shares of Common Stock is increased by a stock dividend payable in shares of
Common Stock or by a subdivision of the outstanding shares of Common Stock,
which may include a stock split, then, from and after the time at which the
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<PAGE>
adjusted Exercise Price becomes effective pursuant to Section 3.02 by reason of
such dividend or subdivision, the number of shares issuable upon the exercise of
each Warrant shall be increased in proportion to such increase in outstanding
shares. In the event that the number of outstanding shares of Common Stock is
decreased by a combination of the outstanding shares of Common Stock, then, from
and after the time at which the adjusted Exercise Price becomes effective
pursuant to Section 3.02 by reason of such combination, the number of shares
issuable upon the exercise of this Warrant shall be decreased
in proportion to such decrease in outstanding shares.
Section 3.04. In the event of an adjustment of the Exercise
Price, the number of shares of Common Stock (or reclassified stock) issuable
upon exercise of this Warrant after such adjustment shall be equal to the number
determined by dividing:
(a) an amount equal to the product of (i) the number of shares
of Common Stock issuable upon exercise of this Warrant immediately prior to such
adjustment, and (ii) the Exercise Price immediately prior to such adjustment; by
(b) the Exercise Price immediately after such adjustment.
Section 3.05. In the case of any reorganization or
reclassification of the outstanding shares of Common Stock (other than a change
in par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination) or in the case of any
consolidation of the Company with, or merger of the Company with another
corporation after which no securities of the Company will be publicly held, or
in the case of any sale, lease or conveyance of all, or substantially all, of
the property, assets, business and goodwill of the Company as an entity, the
holder of each Warrant then outstanding shall thereafter have the right, except
as provided under Section 3.02, to purchase the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification, consolidation, merger or sale by a holder of such Warrant
would have had the right to purchase immediately prior to such reorganization,
reclassification, consolidation, merger or sale, at a price equal to the
aggregate Exercise Price then in effect pertaining to such Warrant (the kind,
amount and price of such stock and other securities to be subject to adjustment
as herein provided).
Section 3.06. Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon exercise of this
Warrant, theretofore or thereafter issued, this Warrant may continue to express
the same price and number and kind of shares as are stated in the warrant
initially issued.
Section 3.07. The Company may retain a firm of independent
public accountants of recognized national standing (who may be any such firm
regularly employed by the Company) to make any computation required under this
Article III, and a Certificate signed by such firm shall be conclusive evidence
of the correctness of any computation made hereunder.
-7-
<PAGE>
Section 3.08. Distribution of Assets: In case, prior to the
expiration of this Warrant by exercise or by its terms, the Company shall at any
time make any distribution of its assets to holders of its Common Stock as a
liquidating or partial liquidating dividend, by way of return of capital, or
otherwise (other than as either a cash dividend payable out of any surplus
legally available of the payment of dividends under the laws of the State of
New York or as a stock dividend as provided in this Article III, then the
Holder, on the exercise of this Warrant after the date of record for the
determination of holders of Common Stock entitled to such distribution of assets
or dividend, shall be entitled to receive for the Exercise Price, in addition to
Common Stock, the amount of such assets or dividend which such Holder would have
received if he had been the holder of record of such shares of Common Stock on
the record date for the determination of those entitled to such distribution.
ARTICLE IV
Other Provisions Relating to
Rights of Warrant Holder
Section 4.01. The Warrant Holder, as such, shall not be
entitled to vote or receive dividends or be deemed the holder of shares of
Common Stock for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Warrant Holder, as such, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
action by the Company (whether upon any recapitalization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings or other action affecting shareholders (except for
notices provided for in this Warrant), receive dividends or subscription rights,
or otherwise until this Warrant shall have been exercised and the Warrant Shares
purchasable upon the exercise hereof shall have become deliverable as provided
in Article II, at which time the person or persons in whose name or names the
certificate or certificates for the Warrant Shares being purchased are to be
issued shall be deemed the holder or holders of record of such shares for all
purposes; provided, however, that any such exercise on any date when the stock
transfer books of the Company shall be closed shall constitute the person or
persons in whose name or names the certificate or certificates for such shares
are to be issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open and this Warrant shall not be deemed to have been exercised, in
-8-
<PAGE>
whole or in part as the case may be, until such next succeeding day on which
such stock transfer books are open for the purpose of determining entitlement to
dividends on such Common Stock, and such exercise shall be at the actual Warrant
Price in effect as such date.
Section 4.02. If this Warrant is lost, stolen, mutilated or
destroyed, the Company may, on such terms as to indemnity or otherwise as it may
in its discretion impose (which shall, in the case of a mutilated Warrant,
include the surrender thereof), issue a new Warrant of like denomination and
tenor as, and in substitution for, this Warrant.
Section 4.03. (1) The Company covenants and agrees that at all
times it shall reserve and keep available for the exercise of this Warrant such
number of authorized shares of Common Stock as are sufficient to permit the
exercise in full of this Warrant.
(2) The Company covenants that all shares of Common Stock
issued on exercise of this Warrant will be validly issued, fully paid,
nonassessable and free of preemptive rights.
Section 4.04. Anything contained herein to the contrary
notwithstanding, the Company shall not be required to issue any shares of Common
Stock upon exercise of this Warrant unless the shares have been registered under
the Securities Act of 1933 or in the opinion of counsel to the Company such
issuance is exempt from registration thereunder.
Section 4.05. Notices to the Warrant Holder provided for in
this Warrant shall be deemed given or made by the Company if sent by mail,
first-class or registered, postage prepaid, addressed to the Warrant Holder at
his last known address as it shall appear on the books of the Company.
ARTICLE V
Treatment of Warrant Holder
Section 5.01. Prior to due presentment for registration of
transfer of this warrant, the Company may deem and treat the Warrant Holder as
the absolute owner of this warrant (notwithstanding any notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes and the Company shall not be affected by any notice to the contrary.
-9-
<PAGE>
ARTICLE VI
Restrictions on Transfer of Warrants
Section 6.01. Neither this Warrant nor any rights represented
hereby shall be transferable or assignable by the Warrantholder, otherwise than
by will or by the laws of descent and distribution or to a member of the
immediate family of the Warrantholder who agrees to be bound by the provisions
of this Article, and this Warrant shall be exercisable, only by the
Warrantholder or his permitted assignee, and any attempt to transfer or assign
this Warrant in violation of the foregoing shall be void and of no force or
effect.
Section 6.02. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date and any such lost, stolen or destroyed Warrant shall
thereupon become void. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not the Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
ARTICLE VII
Other Matters
Section 7.01. The Company will from time to time promptly pay,
subject to the provisions of paragraph (4) of Section 2.02, all taxes and
charges that may be imposed upon the Company in respect of the issuance or
delivery of Warrant Shares upon the exercise of this Warrant.
Section 7.02. All the covenants and provisions of this Warrant
by or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.
Section 7.03. Notice or demand pursuant to this Warrant to be
given or made by the Warrant Holder to or on the Company shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed, until
another address is designated in writing by the Company, as follows:
Square Industries, Inc.
921 Bergen Avenue
Jersey City
New Jersey 07306
Attention: President
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<PAGE>
Any notice or demand authorized by this Warrant to be given or
made by the Company to or on the Warrant Holder shall be given in accordance
with the provisions of Section 4.05.
Section 7.04. The validity, interpretation and performance of
this Warrant shall be governed by the laws of the State of New York.
Section 7.05. Nothing in this Warrant expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Warrant Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements in this Warrant contained shall be for the sole and exclusive benefit
of the Company and its successors and of the Warrant Holder.
Section 7.06. The Article headings herein are for convenience
only and are not part of this Warrant and shall not affect the interpretation
thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the
Company under its corporate seal as of the 31st day of October, 1995.
SQUARE INDUSTRIES, INC.
By_______________________
President
Attest: ___________________
Secretary
The undersigned as Warrant Holders agrees to the provisions of
this Warrant.
-------------------------
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<PAGE>
SUBSCRIPTION FORM
To be Executed By The Warrant Holder If He Desires
To Exercise The Warrant In Whole Or In Part:
To: Square Industries, Inc.
The undersigned (_________________________________)
Please insert Social Security or
other identifying number of
Subscriber
hereby irrevocably elects to exercise the right of
purchase represented by the within warrant for, and
to purchase thereunder, shares of Common Stock
provided for therein and tenders payment herewith to
the order of Square Industries, Inc. in the amount of
$ and, if said number of shares of Common Stock
shall not be all the shares of Common Stock
purchasable hereunder, that a new Warrant for the
balance remaining of the shares of Common Stock
purchasable under the within Warrant be registered in
the name of, and delivered to, the undersigned at the
address stated below:
Address: _________________________________________
Date: _____________
Signature
__________________________
Note: The Signature of this
Subscription must correspond
with the name as written upon
the face of this Warrant in
every particular, without
alteration or enlargement or
any change whatsoever.
-12-
<PAGE>
SQUARE INDUSTRIES, INC.
FINANCIAL DATA SCHEDULE
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND THE UNAUDITED STATEMENT
OF INCOME FOR THE NINE MONTHS THEN ENDED CONTAINED IN THE REPORT ON FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 OF SQUARE INDUSTRIES, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
Item Number Item Description
- ----------- ----------------
<S> <C> <C>
5-02(1) Cash and cash items $1,793,000
5-02(2) Marketable securities -0-
5-02(3)(a)(1) Notes and accounts receivable -- trade 786,000
5-02(4) Allowances for doubtful accounts -0-
5-02(6) Inventory -0-
5-02(9) Total current assets 5,002,000
5-02(13) Property, plant and equipment 31,687,000
5-02(14) Accumulated depreciation 6,921,000
5-02(18) Total assets 34,473,000
5-02(21) Total current liabilities 7,797,000
5-02(22) Bonds, mortgages and similar debt -0-
5-02(28) Preferred stock -- mandatory redemption -0-
5-02(29) Preferred stock -- no mandatory redemption -0-
5-02(30) Common stock 12,000
5-02(31) Other stockholders' equity 4,650,000
5-02(32) Total liabilities and stockholders' equity 34,473,000
5-02(b)1(a) Net sales of tangible products -0-
5-03(b)1 Total revenues 48,399,000
5-03(b)2(a) Cost of tangible goods sold -0-
5-03(b)2 Total costs and expenses applicable to sales
and revenues 40,215,000
5-03(b)3 Other costs and expenses 5,816,000
5-03(b)5 Provision for doubtful accounts and notes -0-
5-03(b)(8) Interest and amortization of debt discount 1,518,000
5-03(b)(10) Income before taxes and other items 850,000
5-03(b)(11) Income tax expense 554,000
5-03(b)(14) Income/loss continuing operations 296,000
5-03(b)(15) Discontinued operations -0-
5-03(b)(17) Extraordinary items -0-
5-03(b)(18) Cumulative effect -- changes in accounting principles -0-
5-03(b)(19) Net income or loss 296,000
5-03(b)(20) Earnings per share -- primary 0.23
5-03(b)(20) Earnings per share -- fully diluted 0.23
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,793,000
<SECURITIES> 0
<RECEIVABLES> 786,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,002,000
<PP&E> 31,687,000
<DEPRECIATION> 6,921,000
<TOTAL-ASSETS> 34,473,000
<CURRENT-LIABILITIES> 7,797,000
<BONDS> 0
<COMMON> 0
0
12,000
<OTHER-SE> 4,650,000
<TOTAL-LIABILITY-AND-EQUITY> 34,473,000
<SALES> 0
<TOTAL-REVENUES> 48,399,000
<CGS> 0
<TOTAL-COSTS> 40,215,000
<OTHER-EXPENSES> 5,816,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,518,000
<INCOME-PRETAX> 850,000
<INCOME-TAX> 554,000
<INCOME-CONTINUING> 296,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 296,000
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
