EXHIBIT 10.1
LOAN AGREEMENT
Wachovia Bank, National Association
Summit, New Jersey 07901
(Hereinafter referred to as the "Bank")
Tofutti Brands Inc.
50 Jackson Drive
Cranford, New Jersey 07016
(Hereinafter referred to as "Borrower")
This Loan Agreement ("Agreement") is entered into April ________, 2006,
by and between Bank and Borrower.
This Agreement applies to the loan or loans (individually and
collectively, the "Loan") evidenced by one or more promissory notes of
even date herewith or other notes subject hereto, as modified from time
to time (whether one or more, the "Note") and all Loan Documents. The
terms "Loan Documents" and "Obligations," as used in this Agreement, are
defined in the Note.
Relying upon the covenants, agreements, representations and warranties
contained in this Agreement, Bank is willing to extend credit to Borrower
upon the terms and subject to the conditions set forth herein, and Bank
and Borrower agree as follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement
and until final payment in full of the Obligations: ACCURATE INFORMATION.
All information now and hereafter furnished to Bank is and will be true,
correct and complete in all material respects. Any such information
relating to Borrower's financial condition will accurately reflect
Borrower's financial condition as of the date(s) thereof, (including all
contingent liabilities of every type), and Borrower further represents
that its financial condition has not changed materially or adversely
since the date(s) of such documents. AUTHORIZATION; NON-CONTRAVENTION.
The execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a
party are within its power, have been duly authorized as may be required
and, if necessary, by making appropriate filings with any governmental
agency or unit and are the legal, binding, valid and enforceable
obligations of Borrower and any guarantors; and do not (i) contravene, or
constitute (with or without the giving of notice or lapse of time or
both) a violation of any provision of applicable law, a violation of the
organizational documents of Borrower or any guarantor, or a default under
any agreement, judgment, injunction, order, decree or other instrument
binding upon or affecting Borrower or any guarantor, (ii) result in the
creation or imposition of any lien (other than the lien(s) created by the
Loan Documents) on any of Borrower's or any guarantor's assets, or (iii)
give cause for the acceleration of any obligations of Borrower or any
guarantor to any other creditor. ASSET OWNERSHIP. Borrower has good and
marketable title to all of the properties and assets reflected on the
balance sheets and financial statements supplied Bank by Borrower, and
all such properties and assets are free and clear of mortgages, security
deeds, pledges, liens, charges, and all other encumbrances, except as
otherwise disclosed to Bank by Borrower in writing and approved by Bank
("Permitted Liens"). To Borrower's knowledge, no default has occurred
under any Permitted Liens and no claims or interests adverse to
Borrower's present rights in its properties and assets have arisen.
DISCHARGE OF LIENS AND TAXES. Borrower has duly filed, paid and/or
discharged all taxes or other claims that may become a lien on any of its
property or assets, except to the extent that such items are being
appropriately contested in good faith and an adequate reserve for the
payment thereof is being maintained. SUFFICIENCY OF CAPITAL. Borrower is
not, and after consummation of this Agreement and after giving effect to
all indebtedness incurred and liens created by Borrower in connection
with the Note and any other Loan Documents, will not be, insolvent within
the meaning of 11 U.S.C. ss. 101, as in effect from time to time.
COMPLIANCE WITH LAWS. BorroweR and any subsidiary and affiliate of
Borrower and any guarantor are in compliance in all material respects
with all federal, state and local laws, rules and regulations applicable
to its properties, operations, business, and finances, including, without
limitation,
any federal or state laws relating to liquor (including 18 U.S.C. ss.
3617, et seq.) or narcotics (including 21 U.S.C. SS. 801, et seq.) and/or
any commercial crimes; all applicable federal, state and local laws and
regulations intended to protect the environment; and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), if
applicable. None of Borrower, or any subsidiary or affiliate of Borrower
or any guarantor is a Sanctioned Person or has any of its assets in a
Sanctioned Country or does business in or with, or derives any of its
operating income from investments in or transactions with, Sanctioned
Persons or Sanctioned Countries in violation of economic sanctions
administered by OFAC. The proceeds from the Loan will not be used to fund
any operations in, finance any investments or activities in, or make any
payments to, a Sanctioned Person or a Sanctioned Country. "OFAC" means
the U.S. Department of the Treasury's Office of Foreign Assets Control.
"Sanctioned Country" means a country subject to a sanctions program
identified on the list maintained by OFAC and available at
http://www.treas.gov/offices/enforcement/ofac/sanctions/, or as otherwise
published from time to time. "Sanctioned Person" means (i) a person named
on the list of Specially Designated Nationals or Blocked Persons
maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/, or as otherwise
published from time to time, or (ii) (A) an agency of the government of a
Sanctioned Country, (B) an organization controlled by a Sanctioned
Country, or (C) a person resident in a Sanctioned Country to the extent
subject to a sanctions program administered by OFAC. ORGANIZATION AND
AUTHORITY. Each corporation, partnership or limited liability company
Borrower and/or guarantor, as applicable, is duly created, validly
existing and in good standing under the laws of the state of its
organization, and has all powers, governmental licenses, authorizations,
consents and approvals required to operate its business as now conducted.
Each corporation, partnership or limited liability company Borrower
and/or guarantor, as applicable, is duly qualified, licensed and in good
standing in each jurisdiction where qualification or licensing is
required by the nature of its business or the character and location of
its property, business or customers, and in which the failure to so
qualify or be licensed, as the case may be, in the aggregate, could have
a material adverse effect on the business, financial position, results of
operations, properties or prospects of Borrower or any such guarantor. NO
LITIGATION. There are no pending or threatened suits, claims or demands
against Borrower or any guarantor that have not been disclosed to Bank by
Borrower in writing, and approved by Bank. INDEMNITY. Borrower will
indemnify Bank and its affiliates from and against any losses,
liabilities, claims, damages, penalties or fines imposed upon, asserted
or assessed against or incurred by Bank arising out of the inaccuracy or
breach of any of the representations contained in this Agreement or any
other Loan Documents.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date hereof and
until final payment in full of the Obligations, unless Bank shall
otherwise consent in writing, Borrower will: ACCESS TO BOOKS AND RECORDS.
Allow Bank, or its agents, during normal business hours, access to the
books, records and such other documents of Borrower as Bank shall
reasonably require, and allow Bank, at Borrower's expense, to inspect,
audit and examine the same and to make extracts therefrom and to make
copies thereof. ACCOUNTS PAYABLE AGING. Deliver to Bank, from time to
time hereafter but not less than annually within 90 days of the end of
each such period, a detailed payables report including aging of payables
by total, vendor names and addresses, a reconciliation statement, and the
original date of each invoice. ACCOUNTS RECEIVABLE AGING. Deliver to
Bank, from time to time hereafter but not less than annually within 90
days of the end of each such period, a detailed receivables report
including totals, customer names and addresses, a reconciliation
statement, and the original date of each invoice. BUSINESS CONTINUITY.
Conduct its business in substantially the same manner and locations as
such business is now and has previously been conducted. CERTIFICATE OF
FULL COMPLIANCE FROM ACCOUNTANT. Deliver to Bank, with the financial
statements required herein, a certification by Borrower's independent
certified public accountant that Borrower is in full compliance with the
Loan Documents. COMPLIANCE WITH OTHER AGREEMENTS. Comply with all terms
and conditions contained in this Agreement, and any other Loan Documents,
and swap agreements, if applicable, as defined in the 11 U.S.C. ss. 101,
as in effect from time to time. ESTOPPEL CERTIFICATE. Furnish, withiN 15
days after request by Bank, a written statement duly acknowledged of the
amount due under the Loan and whether offsets or defenses exist against
the Obligations. INSURANCE. Maintain adequate insurance coverage with
respect to its properties and business against loss or damage of the
kinds and in the amounts customarily insured against by companies of
established reputation engaged in the same or similar businesses
including, without limitation, commercial general liability insurance,
workers compensation insurance, and business interruption insurance; all
acquired in such amounts and from such companies as Bank may
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reasonably require. MAINTAIN PROPERTIES. Maintain, preserve and keep its
property in good repair, working order and condition, making all
replacements, additions and improvements thereto necessary for the proper
conduct of its business, unless prohibited by the Loan Documents. NOTICE
OF DEFAULT AND OTHER NOTICES. (a) NOTICE OF DEFAULT. Furnish to Bank
immediately upon becoming aware of the existence of any condition or
event which constitutes a Default (as defined in the Loan Documents) or
any event which, upon the giving of notice or lapse of time or both, may
become a Default, written notice specifying the nature and period of
existence thereof and the action which Borrower is taking or proposes to
take with respect thereto. (b) OTHER NOTICES. Promptly notify Bank in
writing of (i) any material adverse change in its financial condition or
its business; (ii) any default under any material agreement, contract or
other instrument to which it is a party or by which any of its properties
are bound, or any acceleration of the maturity of any indebtedness owing
by Borrower; (iii) any material adverse claim against or affecting
Borrower or any part of its properties; (iv) the commencement of, and any
material determination in, any litigation with any third party or any
proceeding before any governmental agency or unit affecting Borrower; and
(v) at least 30 days prior thereto, any change in Borrower's name or
address as shown above, and/or any change in Borrower's structure. OTHER
FINANCIAL INFORMATION. Deliver promptly such other information regarding
the operation, business affairs, and financial condition of Borrower
which Bank may reasonably request. PAYMENT OF DEBTS. Pay and discharge
when due, and before subject to penalty or further charge, and otherwise
satisfy before maturity or delinquency, all obligations, debts, taxes,
and liabilities of whatever nature or amount, except those which Borrower
in good faith disputes. REPORTS AND PROXIES. Deliver to Bank, promptly, a
copy of all financial statements, reports, notices, and proxy statements,
sent by Borrower to stockholders, and all regular or periodic reports
required to be filed by Borrower with any governmental agency or
authority.
NEGATIVE COVENANTS. Borrower agrees that from the date hereof and until
final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: CHANGE IN FISCAL YEAR. Change its
fiscal year. DEFAULT ON OTHER CONTRACTS OR OBLIGATIONS. Default on any
material contract with or obligation when due to a third party or default
in the performance of any obligation to a third party incurred for money
borrowed in an amount in excess of $25,000.00. GOVERNMENT INTERVENTION.
Permit the assertion or making of any seizure, vesting or intervention by
or under authority of any governmental entity, as a result of which the
management of Borrower or any guarantor is displaced of its authority in
the conduct of its respective business or such business is curtailed or
materially impaired. JUDGMENT ENTERED. Permit the entry of any monetary
judgment or the assessment against, the filing of any tax lien against,
or the issuance of any writ of garnishment or attachment against any
property of or debts due Borrower in an amount in excess of $25,000.00
which is not discharged or execution is not stayed within 30 days of
entry. RETIRE OR REPURCHASE CAPITAL STOCK. Retire or otherwise acquire
any of its capital stock.
ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 120
days after the close of each fiscal year, audited financial statements
reflecting its operations during such fiscal year, including, without
limitation, a balance sheet, profit and loss statement and statement of
cash flows, with supporting schedules and in reasonable detail, prepared
in conformity with generally accepted accounting principles, applied on a
basis consistent with that of the preceding year. If audited statements
are required, all such statements shall be examined by an independent
certified public accountant acceptable to Bank. The opinion of such
independent certified public accountant shall not be acceptable to Bank
if qualified due to any limitations in scope imposed by Borrower or any
other person or entity. Any other qualification of the opinion by the
accountant shall render the acceptability of the financial statements
subject to Bank's approval. If audited statements are required,
Borrower's accountant shall provide Bank with a written acknowledgment of
the Bank's reliance upon the statements in accordance with N.J.S. 2A:
53A-25.
FINANCIAL COVENANTS. Borrower agrees to the following provisions from the
date hereof until final payment in full of the Obligations, unless Bank
shall otherwise consent in writing, using the financial information for
Borrower, its subsidiaries, affiliates and its holding or parent company,
as applicable: DEPOSIT RELATIONSHIP. Borrower shall maintain its primary
depository account with Bank.
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CONDITIONS PRECEDENT. The obligations of Bank to make the loan and any
advances pursuant to this Agreement are subject to the following
conditions precedent: ADDITIONAL DOCUMENTS. Receipt by Bank of such
additional supporting documents as Bank or its counsel may reasonably
request.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written
above, have caused this Agreement to be executed under seal.
Tofutti Brands Inc.
By: ____________________________________(SEAL)
Steven Kass, Chief Financial & Accounting Officer
Wachovia Bank, National Association
By: ___________________________________(SEAL)
Michael P. Byrne, Vice President
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