LOAN AND SECURITY AGREEMENT
Between
TEXTRON FINANCIAL CORPORATION
As Lender
and
GALAXY NUTRITIONAL FOODS, INC.
As Borrower
Dated as of May 27, 2003
TABLE OF CONTENTS
DEFINITIONS ........................................................... 1-15
ARTICLE I - LOANS, RENEWAL AND TERMINATION ............................ 16
1.1 Revolving Loan Advances ..................................... 16
1.2 Borrowing Procedures ........................................ 16
1.3 Interest .................................................... 16-17
1.4 Charges to Loan Account ..................................... 17
1.5 Allocation of Payments and Limit of Interest ................ 17
1.6 Renewal and Termination .................................... 17-18
ARTICLE II - FEES .................................................... 18
2.1 Closing Fee ................................................ 18
2.2 Facility Fee ............................................... 18
2.3 Field Examination Fee ...................................... 18
2.4 Wire Transfer Fee .......................................... 18
2.5 Early Termination Fee ...................................... 18-19
2.6 Costs and Expenses ......................................... 19
2.7 Unused Line Fee.............................................. 19
2.8 Collateral Monitoring Fee ................................... 19
ARTICLE III - GRANT OF SECURITY INTEREST .............................. 19
3.1 Grant of Security Interest ................................. 19
3.2 Continued Priority of Security Interest .................... 20-21
ARTICLE IV - PROCEEDS OF COLLATERAL, RECEIVABLES
AND COLLECTIONS ......................................... 21
4.1 Borrower's Proceeds of Collateral .......................... 21
4.2 Collection of Receivables and other Collateral .............. 22
ARTICLE V - REPRESENTATIONS AND WARRANTIES ........................... 22
5.1 Existence, Power and Authority; Borrower Affiliates ......... 22-23
(a) Organization; Qualification ........................... 22
(b) Power ................................................. 23
(c) Borrower Affiliates ................................... 23
(d) Capitalization ........................................ 23
(e) Business ............................................... 23
5.2 Compliance with Other Agreements and Applicable Law ........ 23
5.3 Absence of Litigation ...................................... 23
5.4 Taxes and Returns .......................................... 23
5.5 Lien and Priority and Nature of Certain Collateral .......... 23-24
(a) Liens ................................................. 23-24
(b) Title ................................................. 24
(c) Receivables ........................................... 24
(d) Inventory ............................................. 24
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(e) Equipment .............................................. 24
(f) Real Estate ..................................................... 24
(g) Corporate and Fictitious Names ........................ 24
5.6 Principal Place of Business ................................ 24
5.7 Environmental Compliance ................................... 25
5.8 Proprietary Rights ......................................... 25
5.9 Trade Names ................................................ 25
5.10 Employee Relations ......................................... 25-26
5.11 Employee Pension Benefit Plans ............................. 26
5.12 Bank Accounts .............................................. 26
5.13 Accuracy and Completeness of Information ................... 26
5.14 Software License Compliance ................................ 26
5.15 Investment Company Act; Other Regulations.................... 26
5.17 Survival of Warranties; Cumulative ......................... 26
ARTICLE VI - AFFIRMATIVE COVENANTS ................................... 27
6.1 Financial Statements ....................................... 27-28
6.2 Books and Records .......................................... 28
6.3 Additional Documentation ................................... 28
6.4 Existence, Name, Organization and Chief Executive
Office ..................................................... 28
6.5 Compliance with Laws and Taxes ............................. 28
6.6 Performance of Obligations ................................. 28-29
6.7 Reporting as to Revenues, Receivables and Inventory ......... 29-30
6.8 Over-Advance ............................................... 30
6.9 Breach or Default .......................................... 30
6.10 Maintenance of Assets ...................................... 30
6.11 Insurance .................................................. 30-31
6.12 Use of Proceeds ............................................ 31
6.13 Disclosure .................................................. 31
6.14 Further Assurances .......................................... 31
6.15 Brokerage Commissions ....................................... 31
6.16 FDA and Other Regulatory Bodies Compliance .................. 32
ARTICLE VII - BORROWER'S NEGATIVE COVENANTS .......................... 32
7.1 Business, Management and Organization ...................... 32
7.2 Disposition of Assets ...................................... 32
7.3 Loans and Guarantees ....................................... 32
7.4 Capital Expenditures and Investments ....................... 32-33
7.5 Distributions and Salaries ................................. 33
7.6 Financial Covenants ........................................ 33-34
7.7 Change of Control .......................................... 34
7.8 Limitation on Indebtedness for Money Borrowed .............. 34
7.9 Mergers; Consolidations; Acquisitions ...................... 34
7.10 Subsidiaries ............................................... 34
7.11 Fiscal Year ................................................ 34
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7.12 Affiliate Transactions ...................................... 34-35
ARTICLE VIII - CONDITIONS PRECEDENT .................................. 35
8.1 Initial Credit ............................................. 35-37
8.2 Initial and Subsequent Credit ............................... 37
ARTICLE IX - EVENTS OF DEFAULT; REMEDIES ............................. 37
9.1 Events of Default .......................................... 37-39
9.2 Lender's Remedies .......................................... 39-40
ARTICLE X - JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
AND GOVERNING LAW ........................................ 40
10.1 Governing Law; Choice of Forum; Services of Process;
Jury Trial Waiver .......................................... 40-41
10.2 Waiver of Certain Claims and Counterclaims ................. 41-42
10.3 Indemnification ............................................ 42
ARTICLE XI - MISCELLANEOUS ........................................... 42
11.1 Power of Attorney .......................................... 42
11.2 Outstanding Revolving Loan Advances ........................ 42
11.3 Modifications and Course of Dealing ........................ 42-43
11.4 Assignment and Participation ............................... 43
11.5 Delegation of Duties ....................................... 43
11.6 Notices .................................................... 43
11.7 Expenses ................................................... 43
11.8 Assignment of Receivables and Inventory .................... 43-44
11.9 Binding Effect; Severability ............................... 44
11.10 Final Agreement ........................................... 44
11.11 Counterparts .............................................. 44
11.12 Captions .................................................. 44
11.13 Borrower's Representative ................................. 44
Signatures ........................................................... 45-46
ATTACHMENTS TO LOAN AND SECURITY AGREEMENT:
EXHIBIT A - FORM OF COVENANT COMPLIANCE CERTIFICATE
SCHEDULE 5.1(a) Organization; Qualification
SCHEDULE 5.1(c) Affiliates
SCHEDULE 5.1(d) Capitalization
SCHEDULE 5.1(e) Business of Borrower
SCHEDULE 5.2 Compliance with Other Agreements and Applicable Law
SCHEDULE 5.3 Litigation
SCHEDULE 5.4 Taxes and Returns
SCHEDULE 5.5(a) Permitted Liens
SCHEDULE 5.5(b) Title
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SCHEDULE 5.5(d) Inventory
SCHEDULE 5.5(e) Equipment
SCHEDULE 5.5(f) Real Property
SCHEDULE 5.5(g) Corporate and Fictitious Names
SCHEDULE 5.6 Principal Places of Business; Chief Executive Office
SCHEDULE 5.7 Environmental Compliance
SCHEDULE 5.8 Registered Proprietary Rights
SCHEDULE 5.9 Trade Names
SCHEDULE 5.10 Employee Relations
SCHEDULE 7.8 Permitted Indebtedness
SCHEDULE 7.12 Affiliated/Interest Party Agreements
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LOAN AND SECURITY AGREEMENT
Dated as of May 27, 2003
GALAXY NUTRITIONAL FOODS, INC., a Delaware corporation
("Borrower") and TEXTRON FINANCIAL CORPORATION, a Delaware
corporation ("Lender"), agree as follows:
DEFINITIONS
As used in this Agreement:
"Account" or "Accounts" means all now owned or hereafter acquired right,
title and interest in all accounts, as such term is defined in the UCC, and any
and all supporting obligations with respect to any of the foregoing.
"Account Debtor" means a Person to whom Borrower sells inventory, goods or
services in the ordinary course of business, including without limitation, each
Person who is obligated on a Receivable.
"Additional Documents" has the meaning set forth in Section 3.2(d).
"Adjusted Tangible Net Worth" means, with respect to Borrower, the sum of
(i) stockholder's equity, including preferred stock, determined in accordance
with GAAP and (ii) subordinated indebtedness (if any), minus the sum of (a)
Intangible Assets, (b) all loans or advances to any Person, and (c) prepaid
expenses.
"Affiliate" means, with respect to a Person, any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person. For purposes of this definition, control of a Person shall mean the
power, direct or indirect, (x) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person, or (y) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities or partnership or other voting interest, by contract or
otherwise.
"Agreement" means this Loan and Security Agreement, including all
Schedules, exhibits and other attachments hereto, as the same may be amended,
supplemented, extended or restated from time to time.
"Agreement Date" means the date as of which this Agreement is dated.
"Annual Facility Fee" means the fee referred to in Section 2.2.
"Applicable Law" means all applicable provisions of constitutions, statutes,
rules, regulations and orders of governmental bodies and orders and decrees of
courts and arbitrators.
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"Asset Disposition" means the disposition of any asset owned by Borrower or
any of its Subsidiaries, other than sales of Inventory in the ordinary course of
business.
"Availability" means at any time (a) the amount of the Borrowing Base at
such time minus (b) the aggregate principal amount of Revolving Loan Advances.
"Availability Reserve" means a reserve based on the requirement that excess
Availability under the Revolving Credit Facility be in an amount of not less
than $100,000.00.
"Bankruptcy Code" means the United States Bankruptcy Code, as in effect from
time to time.
"Board" means the duly elected and serving members of the Board of Directors
of Borrower.
"Borrower" means Borrower as defined in the preamble.
"Borrower's Incorporation Certificate" means Borrower's Restated Certificate
of Incorporation filed December 23, 2002 with the Secretary of State, State of
Delaware.
"Borrowing" means a borrowing of Revolving Loan Advances.
"Borrowing Base" means, with respect to Borrower, an amount in dollars equal
to the lesser of (a) the Revolving Credit Limit, or (b) the sum, without
duplication, of: (i) up to eight-five percent (85%) of the net amount of the
Eligible Receivables; plus (ii) up to sixty percent (60%) of the Eligible
Inventory not to exceed $3,500,000.00; minus (iii) the Availability Reserve;
minus (iv) the Dilution Reserve, and minus (v) other Reserves, if any.
"Borrowing Base Certificate" means the Borrowing Base Certificate referred
to in Section 1.2.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks in Providence, Rhode Island are authorized or required to close.
"Capital Expenditures" means the aggregate of all expenditures made and
liabilities incurred that, in accordance with GAAP, are required to be included
in or reflected by the property, plant, equipment or similar fixed assets
accounts.
"Capitalized Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"Change of Control" means the occurrence of any of the following events:
(i) the sale or transfer of all or substantially all of the assets of Borrower
as an entirety to any Person or related group of Persons other than an Affiliate
or Affiliates of Borrower; or (ii) Borrower is liquidated, dissolved, or adopts
a plan of liquidation pursuant to the Bankruptcy Code or any other bankruptcy
law.
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"Closing Date" means the date of the funding of an initial Revolving Loan
Advance under this Agreement.
"Closing Fee" means the fee referred to in Section 2.1.
"Collateral" means all of Borrower's assets, including, without limitation,
all of the following property and interests in property of Borrower, wherever
located and whether now or hereafter existing or now owned or hereafter acquired
or arising: (i) all Receivables; (ii) all Inventory; (iii) all Equipment; (iv)
all Contract Rights; (v) all General Intangibles; (vi) all Investment Property;
(vii) each Deposit Account and all certificates of deposit maintained with a
bank, savings and loan association, credit union or like organization, other
than an account evidenced by a certificate of deposit that is an instrument
under the UCC; (viii) all goods and other property, whether or not delivered,
(a) the sale or lease of which gives or purports to give rise to any Receivable,
including, but not limited to, all merchandise returned or rejected by or
repossessed from customers, or (b) securing any Receivable, including, without
limitation, all rights as an unpaid vendor or lienor (including, without
limitation, stoppage in transit, replevin and reclamation) with respect to such
goods and other property; (ix) all mortgages, deeds to secure debt and deeds of
trust on real or personal property, guaranties, leases, security agreements, and
other agreements and property which secure or relate to any Receivable or other
Collateral, or are acquired for the purpose of securing and enforcing any item
thereof; (x) all documents of title, policies and certificates of insurance,
securities, chattel paper (including electronic chattel paper and tangible
chattel paper) and other documents and instruments; (xi) all other goods and
personal property, whether tangible or intangible, wherever located, including
money, supporting obligations, letters of credit, and each Letter-of-credit
right; (xii) all files, correspondence, computer programs, tapes, discs and
related data processing software which contain information identifying or
pertaining to any of the Receivables, or any Account Debtor, or showing the
amounts thereof or payments thereon or otherwise necessary or helpful in the
realization thereon or the collection thereof; (xii) any "commercial tort
claims" as that term is defined in the UCC (as identified by the parties in
writing from time to time) and (xiv) any and all products and proceeds of the
foregoing (including, but not limited to, any claim to any item referred to in
this definition, and any claim against any third party for loss of, damage to or
destruction of any or all of, the Collateral or for proceeds payable under, or
unearned premiums with respect to, policies of insurance) in whatever form,
including, but not limited to, cash, negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements and
other documents.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"Contract Rights" means any rights under contracts not yet earned by
performance and not evidenced by an instrument or chattel paper.
"Covenant Compliance Certificate" means the Covenant Compliance Certificate
referred to in Section 6.1.
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"Default" shall mean an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an Event of
Default.
"Deposit Account" has the meaning given to it in the UCC.
"Deposit Account Control Agreement" means each Deposit Account Control
Agreement among Borrower, Lender and the bank named therein, pursuant to which
Lender shall have been granted a first priority lien and security interest in
the deposit account more particularly described therein.
"Dilution Reserve" means the reserve established by Lender in an amount not
greater than the amount by which credits, returns, discounts and allowances
related to the Receivables exceed five percent (5%) of the Receivables, which
shall be effective upon receipt by Lender of the most recently completed report
of the field examination of the books, records and other assets of Borrowers
conducted pursuant to Section 3.2 or under any other provision of this
Agreement.
"Dollar" and "$" means freely transferable United States dollars.
"Early Termination Fee" means the fee referred to in Section 2.5.
"EBITDA" means, for any period, the sum of the amounts for such period of
(a) Net Income, (b) Interest Expense, (c) taxes imposed on or measured by income
or excess profits (for such period and without regard to any prior periods), (d)
the amount of all depreciation and amortization allowances and (e) other non-
cash stock compensation expenses and benefits of Borrower.
"Eligible Inventory" means that portion of Borrower's Inventory on which
Lender has a first and exclusive perfected security interest and that Lender
determines in its sole discretion from time to time, based on credit policies,
market conditions, Borrower's business and financial condition and other
matters, is eligible for use in calculating the Borrowing Base. For purposes of
determining the Borrowing Base, Eligible Inventory shall not include: (a) work
in process, (b) slow- moving, obsolete, or discontinued Inventory, (c) supply
items, pallets or packaging, (d) Inventory in the control of a third person for
processing, storage or otherwise unless the Borrower shall have obtained and
delivered to Lender a bailee or other appropriate waiver, in form and substance
satisfactory to Lender, the original documents or other instruments evidencing
such Inventory, or such other agreements or other documents as Lender shall
require in its sole and absolute discretion, (e) Inventory of an age within
ninety (90) days of its respective expiration dates; (f) consigned Inventory,
(g) Inventory in transit, (h) Inventory held by Borrower for lease or to be
furnished under a contract of service, (i) Inventory associated with any
contract of which Borrower has knowledge that the same may be subject to
cancellation or a material adverse development, (j) Inventory located other than
at the Orlando Warehouses, (k) Inventory associated with any contract to the
extent that progress or advance payments are received from the Account Debtor
such that Inventory is identified to such contract, or (l) Inventory the value
of which may be otherwise impaired as determined by Lender in its sole
discretion. For purposes of this definition, Inventory that at any time is or
becomes Eligible Inventory, but which subsequently fails to meet any of the
requirements of this definition shall
4
cease to be Eligible Inventory (but shall continue to be part of the Collateral)
for so long as the same fails to meets such requirements.
"Eligible Receivable" means any Receivable of Borrower that consists of
the unpaid portion of the obligation stated on the invoice issued to an Account
Debtor with respect to Inventory sold and shipped to or services performed for
such Account Debtor in the ordinary course of business that Lender determines in
its sole and good faith discretion, based on credit policies, market conditions,
Borrower's business and other criteria, is eligible. A Receivable shall not be
an Eligible Receivable unless such Receivable (i) is subject to Lender's
perfected first priority security interest and no other Lien, (ii) is evidenced
by an invoice or other documentary evidence satisfactory to Lender that has been
sent to the Account Debtor, (iii) is unconditionally due and payable in Dollars
or Canadian currency, and (iv) conforms to the warranties regarding Accounts and
Receivables contained in this Agreement. Eligible Receivables shall not include
any of the following:
(a) a Receivable that is unpaid more than ninety (90) days after the
original invoice date thereof or is Receivable with payment terms of more than
sixty (60) days from the original invoice date;
(b) a Receivable where fifty percent (50%) or more of all Receivables of
the Account Debtor or an affiliated group of Account Debtors (in dollar value)
are not Eligible Receivables pursuant to clause (a) above;
(c) a Receivable owed by an Account Debtor, or affiliated group of Account
Debtors, which is obligated to Borrower respecting Receivables, the aggregate
unpaid balance of which exceeds fifteen percent (15%) (unless otherwise agreed
to in writing by Lender) of the aggregate unpaid balance of all otherwise
Eligible Receivables owed to Borrower at such time by such Account Debtors, but
only to the extent of such excess;
(d) a Receivable that (i) arises from uncompleted performance on the part
of Borrower, (ii) constitutes a progress billing, advance billing, any retention
amount, or retainage, (iii) is a guaranteed sale, a sale and return, or other
repurchase or return basis; or (iv) is a "xxxx and hold" or involves a sale of
goods, and all such goods have not been lawfully shipped and invoiced to the
Account Debtor (or if requested by Lender, copies of all invoices, together with
all shipping documents and delivery receipts evidencing such shipment have not
been delivered to Lender), unless such Account Debtor enters into a "xxxx and
hold" agreement or similar agreement with Borrower acceptable to Lender in its
discretion;
(e) a Receivable with respect to which the Account Debtor is either (i)
the United States or any department, agency, or instrumentality of the United
States (other than Receivables with respect to which Borrower has complied, to
the satisfaction of Lender, with the Assignment of Claims Act of 1940, as
amended), or (ii) any state of the United States (other than (y) Receivables
owed by any state that does not have a statutory counterpart to the Assignment
of Claims Act or (z) Receivables owed by any state that has a statutory
counterpart to the Assignment of Claims Act as to which Borrower has complied to
Lender's satisfaction);
5
(f) a Receivable that arises from an Account Debtor that is a creditor of
Borrower, has threatened or asserted a right of setoff, has disputed its
liability or has made any claim with respect to its obligation to pay, or a
Receivable that is subject to a levy, prior assignment, claim, Lien, subrogation
right or security interest, except that, if such Account Debtor enters into a
written set off agreement with Borrower acceptable to Lender in its sole
discretion, then, in such case, the amount by which such Receivable excess the
amount of such offset will be considered eligible;
(g) a Receivable that is subject to any credit or contra provided, however,
that if the amount of such Receivable exceeds the amount of such credit or
contra, such excess may be considered for eligibility;
(h) a Receivable that arises from an Affiliate of Borrower or an
Interested Party;
(i) a Receivable that arises from an Account Debtor (i) that is subject to
an Insolvency Proceeding, is not solvent or has gone out of business; (ii) to
whom goods are being shipped on a "cash on delivery" or C.O.D. basis; or (iii)
as to which Lender or Borrower are aware of an imminent Insolvency Proceeding or
a material impairment of the financial condition;
(j) a Receivable with respect to which the Account Debtor is located in
the states of New Jersey, Minnesota, or West Virginia (or any other state that
requires a creditor to file a business activity report or similar document in
order to bring suit or enforce its remedies against such Account Debtor in the
courts or through any judicial process of such state), unless Borrower (i) has
qualified to do business in New Jersey, Minnesota, West Virginia, or such other
states, (ii) has filed a business activities report with the applicable division
of taxation, the department of revenue, or with such other state offices, as
appropriate, for the then-current year, or (iii) is exempt from such filing
requirement;
(k) a Receivable that is evidenced by any chattel paper, promissory note,
payment instrument or written agreement or arises from the sale of goods by
Borrower to any Account Debtor purchasing such goods primarily for personal,
family or household purposes, or on a sale or return or other conditional basis;
(l) a Receivable that arises from an Account Debtor whose chief executive
office or place of organization is outside the United States or any of the
following provinces of Canada: Ontario, Alberta, Manitoba, Saskatchewan, British
Columbia, Xxxxxx Xxxxxx Island and the Yukon Territory, unless (i) the payment
for such Receivable is assured by an irrevocable letter of credit payable in
United States dollars satisfactory to Lender (as to form, substance, issuer and
domestic confirming bank), the proceeds of which have been assigned to Lender
and the original letter of credit has been delivered to Lender and directly
drawable by Lender, or (ii) the payment for such Receivable is insured by
foreign credit insurance acceptable to Lender, such credit insurance has been
collaterally assigned to Lender in form satisfactory to Lender, and Lender has
been named beneficiary with respect thereto;
(m) a Receivable arising from the delivery of any toolings, samples, trial
merchandise, promotional or demonstration material; or
6
(n) a Receivable for which Lender has notified Borrower that the Receivable
or the Account Debtor is unsatisfactory or unacceptable (which Lender reserves
the right to do in its sole good faith discretion at any time).
For purposes of this definition, any Receivable that at any time is or becomes
an Eligible Receivable, but which subsequently fails to meet any of the
requirements of this definition, shall cease to be an Eligible Receivable (but
shall continue to be part of the Collateral) for so long as the same fails to
meet such requirements.
"Environmental Laws" means all federal, state, local and foreign laws now
or hereafter in effect relating to pollution or protection of the environment,
including laws relating to emissions, discharges, Releases or threatened
Releases of pollutants, Contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport, or handling of pollutants, Contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes, and all
regulations, notices or demand letters issued, entered, promulgated or approved
thereunder.
"Equipment" means and includes, all machinery, apparatus, equipment, motor
vehicles, tractors, trailers, rolling stock, fittings, fixtures and other
tangible personal property (other than Inventory) of every kind and description
used in Borrower's business operations or owned by Borrower or in which Borrower
has an interest, and all parts, accessories and special tools and all increases
and accessions thereto and substitutions and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as in
effect from time to time.
"Escrow Agreement" means that certain Escrow Agreement, dated as of the
Agreement Date among Lender, Borrower, SouthTrust, Gibraltar Bank, FSB, and each
other party who is a signatory thereto.
"Event of Default" means an event described in Section 9.1 of the
Agreement.
"FDA" means the Food and Drug Administration.
"Financing Statements" means any and all Uniform Commercial Code financing
statements, in form and substance satisfactory to Lender, naming Lender as
secured party, and Borrower as debtor.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Borrower that ends on the last day of
March of each year.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (i)
Borrower's EBITDA minus Unfunded Capital Expenditures minus taxes actually paid
by Borrower in cash minus distributions and dividends paid by Borrower in cash,
to (ii) Borrower's Interest Expense
7
plus scheduled amortization payments (including Capitalized Lease payments) made
by Borrower, in each case for such period.
"GAAP" means generally accepted accounting principles consistently applied
and maintained throughout the period indicated and, when used with reference to
Borrower or any Subsidiary of Borrower, consistent with the prior financial
practices of Borrower.
"General Intangibles" means all of Borrower's now owned or hereafter
acquired general intangibles, choses in action and causes of action and all
other intangible personal property of Borrower of every kind and nature (other
than Accounts), including, without limitation, all Proprietary Rights, corporate
or other business records, inventions, designs, blueprints, plans,
specifications, goodwill, computer software, customer lists, registrations,
licenses, franchises, tax refund claims, reversions or any rights thereto and
any other amounts payable to Borrower from any Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof, proceeds of
insurance covering the lives of key employees on which Borrower is beneficiary
and any letter of credit, guarantee, claims, security interest or other security
held by or granted to Borrower to secure payment by an Account Debtor of any of
the Accounts.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
governmental bodies, whether federal, state, local or foreign national or
provincial and all agencies thereof.
"Indebtedness" of any Person means, without duplication, all Liabilities
of such Person, and to the extent not otherwise included in Liabilities, the
following: (a) all obligations for Money Borrowed or for the deferred purchase
price of property or services, (b) all obligations (including, during the
noncancellable term of any lease in the nature of a title retention agreement,
all future payment obligations under such lease discounted to their present
value in accordance with GAAP) secured by any Lien to which any property or
asset owned or held by such Person is subject, whether or not the obligation
secured thereby shall have been assumed by such Person, (c) all obligations of
other Persons which such Person has guaranteed, including, but not limited to,
all obligations of such Person consisting of recourse liability with respect to
accounts receivable sold or otherwise disposed of by such Person, and (d) in the
case of Borrower (without duplication) all Obligations under the Loan Documents,
provided that Indebtedness shall not include unsecured trade payables or trade
credit incurred by Borrower.
"Initial Term" means the three (3) year period commencing on the Agreement
Date.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with creditors,
or proceedings seeking reorganization arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that portion of the
book value of all of such Person's assets that would be treated as intangibles
under GAAP.
8
"Interest Expense" means for any period as determined in conformity with
GAAP, total interest expense, whether paid or accrued or due (including without
limitation, in respect of the Loans and subordinated debt, if any) and payable,
including without limitation, the interest component of Capitalized Lease
obligations for such period, all bank fees that are in the nature of interest
and (to the extent not duplicative) net costs under swap, cap or other interest
rate contracts, but excluding amortized loan costs and bank charges.
"Interest Rate" means a variable rate, adjusted monthly on the first (1st)
day of each month during the Initial Term and each Renewal Term, equal to the
Prime Rate plus one and three- quarter percent (1.75%) per annum calculated on
the average cash borrowings for the preceding month. In each case, the Interest
Rate shall not be subject to rebate or proration upon the termination of this
Agreement for any reason.
"Interested Party" means (a) any highly compensated employee of Borrower
(that is, any employee with annual income equal or greater to the then current
standard set forth in Section 414(q)(1)(B)(i) of the Internal Revenue Code), (b)
any shareholder holding 10% or more of the outstanding voting securities of
Borrower, and (c) any director of Borrower.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as in
effect from time to time.
"Inventory" means all inventory as such term is defined in the Uniform
Commercial Code and shall include, without limitation, (a) all goods intended
for sale or lease by Borrower, for display or demonstration and all other
products intended for sale by Borrower to its customer, (b) all work-in-process,
(c) all raw materials or other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing of such goods or
otherwise used or consumed in Borrower's business, and (d) all documents
evidencing and general intangibles relating to any of the foregoing.
"Investment" means, with respect to any Person; (a) the acquisition or
ownership by such Person of any share of capital stock, evidence of Indebtedness
(which shall not include funds on deposit in demand deposit accounts) or other
security issued by any other Person, (b) any loan, advance or extension of
credit to, or contribution to the capital of, any other Person, excluding
advances to employees in the ordinary course of business for business expenses,
(c) the obligations of any other Person that are guaranteed by such Person, (d)
any other investment in any other Person, and (e) any commitment or option to
make any of the investments listed in clauses (a) through (d) above.
"Investment Property" has the meaning given to it in the UCC.
"Lender" shall mean Textron Financial Corporation, a
Delaware corporation.
"Letter-of-credit right" has the meaning given to it in the UCC.
"Liabilities" of any Person means all items (except for items of capital
stock, additional paid-in capital or retained earnings, or of general
contingency or deferred tax reserves) which in accordance with GAAP would be
included in determining total liabilities as shown on the
9
liability side of a balance sheet of such Person as at the date as of which
Liabilities are to be determined.
"Lien" as applied to the property of Borrower or any Person means: (a) any
mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease
constituting a Capitalized Lease obligation, conditional sale or other title
retention agreement, or other security interest, security title or encumbrance
of any kind in respect of any property of such Person, or upon the income or
profits therefrom, (b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person, and (c) the filing of, or any agreement to give, any
financing statement under the Uniform Commercial Code or its equivalent in any
jurisdiction, excluding informational financing statements relating to property
leased by such Person.
"Loan Documents" means collectively this Agreement, the Security Documents
and each other instrument, agreement or document executed by Borrower or any
other Person in connection with this Agreement, whether prior to, on or after
the Agreement Date.
"Loans" means the Revolving Loan Advances.
"Lockbox" means each United States Post Office Box specified in the Lockbox
Agreement.
"Lockbox Agreement" means each agreement between Borrower and a bank
concerning the establishment of the Lockbox and related bank deposit account for
the collection of and remittance to Lender of Receivables.
"Materially Adverse Effect" means any act, omission, situation,
circumstance, event or undertaking which would, singly or in any combination
with one or more other acts, omissions, situations, circumstances, events or
undertakings have, or reasonably be expected to have, a materially adverse
effect upon (a) the business, assets, properties, liabilities, financial
condition and results of operations of Borrower and its Subsidiaries taken as a
whole, (b) the value of the Collateral, (c) the Security Interest or the
priority of the Security Interest, (d) the respective ability of Borrower or any
other obligor to perform any material obligations under this Agreement or any
other Loan Document to which it is a party, or (e) the legality, validity,
binding effect, enforceability or admissibility into evidence of any Loan
Document or the ability of Lender to enforce any material rights or remedies
under or in connection with any Loan Document.
"Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness for
money borrowed, (b) Indebtedness, whether or not in any such case the same was
for money borrowed, (i) represented by notes payable, and drafts accepted, that
represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid or that was issued or assumed as full or partial
payment for property, (c) Indebtedness that constitutes a Capitalized Lease
obligation, and (d) Indebtedness that is such by virtue of clause (c) of the
definition thereof, but only to the extent
10
that the obligations guaranteed are obligations that would constitute
Indebtedness for Money Borrowed, provided that Money Borrowed shall not include
unsecured trade payables and other trade credit incurred in the ordinary course
of business.
"Net Income" means, as applied to any Person, the net income (or net loss)
of such Person for the period in question after giving effect to deduction of or
provision for all operating expenses, all taxes and reserves (including reserves
for deferred taxes) and all other proper deductions, all determined in
accordance with GAAP, provided that there shall be excluded: (a) the net income
(or net loss) of any Person accrued prior to the date it becomes a Subsidiary
of, or is merged into or consolidated with, the Person whose Net Income is being
determined or a Subsidiary of such Person, (b) the net income (or net loss) of
any Person in which the Person whose Net Income is being determined or any
Subsidiary of such Person has an ownership interest, except, in the case of net
income, to the extent that any such income has actually been received by such
Person or such Subsidiary in the form of cash dividends or similar
distributions, (c) any restoration of any contingency reserve, except to the
extent that provision for such reserve was made out of income during such
period, (d) any net gains or losses on the sale or other disposition, not in the
ordinary course of business, of Investments, business units and other capital
assets, provided that there shall also be excluded any related charges for taxes
thereon, (e) any net gain arising from the collection of the proceeds of any
insurance policy, (f) any write-up of any asset, and (g) any other extraordinary
item.
"Net Proceeds" means proceeds received by Borrower or any of its
Subsidiaries in cash from any Asset Disposition (including, without limitation,
payments under notes or other debt securities received in connection with any
Asset Disposition), net of: (a) the transaction costs of such sale, lease,
transfer or other disposition; (b) any tax liability arising from such
transaction; and (c) amounts applied to repayment of Indebtedness (other than
the Obligations) secured by a Lien on the asset or property disposed.
"Notice of Borrowing" means a telephonic or electronic notice followed by a
confirming same-day written notice requesting a Borrowing, which is given by
telex or facsimile transmission in accordance with the applicable provisions of
this Agreement and which specifies (i) the amount of the requested Borrowing,
and (ii) the date of the requested Borrowing.
"Obligations" means, in each case whether now in existence or hereafter
arising, (a) the principal of, and interest and premium, if any, on, the
Revolving Loan Advances, and (b) all indebtedness, liabilities, obligations,
covenants and duties of Borrower to Lender of every kind, nature and description
arising under this Agreement, or any of the other Loan Documents, or in
connection with the Revolving Credit Facility, whether direct or indirect,
absolute or contingent, due or not due, contractual or tortious, liquidated or
unliquidated, and whether or not evidenced by any note, and whether or not for
the payment of money, including without limitation, fees and expenses required
to be paid or reimbursed pursuant to this Agreement.
"Obligor" means Borrower and any Person who may now or in the future
guaranty the payment and performance of the whole or any part of the
Obligations.
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"Orlando Warehouses" means those certain warehouses located at 0000 Xxxxxxxx
Xxx, Xxxxxxx, Xxxxxxx and 0000 Xxxxx Xxx, Xxxxxxx, Xxxxxxx, for which each
landlord has provided a Landlord's Waiver and Consent on terms and conditions
acceptable to Lender.
"Payable Reserve" means a reserve required by Lender from time to time in
the exercise of its discretion reflecting an amount equal to the sum of accounts
payable over sixty (60) days past due for which no accommodation for payment has
been made by Borrower to the satisfaction of Lenders in its sole discretion.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.
"Permitted Investments" means Investments of Borrower in: (a) negotiable
certificates of deposit or time deposits issued by a state bank or by any United
States bank or trust company having capital, surplus and undivided profits in
excess of $1,000,000.00; (b) obligations issued or guaranteed by the United
States of America or any agency or instrumentality thereof which has a remaining
maturity at the time of purchase of not more than one year and repurchase
agreements relating to the same;(c) commercial paper with maturities of not more
than 180 days and a published rating of not less than A-1 or P-1 (or the
equivalent rating), (d) U.S. money market funds that invest solely in
obligations issued or guaranteed by the United States of America or an agency
thereof; (e) loans to employees not prohibited under Section 7.3; and (f)
advances or extensions of credit made by Borrower in the ordinary course of its
business not to exceed $100,000.00 in the aggregate outstanding at any time.
"Permitted Liens" means: (a) Liens securing taxes, assessments and other
governmental charges or levies (excluding any Lien imposed pursuant to any of
the provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, but (i) in all cases only if payment shall not
at the time be required to be made, and (ii) in the case of warehousemen or
landlords, only if such liens are junior to the Security Interest in any of the
Collateral, (b) Liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under workers' compensation, unemployment insurance or similar legislation or
under payment or performance bonds, (c) other Liens on real property owned by
Borrower in the nature of zoning restrictions, easements, and rights or
restrictions of record on the use of real property, which do not materially
detract from the value of such property or impair the use thereof in the
business of Borrower, (d) purchase money Liens, (e) judgment Liens that have
been stayed or bonded deposits or pledges made in connection with, or to secure
payment of, worker's compensation, (f) unemployment insurance, old age pension
programs mandated under Applicable Law or other social security; (g) Liens shown
on Schedule 5.5(a), and (h) Liens of Lender arising under this Agreement and the
other Loan Documents.
"Person" means any individual, limited liability company, corporation,
partnership, association, trust or unincorporated organization, or a government
or any agency or political subdivision thereof.
"Plan" means any employee benefit plan as defined in Section 3(3) of ERISA
in respect of which Borrower is, or within the immediately preceding six years
was, an "employer" as defined in Section 3(5) of ERISA.
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"Prime Rate" means for any month the rate of interest per annum announced or
quoted by JPMorgan Chase Bank on the last day of the preceding month as its
prime rate for commercial loans, whether or not such rate is the lowest rate
charged by JPMorgan Chase Bank to its most preferred borrower, and, if such
prime rate for commercial loans is discontinued by JPMorgan Chase Bank as a
standard, a comparable reference rate designated by Lender as a substitute
therefor shall be the Prime Rate.
"Proprietary Rights" means all of Borrower's now owned and hereafter arising
or acquired patents, patent applications, inventions and improvements,
copyrights, copyright applications, literary rights, trademarks, trademark
applications, trade names, trade secrets, service marks, data bases, computer
software and software systems, including the source and object codes,
information systems, discs, tapes, customer lists, telephone numbers, credit
memoranda, goodwill, licenses, and other intangible property, and all other
rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing, all
income, royalties, damages, claims and payments now or hereafter due and/or
payable under or with respect thereto, including without limitation, damages and
payments for past and future infringement thereof, and all rights to xxx for
past, present and future infringement of any of the foregoing.
"Receivable" means and includes (a) any and all rights to the payment of
money or other forms of consideration of any kind (whether classified under the
Uniform Commercial Code as Accounts, contract rights, chattel paper, general
intangibles, or otherwise) including, but not limited to, Accounts, accounts
receivable, letters of credit and the right to receive payment thereunder,
chattel paper, tax refunds, insurance proceeds, Contract Rights, notes, drafts,
instruments, documents, acceptances, and all other debts, obligations and
liabilities in whatever form from any Person, (b) all guarantees, security and
Liens for payment thereof, (c) all goods, whether now owned or hereafter
acquired, and whether sold, delivered, undelivered, in transit or returned,
which may be represented by, or the sale or lease of which may have given rise
to, any such right to payment or other debt, obligation or liability, and (d)
all proceeds of any of the foregoing.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System (or any successor).
"Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the outdoor
environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water or groundwater.
"Remedial Action" means actions required to (a) clean up, remove, treat or
in any other way address Contaminants in the outdoor environment; (b) prevent
the Release or threat of Release or minimize the further Release of Contaminants
so they do not migrate or endanger or threaten to endanger public health or
welfare or the outdoor environment; or (c) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
"Renewal Term" means the extension of this Agreement beyond the Initial
Term, as provided for in Section 1.6.
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"Reportable Event" has the meaning set forth in Section 4043(b) of ERISA,
but shall not include a Reportable Event as to which the provision for thirty
(30) days notice to the PBGC is waived under applicable regulations.
"Reserves" means reserves established against the amount of the Revolving
Loan Advances, which Lender in the exercise of its credit judgment and
discretion, deems necessary to ensure payment of the Obligations.
"Revenues" shall mean all money, funds, cash, proceeds, or payments of any
kind received by Borrower from all sources, including without limitation, all
proceeds of Collateral, including Net Proceeds, insurance proceeds, and all
proceeds from the sale of Inventory or other Collateral, whether received in
cash, by check, by other instrument, or otherwise.
"Revolving Credit Facility" means the revolving credit facility established
under this Agreement in an aggregate principal amount outstanding at any one
time of $7,500,000.00 or such lesser or greater amount as shall be agreed upon
from time to time in writing by Lender and Borrower.
"Revolving Loan Advance" means a revolving loan made to Borrower pursuant to
Section 1.1 and "Revolving Loan Advances" means more than one Revolving Loan
Advance.
"SEC" means the Securities and Exchange Commission.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Security Documents" means each of the following: (a) the Financing
Statements, (b) the Trademark Agreement, (c) each Deposit Account Control
Agreement, (d) each Lockbox Agreement, and (e) each other writing executed and
delivered by Borrower or any other Obligor securing the Obligations or any part
thereof.
"Security Interest" means the Liens of Lender on and in the Collateral
created or effected hereby or by any of the Security Documents or pursuant to
the terms hereof or thereof.
"SouthTrust" means SouthTrust Bank.
"SouthTrust Collateral" means the collateral in which the Borrower has
granted to SouthTrust a security interest as more fully described in that
certain Security Agreement (Machinery and Equipment) dated as of March 10, 2002,
as it has been and may hereafter be amended, supplemented, extended or restated
from time to time, and in which SouthTrust has a first priority security
interest in accordance with applicable law.
"SouthTrust Debt" means those certain term loans of SouthTrust secured by
the SouthTrust Collateral.
14
"Subsidiary" means, (a) when used to determine the relationship of a Person
to another Person, a Person of which an aggregate of fifty percent (50%) or more
of the stock of any class or classes or fifty percent (50%) or more of other
ownership interests is owned of record or beneficially by such other Person, or
by one or more Subsidiaries of such other Person, or by such other Person and
one or more Subsidiaries of such Person, (i) if the holders of such stock, or
other ownership interests, (A) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or other
individuals performing similar functions) of such Person, even though the right
so to vote has been suspended by the happening of such a contingency, or (B) are
entitled, as such holders, to vote for the election of a majority of the
directors (or individuals performing similar functions) of such Person, whether
or not the right so to vote exists by reason of the happening of a contingency,
or (ii) in the case of such other ownership interests, if such ownership
interests constitute a majority voting interest, and (b) when used with respect
to a Plan, ERISA or a provision of the Internal Revenue Code pertaining to
employee benefit plans, any other corporation, trade or business (whether or not
incorporated) which is under common control with Borrower and is treated as a
single employer with Borrower under Section 414(b) or (c) of the Internal
Revenue Code and the regulations thereunder.
"Termination Date" means the earliest to occur of: (a) the end of the
Initial Term, or such later date as to which the same may be extended pursuant
to the provisions of Section 1.6, (b) such date as the Obligations shall have
been accelerated pursuant to the provisions of Section 9.2, or (c) such date as
all Obligations shall have been irrevocably paid in full and the Revolving
Credit Facility shall have been terminated.
"Termination Event" means (a) a Reportable Event, or (b) the filing of a
notice of intent to terminate a Plan, or the treatment of a Plan amendment as a
termination, under Section 4041(c) of ERISA, or (c) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or the
appointment of a trustee to administer any Plan.
"Trademark Agreement" means the Patent, Copyright and Trademark Collateral
Assignment and Security Agreement, dated on or about the Agreement Date, made by
Borrower to Lender.
"Unfunded Capital Expenditures" means Capital Expenditures that are funded
or financed with the proceeds of any Borrowing under this Agreement.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code as in
effect from time to time in the state of Rhode Island.
General. Unless otherwise defined, all terms used in this Agreement that are
defined in the UCC shall have the meaning give them in the UCC. All terms of an
accounting nature not specifically defined in this Agreement shall have the
meaning ascribed them by GAAP. References to any legislation or statute or code,
or to any provision thereof, shall include any modification or reenactment of,
or any legislative, statutory or code provision substituted for, such
legislation, statute or code or provision thereof. References to any Person
include its successor or permitted substitutes and assigns.
15
ARTICLE I - LOANS, RENEWAL AND TERMINATION
1.1 Revolving Loan Advances. Lender agrees, for so long as no Default or
Event of Default exists and subject to the terms of this Agreement, to make
Revolving Loan Advances to Borrower in an aggregate amount at any time
outstanding up to the amount of the Borrowing Base at such time; provided,
however, the aggregate amount of all Loans outstanding at any time shall not
exceed the amount of the Revolving Credit Facility. It is expressly understood
and agreed that Lender intends to use the Borrowing Base as a maximum ceiling on
Revolving Loan Advances to Borrower; provided, however, that it is agreed that
should the Revolving Loan Advances ever exceed the ceiling so determined or any
other limitation set forth in this Agreement, such Revolving Loan Advances shall
nevertheless constitute Obligations secured by the Security Interest of Lender
and, as such, shall be entitled to all benefits thereof and security therefor.
Under the Revolving Credit Facility, Borrower from time to time may borrow,
repay, prepay and reborrow the Revolving Loan Advances pursuant to the terms of
this Agreement.
1.2 Borrowing Procedures.
(a) Subject to the provisions of Section 8.1 of this Agreement, and
provided that there does not then exist a Default or an Event of Default,
Borrower may, from time to time, request that Lender make Revolving Loan
Advances to Borrower in accordance with the terms of this Agreement. Lender
shall fund Borrower's request for Revolving Loan Advances as follows: (i) by the
close of business on the day such request is received if the request is received
prior to 2:00 p.m. east coast time; and (ii) by the close of the next Business
Day if the request is received after that time.
(b) Each request for a Revolving Loan Advance shall be made by
transmission to Lender of a Notice of Borrowing and shall, if requested by
Lender or required pursuant to Section 6.7, be accompanied by a complete and
accurate Borrowing Base Certificate, and shall be confirmed by Borrower with
Lender by telephone; provided, that Lender shall at any time have the right to
review and adjust, in the exercise of its reasonable discretion, any calculation
set forth in the Borrowing Base Certificate or the Notice of Borrowing (i) to
reflect Lender's reasonable estimate of declines in value of any of the
Collateral described in such Borrowing Base Certificate, and (ii) to the extent
such calculation is not in accordance with this Agreement. Borrower shall make
no more than one (1) request for Revolving Loan Advances each day.
(c) Borrower shall reimburse Lender and hold Lender harmless from any
loss or expense that Lender actually sustains or incurs as a consequence of the
failure of Borrower to borrow additional Loans after Borrower has requested (or
is deemed to have requested) such additional Loans, including any such loss or
expense arising from the liquidation or re-employment of funds obtained by
Lender to maintain the Loans or from fees payable to terminate the deposits from
which such funds were obtained.
1.3 Interest.
(a) Interest shall accrue on the outstanding principal balance of the
Revolving Loan Advances at the Interest Rate. All interest accrued on the
outstanding principal balance of
16
the Revolving Loan Advances shall be calculated on the basis of a year of three
hundred sixty (360) days and the actual number of days elapsed in each month.
Accrued interest shall be added to the outstanding principal balance of the
Loans on the first Business Day of each calendar month following the month in
which such interest accrues.
(b) Upon the occurrence and during the continuation of an Event of
Default, the unpaid principal balance of the Revolving Loan Advances shall bear
interest at a per annum rate equal to the Interest Rate plus three percent (3%)
effective as of and from the date such Event of Default first occurred, as
determined by Lender.
1.4 Charges to Loan Account. At Lender's option, exercised in Lender's sole
discretion, Lender may (a) deduct the aggregate amount of principal, interest,
fees, costs, expenses, and other charges and amounts provided for in this
Agreement or in any other Loan Documents from any Revolving Loan Advance on the
due date thereof, (b) treat such amounts as a Revolving Loan Advance or (c)
disburse such amount by way of direct payment, which such disbursement shall be
deemed to be a Revolving Loan Advance.
1.5 Allocation of Payments and Limit of Interest. Prior to the occurrence
of an Event of Default, all Revenues received by Lender from Borrower shall be
applied pro tanto to the Obligations as follows: first to pay any fees and
expenses then due to Lender under the Loan Documents, until paid in full, and
second, to repay the principal amount of all outstanding Obligations until paid
in full. Upon the occurrence and during the continuance of an Event of Default,
all Revenues received by Lender from Borrower shall be applied pro tanto to the
Obligations in such manner as Lender shall determine in its sole discretion.
Lender does not intend to charge interest at a rate in excess of the highest
rate permitted by Applicable Law. Interest on any outstanding principal balance
shall be spread over the entire period that such principal balance is
outstanding. Any excess interest charges paid by Borrower to Lender shall be
applied to reduce the outstanding principal balance of the Obligations.
1.6 Renewal and Termination.
(a) This Agreement shall expire on the Termination Date. This
Agreement shall be automatically renewed for additional one (1) year periods
upon expiration of the Initial Term unless terminated by Lender or Borrower as
provided in this Section 1.6. Borrower may terminate this Agreement at the
expiration of the Initial Term or at the end of each Renewal by giving written
notice of such termination to Lender at least ninety (90) days prior to the
effective date of such termination, and, if such termination date is on a date
other than the end of the Initial Term or a Renewal Term, by payment to Lender
of the Early Termination Fee as provided in Section 2.5 hereof. Lender may
terminate this Agreement (i) at the expiration of the Initial Term or at the end
of each Renewal by giving written notice of such termination to Borrower at
least ninety (90) days prior to the effective date of such termination and (ii)
at any time during the existence of an uncured Event of Default.
(b) Upon the termination of this Agreement for any reason as herein
provided, Borrower shall be required to pay, discharge and satisfy, no later
than the effective date of such termination, the Revolving Loan Advances, all
accrued and unpaid interest and fees, any Early Termination Fee, and all other
non- contingent Obligations outstanding.
17
(c) All undertakings, agreements, covenants, warranties and
representations of Borrower contained in this Agreement and the other Loan
Documents shall survive any such termination, and Lender shall retain each and
every Security Interest, and all other rights and remedies of Lender under this
Agreement and the other Loan Documents, notwithstanding such termination until
Borrower has paid the amounts described in Section 1.6(b).
(d) Notwithstanding the payment in full of the Revolving Loan
Advances, all accrued and unpaid interest and fees, any Early Termination Fee,
and all other non-contingent Obligations outstanding, Lender shall not be
required to terminate its Security Interests unless, with respect to any loss or
damage Lender may incur as a result of dishonored checks or other items of
payment received by Lender from Borrower or any Account Debtor and applied to
the Obligations, Lender shall (i) have received a written agreement, executed by
Borrower and by any Person whose loans or other advances to Borrower are used in
whole or in part to satisfy the Obligations, indemnifying Lender from any such
loss or damage; or (ii) have retained such monetary reserves and its Security
Interest for such period of time as Lender, in its reasonable discretion, may
deem necessary to protect Lender from any such loss or damage.
ARTICLE II - FEES
2.1 Closing Fee. In order to induce Lender to enter into this Agreement and
to make the Loans, Borrower shall pay a Closing Fee in accordance with the
Escrow Agreement and Schedule 2 thereto. The Closing Fee shall be fully earned
by Lender as of the date hereof.
2.2 Facility Fee. Borrower shall pay to Lender an Annual Facility Fee in an
amount equal to $37,500.00 on the first and second anniversary date of this
Agreement, which Annual Facility Fee shall be fully earned by Lender as of each
due date thereof.
2.3 Field Examination Fee. For each field examination of the books, records
and other assets of Borrower performed by one or more employees or agents of
Lender, Borrower shall pay to Lender a field examination fee in an amount equal
to $750.00 (or such other amount as Lender shall establish from time to time on
notice to Borrower) for each day spent by each such employee in performing
and/or summarizing the results of such examination (including all necessary
travel time) plus all reasonable "out-of- pocket" expenses. Field examinations
shall be performed by Lender no more frequently than quarterly, and, if Borrower
is in default, with such frequency as Lender shall determine in its sole
discretion, and each field examination fee shall be payable by Borrower to
Lender on the date on which each such field examination is performed.
2.4 Wire Transfer Fee. For each wire transfer initiated by Lender to or for the
benefit of Borrower, Borrower shall pay to Lender a fee of $25.00 or such higher
amount as Lender shall reasonably establish from time to time.
2.5 Early Termination Fee. If for any reason this Agreement is terminated
by Borrower prior to the end of the Initial Term or any Renewal Term of this
Agreement, in view of the impracticality and extreme difficulty of ascertaining
actual damages and by mutual agreement of the parties as to a reasonable
calculation of lost profits of Lender as a result thereof, Borrower agrees to
pay to Lender, upon the effective date of such termination, an Early
18
Termination Fee in an amount equal to the following percentage of the amount of
the Revolving Credit Facility corresponding to the period in which the
termination date occurs:
Percentage of Revolving Period
----------------------- ------
Credit Facility
---------------
3% From Agreement Date to and
including the first
anniversary of the Agreement
Date
2% From the first anniversary of
the Agreement Date to and
including the second
anniversary of the Agreement
Date
1% From and after second
anniversary of the Agreement
Date but on or prior to the
Termination Date
The Early Termination Fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination, and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to the Early Termination Fee upon the termination of
this Agreement by Lender on account of any Event of Default as provided in
Section 9.2 or the occurrence of an Event of Default described in Section
9.1(h). The Early Termination Fee shall be deemed included in the Obligations.
2.6 Costs and Expenses. Borrower agrees to reimburse Lender for all
reasonable out-of-pocket expenses incurred by Lender in connection with the
Loans, including, but not limited to, filing fees, tax, lien and judgment search
fees, fees of outside auditors, bank fees, outside attorneys' fees, allocated
costs of internal counsel, and any other reasonable fees or expenses.
2.7 Unused Line Fee. Borrower shall pay to Lender an unused line fee equal
to one-fourth of one percent (0.25%) per annum of the amount of the Revolving
Credit Facility not used for cash Borrowings. Such unused line fee shall be
payable monthly in arrears on the first (1st) day of each month during the
Initial Term and each Renewal Term, and shall be calculated on the average cash
Borrowings for each preceding month, and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason. The Unused Line
Fee shall be deemed included in the Obligations.
2.8 Collateral Monitoring Fee. Borrower shall pay to Lender a collateral
monitoring fee in an amount equal to $1,500 per month during the term of this
Agreement. The collateral monitoring fee shall be payable on the first day of
each month. Each collateral monitoring fee shall be deemed included in the
Obligations when charged.
ARTICLE III - GRANT OF SECURITY INTEREST
3.1 Grant of Security Interest. To secure the payment, performance and
observance of the Obligations, Borrower grants and hereby assigns, mortgages,
and pledges, to Lender all of the Collateral, and grants to Lender a continuing
security interest in, and a Lien upon, and a right of set off against, all of
the Collateral.
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3.2 Continued Priority of Security Interest.
(a) The Security Interest granted by Borrower shall at all times be
valid, perfected and enforceable against Borrower and all third parties in
accordance with the terms of this Agreement, as security for the
Obligations, and the Collateral shall not be at any time subject to any
Liens that are prior to, or on parity with or junior to the Security
Interest, other than Permitted Liens. Borrower represents and warrants to
Lender that none of the lenders holding a Permitted Lien has a security
interest in the Collateral superior in priority to the Lien of Lender
granted under this Agreement, other than the first priority security
interest of SouthTrust in the SouthTrust Collateral.
(b) Borrower shall, at its sole cost and expense, take all action that
may be necessary or desirable, or that Lender may reasonably request, so as
at all times to maintain the validity, perfection, enforceability and rank
of the Security Interest in the Collateral in conformity with the
requirements of Section 3.2(a), or to enable Lender to exercise or enforce
its rights hereunder.
(c) Borrower covenants and agrees with Lender that from and after the
Agreement Date and until the Termination Date:
(i) In the event that any Collateral, including proceeds, is evidenced
by or consists of negotiable collateral (including without limitation
letters of credit, Letter-of-credit rights, instruments, promissory notes,
draft documents or chattel paper (including electronic and tangible chattel
paper)), and if and to the extent that perfection or priority of Lender's
security interest is dependent on or enhanced by possession, Borrower,
immediately upon the request of Lender, shall endorse and deliver physical
possession of such negotiable collateral or chattel paper to Lender.
(ii) Borrower shall take all steps reasonably necessary to grant
Lender control of all electronic chattel paper in accordance with the UCC
and all "transferable records" as defined in each of the Uniform Electronic
Transaction Act and the Electronic Signatures in Global and National
Commerce Act; and
(iii) If Borrower retains possession of any chattel paper or
instruments with Lender's consent, such chattel paper and instruments shall
be marked with the following legend: "This writing and the obligations
evidenced or secured thereby are subject to the security interest of
Textron Financial Corporation."
(d) At any time upon the reasonable request of Lender, Borrower shall
execute (or cause to be executed) and deliver to Lender, any and all
financing statements, original financing statements in lieu of continuation
statements, fixture filings, security agreements, pledges, assignments,
endorsements of certificates of title, and all other documents (the
"Additional Documents") upon which Borrower's signature may be required
that Lender may request in its discretion, in form and substance
satisfactory to Lender, to perfect and continue the perfection of or better
perfect Lender's Liens in the Collateral (whether now owned or hereafter
arising or acquired), and in order to consummate fully all of the
transactions contemplated hereby and under the other Loan Documents. To the
maximum extent permitted by
20
Applicable Law, Borrower authorizes Lender to execute any such Additional
Documents in Borrower's name and authorizes Lender to file such executed
Additional Documents in any appropriate filing office. In addition, on such
periodic basis as Lender shall require, Borrower shall (a) provide Lender
with a report of all new patentable, copyrightable (other than materials
commonly prepared in the ordinary course of business), or trademarkable
materials acquired or generated by Borrower during the prior period, (b)
cause to be prepared, executed, and delivered to Lender supplemental
schedules to the applicable Loan Documents to identify such patents,
copyrights, and trademarks that have been or will be registered by the
Borrower with the appropriate filing office as being subject to the
security interests created thereunder, and (c) execute and deliver to
Lender such documents as Lender may require to perfect its security
interest in such registered patents, copyrights, and trademarks. Borrower
authorizes Lender to transmit, communicate or, as applicable, file any
financing statement under the UCC, record, in-lieu financing statement,
amendment, correction statement, continuation statement, termination
statement or other instrument describing the Collateral as "all personal
property of Debtor" or "all assets of Debtor" or words of similar effect in
such jurisdictions and in such filing offices as Lender may deem necessary
or desirable in order to perfect any security interest granted by Borrower
under this Agreement and the other Loan Documents without signature.
Borrower hereby ratifies, to the extent necessary, Lender's authorization
to file a financing statement, if such financing statement has been
pre-filed by Lender prior to the Agreement Date. Prior to repayment in full
and final discharge of the Obligations, Borrower shall not terminate, amend
or file a correction statement with respect to any financing statement
filed pursuant to this Section 3.2(d) without Lender's prior written
consent.
(e) Borrower shall promptly notify Lender in writing upon incurring or
otherwise obtaining a commercial tort claim, as that term is defined in the
UCC, after the date hereof against any third party and, upon request of
Lender, promptly amend Schedule 1 to this Agreement, authorize the filing
of additional or amendments to existing financing statements and do such
other acts or things that are necessary or desirable by Lender to give
Lender a security interest in any such commercial tort claim.
(f) Borrower shall xxxx its books and records as directed by Lender
and as may be necessary or appropriate to evidence, protect and perfect the
Security Interest and shall cause its financial statements to reflect the
Security Interest.
ARTICLE IV - PROCEEDS OF COLLATERAL, RECEIVABLES AND COLLECTIONS
4.1 Borrower's Proceeds of Collateral. Borrower shall pay to Lender all
proceeds of Collateral, including Net Proceeds, immediately upon Borrower's
receipt thereof; except that, Revenues from the SouthTrust Collateral shall be
paid to SouthTrust first until the SouthTrust Debt is paid in full and then the
balance, if any, to Lender. For purposes of calculating interest owing by
Borrower hereunder, Lender shall apply the amount of such Revenues to the
Obligations two (2) Business Days following the date upon which Lender receives
such Revenues in immediately available funds.
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4.2 Collection of Receivables and other Collateral.
(a) Borrower shall establish and maintain, at its expense, a Lockbox,
in the sole discretion of Lender, with such banks as are acceptable to Lender
pursuant to documentation satisfactory to Lender, in its discretion, into which
Borrower shall promptly deposit or cause to be deposited all Revenues (other
than de minimus Revenues directly collected by Borrower at its business premises
in an aggregate amount not to exceed $10,000 per month); provided, that, not
later than one hundred eighty (180) days of the date of the initial Loan
hereunder, Borrower shall cause all Revenues to be deposited in the Lockbox at
SouthTrust and will discontinue use of the Lockbox at Regions Bank. Borrower
shall direct and instruct all of its Account Debtors to directly remit to such
Lockbox all payments on Receivables and all other payments constituting
Revenues, in the identical form in which such payments are made, whether by
cash, check or other manner of payment. If, notwithstanding such instructions,
Borrower receives any Revenues directly, Borrower shall hold such Revenues in
trust as Lender's trustee and within one (1) Business Day of receipt Borrower
shall deposit such Revenues directly into the Lockbox. Borrower agrees that all
payments made to the Lockbox or other funds received and collected by Lender,
whether in respect of the Receivables, as other Revenues, or otherwise, shall be
subject to Lender's sole control and shall be treated as payments to Lender in
respect of the Obligations and therefore shall constitute the property of Lender
to the extent of the amount of the outstanding Obligations.
(b) Lender or its designee may, in Lender's sole discretion, at any
time during which an Event of Default exists, notify Account Debtors of the
Security Interest and collect Receivables directly from Account Debtors and
charge the collection costs and expenses to Borrower as additional Loans.
Whether or not a Default or an Event of Default has occurred, any of Lender's
officers, employees or agents shall have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender, or Borrower, to verify
the validity, amount or any other matter relating to any Receivables by mail,
telephone, electronic communication or otherwise. Borrower shall cooperate fully
with Lender in an effort to facilitate and promptly conclude any such
verification process.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender, as of the date of this Agreement
and at all times that Lender makes Loans to Borrower, as follows:
5.1 Existence, Power and Authority; Borrower Affiliates;
Subsidiaries.
(a) Organization; Qualification. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, as identified in Schedule 5.1(a), having the
corporate power and authority to own its properties and to carry on its business
as now being and hereafter proposed to be conducted, and Borrower is duly
qualified and authorized to do business in the jurisdictions listed on Schedule
5.1(a) and in each jurisdiction in which the nature of its business or the
ownership and characteristics of its property requires such qualification or
authorization, except where the failure to be so qualified would not have a
Materially Adverse Effect. The jurisdictions in which Borrower is qualified to
do business as a foreign entity are listed on Schedule 5.1(a).
22
(b) Power. Borrower has the right and power, and has taken all
necessary action to authorize it, to execute, deliver and perform the Loan
Documents in accordance with their respective terms. Each of the Loan Documents
has been duly executed and delivered by the duly authorized officers of Borrower
and each is, or each when executed and delivered in accordance with this
Agreement will be, a legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms. All of the
transactions contemplated under the Loan Documents are within Borrower's powers
and are not in contravention of law or the terms of Borrower's Incorporation
Certificate or Borrower's by-laws, or other organizational documentation, or any
material agreement or undertaking to which Borrower is a party or by which
Borrower or its property is bound, and does not result in the creation or
imposition of any lien, charge or encumbrance upon any assets of Borrower, other
than the Lien of Lender.
(c) Borrower Affiliates; Subsidiaries. Except as set forth on Schedule
5.1(c), Borrower has no Affiliates or Subsidiaries.
(d) Capitalization. The outstanding shares of capital stock of
Borrower have been duly and validly issued and are fully paid and nonassessable.
Except as set forth on Schedule 5.1(d), there are no existing warrants, options,
or commitments of any kind or nature convertible into capital stock of any class
of Borrower.
(e) Business. Borrower is engaged principally in the business(es)
described on Schedule 5.1(e).
5.2 Compliance with Other Agreements and Applicable Law. Except as set
forth on Schedule 5.2, Borrower is not in default under, or in violation in any
respect of, any material agreement, contract, instrument or other commitment to
which Borrower is a party or by which Borrower or its property is bound, and
Borrower is in compliance in all material respects with all Governmental
Approvals applicable to or required in connection with the conduct of Borrower's
business and affairs, and Borrower is otherwise in compliance in all material
respects with all Applicable Laws.
5.3 Absence of Litigation. Except as set forth on Schedule 5.3, there are
no actions, proceedings or investigations pending or threatened against
Borrower, or any of its assets, which, if adversely determined against Borrower
can reasonably be expected to have a Materially Adverse Effect on the assets,
financial condition or business of Borrower.
5.4 Taxes and Returns. Except as set forth on Schedule 5.4, Borrower has
timely filed all tax returns which Borrower is required by law to file or has
obtained valid extensions, and all taxes and other sums related to the payment
of taxes owing by Borrower to any governmental authority have been fully paid
and Borrower maintains adequate reserves to pay such tax liabilities as they
accrue.
5.5 Lien Priority and Nature of Certain Collateral.
(a) Liens. Except for the SouthTrust Collateral, Lender has a
perfected first priority security interest in the Collateral and, except for the
Liens described on Schedule 5.5(a) and the other Permitted Liens, none of the
properties and assets of Borrower is subject to any Lien. As to the SouthTrust
Collateral, Lender has a security interest junior to SouthTrust. Other
23
than the Financing Statements of Lender pursuant to this Agreement, no financing
statement under the Uniform Commercial Code of any state or other instrument
evidencing a Lien that names Borrower as debtor has been filed (and has not
been, or will not upon repayment of outstanding loans from the proceeds from the
Loans upon or about the Closing Date be, terminated) in any state or other
jurisdiction, and Borrower has not signed any such financing statement or other
instrument or any security agreement authorizing any secured party thereunder to
file any such financing statement or instrument, except to perfect the Liens
listed on Schedule 5.5(a) and the other Permitted Liens and those that will no
longer be effective upon repayment of outstanding loans from the proceeds from
the Loans on or about the Closing Date. Borrower further represents and warrants
that since April 4, 2003, Borrower has not granted any new Liens on the
Collateral or authorized the filing of any financing statements other than to
Lender.
(b) Title. Except as set forth on Schedule 5.5(b), Borrower has valid
and legal title to or leasehold interest in all personal property, real
property, and other assets used in its business.
(c) Receivables. Each Eligible Receivable has arisen from the sale and
delivery of goods or from services rendered by Borrower, is genuine, complete
and, in all other respects, what it purports to be, and is not otherwise
ineligible under the standards set forth in this Agreement.
(d) Inventory. All Inventory is located on the premises set forth on
Schedule 5.5(d) or is Inventory in transit to one of such locations, except as
otherwise disclosed in writing to Lender. Borrower has not, within the twelve
(12) months preceding the Agreement Date, located any Inventory at premises
other than those set forth on Schedule 5.5(d).
(e) Equipment. All Equipment currently in use in Borrower's business
is in good order and repair in all material respects and is located on the
premises set forth on Schedule 5.5(e). Borrower has not, within the twelve-(12)
months preceding the Agreement Date, located any Equipment at premises other
than those set forth on Schedule 5.5.(e)
(f) Real Estate. Borrower owns or leases no real property other than
that described on Schedule 5.5(f).
(g) Corporate and Fictitious Names. Except as otherwise disclosed on
Schedule 5.5(g), during the five-year period preceding the Agreement Date,
neither Borrower nor any predecessor of Borrower has been known as or used any
corporate or fictitious name other than the name of Borrower as first set forth
in this Agreement.
5.6 Principal Place of Business. Borrower's principal places of business
and, if Borrower has more than one principal place of business, Borrower's chief
executive office, are located at the addresses set forth on Schedule 5.6. All
books and records pertaining to the Collateral are kept by Borrower at its
principal places of business.
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5.7 Environmental Compliance.
(a) Except as set forth on Schedule 5.7, to the best of Borrower's
knowledge, Borrower has not Released, generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Contaminants on
or off its premises (whether or not owned by Borrower), in any manner that
violates in any material respect any applicable Environmental Laws or any
Governmental Approvals, and the business and operations of Borrower comply in
all material respects with all Environmental Laws and all Governmental Approvals
and similar authorizations.
(b) Except as set forth on Schedule 5.7, to the best of Borrower's
knowledge (i) there is not and has not been any Remedial Action taken with
respect to any real estate leased by Borrower, (ii) there has not been nor is
there now pending any investigation, proceeding, complaint, order, directive,
claim, citation or notice by any governmental authority or any other person with
respect to any non-compliance with or violation of the requirements of any
Environmental Laws by Borrower, or (iii) there has not been any Release,
threatened or actual, of any Contaminants, or generation, use, storage,
treatment, transportation, manufacture, handling, production, or disposal of any
Contaminants, or any other environmental, health or safety matter, which
materially adversely affects (A) Borrower, (B) its business, operations, or
assets, or (C) any properties at which Borrower has transported, or stored any
Contaminants.
(c) Except as set forth on Schedule 5.7, Borrower has no liability
(contingent or otherwise) with a known Release, threatened or actual, from any
real property owned or leased by Borrower, or the generation, use, storage,
treatment, transportation, manufacture, handling, production, or disposal of any
Contaminant, on the owned or leased real property.
(d) All material Governmental Approvals or similar authorizations
required to be obtained or filed in connection with the operations of Borrower
under any Environmental Laws have been obtained, and all Governmental Approvals
and similar authorizations are valid and in full force and effect in all
respects.
5.8 Proprietary Rights. A correct and complete schedule of all of
Borrower's registered Proprietary Rights is set forth in Schedule 5.8 and none
of the Proprietary Rights is subject to any licensing agreement or similar
arrangement, except as set forth on Schedule 5.8 or as entered into in the
ordinary course of Borrower's business. To the best knowledge of Borrower (i)
none of the Proprietary Rights infringes on the valid trademark, trade name,
copyright, or patent right of any other person or entity, and (ii) no other
person's or entity's property infringes on the Proprietary Rights, in any
material respect. The Proprietary Rights described on Schedule 5.8 constitute
all of the property of such type necessary to the current conduct of the
business of Borrower.
5.9 Trade Names. All trade names or styles under which Borrower sells
Inventory or Equipment or creates Accounts, or to which instruments in payment
of Accounts are made payable, are listed on Schedule 5.5(g) and Schedule 5.9.
5.10 Employee Relations. Borrower has a stable work force in place and
Borrower is not, except as disclosed on Schedule 5.10, party to any collective
bargaining agreement nor has
25
any labor union been recognized as the representative of Borrower's employees,
and Borrower knows of no pending, threatened, or contemplated strikes, work
stoppage or other labor disputes involving any of Borrower's employees.
5.11 Employee Pension Benefit Plans. Each Plan meets the minimum funding
standards of Section 302 of ERISA, if applicable, and no Termination Event has
occurred with respect to any Plan of Borrower.
5.12 Bank Accounts. Borrower has provided to Lender in writing a complete
and correct list of all checking accounts, deposit accounts, and other bank
accounts maintained by Borrower.
5.13 Accuracy and Completeness of Information. All representations and
warranties set forth in this Article V, and all statements and other information
furnished by or on behalf of Borrower in connection with this Agreement or any
of the Loan Documents, are true and correct in all material respects and do not
omit any material fact; except that, the information certificate provided by
Borrower to Lender shall be deemed supplemented and updated by the
representations and warranties set forth in this Article V and the Schedules
attached hereto. Each financial statement furnished by or on behalf of Borrower
presents fairly the financial condition of Borrower as of the date of such
statement and for the relevant period(s) then ended.
5.14 Software License Compliance. Borrower warrants and represents that all
software used by Borrower on any of Borrower's computers is either Borrower's
proprietary software or is duly licensed, maintained and operated in material
compliance with the software owner's license terms and conditions.
5.15 Investment Company; Other Regulations. Borrower is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended. Borrower is not
subject to regulations under any federal or state statute or regulations which
limits its ability to incur Indebtedness or which may otherwise render all or
any portion of the Obligations unenforceable.
5.17 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Loan Documents shall survive the
execution and delivery of this Agreement, any investigation made by or on behalf
of Lender, or any Borrowing hereunder, and shall be deemed to have been made
again to Lender on the date of each additional Borrowing or other credit
accommodation under this Agreement, except to the extent such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of
such earlier date), and shall be conclusively presumed to have been relied on by
Lender regardless of any investigation made or information possessed by Lender.
The representations and warranties set forth in this Agreement and in the other
Loan Documents shall be cumulative and shall be in addition to any other
representations or warranties which Borrower shall now or hereafter give, or
cause to be given, to Lender.
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ARTICLE VI - AFFIRMATIVE COVENANTS
Until this Agreement has been terminated and all Obligations have been paid
in full, Borrower covenants and agrees with Lender as follows:
6.1 Financial Statements. Borrower shall deliver to Lender:
(a) for each Fiscal Year, immediately upon filing the same with the
SEC, provided such filing is not deemed late under applicable law or
regulations, Borrower's Form 10-K; provided, that, if Borrower's Form 10-K is
not filed within ninety (90) days following the close of each Fiscal Year,
Borrower's annual audited financial statements certified by a recognized firm of
certified public accountants acceptable to Lender as having been prepared in
accordance with GAAP and as presenting fairly the financial condition of
Borrower as of the date thereof and for the period then ended, including, income
statement, balance sheet, and statement of cash flow (and including any
management letter to Borrower from such accountants, to be delivered not later
than thirty (30) days after such letter is issued);
(b) for each Fiscal Quarter (other than the fourth Fiscal Quarter),
immediately upon filing the same with the SEC, provided such filing is not
deemed late under applicable law or regulations, Borrower's Form 10-Q; provided,
that, for the fourth Fiscal Quarter of each Fiscal Year and if Borrower's Form
10-Q is not filed within forty-five (45) days of any other Fiscal Quarter,
unaudited financial statements, including income statement, balance sheet, and
statement of cash flow, for Borrower prepared in accordance with GAAP (subject
to the absence of notes and to annual audit adjustment), certified by an
Executive Officer of Borrower as presenting fairly the financial condition of
Borrower as of the date thereof and for the period then ended;
(c) promptly after the filing thereof, a true, correct, and complete
copy of each material report and registration statement other than described in
(a) and (b) above, including amendments, and extensions filed with the SEC,
including, without limitation, each Form 8-K filed by or on behalf of Borrower
with the SEC.
(d) within ten (10) days of receipt by Borrower, copies of all FDA
and State of Florida inspection reports.
(e) upon Lender's reasonable request, such other financial
information, including, (i) within thirty (30) days after the close of each
month, reasonably detailed monthly and fiscal year-to-date financial statements,
including income statement, balance sheet, and statement of cash flow, prepared
in accordance with GAAP (subject to the absence of notes and to annual audit
adjustment), certified by the chief executive officer, chief financial officer,
or other authorized individual of Borrower as presenting fairly the financial
condition of Borrower, which, for the end of each month, shall also include a
Covenant Compliance Certificate, in the form of Exhibit A attached hereto,
setting forth a calculation of the financial covenants described in Section 7.6
below, and the status of all other monetary covenants set forth in this
Agreement, (ii) at least sixty (60) days prior to the end of Borrower's Fiscal
Year an annual operating budget showing a projected income statement, balance
sheet and cash flows as of each Fiscal Quarter
27
for the forthcoming Fiscal Year, and (iii) Receivable dilution analyses,
origination reports and default/charge-off reports.
Borrower may deliver the reports required under this Section 6.1 to Lender by
email to the email address(es) provided by Lender from time to time.
6.2 Books and Records. Borrower shall keep accurate and complete records of
the Collateral and permit Lender to: (a) visit during regular business hours
Borrower's business locations at intervals to be determined by Lender; and (b)
inspect, audit and make extracts from or copies of Borrower's books, records,
journals, receipts, computer tapes and disks. All governmental authorities are
authorized to furnish Lender with copies of reports of examinations of Borrower
made by such parties. Banks, Account Debtors and other third parties (without
waiving any attorney-client privilege) with whom Borrower has contractual
relationships pertaining to the Collateral or the Loan Documents, are authorized
to furnish Lender with copies of such contracts and related materials. Lender is
authorized, in its own name or any other name, to communicate with Account
Debtors in order to verify the existence, amount and terms of any Receivable.
6.3 Additional Documentation. Borrower shall execute and deliver to Lender
all additional documents that Lender may, from time to time, reasonably
determine are necessary or appropriate to evidence the Loans or to continue or
perfect Lender's Security Interest in the Collateral.
6.4 Existence, Name, Organization and Chief Executive Office. Borrower
shall maintain its existence in good standing and shall deliver to Lender
written notice, at least sixty (60) days in advance, of any proposed change in
Borrower's state of incorporation, a change in Borrower's name or organizational
identification number, a change in the use of any trade name, new trade names,
fictitious name or new fictitious names, Borrower's business locations, the
location of Borrower's principal place of business or chief executive office,
the mailing address of Borrower, the location of any Inventory or Equipment, or
the location of Borrower's books and records, and shall execute or cause to be
executed any and all documents that Lender reasonably requests in connection
therewith, including, in the case of any new location of Inventory that is not
owned by Borrower, the waiver and consent from the lessor of such premises that
is more particularly described in clause (g) of the definition of Eligible
Inventory.
6.5 Compliance with Laws and Taxes. Borrower shall comply in all material
respects with all Applicable Laws. Borrower shall pay all real and personal
property taxes, assessments and charges, and all franchise, income,
unemployment, social security, withholding, sales and all other taxes assessed
against Borrower or the Collateral, at such times and in such manner so as to
avoid any penalty from accruing against Borrower or any Lien or charge from
attaching to the Collateral. Borrower shall promptly deliver to Lender, upon
request, receipted bills evidencing payment of such taxes and assessments.
6.6 Performance of Obligations. Borrower shall:
(a) perform, in a timely manner, all of its obligations pursuant to all
leases, mortgages, deeds of trust or other agreements to which Borrower is a
party, and shall pay when due all debt owed by Borrower and all claims of
mechanics, materialmen, carriers, landlords,
28
warehousemen and other like persons, except only, and to the extent that, the
amount of any such debt and claims is being contested by Borrower in good faith
by appropriate proceedings and Borrower maintains on its books reasonable
reserves therefor in accordance with GAAP;
(b) with respect to Borrower's Series A Preferred Stock, (i) notify Lender
immediately upon (A) determining or receiving any information that any one or
more of the "Redemption Events" described in Article Fourth, Section A(8)(a)(i)
of Borrower's Incorporation Certificate is reasonably likely to occur, has
occurred or, with the passage of time, will occur and (B) receipt of notice of a
redemption event (i.e., a "Holders' Redemption Notice") from one or more of the
holders of Borrower's Series A Preferred Stock pursuant to Borrower's
Incorporation Certificate and (ii) deliver to Lender a copy of any Holder's
Redemption Notice (as defined in Borrower's Incorporation Certificate) via
facsimile; and
(c) with respect to Borrower's obligations owing to Xxxxxx Xxxxxx, (i)
notify Lender immediately upon (A) determining that Borrower will default or
otherwise fail to pay any amounts owing to him when due (but in all cases not
less than ten (10) days prior to the date payment is due) and (ii) receipt of
any notice attempting to accelerate all or part of any such obligations owing,
(ii) deliver to Lender a copy of any notices of default or other correspondence
from him relating to a default or potential default in the obligations, and
(iii) withhold and not make any further payments to him once an Event of Default
occurs under this Agreement.
6.7 Reporting as to Revenues, Receivables and Inventory.
(a) With such frequency as Lender shall direct, Borrower shall deliver to
Lender such information as Lender shall request with respect to the Revenues,
Receivables and Inventory, including, but not limited to:
(i) no later than 5:00 p.m., east coast time on the first to occur in
any given week of (A) the day on which Borrower requests a Revolving Loan
Advance or (B) Wednesday of each week, a weekly Borrowing Base Certificate based
on the Receivables and Inventory as of the end of the preceding week, together
with a detailed summary of sources of all of the Revenues, including sales of
Inventory, and credits and collections associated with Receivables;
(ii) no later than the fifteenth (15th) day of each month, a Borrowing
Base Certificate based upon the Receivables and Inventory as of the
end of the preceding month, together with a detailed summary of the
sources of all of the Revenues, including sales of Inventory and
credits and collections associated with Receivables, for the preceding
month;
(iii) no later than the fifteenth (15th) day of each month, detailed
schedules showing the aging of Receivables and Borrower's accounts
payable as of the end of the preceding month;
(iv) within fifteen (15) days of any change in Interested Parties, a
current list of Interested Parties;
(v) daily sales and collections reporting;
(vi) weekly Inventory reporting; and
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(vii) no later than ten (10) days following Lender's request therefor,
a complete and updated list of Borrower's customers, including the
name, address and telephone number of each customer.
(b) Borrower shall notify Lender promptly if:
(i) Borrower enters into a long-term contract with the United States
of America, and, if requested by Lender, Borrower shall execute all instruments
and take all steps necessary to insure that all amounts due and to become due
under such long- term contract are properly assigned to Lender pursuant to the
Assignment of Claims Act of 1940 or otherwise;
(ii) Borrower receives information with regard to any type or item of
Collateral which might have in any way a Materially Adverse Effect on the value
of the Collateral as a whole or the rights and remedies of Lender with respect
thereto; and
(iii) any accounts due and owing in which amounts in excess of $20,000
are in dispute by any single Account Debtor on an Eligible Receivable, and
Borrower shall explain in detail the reason for the dispute, all claims related
to the dispute, and the amount in controversy;
6.8 Over-Advance. If, at any time, the aggregate unpaid principal amount of
any of the Revolving Loan Advances, including without limitation, all amounts
deemed to be Revolving Loan Advances in accordance with Section 1.4, exceeds any
applicable limit set forth in this Agreement, Borrower shall immediately pay to
Lender the amount of any such excess and all accrued interest and other charges
owing to Lender with respect thereto.
6.9 Breach or Default. Borrower shall notify Lender immediately upon the
occurrence of any circumstance which: (a) makes any representation or warranty
of Borrower contained in this Agreement or any other Loan Document incorrect or
misleading in any material respect; or (b) constitutes an Event of Default.
6.10 Maintenance of Assets. Borrower shall maintain all of its real and
personal property currently in use in Borrower's business in good repair,
working order and condition, shall make all necessary replacements to such
property so that the value and the operating efficiency of such property will be
preserved, shall prevent any personal property from becoming a fixture to real
estate (unless owned by Borrower and encumbered by a mortgage, deed of trust,
security deed or similar agreement in favor of Lender), and will pay or cause to
be paid all rental or mortgage payments due on its real property.
Notwithstanding the foregoing, Borrower shall not be required to maintain or
replace any personal property that Borrower has in good faith determined is
obsolete or not useful in the conduct of Borrower's business.
6.11 Insurance. Borrower shall procure and continuously maintain: (a) "All
Risk Extended Coverage" property insurance covering Borrower's tangible personal
property for the full replacement value thereof; (b) "All Risk Extended
Coverage" business interruption insurance in an amount acceptable to Lender; (c)
liability insurance in an amount acceptable to Lender; and (d) such other
customary insurance coverages as are reasonably specified by Lender from time to
time. Each property and business interruption insurance policy shall contain a
standard Lender's Loss Payable Endorsement in favor of Lender, providing for,
among other things, thirty (30) days prior written notice to Lender of any
cancellation, non-renewal or
30
modification of such coverage. Borrower shall deliver to Lender certified copies
of such policies and all required endorsements, or other evidence of such
insurance acceptable to Lender. All amounts received by Lender from any such
insurance policies may be applied by Lender to the Obligations. If Borrower
fails to procure required insurance or such insurance is canceled or otherwise
lapses, Lender may procure such insurance and add the cost of such insurance to
the principal balance of the Loans.
6.12 Use of Proceeds.
(a) Borrower shall use the proceeds of all Revolving Loan Advances and
all other loans or accommodations made by Lender for Borrower for legal and
proper business purposes; and
(b) not use any part of such proceeds (i) to purchase or to carry or
reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulation U or T of the Board of Governors
of the Federal Reserve System) or, in any event, for any purpose which would
involve a violation of Regulation U, T or X of such Board of Governors, (ii) for
any personal, family or household purposes, or (iii) for any purpose prohibited
by law or by the terms and conditions of this Agreement or any of the Loan
Documents.
6.13 Disclosure. Promptly and in no event later than five (5) Business Days
after obtaining knowledge thereof, Borrower shall (i) notify Lender if any
written information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and (ii) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgment,
filing, or recordation thereof.
6.14 Further Assurances. Borrower will promptly cure, or cause to be cured,
defects in the execution and delivery of the Loan Documents (including this
Agreement), resulting from any act or failure to act by Borrower or any of the
employees or officers thereof. Borrower, at its expense, will promptly execute
and deliver to Lender, or cause to be executed and delivered to Lender, all such
other and further documents, agreements, and instruments in compliance with or
accomplishment of the covenants and agreements of Borrower in the Loan
Documents, including this Agreement, or to correct any technical omissions in
the Loan Documents, or to obtain any consents that are necessary in connection
with or in accomplishment of the covenants and agreements of Borrower, all as
may be necessary or appropriate in connection therewith as may be requested by
Lender.
6.15 Brokerage Commissions. Except as otherwise provided in the Escrow
Agreement, Borrower shall pay any and all brokerage commission or finders fees
incurred in connection with or as a result of Borrower's obtaining financing
from Lender under this Agreement. Borrower agrees to indemnify, defend, and hold
Lender harmless from and against any claim of any broker or finder arising out
of Borrower's obtaining financing from Lender under this Agreement.
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6.16 FDA and Other Regulatory Bodies Compliance. Borrower shall on the
Agreement Date and at times until the Obligations are paid in full operate its
business in material compliance with all applicable federal, state and local
laws, regulations and other requirements for companies involved in the
manufacturing, distribution or sale of food products similar to those
manufactured, distributed or sold by Borrower, including, without limitation any
and all applicable (i) FDA rules and regulations, including, without limitation,
those rules and regulations with respect to product descriptions, nutritional
claims, label formats, minimum type sizes, content and location of nutritional
information panels, nutritional comparisons, ingredient content panels, and
manufacturing techniques; (ii) customs regulations; or (iii) other government
regulations regarding comestibles.
ARTICLE VII - BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees with Lender, from and after the date of this
Agreement, as follows:
7.1 Business, Management and Organization. Borrower shall not: (a) make any
material change in its management, which includes the following: the removal of
Xxxxxxxxxxx New, as Chief Executive Officer of Borrower; (b) make any material
change in the general nature of the business that Borrower presently conducts;
(c) change its name except after first complying with Section 6.4 of this
Agreement; (d) change its state of incorporation except after first complying
with Section 6.4 of this Agreement, or its type of organization (that is, from a
corporation); or (e) issue any additional shares of Borrower's Series A
preferred stock other than pursuant to Article Fourth, Section A(3) of
Borrower's Incorporation Certificate.
7.2 Disposition of Assets. Borrower shall not: (a) encumber the Collateral
in favor of any party other than Lender, whether voluntarily or involuntarily,
other than the Permitted Liens; or (b) sell, consign, lease or remove from
Borrower's business locations any of Borrower's assets except that, until Lender
gives Borrower notice to the contrary during the existence of any Event of
Default, Borrower may (i) sell Inventory in the ordinary course of its business
(any sale or exchange of Inventory in satisfaction of indebtedness of Borrower
shall not be deemed a sale of Inventory in the ordinary course of business);
(ii) sell or dispose of obsolete assets that constitute Collateral which
Borrower has determined, in good faith, not to be useful in the conduct of its
business and which, in any Fiscal Year, do not have an aggregate fair market
value in excess of $100,000.00; and (iii) sell or dispose of obsolete assets
that do not constitute Collateral which Borrower has determined, in good faith,
not to be useful in the conduct of its business.
7.3 Loans and Guarantees. Borrower shall not make any loan or contribute
money, goods or services to, or guaranty or agree to become liable for any
obligation of, any other Person, including any Affiliates of Borrower or any
Interested Party, other than: (a) loans to employees of Borrower for
reimbursable expenses incurred by such employees in the normal course of
Borrower's business; (b) other loans to employees of Borrower not to exceed
$25,000.00 in the aggregate outstanding at any time; (c) sales of Inventory in
the ordinary course of business; and (d) Permitted Investments.
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7.4 Capital Expenditures and Investments. Borrower shall not: (a) make any
Unfunded Capital Expenditures in the Fiscal Year ending March 31, 2004, in the
aggregate, in excess of $250,000.00 (but in an amount not to exceed $150,000 for
acquisition and/or upgrade of Borrower's computer system) or in any Fiscal Year
thereafter, in the aggregate, in excess of $100,000.00 or (b) make any
Investment other than Permitted Investments.
7.5 Distributions and Salaries. Borrower shall not:
(a) make any cash dividend, distribution or payment on or with respect
to any shares, or purchase, redeem or otherwise acquire or retire any of its
stock (except (i) shares acquired on the conversion thereof into other shares of
stock, (ii) repurchases of stock from former employees or directors of Borrower
under the terms of applicable repurchase agreements or otherwise, such
repurchases not to exceed in the aggregate $50,000.00 in any Fiscal Year; or
(iii) with respect to Borrower's Series A convertible preferred stock,
redemption of any or all of such stock issued as of the date of this Agreement
pursuant to and on the terms of subsection (a) of Article Fourth, Section (A) 8
of Borrower's Incorporation Certificate only (and not pursuant to any other part
of Article Fourth, Section (A) 8 or part of Borrower's Incorporation
Certificate)); or
(b) increase, whether by election, promotion, hiring or otherwise, the
salaries and other compensation paid to officers of Borrower by more than
fifteen percent (15%) in the aggregate in any Fiscal Year from the salary paid
to the same or similar officers in the prior Fiscal Year fulfilling same or
similar responsibilities and duties.
7.6 Financial Covenants.
(a) Borrower shall not permit the Fixed Charge Coverage Ratio to be
less than 1.00 to 1.00 as of Closing Date and, thereafter, as of the end of each
calendar month, for the immediately preceding rolling twelve month period,
commencing with the month ending May 31, 2003, to be less than the ratio
specified below set forth opposite such month:
PERIOD ENDING RATIO
------------- -----
May 31, 2003 through 1.00 to 1.00
September 30, 2003
October 1, 2003 though 1:15 to 1:00
March 31, 2004
April 1, 2004 through 1:25 to 1:00
September 30, 2004
October 1, 2004, through 1:40 to 1:00
March 31, 2005
April 1, 2005 and thereafter 1:50 to 1: 00
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(b) Borrower shall not permit its Adjusted Tangible Net Worth as of
the Closing Date to be less than $11,000,000.00 or, at any time thereafter, to
be less than the sum of $11,000,000.00 plus an amount equal to seventy-five
percent (75%) of Net Income for each calendar month, commencing with the month
ending May 31, 2003, and for each month thereafter. For any determination
hereunder, non-cash stock compensation expense and benefits shall be excluded
from shareholders' equity and Net Income so that such expenses and benefits
shall have a zero effect upon the calculation.
(c) Borrower's shall not permit its Trailing Twelve Month Inventory
Turnover to be less than (i) four times (4x) as of the Closing Date and at the
end of each calendar month thereafter through March 31, 2004, commencing May 31,
2003, and (ii) five times (5x) at the end of April 30, 2004, and each calendar
month thereafter, in each instance as determined by Lender in its sole
discretion. "Trailing Twelve Month Inventory Turnover" means, for the
immediately preceding rolling twelve month period as of the date of
determination, the trailing twelve (12) month cost of sales less depreciation
for the applicable period, divided by the average month-end Inventory balances
for the current period and the trailing eleven (11) months, calculated as of and
from the Closing Date.
All amounts referenced in this Section shall be determined in accordance
with GAAP.
7.7 Change of Control. Borrower shall not cause, permit, or suffer,
directly or indirectly, any Change of Control.
7.8 Limitation on Indebtedness for Money Borrowed. Borrower shall not
create or suffer to exist any Indebtedness for Money Borrowed except: (i) the
Indebtedness for Money Borrowed by Borrower to Lender under this Agreement and
the Loan Documents; (ii) Indebtedness for Money Borrowed outstanding as of the
Closing Date and listed on Schedule 7.8; (iii) Indebtedness for Money Borrowed
secured by Permitted Liens; (iv) other Indebtedness for Money Borrowed in an
aggregate outstanding amount not to exceed $100,000.00; and (v) Indebtedness for
Money Borrowed in order to refinance, but not to increase the amount of the
available principal amount of, any of the foregoing.
7.9 Mergers; Consolidations; Acquisitions. Borrower shall not merge or
consolidate, or permit any Subsidiary of Borrower to merge or consolidate, with
any Person; nor acquire, or permit any of its Subsidiaries to acquire, all or
any substantial part of the properties and assets or Securities of any Person.
7.10 Subsidiaries. After the Closing Date, Borrower shall not create any
Subsidiaries, or transfer any assets to any Subsidiary.
7.11 Fiscal Year. Borrower shall not change its Fiscal Year
end for accounting purposes.
7.12 Affiliate/Interested Party Transactions. Borrower shall not enter into
or be a party to any agreement or transaction with any Affiliate or Interested
Party except (i) agreements disclosed prior to the Closing Date in Borrower's
SEC filings or as set forth on Schedule 7.12 and other non-material agreements
as of the Closing Date, (ii) in the ordinary course of and
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pursuant to the reasonable requirements of Borrower's business and upon fair and
reasonable terms that are no less favorable to Borrower than it would obtain in
a comparable arms length transaction with a Person not an Affiliate or
Interested Party of Borrower, and such agreement or transaction is fully
disclosed to Lender, or (iii) to raise equity for the purpose of paying
dividends or distributions or redeeming all or part of Borrower's Series A
convertible preferred stock when and in the amount due pursuant to Borrower's
Incorporation Certificate.
ARTICLE VIII - CONDITIONS PRECEDENT
8.1 Initial Credit. The obligation of Lender to extend any credit under
this Agreement, including the making of the initial Revolving Loan Advance and
any future Loans, is subject to the fulfillment to Lender's satisfaction of all
of the following conditions:
(a) All legal matters incidental to the extension of credit by Lender
shall satisfactory to counsel of Lender.
(b) Lender shall have received, in form and substance satisfactory to
Lender, each of the following, duly executed:
(i) This Agreement;
(ii) The Trademark Agreement;
(iii) Borrower's borrowing resolutions, together with a
secretary's certificate;
(iv) UCC-1 Financing Statement(s); (v) An opinion of Borrower's
counsel;
(vi) Each Deposit Account Control Agreement for Borrower;
(vii) The Lockbox Agreement with each of (i) SouthTrust and (ii)
Regions Bank;
(viii) A Processor Agreement with Stueben Foods;
(ix) Each other Security Document;
(x) A Landlord Waiver and Consent from each of Borrower's
landlords;
(xi) All releases, terminations, agreements and other documents
as Lender may request to effect and evidence termination
of the existing financing arrangements of Borrower and the
interests of any other lender or lenders pursuant to any
such financing arrangements in any assets and properties
of Borrower;
(xii) A Borrowing Base Certificate dated as of the Agreement
Date;
(xiii) The payoff letter from each existing lender to be paid
from the initial Loan;
(xiv) A current list of Interested Parties; and
35
(xv) Such other documents as Lender may require under this
Agreement.
(c) Lender shall have received evidence of insurance and loss payee
endorsements and/or certificates of insurance naming Lender as loss payee, as
required under this Agreement, in form and substance satisfactory to Lender, at
Borrower's cost and expense;
(d) Lender shall have completed a field review of the records and
other information with respect to the Collateral as Lender may require, the
results of which (including evidence of segregation and identification of
Collateral) shall be satisfactory to Lender in its discretion;
(e) Lender shall have received and reviewed UCC search results for all
jurisdictions in which assets of Borrower are located in the United States, in
form and substance satisfactory to Lender;
(f) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first security
interest in all of the Collateral except as otherwise permitted under this
Agreement;
(g) The excess Availability under the Credit Facility, as of the
Closing Date, shall not be less than (i) $750,000.00 after the payment of all
fees and expenses to be paid by Borrower at Closing Date under this Agreement or
the Escrow Agreement and the application of the proceeds of the initial Loans
funded under this Agreement, plus (ii) a Payable Reserve;
(h) Lender shall have completed its business, legal and collateral due
diligence, including a collateral audit and review of Borrower's books and
records, contracts with Account Debtors conducted by Lender and verification of
Borrower's representations and warranties to the Lender, the results of which
shall be satisfactory to Lender;
(i) Lender shall have completed background checks with respect to
certain principal owners and managers of Borrower, the results of which shall be
satisfactory to Lender in its sole discretion;
(j) Lender shall be satisfied in its sole discretion that there are
no offset arrangements between the Borrower and Account Debtors, including any
related buy-back agreements;
(k) No Default or Event of Default shall have occurred and be
continuing;
(l) All representations and warranties of Borrower set forth in this
Agreement shall be true and correct in all material respects;
(m) The documents regarding the SouthTrust Collateral and SouthTrust
Debt shall be in form and substance acceptable to Lender in its discretion;
(n) The Parties shall have completed or delivered, as applicable, all
items on the checklist of closing items in connection with this Agreement, each
to the satisfaction of Lender in its discretion; and
36
(o) The Escrow Agreement shall have been executed and delivered by all
parties thereto, Borrower shall have disbursed to the Escrow Agent (as defined
in the Escrow Agreement) the sums to be paid by Borrower at Closing, and the
terms of the Escrow Agreement for disbursement of the Initial Loan by Lender
shall have been fully satisfied.
8.2 Initial and Subsequent Credit. The obligation of Lender to make each
extension of credit requested by Borrower under this Agreement, including
without limitation, the initial Revolving Loan Advance and any subsequent
Revolving Loan Advance shall be subject to the fulfillment to Lender's
satisfaction of all of the following conditions:
(a) The representations and warranties contained in this Agreement and
in each of the other Loan Documents shall be true in all material respects on
and as of the date of the signing of this Agreement and on the date of each
extension of credit or the making of any Loans by Lender pursuant to this
Agreement, with the same effect as though such representations and warranties
had been made on and as of each such date, and on each such date, no Event of
Default, and no condition, event or act which with the giving of notice or the
passage of time or both would constitute an Event of Default, shall have
occurred and be continuing or shall exist.
(b) Lender shall have received all additional documents that Lender
may require in connection with such extension of credit, in form and substance
satisfactory to Lender.
(c) There shall be no material adverse change, as determined by Lender
in its discretion, since December 31, 2002, in the financial condition or
business of Borrower, nor any material decline, as determined by Lender in its
discretion, in the market value of any Collateral or a substantial or material
portion thereof or of the assets of Borrower.
ARTICLE IX - EVENTS OF DEFAULT; REMEDIES
9.1 Events of Default. The occurrence or existence of any one or more of
the following events or conditions, whether voluntary or involuntary, shall
constitute an Event of Default:
(a) Borrower fails to pay when due (whether due at stated maturity,
on demand, upon acceleration or otherwise) any installment of principal,
overadvance, interest, premium, if any, and fees on any of the Revolving Loan
Advances, or otherwise owing under this Agreement;
(b) Borrower fails to pay any of the other Obligations on the due date
thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise) and such failure shall continue for a period of ten (10) days after
Lender's giving Borrower written notice thereof;
(c) Borrower fails or neglects to perform, keep or observe any
covenant contained in this Agreement or the other Loan Documents (other than a
covenant which is dealt with specifically elsewhere in this Section 9.1) and the
breach of such other covenant in this Agreement or the other Loan Documents is
not cured within ten (10) days after the sooner to occur of Borrower's receipt
of written notice of such breach from Lender or the date on which such failure
or neglect first becomes known to any officer of Borrower; provided, that if the
cure of such failure or neglect cannot be effected within such ten (10) day
period, and Borrower is
37
diligently attempting to cure such failure or neglect, then such 10-day period
shall be extended up to another twenty (20) days so long as the extension of
such 10-day period will not have a Materially Adverse Effect as determined by
Lender in its discretion;
(d) Any representation or warranty made by or on behalf of Borrower,
or other information provided by or on behalf of Borrower to Lender, was
incorrect or misleading in any material respect at the time it was made or
provided;
(e) Borrower defaults and such default continues beyond any
applicable grace or cure period: (i) under the terms of the SouthTrust Debt; or
(ii) as primary or secondary obligor, in the payment of any principal or
interest on any Indebtedness for Money Borrowed (other than the Obligations) in
excess of $50,000.00 or, if such Indebtedness is payable on demand, Borrower
fails to pay such Indebtedness upon demand; or (iii) in the observance of any
covenant, term or condition contained in any agreement evidencing, securing or
relating to any Indebtedness for Money Borrowed (other than the Obligations) in
excess of $50,000.00, if the effect of such default is to cause, or to permit
any other party to such Indebtedness to cause, all or part of such Indebtedness
to become due before its stated maturity; or (iv) under the terms of Borrower's
Incorporation Certificate for the payment of dividends, distributions or
redemption amounts to the holder(s) of Borrower's Series A preferred stock;
(f) A writ of attachment, garnishment execution, distraint or similar
process in excess of $50,000.00 is issued against Borrower, or any of its
properties except for any such writ of attachment, garnishment execution,
distraint or similar process that is subject to a bonafide dispute by Borrower
and is properly contested by appropriate proceedings promptly instituted and
diligently conducted, or which is not paid, released, dismissed, or transferred
to bond within thirty (30) days thereafter;
(g) Lender determines, in its reasonable discretion, that a
Materially Adverse Effect has occurred;
(h) Borrower becomes insolvent or bankrupt; makes an assignment for
the benefit of creditors or consents to the appointment of a trustee or
receiver; a trustee or a receiver is appointed for Borrower or for a significant
portion of Borrower's assets; bankruptcy, reorganization or insolvency
proceedings are instituted by Borrower; reorganization or insolvency proceedings
are instituted against Borrower and are not dismissed within sixty (60) days
after the institution thereof; or if any of the foregoing occurs with respect to
any other Person liable for any of Borrower's obligations owing to Lender;
(i) Any judgment or order for the payment of money in excess of
$50,000.00, individually, or in excess of $100,000.00 in the aggregate for all
such judgments or orders, is entered against Borrower, unless the same shall be
(i) fully covered by insurance and the issuer of the applicable policy shall
have acknowledged full coverage in writing within thirty (30) days of judgment,
or (ii) vacated, stayed, bonded, paid or discharged within a period of thirty
(30) days from the date of such judgment or order;
(j) Any Loan Document is terminated other than as provided for in
this Agreement or in such Loan Document or becomes void or unenforceable, or any
Security
38
Interest in any portion of the Collateral other than Equipment ceases to be a
valid and perfected first priority security interest, other than as a result of
the Permitted Liens; or any Security Interest in any portion of the Equipment
ceases to be a second priority security interest;
(k) Borrower conceals, removes, or permits to be concealed or
removed, any of its assets with the intent to hinder, delay or defraud Lender or
any of Borrower's other creditors;
(l) Any loss, theft, damage or destruction of any item of Collateral
or other property of Borrower which has a Materially Adverse Effect;
(m) There is filed against Borrower or other Person liable for any of
Borrower's Obligations any civil or criminal action, suit or proceeding under
any federal or state racketeering statute (including, without limitation, the
Racketeer Influenced and Corrupt Organization Act of 1970), which action, suit
or proceeding could result in the confiscation or forfeiture of any material
portion of the Collateral;
(n) Any Termination Event with respect to any Plan shall have
occurred; or a decision shall have been made by Borrower or any member of the
"controlled group of corporations" (as defined in Section 1563(a)(4) of the
Internal Revenue Code determined without regard to Sections 1563(a) and
(e)(3)(c) of such Code) of which Borrower is a party, to terminate, file a
notice of termination with respect to, or withdraw from, any Plan; and
(o) Any default, event of default, or breach occurs under lease
agreement(s) for the Orlando Warehouses, or either one of them.
9.2 Lender's Remedies. In addition to any other rights and remedies that
Lender may have, upon the occurrence and during the continuance of an Event of
Default, Lender may:
(a) Without notice to, or demand upon, Borrower:
(i) discontinue making any further Revolving Loan Advances;
(ii) terminate this Agreement;
(iii) declare all Obligations to be immediately due and payable;
(iv) take possession of all or any portion of the Collateral, wherever
located, and enter on any of the premises where any of the Collateral may be
and remove, repair and store any of the Collateral until it is sold or
otherwise disposed of (Lender shall have the right to store, without charge,
all or any portion of the Collateral at any of Borrower's business locations);
(v) use, without charge, Borrower's Proprietary Rights, advertising
materials, or any property of a similar nature, in advertising for sale and
selling any of the Collateral; and
(vi) renew, modify or extend any Receivable, grant waivers or
indulgences with respect to any Receivable, accept partial payments on any
Receivable, release, surrender or substitute any security for payment of any
Receivable, or compromise with, or release, any party liable on any Receivable
in such a manner as Lender may, in its sole discretion deem advisable, all
without affecting or diminishing Borrower's Obligations to Lender.
39
(b) With notice to Borrower:
(i) require Borrower, at Borrower's expense, to assemble the
Collateral and make the Collateral available to Lender at locations reasonably
convenient to Lender and Borrower; and
(ii) sell or otherwise dispose of all or any portion of the Collateral
at public or private sale for cash or credit, with such notice as may be
required by law (in the absence of any contrary requirement, Borrower agrees
that ten (10) days prior notice of a public or private sale of the Collateral
is reasonable), in lots or in bulk, all as Lender, in its sole discretion, may
deem advisable. Lender shall have the right to conduct any such sales, without
charge, at Borrower's business locations. Lender may purchase all or any
portion of the Collateral at public sale and, if permitted by law, at private
sale and, in lieu of actual payment of the purchase price, may offset the
amount of such price against the outstanding amount of the Loans and any other
amounts owing from Borrower to Lender. Proceeds realized from the sale of any
Collateral will be applied in the following order: (a) to the reasonable
costs, expenses and attorneys' fees incurred by Lender in connection with the
collection, acquisition, protection and sale of the Collateral; (b) to any
accrued and unpaid interest owing from Borrower to Lender; and (c) to any
other amounts owing from Borrower to Lender. Borrower agrees that Borrower
will remain fully liable for any deficiency owing to Lender after the proceeds
of the Collateral have been applied to the Loans and all other amounts owing
from Borrower to Lender.
(c) If any of the Collateral shall require repairing, maintenance,
preparation, or the like, or is in process or other unfinished state, Lender
shall have the right, but not the obligation, to repair or perform such
maintenance, preparation, processing or completion of manufacturing to place
the same in such saleable condition as Lender shall deem appropriate, but
Lender shall have the right to sell or dispose of such Collateral with or
without such processing.
ARTICLE X - JURY TRIAL WAIVER;
OTHER WAIVERS AND CONSENTS; AND GOVERNING LAW
10.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.
(a) The provisions of this Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island, without
reference to applicable conflict of law principles.
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of Rhode Island Courts in connection with the
resolution of any disputes relating to this Agreement or the other Loan
Documents. Borrower irrevocably waives any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Loan Documents, or in any way connected with or
related or incidental to the dealings of the parties in respect of this
Agreement or the other Loan Documents or the transactions related hereto or
thereto, in each case whether now existing or
40
hereafter arising, and whether in contract, tort, equity or otherwise, and
agrees that any dispute with respect to any such matters shall be heard only in
the courts described above (except that Lender shall have the right to bring any
action or proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or otherwise enforce its rights against Borrower or its property.
(c) Borrower waives personal service of any and all process upon it
and consents that all such service of process may be made by registered mail
(return receipt requested) directed to Borrower at the address set forth below
and service so made shall be deemed to be completed five (5) Business Days after
the same shall have been so deposited in the United States mails. Nothing
contained in this Agreement shall affect the right of Lender to serve legal
process by any other manner permitted by law.
(d) BORROWER AND LENDER EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THIS AGREEMENT IN RESPECT OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE RELATED TRANSACTIONS, INCLUDING
WITHOUT LIMITATION, THE OBLIGATIONS OF BORROWER, THE COLLATERAL, OR ANY
INSTRUMENT, DOCUMENT OR GUARANTY DELIVERED PURSUANT TO THIS AGREEMENT, OR THE
VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER NOW EXISTING OR
HEREAFTER ARISING, WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND
LENDER EACH HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY
FILE AN ORIGINAL COUNTERPART OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO A TRIAL
BY JURY.
(e) Borrower hereby releases and exculpates Lender, its officers,
employees and designees, and Lender shall not have any liability to Borrower
(whether in contract, tort, equity or otherwise) for losses suffered by Borrower
in connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted at all times in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.
10.2 Waiver of Certain Claims and Counterclaims. In no event shall Lender
have any liability to Borrower for lost profits or other special, consequential,
incidental, exemplary or punitive damages in connection with this Agreement or
any of the other Loan Documents or the transactions contemplated hereby or
thereby, and Borrower expressly waives any and all right to assert any such
claims. Borrower further waives all rights to interpose any claims, deductions,
41
setoffs, recoupment, or counterclaims of any nature (other than compulsory
counterclaims) in any action or proceeding with respect to this Agreement, the
Obligations, the Collateral or any matter arising therefrom or relating hereto
or thereto. No officer of Lender has any authority to waive, condition, or
modify the provisions of this section.
10.3 Indemnification. Borrower hereby agrees to indemnify, save and hold
harmless Lender and its directors, officers, agents, attorneys and employees
from and against: (i) the use or contemplated use of the proceeds of any of the
Revolving Loan Advances, any transaction contemplated by this Agreement or the
other Loan Documents, or any relationship with Borrower or any other party to
this Agreement or the other Loan Documents; (ii) any of the claims reserved by
Borrower's existing lenders being paid with the initial Loan by Lender as more
particularly set forth in the applicable payoff letter between such lender,
Borrower, and Lender; (iii) any administrative or investigative proceeding by
any governmental agency arising out of or related to a claim, demand, action or
cause of action described in clause (i) above; and (iv) any and all liabilities,
losses, costs or expenses (including reasonable attorneys' fees and
disbursements and other professional services) that any party indemnified
hereunder suffers or incurs as a result of any foregoing claim, demand, action
or cause of action; provided, however, that no such indemnitee shall be entitled
to indemnification for any loss caused by its own gross negligence or willful
misconduct. Any obligation or liability of Borrower to any such indemnitee under
this section shall survive the expiration or termination of this Agreement and
the repayment of the Loans and performance of all Obligations.
ARTICLE XI - MISCELLANEOUS
11.1 Power of Attorney. Borrower irrevocably appoints Lender, and any
person designated by Lender, as Borrower's true and lawful attorney-in-fact to:
(a) endorse for Borrower, in Lender's or Borrower's name, any draft or other
order for the payment of money payable to Borrower; and (b) execute and file or
submit for recording, in Lender's or Borrower's name, Financing Statements
describing the Collateral. Lender shall not be liable to Borrower for any action
taken by Lender or its designee under this power of attorney, except to the
extent that such action was taken by Lender in bad faith or with gross
negligence or willful misconduct. Borrower agrees that a carbon, photographic or
other reproduction of a Financing Statement or this Agreement may be filed by
Lender as a Financing Statement.
11.2 Outstanding Revolving Loan Advances. The outstanding principal amount
of, and accrued interest on, the Revolving Loan Advances and the Interest Rate
applicable to the Revolving Loan Advances from time to time, shall be, at all
times, ascertained from the records of Lender and shall be conclusive absent
manifest error.
11.3 Modifications and Course of Dealing. This Agreement constitutes the
entire agreement of Borrower and Lender relative to the subject matter hereof.
No modification of or supplement to this Agreement shall bind Lender unless in
writing and signed by an authorized officer of Lender. The enumeration in this
Agreement of Lender's rights and remedies is not intended to be exclusive, and
such rights and remedies are in addition to and not by way of limitation of any
other rights or remedies that Lender may have under the Uniform Commercial Code
or other Applicable Law. No course of dealing and no delay or failure of Lender
to exercise any right, power or privilege under any of the Loan Documents will
affect any other or
42
future exercise of such right, power or privilege. The exercise of any one
right, power or privilege shall not preclude the exercise of any others, all of
which shall be cumulative.
11.4 Assignment and Participation. Borrower may not assign or transfer any
of its rights or delegate any of its obligations under this Agreement or any of
the other Loan Documents. Lender shall have the right, from time to time,
without notice to Borrower, to sell, assign or otherwise transfer all or any
part of its interest in this Agreement, the other Loan Documents, and the Loans
to any other party, or enter into participation arrangements with any other
party. Borrower authorizes Lender to deliver to potential assignees or
participants Borrower's financial information and all other information
delivered to Lender in furtherance of or pursuant to the terms of this
Agreement.
11.5 Delegation of Duties. Lender may execute any of its duties under this
Agreement or the other Loan Document by or through agents, employees or
attorneys-in-fact. Lender shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact selected by Lender as long as such
selection was made without gross negligence or willful misconduct.
11.6 Notices. Except as otherwise provided herein, whenever any notice,
demand, request or other communication shall or may be given to or served upon
any party by any other party, or whenever any party desires to give or serve
upon any other party any communication with respect to this Agreement, each such
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and five (5)
Business Days after deposit in the United States mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States mail as otherwise provided in this Section
11.6), (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid or (d) when hand-delivered, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number indicated in the signature page to this Agreement or to such other
address (or facsimile number) as may be substituted by notice given as herein
provided.
11.7 Expenses. Borrower agrees to pay, and to hold Lender harmless from and
against, all reasonable out-of-pocket expenses incurred by Lender (including
fees and costs incurred by in-house counsel) in connection with any amendments,
waivers or consents relating to this Agreement or any of the other Loan
Documents. Borrower further agrees to pay any reasonable fees, costs, or
expenses incurred by Lender arising in connection with Lender's enforcement or
preservation of its rights under this Agreement or any other Loan Document, or
in the collection of any of the Loans, including without limitation, attorneys'
fees (including fees and costs incurred by in-house counsel), expert fees, and
legal costs. Borrower also agrees to pay or reimburse Lender for the costs of
conducting an appraisal of Borrower's Inventory.
11.8 Assignment of Receivables and Inventory. This Agreement may be
supplemented by separate assignments of Receivables and Inventory and, if such
assignments are executed, the rights and interests given by Borrower pursuant to
such assignments shall be in addition to, and not in limitation of, the rights
and security interests given by Borrower under this Agreement. Lender will not
be responsible for the safekeeping of any Inventory delivered to Lender, for the
collection of proceeds of any of the Collateral, or for losses of collected
proceeds held by Borrower in trust for Lender.
43
11.9 Binding Effect; Severability. This Agreement shall not be deemed to
create any right in any party except as provided herein and shall inure to the
benefit of, and be binding upon, the successors and assigns of Borrower and
Lender. All of Borrower' obligations under this Agreement are absolute and
unconditional and shall not be subject to any offset or deduction whatsoever.
The provisions of this Agreement are intended to be severable. If any provision
of this Agreement is held invalid or unenforceable in whole or in part, such
provision will be ineffective to the extent of such invalidity or
unenforceability without in any manner effecting the validity or enforceability
of the remaining provisions of this Agreement.
11.10 Final Agreement. This Agreement and the other Loan Documents are
intended by Borrower and Lender to be the final, complete, and exclusive
expression of the agreement between them. This Agreement supersedes any and all
prior oral or written agreements relating to the subject matter hereof. No
modification, rescission, waiver, release, or amendment of any provision of this
Agreement or any provision of any of the other Loan Documents shall be made,
except by a written agreement signed by Borrower and a duly authorized officer
of Lender.
11.11 Counterparts. This Agreement may be executed in any number of
counterparts, and by Lender and Borrower in separate counterparts, each of which
shall be an original, but all of which shall taken together constitute one and
the same agreement. The parties hereby acknowledge and agree that facsimile
signatures of this Agreement shall have the same force and effect as original
signatures.
11.12 Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
11.13 Borrower's Representative. Borrower hereby appoints and authorizes
its Chief Financial Officer to act as its representative and agent hereunder to
issue notices and other communications on its behalf (the "Borrower
Representative"). Notwithstanding any provision herein to the contrary, Lender
agrees that any notice or other communication issued by an authorized
representative on behalf of Borrower Representative shall be acknowledged as a
notice or other communication properly issued by Borrower and that it shall not
recognize any notice or other communication that was not issued by Borrower
Representative or its authorized representative as a properly authorized notice
or other communication from Borrower.
The undersigned, pursuant to due authority, have caused this Agreement to
be executed as of the date set forth above.
[SIGNATURES BEGIN ON NEXT PAGE]
44
[SIGNATURE PAGE]
BORROWER:
GALAXY NUTRITIONAL FOODS, INC.
By: /s/ Xxxxxxxxxxx X. New
Name: Xxxxxxxxxxx X. New
Title: Chief Executive Officer
0000 Xxxxxxxx Xxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
and Chief Financial Officer
Xxxxx & Xxxxxxxxx LLP
With a copy to: 000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
45
[SIGNATURE PAGE]
LENDER:
TEXTRON FINANCIAL CORPORATION
By: _____________________________
Name: __________________________
Title: _________________________
00000 Xxxxx Xxxx Xxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: SVP-ABLG Portfolio
Management
Facsimile: (000) 000-0000
with a copy to: Xxxxxx X. Xxxxxx, Esq.
Textron Financial Corporation
00000 Xxxxx Xxx Xxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
46
ACKNOWLEDGMENT OF GALAXY NUTRITIONAL FOODS, INC.
STATE OF )
) ss:
COUNTY OF )
Before me, a Notary Public in and for said County and State, on this day
personally appeared _______________________________, known to me to be the
person whose name is subscribed to the foregoing instrument, who acknowledged
that he/she executed said instrument as his or her free and voluntary act and
the free and voluntary act of Galaxy Nutritional Foods, Inc., as the
____________ of said Company.
Given under my hand and Notarial Seal this _____ day of May 2003.
________________________________________
Notary Public, State of Florida
________________________________________
Printed, typed or stamped name of Notary Public
My commission expires:
47
EXHIBIT A
FORM OF COVENANT COMPLIANCE CERTIFICATE
48
