Exhibit 10.1
LOAN AND SECURITY AGREEMENT
DATED AS OF DECEMBER 2, 2004
AMONG
LASALLE BUSINESS CREDIT, LLC
AS LENDER,
AND
LUCILLE FARMS, INC.
AND
LUCILLE FARMS OF VERMONT, INC.
AS BORROWERS
TABLE OF CONTENTS
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1. DEFINITIONS.............................................................................................. 1
2. LOANS....................................................................................................10
(A) REVOLVING LOANS.................................................................................10
(B) TERM LOAN A.....................................................................................11
(C) TERM LOAN B.....................................................................................11
(D) CAPITAL EXPENDITURE LOANS.......................................................................11
(E) REPAYMENTS......................................................................................12
(F) NOTES...........................................................................................13
3. LETTERS OF CREDIT........................................................................................13
(A) GENERAL TERMS...................................................................................13
(B) REQUESTS FOR LETTERS OF CREDIT..................................................................13
(C) OBLIGATIONS ABSOLUTE............................................................................14
(D) EXPIRATION DATES OF LETTERS OF CREDIT...........................................................14
4. INTEREST, FEES AND CHARGES...............................................................................14
(A) INTEREST RATE...................................................................................14
(B) FEES AND CHARGES................................................................................14
(C) MAXIMUM INTEREST................................................................................15
5. COLLATERAL...............................................................................................16
(A) GRANT OF SECURITY INTEREST TO LENDER............................................................16
(B) OTHER SECURITY..................................................................................16
(C) POSSESSORY COLLATERAL...........................................................................16
(D) ELECTRONIC CHATTEL PAPER........................................................................16
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN..................................17
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.............................................................17
8. COLLECTIONS..............................................................................................17
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.............................................18
(A) DAILY REPORTS...................................................................................18
(B) MONTHLY REPORTS.................................................................................19
(C) FINANCIAL STATEMENTS............................................................................19
(D) ANNUAL PROJECTIONS..............................................................................19
(E) EXPLANATION OF BUDGETS AND PROJECTIONS..........................................................19
(F) PUBLIC REPORTING................................................................................19
(G) OTHER INFORMATION...............................................................................20
10. TERMINATION..............................................................................................20
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11. REPRESENTATIONS AND WARRANTIES...........................................................................20
(A) FINANCIAL STATEMENTS AND OTHER INFORMATION......................................................20
(B) LOCATIONS.......................................................................................20
(C) LOANS BY BORROWER...............................................................................21
(D) ACCOUNTS AND INVENTORY..........................................................................21
(E) LIENS...........................................................................................21
(F) ORGANIZATION, AUTHORITY AND NO CONFLICT.........................................................21
(G) LITIGATION......................................................................................21
(H) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.................................................22
(I) AFFILIATE TRANSACTIONS..........................................................................22
(J) NAMES AND TRADE NAMES...........................................................................22
(K) EQUIPMENT.......................................................................................22
(L) ENFORCEABILITY..................................................................................22
(M) SOLVENCY........................................................................................22
(N) INDEBTEDNESS....................................................................................22
(O) MARGIN SECURITY AND USE OF PROCEEDS.............................................................22
(P) PARENT, SUBSIDIARIES AND AFFILIATES.............................................................23
(Q) NO DEFAULTS.....................................................................................23
(R) EMPLOYEE MATTERS................................................................................23
(S) INTELLECTUAL PROPERTY...........................................................................23
(T) ENVIRONMENTAL MATTERS...........................................................................23
(U) ERISA MATTERS...................................................................................23
(V) CONDUCT OF BUSINESS.............................................................................24
(W) FOOD SECURITY ACT NOTICES.......................................................................24
(X) FARM PRODUCTS SUPPLIER INFORMATION AND RELATED MATTERS..........................................24
(Y) VERMONT PRODUCER'S LIEN NOTICES.................................................................24
12. AFFIRMATIVE COVENANTS....................................................................................24
(A) MAINTENANCE OF RECORDS..........................................................................25
(B) NOTICES.........................................................................................25
(C) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.................................................26
(D) INSPECTION AND AUDITS...........................................................................26
(E) INSURANCE.......................................................................................26
(F) COLLATERAL......................................................................................27
(G) USE OF PROCEEDS.................................................................................27
(H) TAXES...........................................................................................27
(I) INTELLECTUAL PROPERTY...........................................................................28
(J) CHECKING ACCOUNTS...............................................................................28
(K) PATRIOT ACT, BANK SECRECY ACT AND OFFICE OF FOREIGN ASSETS CONTROL..............................28
(L) FARM PRODUCT SUPPLIERS..........................................................................28
13. NEGATIVE COVENANTS.......................................................................................28
(A) GUARANTIES......................................................................................28
(B) INDEBTEDNESS....................................................................................29
(C) LIENS...........................................................................................29
(D) MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER TRANSACTIONS OUTSIDE THE ORDINARY
COURSE OF BUSINESS..............................................................................29
(E) DIVIDENDS AND DISTRIBUTIONS.....................................................................29
(F) INVESTMENTS; LOANS..............................................................................29
(G) FUNDAMENTAL CHANGES, LINE OF BUSINESS...........................................................29
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(H) EQUIPMENT.......................................................................................29
(I) AFFILIATE TRANSACTIONS..........................................................................30
(J) SETTLING OF ACCOUNTS............................................................................30
(K) MANAGEMENT FEES; COMPENSATION...................................................................30
(L) AMENDMENTS TO SUBORDINATED DEBT AND INTERCREDITOR DOCUMENTS.....................................30
(M) ERISA...........................................................................................30
(N) AASI SECURITIES.................................................................................31
(O) EXPANSION FACILITIES............................................................................31
14. FINANCIAL COVENANTS......................................................................................31
(A) TANGIBLE NET WORTH..............................................................................31
(B) FIXED CHARGE COVERAGE...........................................................................32
(C) CAPITAL EXPENDITURE LIMITATIONS.................................................................32
15. DEFAULT..................................................................................................33
(A) PAYMENT.........................................................................................33
(B) BREACH OF THE LOAN DOCUMENTS....................................................................33
(C) BREACHES OF OTHER OBLIGATIONS...................................................................33
(D) BREACH OF REPRESENTATIONS AND WARRANTIES........................................................33
(E) LOSS OF COLLATERAL..............................................................................33
(F) LIEN, LEVY, SEIZURE OR ATTACHMENT...............................................................33
(G) BANKRUPTCY OR SIMILAR PROCEEDINGS...............................................................33
(H) APPOINTMENT OF RECEIVER.........................................................................33
(I) JUDGMENT........................................................................................34
(J) DEATH OR DISSOLUTION OF OBLIGOR.................................................................34
(K) DEFAULT OR REVOCATION OF GUARANTY...............................................................34
(L) CRIMINAL PROCEEDINGS............................................................................34
(M) CHANGE OF MANAGEMENT............................................................................34
(N) MATERIAL ADVERSE CHANGE.........................................................................34
(O) DEFAULTS UNDER OTHER INDEBTEDNESS...............................................................34
(P) ERISA EVENTS....................................................................................34
(Q) DISSOLUTION OF ANY BORROWER.....................................................................35
(R) BUSINESS INTERRUPTION...........................................................................35
(S) ST. ALBANS LC...................................................................................35
16. REMEDIES UPON AN EVENT OF DEFAULT........................................................................35
17. CONDITIONS PRECEDENT.....................................................................................36
18. JOINT AND SEVERAL LIABILITY..............................................................................38
19. INDEMNIFICATION..........................................................................................39
20. NOTICES..................................................................................................40
21. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION...................................................40
22. MODIFICATION AND BENEFIT OF AGREEMENT....................................................................41
23. HEADINGS OF SUBDIVISIONS.................................................................................41
24. POWER OF ATTORNEY........................................................................................41
25. CONFIDENTIALITY..........................................................................................41
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26. COUNTERPARTS.............................................................................................42
27. ELECTRONIC SUBMISSIONS...................................................................................42
28. WAIVER OF JURY TRIAL; CONFESSION OF JUDGMENT; OTHER WAIVERS..............................................42
EXHIBIT A - BUSINESS AND COLLATERAL LOCATIONS
EXHIBIT 9(d) - COMPLIANCE CERTIFICATE
EXHIBIT 2(a) REVOLVING LOAN NOTE
EXHIBIT 2(b) TERM LOAN A NOTE
EXHIBIT 2(c) TERM LOAN B NOTE
EXHIBIT 2(d) CAPITAL EXPENDITURE NOTE
SCHEDULE 1A - LONG TERM ST. ALBANS PAYABLE
SCHEDULE 1B - PERMITTED LIENS
SCHEDULE 11(g) - COMMERCIAL TORT CLAIMS
SCHEDULE 11(h) - CONSENTS AND PERMITS
SCHEDULE 11(i) - AFFILIATE TRANSACTIONS
SCHEDULE 11(j) - NAMES & TRADE NAMES
SCHEDULE 11(k) - EQUIPMENT
SCHEDULE 11(n) - INDEBTEDNESS
SCHEDULE 11(p) - PARENT, SUBSIDIARIES AND AFFILIATES
SCHEDULE 11(t) - ENVIRONMENTAL MATTERS
SCHEDULE 11(x) - FARM PRODUCT SUPPLIERS
SCHEDULE 17(a) - CLOSING DOCUMENT CHECKLIST
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as amended, modified or
supplemented from time to time, this "LOAN AGREEMENT") made this 2nd day of
December, 2004 by and among LASALLE BUSINESS CREDIT, LLC, a Delaware limited
liability company ("LENDER"), Two Commerce Square, Suite 2610, 2001 Market
Street, Philadelphia, PA 19103, and LUCILLE FARMS, INC., a Delaware corporation,
having its principal place of business at 150 River Road, Montville, New Jersey
07045 ("LUCILLE") and LUCILLE FARMS OF VERMONT, INC., a Vermont corporation,
having its principal place of business at Swanton Industrial Park, Jonergin
Drive, Swanton, Vermont 05488 ("LUCILLE Vermont") (Lucille and Lucille Vermont
are individually referred to as a "BORROWER" and collectively, jointly and
severally, referred to as "BORROWERS").
WITNESSETH:
WHEREAS, Borrowers may, from time to time, request Loans from
Lender, and the parties wish to provide for the terms and conditions upon which
such Loans or other financial accommodations, if made by Lender, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any
Loan by renewal or extension) hereafter made to a Borrower by Lender, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by Borrowers, the parties agree as follows:
1. DEFINITIONS.
"ACCOUNT", "ACCOUNT DEBTOR", "CHATTEL PAPER", "COMMERCIAL TORT
CLAIMS", "DEPOSIT ACCOUNTS", "DOCUMENTS", "ELECTRONIC CHATTEL PAPER",
"EQUIPMENT", "FIXTURES", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENTS",
"INVENTORY", "INVESTMENT PROPERTY", "LETTER-OF-CREDIT RIGHT", "PROCEEDS" and
"TANGIBLE CHATTEL PAPER" shall have the respective meanings assigned to such
terms in the Pennsylvania Uniform Commercial Code, as the same may be in effect
from time to time.
"AFFILIATE" shall mean any Person (i) which directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with, a Borrower, (ii) which beneficially owns or holds five
percent (5%) or more of the voting control or equity interests of a Borrower, or
(iii) five percent (5%) or more of the voting control or equity interests of
which is beneficially owned or held by a Borrower.
"APPROVED ELECTRONIC FORM" shall have the meaning specified in
Section 27 hereof.
"APPROVED ELECTRONIC FORM NOTICE" shall have the meaning specified
in Section 27 hereof.
"BANKRUPTCY CODE" shall have the meaning specified in subsection
18(b) hereof.
"BORROWERS" shall have the meaning specified in the preamble of this
Loan Agreement.
"BSA" shall have the meaning specified in subsection 12(k) hereof.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or
any day that banks in Philadelphia, Pennsylvania are required or permitted to
close.
"CAPITAL ADEQUACY CHARGE" shall have the meaning specified in
subsection 4(b)(vi) hereof.
"CAPITAL ADEQUACY DEMAND" shall have the meaning specified in
subsection 4(b)(vi) hereof.
"CAPITAL EXPENDITURE LOANS" shall mean the Loans made pursuant
to subsection 2(d) hereof.
"CAPITAL EXPENDITURES" shall mean, with respect to any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including expenditures for capitalized lease obligations) by
Borrowers and their Subsidiaries on a consolidated basis during such period that
are required by GAAP to be included in or reflected by the property, plant and
equipment or similar fixed asset accounts (or intangible accounts subject to
amortization) on the balance sheet of Borrowers and their Subsidiaries on a
consolidated basis.
"CLOSING DATE" shall mean the date on which the initial Loans
are disbursed.
"COLLATERAL" shall mean all of the property of each Borrower
described in Section 5 hereof, together with all other real or personal property
of any Obligor or any other Person now or hereafter pledged to Lender to secure,
either directly or indirectly, repayment of any of the Liabilities.
"CONTROLLED GROUP" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control, which together with a Borrower, are treated as a single
employer under Section 414 of the IRC.
"DILUTION" shall mean, with respect to any period, the
percentage obtained by dividing (i) the sum of non-cash credits against Accounts
(including, but not limited to returns, adjustments and rebates) of Borrowers
for such period, plus pending or probable, but not yet applied, non-cash credits
against Accounts of Borrowers for such period, as determined by Lender in its
sole discretion by (ii) gross invoiced sales of Borrowers for such period.
"DISTRIBUTING AGENCY" shall mean the governmental agency of a
State or Commonwealth to which the United States Department of Agriculture makes
available certain Donated Food for ultimate distribution to a signatory to a
Master Processing Agreement.
"DONATED FOOD" shall mean nonfat dry milk products donated by
the United States Department of Agriculture to a Distributing Agency for further
distribution to a signatory to a Master Processing Agreement, which Donated Food
is processed by Lucille Vermont pursuant to a Master Processing Agreement.
"EBITDA" shall mean, with respect to any period, Borrowers'
and their Subsidiaries' Net Income for such period (excluding any gains or
losses on the sale of assets other than the sale of Inventory in the ordinary
course of business, and any extraordinary gains) plus interest expense, income
tax expense, depreciation and amortization for such period, all on a
consolidated basis.
"ELECTRONIC FORM" shall have the meaning specified in Section
27 hereof.
"ELIGIBLE ACCOUNT" shall mean an Account owing to Lucille
Vermont, which is acceptable to Lender in its sole discretion for lending
purposes. Without limiting Lender's discretion, Lender shall, in general,
consider an Account to be an Eligible Account if it meets, and so long as it
continues to meet, the following requirements:
(i) it is genuine and in all respects what it purports to be;
(ii) it is owned by Lucille Vermont, Lucille Vermont has the
right to subject it to a security interest in favor of Lender or assign it
to Lender and it is subject to a first priority perfected security
interest in favor of Lender and to no other claim, lien, security interest
or encumbrance whatsoever, other than Permitted Liens;
(iii) it arises from (A) the performance of services by
Lucille Vermont in the ordinary course of such Borrower's business, and
such services have been fully performed and acknowledged and accepted by
the Account Debtor thereunder; or (B) the sale or lease of Goods by
Lucille Vermont in the ordinary course of such Borrower's business, and
(x) such Goods have been completed in accordance with the Account Debtor's
specifications (if any) and delivered to the Account Debtor, (y) such
Account Debtor has not refused to accept, returned or offered to return,
any of the Goods which are the subject of such Account, and (z) Lucille
Vermont has possession of, or Lucille Vermont has delivered to Lender (at
Lender's request) shipping and delivery receipts evidencing delivery of
such Goods;
(iv) it is evidenced by an invoice rendered to the Account
Debtor thereunder, is due and payable within ninety (90) days after the
date of the invoice and does not remain unpaid ninety (90) days past the
invoice date thereof; provided, however, that if more than twenty-five
percent (25%) of the aggregate dollar amount of invoices owing by a
particular Account Debtor remain unpaid ninety (90) days after the
respective invoice dates thereof, then all Accounts owing by that Account
Debtor shall be deemed ineligible;
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(v) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and is not subject to setoff,
counterclaim, credit, allowance or adjustment by such Account Debtor, or
to any claim by such Account Debtor denying liability thereunder in whole
or in part;
(vi) it does not arise out of a contract or order which fails
in any material respect to comply with the requirements of applicable law;
(vii) the Account Debtor thereunder is not a director,
officer, employee or agent of a Borrower, or a Subsidiary, Parent or
Affiliate;
(viii) it is not an Account with respect to which the Account
Debtor is the United States of America or any state or local government,
or any department, agency or instrumentality thereof, unless Lucille
Vermont assigns its right to payment of such Account to Lender pursuant
to, and in full compliance with, the Assignment of Claims Act of 1940, as
amended, or any comparable state or local law, as applicable;
(ix) it is not an Account with respect to which the Account
Debtor is located in a state which requires Lucille Vermont, as a
precondition to commencing or maintaining an action in the courts of that
state, either to (A) receive a certificate of authority to do business and
be in good standing in such state; or (B) file a notice of business
activities report or similar report with such state's taxing authority,
unless (x) Lucille Vermont has taken one of the actions described in
clauses (A) or (B); (y) the failure to take one of the actions described
in either clause (A) or (B) may be cured retroactively by Lucille Vermont
at its election; or (z) Lucille Vermont has proven, to Lender's
satisfaction, that it is exempt from any such requirements under any such
state's laws;
(x) the Account Debtor is located within the United States of
America, provided, however, that Accounts from Account Debtors located in
Puerto Rico will be eligible, up to a maximum amount of $350,000 in the
aggregate, provided that such Accounts are otherwise eligible hereunder;
(xi) it is not an Account with respect to which the Account
Debtor's obligation to pay is subject to any repurchase obligation or
return right, as with sales made on a bill-and-hold, guaranteed sale, sale
on approval, sale or return or consignment basis;
(xii) it is not an Account (A) with respect to which any
representation or warranty contained in this Loan Agreement is untrue; or
(B) which violates any of the covenants of Lucille Vermont contained in
this Loan Agreement;
(xiii) it is not an Account which, when added to a particular
Account Debtor's other indebtedness to such Borrower, exceeds ten percent
(10%) of all Accounts of Lucille Vermont (other than Ferraro Foods, as to
which the foregoing limit shall be fifteen percent (15%)) or a credit
limit determined by Lender in its sole discretion for that Account Debtor
(except that Accounts excluded from Eligible Accounts solely by reason of
this clause (xiii) shall be Eligible Accounts to the extent of such credit
limit);
(xiv) it is not an Account with respect to which the prospect
of payment or performance by the Account Debtor is or will be impaired, as
determined by Lender in its sole discretion; and.
(xv) it is not an Account with respect to which the obligation
of the Account Debtor is payable other than in money, and to the extent
that the Account is payable to Lucille Vermont other than in money or is
payable to Lucille Vermont partially in money and partially in goods (e.g.
dry powdered milk), only the portion thereof payable in money shall be
deemed an Eligible Account.
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"ELIGIBLE INVENTORY" shall mean Inventory of Lucille Vermont,
which is acceptable to Lender in its sole discretion for lending purposes.
Without limiting Lender's discretion, Lender shall, in general, consider
Inventory to be Eligible Inventory if it meets, and so long as it continues to
meet, the following requirements:
(i) it is comprised solely of finished goods (excluding
supplies, but including nonfat dry milk, to the extent such dry milk
constitutes Donated Food obtained by Lucille Vermont from the United
States Department of Agriculture or other Distributing Agency as
reimbursement to Lucille Vermont for the prior use of its inventory in the
processing and manufacture of finished goods delivered to a Recipient
Agency pursuant to a Master Processing Agreement or other similar
agreement), it is owned by Lucille Vermont, Lucille Vermont has the right
to subject it to a security interest in favor of Lender and it is subject
to a first priority perfected security interest in favor of Lender and to
no other claim, lien, security interest or encumbrance whatsoever, other
than Permitted Liens;
(ii) it is located on one of the premises listed on Exhibit A
(or other locations of which Lender has been advised in writing pursuant
to subsection 12(b)(i) hereof), such locations are within the United
States and is not in transit;
(iii) if held for sale, it is (except as Lender may otherwise
consent in writing) new, in unopened packages or otherwise packaged in
accordance with Lucille Vermont's usual and customary business practices,
and unused and free from defects which would, in Lender's sole
determination, affect its market value;
(iv) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Lender has given its prior written
approval and Lucille Vermont has caused any such bailee, consignee,
warehouseman, processor or similar party to issue and deliver to Lender,
in form and substance acceptable to Lender, such Uniform Commercial Code
financing statements, warehouse receipts, waivers and other documents as
Lender shall require;
(v) Lender has determined, in accordance with Lender's
customary business practices, that it is not unacceptable due to age,
type, category or quantity;
(vi) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Loan Agreement are
untrue; or (B) which violates any of the covenants of Lucille Vermont
contained in this Loan Agreement;
(vii) if comprised of or if it contains Farm Products
purchased from a Farm Product Supplier, and if such Farm Product Supplier
or such Farm Product Supplier's FSA Creditor has given Lucille Vermont an
FSA Notice or such FSA Creditor otherwise has taken the actions under the
FSA necessary to preserve its security interest in such Farm Products,
Lender shall have obtained a waiver in its favor from such FSA Creditor in
form and substance satisfactory to Lender in its sole discretion, or
Lender shall have received evidence of full and indefeasible payment for
such Farm Products in the manner required by such Farm Product Supplier's
FSA Creditor.
(viii) if comprised of dairy products supplied by a "producer"
(as defined in the VPLS) as to which the VPLS applies, no Producer's Lien
shall have been filed by or on behalf of such producer for which a waiver
in favor of Lender shall not have been obtained.
(ix) if comprised of Donated Food, at the time of delivery of
such Donated Food to Lucille Vermont by or on behalf of a Recipient
Agency, Lucille Vermont shall have already delivered finished goods to
such Recipient Agency using inventory of Lucille Vermont as substitute
goods in the processing and manufacture of such finished goods, in lieu of
the use of such Donated Food.
"ENVIRONMENTAL LAWS" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to a Borrower's
business or facilities owned or operated by a Borrower, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
-4-
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, modified or restated from time to time.
"ERISA AFFILIATE" shall mean any member of a Controlled Group,
of which a Borrower is a member.
"EVENT OF DEFAULT" shall have the meaning specified in Section
15 hereof.
"EXCESS AVAILABILITY" shall mean, as of any date of
determination by Lender, the lesser of (i) the Maximum Revolving Loan Limit less
the sum of the outstanding Revolving Loans and the Letter of Credit Obligations,
and (ii) the Revolving Loan Limit less the sum of the outstanding Revolving
Loans and the Letter of Credit Obligations, in each case as of the close of
business on such date and assuming, for purposes of calculation, that all taxes
which are due and owing and remain unpaid, and all accounts payable which remain
unpaid more than thirty (30) days after the due dates thereof as of the close of
business on such date (excluding the Long Term St. Albans Payable), are treated
as additional Revolving Loans outstanding on such date.
"EXCESS CASH FLOW" shall have the meaning specified in
subsection 2(e)(v)(B) hereof.
"FARM PRODUCT" shall have the meaning ascribed thereto in the
FSA.
"FARM PRODUCT SUPPLIER" shall mean any Person from whom
Borrowers purchase milk and/or other agricultural products that constitute Farm
Products.
"FC NUMERATOR" shall mean for any period, EBITDA, minus
Unfunded Capital Expenditures of Borrowers and their Subsidiaries, on a
consolidated basis, during the applicable period, minus payments during the
applicable period in respect of income or franchise taxes of Borrowers and their
Subsidiaries, on a consolidated basis.
"FISCAL YEAR" shall mean each twelve (12) month accounting
period of Borrowers, which ends on March 31 of each year.
"FIXED CHARGES" shall mean for any period, without
duplication, scheduled payments of principal during the applicable period with
respect to all indebtedness of Borrowers and their Subsidiaries, on a
consolidated basis, for borrowed money, plus scheduled payments of principal
during the applicable period with respect to all capitalized lease obligations
of Borrowers and their Subsidiaries, on a consolidated basis, plus scheduled
payments of interest during the applicable period with respect to all
indebtedness of Borrowers and their Subsidiaries, on a consolidated basis, for
borrowed money including capital lease obligations.
"FOOD LAW RESERVE" shall mean such amount as determined by
Lender, in respect of inventory of Lucille Vermont that is subject to (i) an FSA
Notice, as to which an FSA Waiver or other waiver acceptable to Lender, has not
been obtained, or (ii) a Producer's Lien, as to which a waiver or subordination
agreement acceptable to Lender has not been obtained.
"FRAUDULENT CONVEYANCE" shall have the meaning specified in
subsection 18(b) hereof.
"FSA" shall mean the Food Security Act of 1985, as amended.
"FSA CREDITOR" shall mean a secured creditor of a Farm Product
Supplier.
"FSA NOTICE" shall mean a notice from any Person (including,
without limitation, a Farm Product Supplier, an FSA Creditor or a Governmental
Authority), pursuant to or in connection with the FSA or any other federal,
state or local food or agricultural law, rule or regulation, purporting to
indicate that Farm Products purchased by any Borrower are or may be subject to a
security interest or lien in favor of a Farm Product Supplier, an FSA Creditor
or any other Person.
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"GAAP" shall mean generally accepted accounting principles and
policies in the United States as in effect from time to time as applied by
Borrowers on a consistent basis.
"GE" shall mean General Electric Capital Corporation.
"GE DEBT DOCUMENTS" shall mean that certain Master Security
Agreement dated as of November 1, 1999, between GE and Borrowers, together with
that certain Promissory Note in the initial principal amount of $46,046.00 dated
November 1, 1999 by Borrowers in favor of GE and Collateral Schedule No. 001
related thereto, that certain Promissory Note in the initial principal amount of
$138,066.00 dated May 26, 2000 by Borrowers in favor of GE and Collateral
Schedule No. 002 related thereto, that certain Promissory Note in the initial
principal amount of $102,167.90 dated July 28, 2000 by Borrowers in favor of GE
and Collateral Schedule No. 003 related thereto, and that certain Promissory
Note in the initial principal amount of $48,600.00 dated September 13, 2000 by
Borrowers in favor of GE and the Collateral Schedule related thereto, and all
other agreements, documents and instruments executed by or on behalf of a
Borrower or any other Person and delivered to GE in connection with the
transactions contemplated by the Master Security Agreement, as each of the same
may be amended, modified or supplemented from time to time.
"GE EQUIPMENT" shall mean all of Borrowers' machinery and
equipment existing as of November 15, 2004, and upon which GE has an existing
perfected security interest pursuant to the GE Debt Documents, together with all
(i) additions and accessions thereto purchased with proceeds of such machinery
and equipment, or with proceeds of insurance derived from loss or damage to such
machinery or equipment, (ii) replacements therefor purchased with proceeds of
such machinery and equipment or with proceeds of insurance derived from loss or
damage to such machinery and equipment, (iii) substitutes for any of the
foregoing purchased with proceeds of such machinery and equipment or with
proceeds of insurance derived from loss or damage to such machinery and
equipment, (iv) all accessories, replacement parts, and repairs now or hereafter
attached or affixed to or used in connection therewith, except to the extent
that Lender obtains a purchase money lien upon and security interest therein,
and (v) all manuals, drawings, instructions, warranties and rights with respect
thereto, and all proceeds of the foregoing.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, and any entity exercising
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any department, agency or instrumentality thereof.
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or
dangerous substance, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation any that are or become classified as hazardous or
toxic under any Environmental Law).
"INDEMNIFIED PARTY" shall have the meaning specified in
Section 18 hereof.
"INTERCREDITOR DOCUMENTS" shall mean the UPS Intercreditor
Agreement and the St. Albans Subordination Agreement.
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"LASALLE BANK" shall mean LaSalle Bank National Association,
Chicago, Illinois.
"LETTER OF CREDIT" shall mean any Letter of Credit issued on
behalf of a Borrower in accordance with this Loan Agreement.
-6-
"LETTER OF CREDIT OBLIGATIONS" shall mean, as of any date of
determination, the sum of (i) the aggregate undrawn face amount of all Letters
of Credit, and (ii) the aggregate unreimbursed amount of all drawn Letters of
Credit not already converted to Loans hereunder.
"LIABILITIES" shall mean any and all obligations, liabilities
and indebtedness of Borrowers to Lender or to any parent, affiliate or
subsidiary of Lender of any and every kind and nature, howsoever created,
arising or evidenced and howsoever owned, held or acquired, whether now or
hereafter existing, whether now due or to become due, whether primary,
secondary, direct, indirect, absolute, contingent or otherwise (including,
without limitation, obligations of performance), whether several, joint or joint
and several, and whether arising or existing under written or oral agreement or
by operation of law.
"LOAN AGREEMENT" means this Loan and Security Agreement.
"LOAN DOCUMENTS" means the Loan Agreement, together with the
Other Agreements.
"LOANS" shall mean all loans and advances made by Lender to or
on behalf of Borrowers hereunder.
"LOCK BOX" and "LOCK BOX ACCOUNT" shall have the meanings
specified in subsection 8(a) hereof.
"LONG TERM ST. ALBANS PAYABLE" shall mean the outstanding
indebtedness of Lucille Vermont to St. Albans in the amount of $1,500,000,
representing certain trade accounts payable due from Lucille Vermont to St.
Albans for goods sold and delivered to Lucille Vermont during the period from
August 1, 2003 through August 31, 2003 (a true and complete schedule of which,
identified by invoice number and invoice amount, is attached hereto as Schedule
1A), which are reflected on the balance sheet of Lucille Vermont and on the
consolidated balance sheet of Borrowers, both dated October 31, 2004.
"LUCILLE ADMINISTRATIVE FEE" shall mean aggregate fees in any
fiscal year of Borrowers paid by Lucille Vermont to Lucille for all selling,
general administrative and management services, not to exceed $150,000.
"MASTER PROCESSING AGREEMENT" shall mean an agreement between
any Borrower and a Distributing Agency relating to the processing of finished
goods comprised wholly or in part of Donated Food or a permitted substitute
therefor.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, property, assets, prospects, operations or condition, financial
or otherwise, of a Person.
"MAXIMUM LOAN LIMIT" shall mean Eleven Million Dollars
($11,000,000).
"MAXIMUM REVOLVING LOAN LIMIT" shall have the meaning
specified in subsection 2(a) hereof.
"MINIMUM TANGIBLE NET WORTH" shall have the meaning specified
in subsection 14(a) hereof.
"MULTIEMPLOYER PLAN" shall mean a plan described in Section
4001(a)(3) of ERISA, which covers employees of any Borrower or any ERISA
Affiliate.
"NET INCOME" means, for any period, net income (or loss) of
Borrowers for such period on a consolidated basis, determined in accordance with
GAAP, consistently applied.
"NOTES" shall mean, collectively, the promissory notes
evidencing the Loans.
"OBLIGOR" shall mean Borrowers and each other Person who is or
shall become primarily or secondarily liable for any of the Liabilities.
"OFAC" shall have the meaning specified in subsection 12(k)
hereof.
-7-
"OTHER AGREEMENTS" shall mean all agreements, instruments and
documents, other than the Loan Agreement, including, without limitation,
guaranties, mortgages, trust deeds, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases, financing
statements and all other writings heretofore, now or from time to time hereafter
executed by or on behalf of a Borrower or any other Person and delivered to
Lender or to any parent, affiliate or subsidiary of Lender in connection with
the Liabilities or the transactions contemplated hereby, as each of the same may
be amended, modified or supplemented from time to time.
"PARENT" shall mean any Person now or at any time or times
hereafter owning or controlling (alone or with any other Person) at least a
majority of the issued and outstanding equity of a Borrower and, if a Borrower
is a partnership, the general partner of such Borrower.
"PBGC" shall have the meaning specified in subsection 12(b)(v)
hereof.
"PERMITTED INDEBTEDNESS" shall mean (i) the indebtedness of
Borrowers to UPS pursuant to the UPS Debt Documents, and (ii) the Long Term St.
Albans Payable, each subject to and in accordance with the Intercreditor
Documents, and (iii) the indebtedness of Borrowers to GE pursuant to the GE Debt
Documents.
"PERMITTED LIENS" shall mean (i) statutory liens of
landlords, carriers, warehousemen, processors, mechanics, materialmen or
suppliers incurred in the ordinary course of business and securing amounts not
yet due or declared to be due by the claimant thereunder; (ii) liens or security
interests in favor of Lender; (iii) zoning restrictions and easements, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a material adverse effect on a Borrower's
ability to use such real property for its intended purpose in connection with
such Borrower's business; (iv) liens in connection with purchase money
indebtedness and capitalized leases otherwise permitted pursuant to this Loan
Agreement, provided, that such liens attach only to the assets the purchase of
which was financed by such purchase money indebtedness or which is the subject
of such capitalized leases; (v) liens set forth on Schedule 1B; and (vi) liens
specifically permitted by Lender in writing.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, entity, party or foreign or
United States government (whether federal, state, county, city, municipal or
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
"PLAN" shall have the meaning specified in subsection 12(b)(v)
hereof.
"PRIME RATE" shall mean LaSalle Bank's publicly announced
prime rate (which is not intended to be LaSalle Bank's lowest or most favorable
rate in effect at any time) in effect from time to time.
"PRIME RATE LOANS" shall mean the Loans bearing interest with
reference to the Prime Rate.
"PRODUCER'S LIEN" shall mean any lien upon or security
interest in the property of any Borrower, arising under the Vermont Producer's
Lien Statute, as to which a notice of lien is filed against such Borrower
pursuant to and as contemplated by VPLS Section 2902, 6 V.S.A., ss. 2902.
"PROJECTIONS" shall have the meaning specified in subsection
12(k) hereof.
"RECIPIENT AGENCY" shall mean the governmental or
quasi-governmental agency that is the recipient of finished goods processed by
Lucille Vermont wholly or in part with Donated Food or a permitted substitute
therefor pursuant to a Master Processing Agreement.
"REPORTABLE EVENT" shall mean a reportable event described in
Section 4043(b) of ERISA or the regulations promulgated thereunder for which the
30-day notice of such event has not been waived pursuant to such regulations.
"REVOLVING LOAN LIMIT" shall have the meaning specified in
subsection 2(a) hereof.
"REVOLVING LOANS" shall have the meaning specified in
subsection 2(a) hereof.
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"ST. ALBANS" shall mean St. Albans Cooperative Creamery, Inc.
"ST. ALBANS LC" shall mean that certain standby letter of
credit in form and substance acceptable to Lender in all respects, issued in
favor of Lender on behalf of St. Albans by a United States bank acceptable to
Lender, as security for the full and prompt repayment of Term Loan A, having a
stated amount at all times during the Term in an amount at least equal to the
balance outstanding from time to time under Term Loan A.
"ST. ALBANS SUBORDINATION AGREEMENT" shall mean that certain
Subordination Agreement dated on or about the date hereof between Lender and St.
Albans.
"SUBSIDIARY" shall mean any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time stock of any other class of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time, directly or indirectly, owned by a Borrower, or
any partnership, joint venture or limited liability company of which more than
fifty percent (50%) of the outstanding equity interests or voting interests are
at the time, directly or indirectly, owned by a Borrower or any partnership of
which a Borrower is a general partner.
"TANGIBLE NET WORTH" shall have the meaning specified in
subsection 14(a) hereof.
"TAX" shall mean, in relation to any LIBOR Rate Loans and the
applicable LIBOR Rate, any tax, levy, impost, duty, deduction, withholding or
charges of whatever nature required to be paid by Lender and/or to be withheld
or deducted from any payment otherwise required hereby to be made by a Borrower
to Lender; provided, that the term "Tax" shall not include any taxes imposed
upon the net income of Lender.
"TERM" shall have the meaning specified in Section 10 hereof.
"TERM LOAN A" shall have the meaning specified in subsection
2(b) hereof.
"TERM LOAN B" shall have the meaning specified in subsection
2(c) hereof.
"TERM LOANS" shall mean, collectively, Term Loan A, Term Loan B
and the Capital Expenditure Loans.
"TERMINATION EVENT" shall mean (i) a Reportable Event with
respect to any Plan or Multiemployer Plan; (ii) the withdrawal of a Borrower or
any member of the Controlled Group from a Plan or Multiemployer Plan during a
plan year in which such entity was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (v) any event or condition (a) which might reasonably
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan or Multiemployer Plan, or (b)
that may reasonably result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of a Borrower or any member of the
Controlled Group from a Multiemployer Plan.
"UNFUNDED CAPITAL EXPENDITURES" shall mean Capital Expenditures
that are not financed with Capital Expenditure Loans or with other long-term
debt permitted by Lender to be incurred by Borrowers.
"UPS" shall mean UPS Capital Business Credit f/k/a First
International Bank, N.A.
"UPS DEBT DOCUMENTS" shall mean that certain Commercial Loan
Agreement dated as of February 8, 1999, between UPS and Borrowers, together with
that certain Security Agreement dated February 8, 1999 between UPS and Lucille,
that certain Commercial Mortgage and Security Agreement dated February 8, 1999
between UPS and Lucille Vermont, that certain Commercial Term Promissory Note
dated February 8, 1999 in the principal amount of $990,000, made by Borrowers in
favor of UPS, that certain Commercial Term Promissory Note dated February 8,
1999 in the principal amount of $3,960,000, made by Borrowers in favor of UPS,
and all other agreements, documents and instruments executed by or on behalf of
a Borrower or any other Person and delivered to UPS in connection with the
transactions contemplated by the UPS Commercial Loan Agreement, as each of the
same may be amended, modified or supplemented from time to time.
-9-
"UPS EQUIPMENT" shall mean all of Borrowers' machinery and
equipment existing as of November 15, 2004, and upon which UPS has an existing
perfected security interest, together with all (i) additions and accessions
thereto purchased with proceeds of such machinery and equipment, or with
proceeds of insurance derived from loss or damage to such machinery or
equipment, (ii) replacements therefor purchased with proceeds of such machinery
and equipment or with proceeds of insurance derived from loss or damage to such
machinery and equipment, (iii) substitutes for any of the foregoing purchased
with proceeds of such machinery and equipment or with proceeds of insurance
derived from loss or damage to such machinery and equipment, (iv) all
accessories, replacement parts, and repairs now or hereafter attached or affixed
to or used in connection therewith, except to the extent that Lender obtains a
purchase money lien upon and security interest therein, and (v) all manuals,
drawings, instructions, warranties and rights with respect thereto, and all
proceeds of the foregoing.
"UPS INTERCREDITOR AGREEMENT" shall mean that certain
Intercreditor Agreement dated on or about the date hereof between Lender and
UPS.
"VERMONT PRODUCER'S LIEN STATUTE" or "VPLS" shall mean 6
V.S.A., ss. 2901, et seq., as amended.
2. LOANS.
(a) REVOLVING LOANS.
Subject to the terms and conditions of the Loan Documents,
during the Term, Lender shall make revolving loans and advances to Lucille
Vermont (the "REVOLVING LOANS") in an amount up to the sum of the following
sublimits (the "REVOLVING LOAN LIMIT"):
(i) up to eighty-five percent (85%) of the face amount (less
maximum discounts, credits and allowances which may be taken by or granted
to Account Debtors in connection therewith in the ordinary course of
Lucille Vermont's business) of Lucille Vermont's Eligible Accounts;
provided, that such advance rate shall be reduced by one (1) percentage
point for each whole or partial percentage point by which Dilution (as
determined by Lender in good faith based on the results of the most recent
twelve (12) month period for which Lender has conducted a field audit of
Borrowers) exceeds five percent (5%); plus
(ii) up to sixty percent (60%) of the lower of cost or market
value of Lucille Vermont's Borrower's Eligible Inventory or Two Million
Dollars ($2,000,000), whichever is less; minus
(iii) such reserves as Lender elects, in its sole discretion
to establish from time to time, including, without limitation, the Food
Law Reserve;
provided that the Revolving Loan Limit shall in no event exceed Seven Million
and No/100 Dollars ($7,000,000) (the "MAXIMUM REVOLVING LOAN LIMIT") except as
such amount may be increased or decreased by Lender, in its sole discretion.
The aggregate unpaid principal balance of the Revolving Loans
shall not at any time exceed the lesser of the (i) Revolving Loan Limit minus
the Letter of Credit Obligations and (ii) the Maximum Revolving Loan Limit minus
the Letter of Credit Obligations. If at any time the outstanding Revolving Loans
exceeds either the Revolving Loan Limit or the Maximum Revolving Loan Limit, in
each case minus the Letter of Credit Obligations, or any portion of the
Revolving Loans and Letter of Credit Obligations exceeds any applicable sublimit
within the Revolving Loan Limit, Borrowers shall immediately, and without the
necessity of demand by Lender, pay to Lender such amount as may be necessary to
eliminate such excess and Lender shall apply such payment to the Revolving Loans
in such order as Lender shall determine in its sole discretion.
Each Borrower hereby authorizes Lender, in its sole
discretion, to charge any of such Borrower's accounts or advance Revolving Loans
to make any payments of principal, interest, fees, costs or expenses required to
be made under the Loan Documents.
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A request for a Revolving Loan shall be made or shall be
deemed to be made, each in the following manner: Lucille Vermont shall give
Lender same day notice, no later than 1:00 P.M. (determined based on the local
time of each Borrower at its principal place of business) for such day, of its
request for a Revolving Loan as a Prime Rate Loan, in which notice Lucille
Vermont shall specify the amount of the proposed borrowing and the proposed
borrowing date; provided, however, that no such request may be made at a time
when there exists an Event of Default or an event which, with the passage of
time or giving of notice, will become an Event of Default. In the event that a
Borrower maintains a controlled disbursement account at LaSalle Bank, each check
presented for payment against such controlled disbursement account and any other
charge or request for payment against such controlled disbursement account shall
constitute a request for a Revolving Loan as a Prime Rate Loan. As an
accommodation to Borrowers, Lender may permit telephone requests for Revolving
Loans and electronic transmittal of instructions, authorizations, agreements or
reports to Lender by Borrowers. Unless a Borrower specifically directs Lender in
writing not to accept or act upon telephonic or electronic communications from
such Borrower, Lender shall have no liability to Borrowers for any loss or
damage suffered by a Borrower as a result of Lender's honoring of any requests,
execution of any instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically or electronically and purporting to
have been sent to Lender by a Borrower and Lender shall have no duty to verify
the origin of any such communication or the authority of the Person sending it.
Each Borrower hereby irrevocably authorizes Lender to disburse
the proceeds of each Revolving Loan requested by such Borrower, or deemed to be
requested by such Borrower, as follows: the proceeds of each Revolving Loan
requested under subsection 2(a) hereof shall be disbursed by Lender in lawful
money of the United States of America in immediately available funds, in the
case of the initial borrowing, in accordance with the terms of the written
disbursement letter from such Borrower, and in the case of each subsequent
borrowing, by wire transfer or Automated Clearing House (ACH) transfer to such
bank account as may be agreed upon by such Borrower and Lender from time to
time, or elsewhere if pursuant to a written direction from such Borrower.
(b) TERM LOAN A.
Subject to the terms and conditions of the Loan Documents, on
the date that the conditions to the initial Loans are satisfied, Lender shall
make a term loan to Borrowers in an amount equal to the lesser of (i) one
hundred percent (100%) of the face amount of a standby letter of credit, in form
and substance satisfactory to Lender, issued on behalf of St. Albans in favor of
Lender, and (ii) Two Million Dollars ($2,000,000), as a special accommodation
("TERM LOAN A"). Amounts repaid with respect to Term Loan A may not be
reborrowed.
(c) TERM LOAN B.
Subject to the terms and conditions of the Loan Documents, on
the date that the conditions to the initial Loans are satisfied, Lender shall
make a term loan to Borrowers in an amount equal to One Million Dollars
($1,000,000) as a special accommodation ("TERM LOAN B"). Amounts repaid with
respect to Term Loan B may not be reborrowed.
(d) CAPITAL EXPENDITURE LOANS.
Subject to the terms and conditions of the Loan Documents,
from time to time after the initial Loans are advanced hereunder, Lender shall
make advances to Borrowers up to eighty percent (80%) of (i) the purchase price
(exclusive of sales taxes, delivery charges and other "soft" costs related to
such purchase) of new Equipment, or (ii) the orderly liquidation value of used
Equipment (as determined by an appraiser acceptable to Lender in its sole
discretion), to be purchased with the proceeds of such advances, which Equipment
is acceptable to Lender in its sole discretion, and upon which Lender shall have
a first priority perfected security interest; provided, that (A) the aggregate
amount advanced for such purchases shall not exceed One Million Dollars
($1,000,000), (B) at least three (3) Business Days prior to any such advance
hereunder, such Borrower shall have furnished to Lender an invoice and
acceptance letter for the Equipment being purchased, executed such documents and
taken such other actions as Lender shall require to assure that Lender has a
first priority perfected security interest in such Equipment, including, without
limitation, obtaining legal title to and taking delivery of such Equipment, and
(C) each advance hereunder shall be in an amount of not less than Two Hundred
Thousand Dollars ($200,000). Amounts repaid with respect to the Capital
Expenditure Loans may not be reborrowed.
-11-
(e) REPAYMENTS.
All Liabilities shall be repaid as follows:
(i) Repayment of Revolving Loans. The Revolving Loans and all
other Liabilities (other than the Term Loans) shall be repaid on the last
day of the Term.
(ii) Repayment of Term Loan A. Term Loan A shall be repaid in
equal monthly installments of Twenty-Three Thousand Eight Hundred Ten
Dollars ($23,810) payable on the first day of each calendar month
commencing on December 1, 2006, and continuing thereafter on the first day
of each succeeding calendar month; provided, that any remaining
outstanding principal balance of Term Loan A shall be repaid at the
earlier of (A) December 1, 2009, or (B) the date on which this Loan
Agreement otherwise terminates pursuant to its terms. If any such payment
due date is not a Business Day, then such payment may be made on the next
succeeding Business Day and such extension of time shall be included in
the computation of the amount of interest and fees due hereunder.
(iii) Repayment of Term Loan B. Term Loan B shall be repaid in
equal monthly installments of Forty-One Thousand Six Hundred Sixty-Seven
Dollars ($41,667) payable on the first day of each calendar month,
commencing on January 1, 2005 and continuing on the first day of each
succeeding calendar month thereafter; provided, that any remaining
outstanding principal balance of Term Loan B shall be repaid by the
earlier of (A) the end of the twenty-fourth (24th) month of such
installments, or (B) the date on which this Loan Agreement otherwise
terminates pursuant to its terms. If any such payment due date is not a
Business Day, then such payment may be made on the next succeeding
Business Day and such extension of time shall be included in the
computation of the amount of interest and fees due hereunder.
(iv) Repayment of Capital Expenditure Loans. Each Capital
Expenditure Loan shall be repaid in equal monthly installments in an
amount sufficient to repay such Capital Expenditure Loan in full by the
end of the sixtieth (60th) month following the date of such loan advance.
Such payments shall be made on the first day of the month immediately
following the month of each such loan advance, and on the corresponding
day of each month thereafter; provided, that any remaining outstanding
principal balance of any Capital Expenditure Loan shall be repaid by the
date on which this Loan Agreement otherwise terminates pursuant to its
terms. If any such payment due date is not a Business Day, then such
payment may be made on the next succeeding Business Day and such extension
of time shall be included in the computation of the amount of interest and
fees due hereunder.
(v) Mandatory Prepayments of Term Loan B and Capital
Expenditure Loans.
(A) Sales of Assets/ Casualty. Upon receipt of the
proceeds of the sale or other disposition of any Equipment of either
or both Borrowers constituting Collateral (so long as such proceeds
individually or in the aggregate in any fiscal year of Borrowers
exceed $50,000), such proceeds shall be paid by such Borrower to
Lender as a mandatory prepayment of Term Loan B and the Capital
Expenditure Loans, to be applied against such Loans and in such
manner as Lender shall determine in its sole discretion, and any
prepayment made pursuant to this subparagraph 2(e)(v)(A) shall not
affect the obligation of Borrowers to make the monthly installment
payments otherwise due hereunder; provided, however that so long as
no default or Event of Default has occurred hereunder, proceeds from
the sale or other disposition of such Equipment in amounts
individually or in the aggregate less than $50,000 in any fiscal
year of Borrowers, shall be applied against the outstanding
Revolving Loans and shall thereafter be available for use by
Borrowers, including for use in funding Capital Expenditures to
replace the Equipment sold or, otherwise divested, so long as such
use for Capital Expenditure purposes occurs within six (6) months
after Borrowers' receipt of such sale or divestiture proceeds. If
any Equipment having an aggregate value of less than $100,000 is
damaged or destroyed, in whole or in part and such damage or
destruction (i) is covered by insurance, and (ii) would not in
Lender's sole discretion have a Material Adverse Effect (hereinafter
referred to as a "NON-MATERIAL EQUIPMENT CASUALTY"), the proceeds
thereof (so long as such proceeds individually or in the aggregate
in any fiscal year of Borrowers exceed $50,000), shall be paid by
Borrowers to Lender to be segregated from and shall not be applied
against the Loans, but rather shall, so long as no default or Event
of Default has occurred hereunder, be made available for use by
Borrowers to fund the purchase of replacement Equipment so long as
such replacement Equipment is purchased within six months after
receipt of such insurance proceeds. Proceeds derived from the loss
or damage to Equipment, other than a Non-Material Equipment
Casualty, shall be paid to Lender to be applied against the Loans as
described herein in such manner as Lender shall determine in its
sole discretion, and any prepayment made pursuant to this sentence
shall not affect the obligation of Borrowers to make the monthly
installment payments otherwise due hereunder.
-12-
(B) Excess Cash Flow. Ten (10) days after receipt of
Borrowers' Fiscal Year end audited financial statements for each
Fiscal Year of Borrowers commencing with Borrowers' Fiscal Year
ended March 31, 2006, Borrowers shall make a mandatory prepayment of
Term Loan B in an amount equal to twenty-five percent (25%) of
Borrowers' Excess Cash Flow (as described below) for the Fiscal Year
just ended, such prepayment to be applied against such Loan and in
such manner as Lender shall determine in its sole discretion, and
any prepayment made pursuant to this subparagraph 2(e)(v)(B) shall
not affect the obligation of Borrowers to make the monthly
installment payments otherwise due hereunder. For purposes hereof,
"EXCESS CASH FLOW" shall mean for each of Borrowers' Fiscal Years,
Borrowers' EBITDA for such period, minus Borrowers' taxes during
such period, minus cash interest payable during such period, minus
actual principal payments made with respect to long term debt during
such period (including payments on account of the Long Term St.
Albans Payable), minus all Unfunded Capital Expenditures by
Borrowers during such period.
(f) NOTES.
The Loans shall, in Lender's sole discretion, be evidenced by
one or more promissory notes in form and substance attached hereto as Exhibit
2(a) with respect to the "Revolving Loan Note", Exhibit 2(b) with respect to the
"Term Loan A Note", Exhibit 2(c) with respect to the "Term Loan B Note", and
Exhibit 2(d) with respect to the "Capital Expenditure Note". However, if such
Loans are not so evidenced, such Loans may be evidenced solely by entries upon
the books and records maintained by Lender.
3. LETTERS OF CREDIT.
(a) GENERAL TERMS.
Subject to the terms and conditions of the Loan Documents,
during the Term, Lender shall from time to time cause to be issued and co-sign
for or otherwise guarantee, upon a Borrower's request, commercial and/or standby
Letters of Credit; provided, that the aggregate undrawn face amount of all such
Letters of Credit shall at no time exceed Two Million Dollars ($2,000,000).
Payments made by Lender to any Person on account of any Letter of Credit shall
constitute Loans hereunder and each Borrower agrees that each payment made by
the issuer of a Letter of Credit in respect of a Letter of Credit issued on
behalf of such Borrower shall constitute a request by such Borrower for a Loan
to reimburse such issuer. Borrowers shall remit to Lender a Letter of Credit fee
equal to three and one-half percent (3.50%) per month on the aggregate undrawn
face amount of all Letters of Credit outstanding, which fee shall be payable
monthly in arrears on the last Business Day of each month. Borrowers shall also
pay on demand the normal and customary administrative charges of the issuer of
the Letter of Credit for issuance, amendment, negotiation, renewal or extension
of any Letter of Credit.
(b) REQUESTS FOR LETTERS OF CREDIT.
Each Borrower shall make requests for Letters of Credit in
writing at least two (2) Business Days prior to the date such Letter of Credit
is to be issued. Each such request shall specify the date such Letter of Credit
is to be issued, the amount thereof, the name and address of the beneficiary
thereof and a description of the transaction to be supported thereby. Any such
notice shall be accompanied by the form of Letter of Credit requested and any
application or reimbursement agreement required by the issuer of such Letter of
Credit. If any term of such application or reimbursement agreement is
inconsistent with this Loan Agreement, then the provisions of this Loan
Agreement shall control to the extent of such inconsistency.
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(c) OBLIGATIONS ABSOLUTE.
Each Borrower shall be obligated to reimburse the issuer of
any Letter of Credit, or Lender if Lender has reimbursed such issuer on a
Borrower's behalf, for any payments made in respect of any Letter of Credit,
which obligation shall be unconditional and irrevocable and shall be paid
regardless of: (i) any lack of validity or enforceability of any Letter of
Credit, (ii) any amendment or waiver of or consent or departure from all or any
provisions of any Letter of Credit, this Loan Agreement or any Other Agreement,
(iii) the existence of any claim, set off, defense or other right which a
Borrower or any other Person may have against any beneficiary of any Letter of
Credit, Lender or the issuer of the Letter of Credit, (iv) any draft or other
document presented under any Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect, (v) any payment under any Letter of Credit against
presentation of a draft or other document that does not comply with the terms of
such Letter of Credit, and (vi) any other act or omission to act or delay of any
kind of the issuer of such Letter of Credit, the Lender or any other Person or
any other event or circumstance that might otherwise constitute a legal or
equitable discharge of a Borrower's obligations hereunder. It is understood and
agreed by each Borrower that the issuer of any Letter of Credit may accept
documents that appear on their face to be in order without further investigation
or inquiry, regardless of any notice or information to the contrary.
(d) EXPIRATION DATES OF LETTERS OF CREDIT.
The expiration date of each Letter of Credit shall be no later
than the earlier of (i) one (1) year from the date of issuance and (ii) the
thirtieth (30th) day prior to the end of the Term. Notwithstanding the
foregoing, a Letter of Credit may provide for automatic extensions of its
expiration date for one or more one (1) year periods, so long as the issuer
thereof has the right to terminate the Letter of Credit at the end of each one
(1) year period and no extension period extends past the thirtieth (30th) day
prior to the end of the Term.
4. INTEREST, FEES AND CHARGES.
(a) INTEREST RATE.
Each Revolving Loan and Term Loan A shall bear interest at the
rate of twenty-five one hundredths of one percent (0.25%) per annum in excess of
the Prime Rate in effect from time to time, Term Loan B shall bear interest at
the rate of one and one-half percent (1.50%) per annum in excess of such Prime
Rate, and each Equipment Loan shall bear interest at the rate of one and
one-quarter percent (1.25%) per annum in excess of such Prime Rate. All such
interest shall be payable on the last Business Day of each month in arrears.
Said rates of interest shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the effective date of each
such change in the Prime Rate. In addition, said rates of interest shall be
subject to a one-time reduction of twenty-five (25) basis points if, as of one
(1) year from the Closing Date, there have been no defaults or Events of
Default, and Borrowers have maintained Excess Availability of at least $250,000
continuously for the thirty (30) day period immediately preceding such date.
Upon the occurrence of an Event of Default and during the continuance thereof,
each Loan shall bear interest at the rate of two percent (2%) per annum in
excess of the interest rate otherwise payable thereon, which interest shall be
payable on demand. All interest shall be calculated on the basis of a 360-day
year.
(b) FEES AND CHARGES.
(i) Closing Fee. Borrowers shall jointly and severally pay to
Lender a closing fee of One Hundred Thousand Dollars ($100,000), which fee
shall be fully earned and payable as of the Closing Date, but which, as an
accommodation to Borrowers, may be paid in three (3) installments of
Thirty-Three Thousand Three Hundred Thirty-Three and 33/100 Dollars
($33,333.33) each, with the first such installment due and payable on the
Closing Date, and the subsequent two (2) installments due and payable on
each of the next two (2) anniversaries of such Closing Date, subject to
being due and payable in full upon the earlier termination of this Loan
Agreement as a result of default and acceleration, prepayment or
otherwise.
(ii) Unused Line Fee. Borrowers shall jointly and severally
pay to Lender an unused line fee of three-eighths of one percent (0.375%)
of (A) the difference between the Maximum Revolving Loan Limit and the
average daily balance of the Revolving Loans plus the outstanding Letter
of Credit Obligations for each month, and (B) the unused amount of the
Capital Expenditure Loans, which fee shall be fully earned by Lender and
payable monthly in arrears on the last Business Day of each month. Said
fee shall be calculated on the basis of a 360-day year.
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(iii) Collateral Management Fee. Borrowers shall jointly and
severally pay to Lender a collateral management fee of Ten Thousand
Dollars ($10,000) on the Closing Date and on the day before each
subsequent anniversary date of such Closing Date during the Term.
(iv) Prepayment Fee. In the event that Borrowers prepay the
Loans prior to the end of the Term and this Loan Agreement is terminated
as a result thereof, Borrowers shall jointly and severally pay to Lender a
prepayment fee equal to (A) one and three quarters of one percent (1.75%)
of the Maximum Loan Limit if such prepayment occurs within one (1) year of
the Closing Date, and (B) three quarters of one percent (0.75%) of the
Maximum Loan Limit if such prepayment occurs after one (1) year, but
within three (3) years, of the Closing Date.
(v) Costs and Expenses. Borrowers shall reimburse Lender for
all costs and expenses, including, without limitation, legal expenses and
reasonable attorneys' fees (whether for internal or outside counsel),
incurred by Lender in connection with the (A) documentation and
consummation of this transaction and any other transactions between
Borrowers and Lender, including, without limitation, Uniform Commercial
Code and other public record searches and filings, overnight courier or
other express or messenger delivery, appraisal costs, surveys, title
insurance and environmental audit or review costs; (B) collection,
protection or enforcement of any rights in or to the Collateral; (C)
collection of any Liabilities; and (D) administration and enforcement of
any of Lender's rights under this Loan Agreement or any Other Agreement
(including, without limitation, any costs and expenses of any third party
provider engaged by Lender for such purposes). Borrowers shall also pay
all normal service charges with respect to all accounts maintained by each
Borrower with Lender and LaSalle Bank and any additional services
requested by a Borrower from Lender and LaSalle Bank. All such costs,
expenses and charges shall, if owed to LaSalle Bank, be reimbursed by
Lender and in such event or in the event such costs and expenses are owed
to Lender, shall constitute Liabilities hereunder, shall be payable by
Borrowers to Lender on demand, and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder.
(vi) Capital Adequacy Charge. If Lender shall have determined
that the adoption of any law, rule or regulation regarding capital
adequacy, or any change therein or in the interpretation or application
thereof, or compliance by Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central
bank or Governmental Authority enacted after the date hereof, does or
shall have the effect of reducing the rate of return on Lender's capital
as a consequence of its obligations hereunder to a level below that which
Lender could have achieved but for such adoption, change or compliance
(taking into consideration Lender's policies with respect to capital
adequacy) by a material amount, then from time to time, after submission
by Lender to Borrowers of a written demand therefor ("CAPITAL ADEQUACY
DEMAND") together with the certificate described below, Borrowers shall
pay to Lender such additional amount or amounts ("CAPITAL ADEQUACY
CHARGE") as will compensate Lender for such reduction, such Capital
Adequacy Demand to be made with reasonable promptness following such
determination. A certificate of Lender claiming entitlement to payment as
set forth above shall be conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the occurrence giving rise to
such reduction, the amount of the Capital Adequacy Charge to be paid to
Lender, and the method by which such amount was determined. In determining
such amount, Lender may use any reasonable averaging and attribution
method, applied on a non-discriminatory basis.
(c) MAXIMUM INTEREST.
It is the intent of the parties that the rate of interest and
other charges to each Borrower under the Loan Documents shall be lawful;
therefore, if for any reason the interest or other charges payable under this
Loan Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Lender may lawfully charge such
Borrower, then the obligation to pay interest and other charges shall
automatically be reduced to such limit and, if any amount in excess of such
limit shall have been paid, then such amount shall be refunded to such Borrower.
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5. COLLATERAL.
(a) GRANT OF SECURITY INTEREST TO LENDER.
As security for the payment of all Loans now or in the future
made by Lender to Borrowers hereunder and for the payment or other satisfaction
of all other Liabilities, each Borrower hereby assigns to Lender and grants to
Lender a continuing security interest in all tangible and intangible personal
property assets of such Borrower (excluding the UPS Equipment and the GE
Equipment), whether now or hereafter owned, existing, acquired or arising and
wherever now or hereafter located, including without limitation: (i) all
Accounts (whether or not Eligible Accounts) and all Goods whose sale, lease or
other disposition by such Borrower has given rise to Accounts and have been
returned to, or repossessed or stopped in transit by, such Borrower; (ii) all
Chattel Paper, Instruments, Documents and General Intangibles (including,
without limitation, all patents, patent applications, trademarks, trademark
applications, trade names, trade secrets, goodwill, copyrights, copyright
applications, registrations, licenses, software, franchises, customer lists, tax
refund claims, claims against carriers and shippers, guarantee claims, contract
rights, payment intangibles, security interests, security deposits and rights to
indemnification); (iii) all Inventory (whether or not Eligible Inventory); (iv)
all Goods (other than Inventory), including, without limitation, Equipment and
vehicles; (v) all Investment Property; (vi) all Deposit Accounts, bank accounts,
deposits and cash; (vii) all Letter-of-Credit Rights; (viii) Commercial Tort
Claims listed on Schedule 11(g) hereto; (ix) any other property of such Borrower
now or hereafter in the possession, custody or control of Lender or any agent or
any parent, affiliate or subsidiary of Lender or any participant with Lender in
the Loans, for any purpose (whether for safekeeping, deposit, collection,
custody, pledge, transmission or otherwise); and (x) all additions and
accessions to, substitutions for, and replacements, products and Proceeds of the
foregoing property, including, without limitation, proceeds of all insurance
policies insuring the foregoing property, and all of such Borrower's books and
records relating to any of the foregoing and to such Borrower's business.
(b) OTHER SECURITY.
Lender, in its sole discretion, without waiving or releasing
any obligation, liability or duty of a Borrower under the Loan Documents or any
Event of Default, may at any time or times hereafter, but shall not be obligated
to, pay, acquire or accept an assignment of any security interest, lien,
encumbrance or claim asserted by any Person in, upon or against the Collateral.
All sums paid by Lender in respect thereof and all costs, fees and expenses
including, without limitation, reasonable attorney fees, all court costs and all
other charges relating thereto incurred by Lender shall constitute Liabilities,
payable by Borrowers to Lender on demand and, until paid, shall bear interest at
the highest rate then applicable to Loans hereunder.
(c) POSSESSORY COLLATERAL.
Immediately upon a Borrower's receipt of any portion of the
Collateral evidenced by an agreement, Instrument or Document, including, without
limitation, any Tangible Chattel Paper and any Investment Property consisting of
certificated securities, such Borrower shall deliver the original thereof to
Lender together with an appropriate endorsement or other specific evidence of
assignment thereof to Lender (in form and substance acceptable to Lender). If an
endorsement or assignment of any such items shall not be made for any reason,
Lender is hereby irrevocably authorized, as each Borrower's attorney and
agent-in-fact, to endorse or assign the same on such Borrower's behalf.
(d) ELECTRONIC CHATTEL PAPER.
To the extent that a Borrower obtains or maintains any
Electronic Chattel Paper, such Borrower shall create, store and assign the
record or records comprising the Electronic Chattel Paper in such a manner that
(i) a single authoritative copy of the record or records exists which is unique,
identifiable and except as otherwise provided in clauses (iv), (v) and (vi)
below, unalterable, (ii) the authoritative copy identifies Lender as the
assignee of the record or records, (iii) the authoritative copy is communicated
to and maintained by the Lender or its designated custodian, (iv) copies or
revisions that add or change an identified assignee of the authoritative copy
can only be made with the participation of Lender, (v) each copy of the
authoritative copy and any copy of a copy is readily identifiable as a copy that
is not the authoritative copy and (vi) any revision of the authoritative copy is
readily identifiable as an authorized or unauthorized revision.
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6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN.
Each Borrower hereby irrevocably authorizes Lender to file
such Uniform Commercial Code financing statements, amendments, renewals and
assignments thereof, as Lender deems reasonably necessary, consistent with the
rights privileges and security interests afforded to Lender hereunder and shall,
at Lender's request, at any time and from time to time, authenticate, execute
and deliver to Lender, or authorize Lender to file, such financing statements,
documents and other agreements and instruments (and pay the cost of filing or
recording the same in all public offices deemed necessary or desirable by
Lender) and do such other acts and things or cause third parties to do such
other acts and things as Lender may deem necessary or desirable in its sole
discretion in order to establish and maintain a valid, attached and perfected
security interest in the Collateral in favor of Lender (free and clear of all
other liens, claims, encumbrances and rights of third parties whatsoever,
whether voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Liabilities, and in order to facilitate the collection of the
Collateral. Each Borrower irrevocably hereby makes, constitutes and appoints
Lender (and all Persons designated by Lender for that purpose) as such
Borrower's true and lawful attorney and agent-in-fact to execute and file such
financing statements, documents and other agreements and instruments and do such
other acts and things as may be necessary to preserve and perfect Lender's
security interest in the Collateral. Each Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Loan Agreement or of a
financing statement shall be sufficient as a financing statement, each Borrower
further ratifies and confirms the prior filing by Lender of any and all
financing statements which identify such Borrower as debtor, Lender as secured
party and any or all Collateral as collateral.
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.
Until an Event of Default has occurred, each Borrower shall have the
right, except as otherwise provided in this Loan Agreement, in the ordinary
course of such Borrower's business, to (a) sell, lease or furnish under
contracts of service any of such Borrower's Inventory normally held by such
Borrower for any such purpose; and (b) use and consume any raw materials, work
in process or other materials normally held by such Borrower for such purpose;
provided, however, that a sale in the ordinary course of business shall not
include any transfer or sale in satisfaction, partial or complete, of a debt
owed by such Borrower.
8. COLLECTIONS.
(a) Each Borrower shall direct all of its Account Debtors to make
all payments on the Accounts directly to a post office box (the "LOCK BOX")
designated by, and under the exclusive control of, Lender at LaSalle Bank. Each
Borrower shall establish an account (the "LOCK BOX ACCOUNT") in Lender's name
with LaSalle Bank, into which all payments received in the Lock Box shall be
deposited, and into which such Borrower will immediately deposit all payments
received by such Borrower on Accounts in the identical form in which such
payments were received, whether by cash or check. If a Borrower, any Affiliate
or Subsidiary, any shareholder, officer, director, employee or agent of a
Borrower or any Affiliate or Subsidiary, or any other Person acting for or in
concert with a Borrower shall receive any monies, checks, notes, drafts or other
payments relating to or as Proceeds of Accounts or other Collateral, such
Borrower and each such Person shall receive all such items in trust for, and as
the sole and exclusive property of, Lender and, immediately upon receipt
thereof, shall remit the same (or cause the same to be remitted) in kind to the
Lock Box Account. LaSalle Bank, or such other financial institution with which
the Lock Box Account is established shall acknowledge and agree, in a manner
satisfactory to Lender, that the amounts on deposit in such Lock Box and Lock
Box Account are the sole and exclusive property of Lender, that such financial
institution will follow the instructions of Lender with respect to disposition
of funds in the Lock Box and Lock Box Account without further consent from
Borrowers, that such financial institution has no right to setoff against the
Lock Box or Lock Box Account or against any other account maintained by such
financial institution into which the contents of the Lock Box or Lock Box
Account are transferred, and that such financial institution shall wire, or
otherwise transfer in immediately available funds to Lender in a manner
satisfactory to Lender, funds deposited in the Lock Box Account on a daily basis
as such funds are collected. Each Borrower agrees that all payments made to such
Lock Box Account or otherwise received by Lender, whether in respect of the
Accounts or as Proceeds of other Collateral or otherwise, will be applied on
account of the Liabilities in accordance with the terms of this Loan Agreement.
Each Borrower agrees to pay all fees, costs and expenses in connection with
opening and maintaining the Lock Box and Lock Box Account. All of such fees,
costs and expenses if not paid by a Borrower, may be paid by Lender and in such
event all amounts paid by Lender shall constitute Liabilities hereunder, shall
be payable to Lender by Borrowers upon demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder. All checks,
drafts, instruments and other items of payment or Proceeds of Collateral shall
be endorsed by the applicable Borrower to Lender, and, if that endorsement of
any such item shall not be made for any reason, Lender is hereby irrevocably
authorized to endorse the same on such Borrower's behalf. For the purpose of
this section, each Borrower irrevocably hereby makes, constitutes and appoints
Lender (and all Persons designated by Lender for that purpose) as such
Borrower's true and lawful attorney and agent-in-fact (i) to endorse such
Borrower's name upon said items of payment and/or Proceeds of Collateral and
upon any Chattel Paper, Document, Instrument, invoice or similar document or
agreement relating to any Account of such Borrower or Goods pertaining thereto;
(ii) to take control in any manner of any item of payment or Proceeds thereof
and (iii) to have access to any lock box or postal box into which any of such
Borrower's mail is deposited, and open and process all mail addressed to such
Borrower and deposited therein.
-17-
(b) Lender may, at any time and from time to time, whether before
or after notification to any Account Debtor and whether before or after the
maturity of any of the Liabilities, (i) enforce collection of any of Borrowers'
Accounts or other amounts owed to a Borrower by suit or otherwise; (ii) exercise
all of such Borrower's rights and remedies with respect to proceedings brought
to collect any Accounts or other amounts owed to such Borrower; (iii) surrender,
release or exchange all or any part of any Accounts or other amounts owed to
such Borrower, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder; (iv) sell or
assign any Account of such Borrower or other amount owed to such Borrower upon
such terms, for such amount and at such time or times as Lender deems advisable;
(v) prepare, file and sign such Borrower's name on any proof of claim in
bankruptcy or other similar document against any Account Debtor or other Person
obligated to such Borrower; and (vi) do all other acts and things which are
necessary, in Lender's sole discretion, to fulfill such Borrower's obligations
under the Loan Documents and to allow Lender to collect the Accounts or other
amounts owed to such Borrower. In addition to any other provision hereof, Lender
may at any time, whether before or after the occurrence of an Event of Default,
at Borrowers' expense, notify any parties obligated on any of the Accounts to
make payment directly to Lender of any amounts due or to become due thereunder.
(c) For purposes of calculating interest and fees, Lender shall,
within two (2) Business Days after receipt by Lender at its office in Chicago,
Illinois of (i) checks and (ii) cash or other immediately available funds from
collections of items of payment and Proceeds of any Collateral, apply the whole
or any part of such collections or Proceeds against the Liabilities in such
order as Lender shall determine in its sole discretion. For purposes of
determining the amount of Loans available for borrowing purposes, checks and
cash or other immediately available funds from collections of items of payment
and Proceeds of any Collateral shall be applied in whole or in part against the
Liabilities, in such order as Lender shall determine in its sole discretion, on
the day of receipt, subject to actual collection.
(d) On a monthly basis, Lender shall deliver to Borrowers an
account statement showing all Loans, charges and payments, which shall be deemed
final, binding and conclusive upon Borrowers unless a Borrower notifies Lender
in writing, specifying any error therein, within thirty (30) days of the date
such account statement is sent to Borrowers and any such notice shall only
constitute an objection to the items specifically identified.
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.
(a) DAILY REPORTS.
Each Borrower shall deliver to Lender an executed daily loan
report and certificate in Lender's then current form on each day on which such
Borrower requests a Revolving Loan, and in any event at least once each week,
which shall be accompanied by copies of such Borrower's sales journal, cash
receipts journal and credit memo journal for the relevant period. Such report
shall reflect the activity of such Borrower with respect to Accounts for the
immediately preceding week, and shall be in a form and with such specificity as
is satisfactory to Lender and shall contain such additional information
concerning Accounts and Inventory as may be requested by Lender including,
without limitation, but only if specifically requested by Lender, copies of all
invoices prepared in connection with such Accounts.
-18-
(b) MONTHLY REPORTS.
Borrowers shall deliver to Lender in form satisfactory to
Lender in its sole discretion, in addition to any other reports requested by
Lender from time to time, as soon as practicable and in any event: (i) within
twenty (20) days after the end of each month, (A) a detailed trial balance of
each Borrower's Accounts aged per invoice date, in form and substance reasonably
satisfactory to Lender including, without limitation, the names and addresses of
all Account Debtors of each Borrower, (B) a summary and detail of accounts
payable (such Accounts and accounts payable divided into such time intervals as
Lender may require in its sole discretion), including a listing of any held
checks, and (C) a schedule identifying in detail the aged accounts payable of
each Borrower to all dairy product suppliers, whether located in Vermont or
otherwise; and (ii) within twenty (20) days after the end of each month, the
general ledger inventory account balance, a perpetual inventory report and
Lender's standard form of Inventory report then in effect or the form most
recently requested from Borrowers by Lender, for each Borrower by each category
of Inventory, together with a description of the monthly change in each category
of Inventory.
(c) FINANCIAL STATEMENTS.
Borrowers shall deliver to Lender the following financial
information, all of which shall be prepared in accordance with GAAP,
consistently applied, and shall be accompanied by a compliance certificate in
the form of Exhibit 9(c) hereto, which compliance certificate shall include a
calculation of all financial covenants contained in this Loan Agreement: (i) no
later than thirty (30) days after each calendar month, copies of internally
prepared financial statements, including, without limitation, balance sheets and
statements of income, retained earnings and cash flow of Borrowers on a
consolidated and consolidating basis, certified by the Chief Financial Officer
of each Borrower (except with respect to such financial statements for the
calendar month ending October 31, 2004, which financial statements shall be
delivered to Lender on or before December 15, 2004); and (ii) no later than
ninety (90) days after the end of each of Borrowers' Fiscal Years, audited
annual financial statements on a consolidated and consolidating basis with an
unqualified opinion by independent certified public accountants selected by
Borrowers and reasonably satisfactory to Lender, which financial statements
shall be accompanied by (A) copies of any management letters sent to a Borrower
by such accountants and (B) to the extent that such accountants will agree to
provide the same, a letter from such accountants acknowledging that they are
aware that a primary intent of Borrowers in obtaining such financial statements
is to influence Lender and that Lender is relying upon such financial statements
in connection with the exercise of its rights hereunder and.
(d) ANNUAL PROJECTIONS.
As soon as practicable and in any event at least thirty (30)
days prior to the beginning of each Fiscal Year, Borrowers shall deliver to
Lender projected balance sheets, statements of income and cash flow for
Borrowers on a consolidated and consolidating basis (the "PROJECTIONS"), for
each of the twelve (12) months during such Fiscal Year, which shall include the
assumptions used therein, together with appropriate supporting details as
reasonably requested by Lender.
(e) EXPLANATION OF BUDGETS AND PROJECTIONS.
In conjunction with the delivery of the annual presentation of
projections or budgets referred to in subsection 9(d) above, Borrowers shall
deliver a letter signed by the President or a Vice President of each Borrower
and by the Treasurer or Chief Financial Officer of each Borrower, describing,
comparing and analyzing, in detail, all changes and developments between the
anticipated financial results included in such projections or budgets and the
historical financial statements of Borrowers.
(f) PUBLIC REPORTING.
Immediately upon the filing thereof, each Borrower shall
deliver to Lender copies of all registration statements and annual, quarterly,
monthly or other regular reports which such Borrower or any of its Subsidiaries
files with the Securities and Exchange Commission, as well as promptly providing
to Lender copies of any reports and proxy statements delivered to its
shareholders.
-19-
(g) OTHER INFORMATION.
Promptly following request therefor by Lender, Borrowers shall
deliver to Lender such other business or financial data, reports, appraisals and
projections as Lender may reasonably request or as may be delivered by any
Borrower pursuant to the UPS Debt Documents and the Intercreditor Documents.
10. TERMINATION.
THIS LOAN AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF UNTIL
DECEMBER 2, 2009 (THE "TERM") UNLESS (A) LENDER MAKES DEMAND FOR REPAYMENT PRIOR
TO THE END OF THE TERM, IN ACCORDANCE WITH THE TERMS OF THIS LOAN AGREEMENT; (B)
THE DUE DATE OF THE LIABILITIES IS ACCELERATED PURSUANT TO SECTION 16 HEREOF; OR
(C) A BORROWER ELECTS TO TERMINATE THIS LOAN AGREEMENT PRIOR TO THE END OF THE
TERM BY GIVING LENDER WRITTEN NOTICE OF SUCH ELECTION AT LEAST THIRTY (30) DAYS
PRIOR TO SUCH EARLY TERMINATION, SUBJECT TO PAYMENT OF THE APPLICABLE PREPAYMENT
FEE AND PAYMENT OF ALL OF THE LIABILITIES IN FULL. If one or more of the events
specified in clauses (A), (B) and (C) occurs or this Loan Agreement otherwise
expires, then (i) Lender shall not make any additional Loans on or after the
date identified as the date on which the Liabilities are to be repaid; and (ii)
this Loan Agreement shall terminate on the date thereafter that the Liabilities
are paid in full. At such time as Borrowers have repaid all of the Liabilities
and this Loan Agreement has terminated, each Borrower shall deliver to Lender a
release, in form and substance satisfactory to Lender, of all obligations and
liabilities of Lender and its officers, directors, employees, agents, parents,
subsidiaries and affiliates to such Borrower, and if such Borrower is obtaining
new financing from another lender, such Borrower shall deliver such lender's
indemnification of Lender, in form and substance satisfactory to Lender, for
checks which Lender has credited to such Borrower's account, but which
subsequently are dishonored for any reason or for automatic clearinghouse or
wire transfers not yet posted to such Borrower's account. If, during the term of
this Loan Agreement, Borrowers prepay all of the Liabilities and this Loan
Agreement is terminated, Borrowers jointly and severally agree to pay to Lender
as a prepayment fee, in addition to the payment of all other Liabilities, an
amount equal to (i) one and three quarters of one percent (1.75%) of the Maximum
Loan Limit if such prepayment occurs within one (1) year of the Closing Date,
and (ii) three quarters of one percent (0.75%) of the Maximum Loan Limit if such
prepayment occurs after one (1) year, but within three (3) years, of the Closing
Date; provided that, notwithstanding the foregoing, Borrowers may prepay up to
$500,000 of Term Loan B without being subject to any prepayment fee.
11. REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants to Lender, which
representations and warranties (whether appearing in this Section 11 or
elsewhere) shall be true at the time of Borrowers' execution hereof and the
closing of the transactions described herein or related hereto, shall remain
true until the repayment in full and satisfaction of all the Liabilities and
termination of this Loan Agreement, and shall be deemed remade by each Borrower
at the time each Loan is made pursuant to this Loan Agreement.
(a) FINANCIAL STATEMENTS AND OTHER INFORMATION.
The financial statements and other information delivered or to
be delivered by Borrowers to Lender at or prior to the date of this Loan
Agreement accurately reflect the financial condition of Borrowers, and there has
been no adverse change in the financial condition, the operations or any other
status of a Borrower since the date of the financial statements delivered to
Lender most recently prior to the date of this Loan Agreement. All written
information now or heretofore furnished by each Borrower to Lender is true and
correct as of the date with respect to which such information was furnished.
(b) LOCATIONS.
The office where each Borrower keeps its books, records and
accounts (or copies thereof) concerning the Collateral, each Borrower's
principal place of business and all of each Borrower's other places of business,
locations of Collateral and post office boxes and locations of bank accounts are
as set forth in Exhibit A and at other locations within the continental United
States of which Lender has been advised by a Borrower in accordance with
subsection 12(b)(i). The Collateral, including, without limitation, the
Equipment (except any part thereof which a Borrower shall have advised Lender in
writing consists of Collateral normally used in more than one state) is kept,
or, in the case of vehicles, based, only at the addresses set forth on Exhibit
A, and at other locations within the continental United States of which Lender
has been advised by a Borrower in writing in accordance with subsection 12(b)(i)
hereof.
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(c) LOANS BY BORROWER.
No Borrower will make any loans or advances to any Affiliate
or other Person, and no such loans or advances are presently outstanding, except
for advances authorized hereunder to employees, officers and directors of such
Borrower for travel and other expenses arising in the ordinary course of such
Borrower's business and loans permitted pursuant to subsection 13(f) hereof.
(d) ACCOUNTS AND INVENTORY.
Each Account or item of Inventory which a Borrower shall,
expressly or by implication, request Lender to classify as an Eligible Account
or as Eligible Inventory, respectively, shall, as of the time when such request
is made, conform in all respects to the requirements of such classification as
set forth in the respective definitions of "Eligible Account" and "Eligible
Inventory" as set forth herein and as otherwise established by Lender from time
to time.
(e) LIENS.
Each Borrower is the lawful owner of all Collateral now
purportedly owned or hereafter purportedly acquired by such Borrower, free from
all liens, claims, security interests and encumbrances whatsoever, whether
voluntarily or involuntarily created and whether or not perfected, including,
without limitation, and liens, security interest or encumbrances arising out of
the FSA, the Vermont Producer's Lien Statute, or any law, regulation, rule,
policies, guidelines, orders or directives relating to food or any food product,
other than the Permitted Liens.
(f) ORGANIZATION, AUTHORITY AND NO CONFLICT.
Lucille is a corporation, duly organized, validly existing and
in good standing in the State of Delaware, its state organizational
identification number is 0831030 and such Borrower is duly qualified and in good
standing in all jurisdictions where the failure to so qualify or be in good
standing would have a Material Adverse Effect. Lucille Vermont is a corporation,
duly organized, validly existing and in good standing in the State of Vermont,
its state organizational identification number is 52441 and such Borrower is
duly qualified and in good standing in all jurisdictions where the failure to so
qualify or be in good standing would have a Material Adverse Effect. Each
Borrower has the right and power and is duly authorized and empowered to enter
into, execute and deliver the Loan Documents and perform its obligations
hereunder and thereunder. Each Borrower's execution, delivery and performance of
the Loan Documents does not conflict with the provisions of the organizational
documents of such Borrower, any statute, regulation, ordinance or rule of law,
or any agreement, contract or other document which may now or hereafter be
binding on such Borrower, and each Borrower's execution, delivery and
performance of the Loan Documents shall not result in the imposition of any lien
or other encumbrance upon any of such Borrower's property under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other agreement
or instrument by which such Borrower or any of its property may be bound or
affected, other than in favor of Lender.
(g) LITIGATION.
There are no actions or proceedings which are pending or
threatened against a Borrower which might have a Material Adverse Effect on such
Borrower, and each Borrower shall, promptly upon becoming aware of any such
pending or threatened action or proceeding, give written notice thereof to
Lender. No Borrower has any Commercial Tort Claims pending other than those set
forth on Schedule 11(g) hereto as Schedule 11(g) may be amended from time to
time.
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(h) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
Except as set forth in Schedule 11(h) attached hereto, each
Borrower has obtained all governmental consents, franchises, certificates,
licenses, authorizations, approvals and permits, the lack of which would have a
Material Adverse Effect on such Borrower. Each Borrower is in compliance in all
material respects with all applicable federal, state, local and foreign
statutes, orders, regulations, rules and ordinances (including, without
limitation, Environmental Laws and statutes, orders, regulations, rules and
ordinances relating to taxes, employer and employee contributions and similar
items, securities, ERISA or employee health and safety) the failure to comply
with which would have a Material Adverse Effect on such Borrower.
(i) AFFILIATE TRANSACTIONS.
Except as set forth on Schedule 11(i) hereto or as permitted
pursuant to subsection 11(c) hereof, no Borrower is conducting, permitting or
suffering to be conducted, transactions with any Affiliate other than
transactions with Affiliates for the purchase or sale of Inventory or services
in the ordinary course of business pursuant to terms that are no less favorable
to such Borrower than the terms upon which such transactions would have been
made had they been made to or with a Person that is not an Affiliate.
(j) NAMES AND TRADE NAMES.
Each Borrower's name has always been as set forth on the first
page of this Loan Agreement and no Borrower uses trade names, assumed names,
fictitious names or division names in the operation of its business, except as
set forth on Schedule 11(j) hereto.
(k) EQUIPMENT.
Except as set forth on Schedule 11(k), each Borrower has good
and indefeasible and merchantable title to and ownership of all of its
Equipment.
(l) ENFORCEABILITY.
The Loan Documents to which a Borrower is a party are the
legal, valid and binding obligations of such Borrower and are enforceable
against such Borrower in accordance with their respective terms.
(m) SOLVENCY.
Each Borrower is, after giving effect to the transactions
contemplated hereby, solvent, able to pay its debts as they become due, has
capital sufficient to carry on its business, now owns property having a value
both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and has not been and will not be rendered
insolvent by the execution, delivery and consummation of the transactions
contemplated by (i) the UPS Debt Documents, (ii) the Intercreditor Documents,
and/or (iii) this Loan Agreement or any of the Other Agreements.
(n) INDEBTEDNESS.
Except as set forth on Schedule 11(n) hereto, no Borrower is
obligated (directly or indirectly), for any loans or other indebtedness for
borrowed money other than the Loans, Permitted Indebtedness, and unsecured
indebtedness to trade creditors arising in the ordinary course of such
Borrower's business.
(o) MARGIN SECURITY AND USE OF PROCEEDS.
No Borrower owns any margin securities, and none of the
proceeds of the Loans hereunder shall be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time. The proceeds of the
Loans (other than the Capital Expenditure Loans) shall be used (i) to repay
existing indebtedness, (ii) to pay fees and expenses of Borrowers in connection
with the closing of the transactions contemplated by this Loan Agreement, and
(iii) for each Borrower's general working capital purposes.
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(p) PARENT, SUBSIDIARIES AND AFFILIATES.
Except as set forth on Schedule 11(p) hereto, no Borrower has
any Parents, Subsidiaries or other Affiliates or divisions, nor is any Borrower
engaged in any joint venture or partnership with any other Person.
(q) NO DEFAULTS.
No Borrower is in default under any material contract, lease
or commitment to which it is a party or by which it is bound, nor does any
Borrower know of any dispute regarding any contract, lease or commitment which
would have a Material Adverse Effect on such Borrower.
(r) EMPLOYEE MATTERS.
There are no controversies pending or threatened between a
Borrower and any of its employees, agents or independent contractors other than
employee grievances arising in the ordinary course of business which would not,
in the aggregate, have a Material Adverse Effect on such Borrower, and each
Borrower is in compliance with all federal and state laws respecting employment
and employment terms, conditions and practices except for such non-compliance
which would not have a Material Adverse Effect on such Borrower. No labor
contract is scheduled to expire during the Term.
(s) INTELLECTUAL PROPERTY.
Each Borrower possesses adequate licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications,
trade styles and trade names to continue to conduct its business as heretofore
conducted by it.
(t) ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 11(t) hereto, (i) no Borrower
has generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether
or not owned by it) in any manner which at any time violates any Environmental
Law or any license, permit, certificate, approval or similar authorization
thereunder and the operations of each Borrower comply in all material respects
with all Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder, (ii) there has been no investigation,
proceeding, complaint, order, directive, claim, citation or notice by any
Governmental Authority or any other Person, nor is any pending or to the best of
each Borrower's knowledge threatened with respect to any non-compliance with or
violation of the requirements of any Environmental Law by a Borrower or the
release, spill or discharge, threatened or actual, of any Hazardous Materials or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which affects a Borrower or its business, operations or
assets or any properties at which a Borrower has transported, stored or disposed
of any Hazardous Materials, and (iii) no Borrower has any material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(u) ERISA MATTERS.
Each Borrower has paid and discharged all obligations and
liabilities arising under ERISA of a character which, if unpaid or unperformed,
might result in the imposition of a lien against any of its properties or
assets.
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(v) CONDUCT OF BUSINESS.
Upon and after the Closing Date, no Borrower proposes to
engage in any business other than the manufacturing, marketing and sale of
cheese, cheese products and other related dairy products, and activities
necessary to conduct such business. As of the date of execution of this Loan
Agreement, Borrowers will own and possess all of the rights and consents
necessary for the conduct of the business of Borrowers.
(w) FOOD SECURITY ACT NOTICES.
Prior to purchasing any Farm Products produced in a state that
has established a central filing system certified in accordance with the FSA,
each Borrower will promptly register with such state's Secretary of State to
receive FSA Notices (with such registration providing for FSA Notices to be sent
directly to such Borrower and Lender, to the extent permitted by the relevant
jurisdiction). Schedule 11(w) sets forth a list of all FSA Notices that each
Borrower has received during the past 12 months, copies of all of which have
been delivered to Lender prior to the execution of this Loan Agreement. If any
Borrower receives an FSA Notice after the Closing Date, it will immediately
(i.e., on the same day it receives such FSA Notice) notify Lender of the same by
delivering a written copy thereof to Lender by facsimile and/or overnight
courier. Each Borrower will make all payments for the purchase of Farm Products
in accordance with any payment obligations imposed by an FSA Creditor as
conditions for the waiver or release of such FSA Creditor's security interests.
Each Borrower has reviewed and will continue to review all order
acknowledgements, invoices and other documents received from FSA Suppliers to
ascertain whether they include or otherwise constitute FSA Notices required to
be disclosed to Lender.
(x) FARM PRODUCTS SUPPLIER INFORMATION AND RELATED MATTERS.
Schedule 11(x) lists the names of all of Borrowers' current
Farm Product Suppliers, and Farm Product Suppliers in the past twelve (12)
months, to the extent that Borrowers know or are able to determine the identity
of such Farm Product Suppliers. Following the occurrence of an Event of Default
under this Loan Agreement, Lender may conduct, at the sole cost and expense of
Borrowers, UCC searches on a periodic basis against such Farm Product Suppliers
(and additional suppliers, if any) as Lender deems appropriate. In addition,
Lender may conduct at the sole cost and expense of Borrowers, UCC searches on a
periodic basis against Farm Product Suppliers as to which FSA Notices have been
received. Each Borrower will use its commercial best efforts to provide Lender
with waivers ("FSA WAIVERS") in form and substance satisfactory to Lender, from
all Farm Product Suppliers and their respective FSA Creditors from which FSA
Notices have been received and as to which the special payment instructions
required by such Farm Product Suppliers or FSA Creditors, as the case may be,
have not been complied with.
(y) VERMONT PRODUCER'S LIEN NOTICES.
Neither Borrower is subject to any Producer's Lien, nor has
either Borrower been subject to a Producer's Lien at any time during the past 12
months. If any Borrower receives notice of a Producer's Lien after the Closing
Date, it will immediately (i.e., on the same day it receives such notice) notify
Lender of the same by delivering a written copy thereof to Lender by facsimile
and/or overnight courier. Each Borrower will make all payments for the purchase
of dairy products from producers (as defined in VPLS) in accordance with all
payment obligations and terms imposed by such producers. Lender may conduct, at
the sole cost and expense of Borrowers, Producer's Lien searches on a periodic
basis against Borrowers as Lender deems appropriate.
12. AFFIRMATIVE COVENANTS.
Until payment and satisfaction in full of all Liabilities and
termination of this Loan Agreement, unless Borrowers obtain Lender's prior
written consent waiving or modifying any of Borrowers' covenants hereunder in
any specific instance, each Borrower covenants and agrees as follows:
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(a) MAINTENANCE OF RECORDS.
Each Borrower shall at all times keep accurate and complete
books, records and accounts with respect to all of such Borrower's business
activities, in accordance with sound accounting practices and GAAP consistently
applied, and shall keep such books, records and accounts, and any copies
thereof, only at the addresses indicated for such purpose on Exhibit A.
(b) NOTICES.
Each Borrower shall:
(i) Locations. Promptly (but in no event less than ten (10)
days prior to the occurrence thereof) notify Lender of the proposed
opening of any new place of business or new location of Collateral, the
closing of any existing place of business or location of Collateral, any
change of in the location of such Borrower's books, records and accounts
(or copies thereof), the opening or closing of any post office box, the
opening or closing of any bank account or, if any of the Collateral
consists of Goods of a type normally used in more than one state, the use
of any such Goods in any state other than a state in which such Borrower
has previously advised Lender that such Goods will be used.
(ii) Eligible Accounts and Inventory. Promptly upon becoming
aware thereof, notify Lender if any Account or Inventory identified by
such Borrower to Lender as an Eligible Account or Eligible Inventory
becomes ineligible for any reason.
(iii) Litigation and Proceedings. Promptly upon becoming aware
thereof, notify Lender of any actions or proceedings which are pending or
threatened against such Borrower which might have a Material Adverse
Effect on such Borrower and of any Commercial Tort Claims of such Borrower
which may arise, which notice shall constitute such Borrower's
authorization to amend Exhibit C to add such Commercial Tort Claim.
(iv) Names and Trade Names. Notify Lender within ten (10) days
of the change of its name or the use of any trade name, assumed name,
fictitious name or division name not previously disclosed to Lender in
writing.
(v) ERISA Matters. Promptly notify Lender of (x) the
occurrence of any Reportable Event which might result in the termination
by the Pension Benefit Guaranty Corporation (the "PBGC") of any employee
benefit plan ("PLAN") covering any officers or employees of such Borrower,
any benefits of which are, or are required to be, guaranteed by the PBGC,
(y) receipt of any notice from the PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor or (z) its
intention to terminate or withdraw from any Plan.
(vi) Environmental Matters. Immediately notify Lender upon
becoming aware of any investigation, proceeding, complaint, order,
directive, claim, citation or notice with respect to any non-compliance
with or violation of the requirements of any Environmental Law by such
Borrower or the generation, use, storage, treatment, transportation,
manufacture handling, production or disposal of any Hazardous Materials or
any other environmental, health or safety matter which affects such
Borrower or its business operations or assets or any properties at which
such Borrower has transported, stored or disposed of any Hazardous
Materials.
(vii) Default; Material Adverse Change. Promptly advise Lender
of any material adverse change in the business, property, assets,
prospects, operations or condition, financial or otherwise, of such
Borrower, the occurrence of any Event of Default hereunder, under the UPS
Debt Documents or the Intercreditor Documents, or the occurrence of any
event which, if uncured, will become an Event of Default after notice or
lapse of time (or both), under any of the aforementioned documents.
All of the foregoing notices shall be provided by Borrowers to Lender in
writing.
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(c) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
Each Borrower shall maintain all governmental consents,
franchises, certificates, licenses, authorizations, approvals and permits, the
lack of which would have a Material Adverse Effect on such Borrower and each
Borrower shall remain in compliance with all applicable federal, state, local
and foreign statutes, orders, regulations, rules and ordinances (including,
without limitation, Environmental Laws and statutes, orders, regulations, rules
and ordinances relating to taxes, employer and employee contributions and
similar items, securities, ERISA or employee health and safety) the failure with
which to comply would have a Material Adverse Effect on such Borrower. Following
any determination by Lender that there is non-compliance, or any condition which
requires any action by or on behalf of a Borrower in order to avoid
non-compliance, with any Environmental Law, at such Borrower's expense cause an
independent environmental engineer acceptable to Lender to conduct such tests of
the relevant site(s) as are appropriate and prepare and deliver a report setting
forth the results of such tests, a proposed plan for remediation and an estimate
of the costs thereof.
(d) INSPECTION AND AUDITS.
Each Borrower shall permit Lender, or any Persons designated
by it, to call at such Borrower's places of business at any reasonable times,
and, without hindrance or delay, to inspect the Collateral and to inspect,
audit, check and make extracts from such Borrower's books, records, journals,
orders, receipts and any correspondence and other data relating to such
Borrower's business, the Collateral or any transactions between the parties
hereto, and shall have the right to make such verification concerning such
Borrower's business as Lender may consider reasonable under the circumstances,
including verifications with account debtors of such Borrower. Each Borrower
shall furnish to Lender such information relevant to Lender's rights under the
Loan Documents as Lender shall at any time and from time to time request.
Lender, through its officers, employees or agents shall have the right, at any
time and from time to time, in Lender's name, to verify the validity, amount or
any other matter relating to any of such Borrower's Accounts, by mail,
telephone, telecopy, electronic mail, or otherwise. Each Borrower authorizes
Lender to discuss the affairs, finances and business of such Borrower with any
officers, employees or directors of such Borrower or with its Parent or any
Affiliate or the officers, employees or directors of its Parent or any
Affiliate, and to discuss the financial condition of such Borrower with such
Borrower's independent public accountants. Any such discussions shall be without
liability to Lender or to Borrowers' independent public accountants. Borrowers
shall pay to Lender all customary fees (currently $750 per person per day) and
all costs and out-of-pocket expenses incurred by Lender in the exercise of its
rights hereunder, including, but not limited to airfare, lodging and meals, and
all of such fees, costs and expenses shall constitute Liabilities hereunder,
shall be payable on demand and, until paid, shall bear interest at the highest
rate then applicable to Loans hereunder.
(e) INSURANCE.
Each Borrower shall:
(i) Keep the Collateral properly housed and insured for the
full insurable value thereof against loss or damage by fire, theft,
explosion, sprinklers, collision (in the case of motor vehicles) and such
other risks as are customarily insured against by Persons engaged in
businesses similar to that of such Borrower, with such companies, in such
amounts, with such deductibles, and under policies in such form, as shall
be satisfactory to Lender including, without limitation, business
interruption insurance. Original (or certified) copies of such policies of
insurance have been or shall be, within ninety (90) days of the date
hereof, delivered to Lender, together with evidence of payment of all
premiums therefor, and shall contain an endorsement, in form and substance
acceptable to Lender, showing loss under such insurance policies payable
to Lender. Such endorsement, or an independent instrument furnished to
Lender, shall provide that the insurance company shall give Lender at
least thirty (30) days written notice before any such policy of insurance
is altered or canceled and that no act, whether willful or negligent, or
default of such Borrower or any other Person shall affect the right of
Lender to recover under such policy of insurance in case of loss or
damage. In addition, each Borrower shall cause to be executed and
delivered to Lender an assignment of proceeds of its business interruption
insurance policies. Each Borrower hereby directs all insurers under all
policies of insurance to pay all proceeds payable thereunder directly to
Lender. Each Borrower irrevocably makes, constitutes and appoints Lender
(and all officers, employees or agents designated by Lender) as such
Borrower's true and lawful attorney (and attorney-in-fact) for the purpose
of making, settling and adjusting claims under such policies of insurance,
endorsing the name of such Borrower on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and
making all determinations and decisions with respect to such policies of
insurance.
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(ii) Maintain, at its expense, such public liability and third
party property damage insurance as is customary for Persons engaged in
businesses similar to that of such Borrower with such companies and in
such amounts, with such deductibles and under policies in such form as
shall be satisfactory to Lender and original (or certified) copies of such
policies have been or shall be delivered to Lender prior to the execution
of this Loan Agreement, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing Lender as
additional insured thereunder and providing that the insurance company
shall give Lender at least thirty (30) days written notice before any such
policy shall be altered or canceled.
(iii) Maintain, at its expense, key person life insurance on
the life of Jay Rosengarten, with an insurance company acceptable to
Lender, in the amount of at least $1,000,000. Such policy and the death
benefits to be paid thereunder shall be assigned to Lender for its benefit
as collateral security for the payment of the Liabilities pursuant to a
collateral assignment of life insurance policy in form and substance
acceptable to Lender, and such assignment shall be duly recorded with the
applicable life insurance company.
If a Borrower at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay any premium relating
thereto, then Lender, without waiving or releasing any obligation or default by
Borrowers hereunder, may (but shall be under no obligation to) obtain and
maintain such policies of insurance and pay such premiums and take such other
actions with respect thereto as Lender deems advisable. Such insurance, if
obtained by Lender, may, but need not, protect such Borrower's interests or pay
any claim made by or against such Borrower with respect to the Collateral. Such
insurance may be more expensive than the cost of insurance such Borrower may be
able to obtain on its own and may be cancelled only upon such Borrower providing
evidence that it has obtained the insurance as required above. All sums
disbursed by Lender in connection with any such actions, including, without
limitation, court costs, expenses, other charges relating thereto and reasonable
attorneys' fees, shall constitute Loans hereunder, shall be payable on demand by
Borrowers to Lender and, until paid, shall bear interest at the highest rate
then applicable to Loans hereunder.
(f) COLLATERAL.
Each Borrower shall keep the Collateral in good condition,
repair and order and shall make all necessary repairs to the Equipment and
replacements thereof so that the operating efficiency and the value thereof
shall at all times be preserved and maintained. Each Borrower shall permit
Lender to examine any of the Collateral at any time and wherever the Collateral
may be located and, each Borrower shall, immediately upon request therefor by
Lender, deliver to Lender any and all evidence of ownership of any of the
Equipment including, without limitation, certificates of title and applications
of title. Each Borrower shall, at the request of Lender, indicate on its records
concerning the Collateral a notation, in form satisfactory to Lender, of the
security interest of Lender hereunder.
(g) USE OF PROCEEDS.
All monies and other property obtained by a Borrower from
Lender pursuant to this Loan Agreement shall be used solely for business
purposes of such Borrower. Borrowers shall not use proceeds of Loans hereunder
in excess of $100,000 per Fiscal Year for the purpose of funding hard or soft
costs associated with the purchase, improvement, development, design, repair, or
replacement of real property or fixtures.
(h) TAXES.
Each Borrower shall file all required tax returns and pay all
of its taxes when due, including, without limitation, taxes imposed by federal,
state or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that such Borrower shall have the right to contest the
payment of such taxes in good faith by appropriate proceedings and diligently
pursued, and for which adequate reserves in conformity with GAAP, consistently
applied, with respect thereto have been established to the reasonable
satisfaction of Lender, so long as (i) the amount so contested is shown on such
Borrower's financial statements; (ii) the contesting of any such payment does
not give rise to a lien for taxes; (iii) such Borrower keeps on deposit with
Lender (such deposit to be held without interest) an amount of money which, in
the sole judgment of Lender, is sufficient to pay such taxes and any interest or
penalties that may accrue thereon; and (iv) if such Borrower fails to prosecute
such contest with reasonable diligence, Lender may apply the money so deposited
in payment of such taxes. If a Borrower fails to pay any such taxes and in the
absence of any such contest by such Borrower, Lender may (but shall be under no
obligation to) advance and pay any sums required to pay any such taxes and/or to
secure the release of any lien therefor, and any sums so advanced by Lender
shall constitute Loans hereunder, shall be payable by such Borrower to Lender on
demand, and, until paid, shall bear interest at the highest rate then applicable
to Loans hereunder.
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(i) INTELLECTUAL PROPERTY.
Each Borrower shall maintain adequate licenses, patents,
patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and trade names to continue its business as heretofore
conducted by it or as hereafter conducted by it.
(j) CHECKING ACCOUNTS.
Each Borrower shall maintain its general checking/controlled
disbursement account with LaSalle Bank. Normal charges shall be assessed
thereon. Although no compensating balance is required, each Borrower must keep
monthly balances in order to merit earnings credits which will cover LaSalle
Bank's service charge for demand deposit account activities. In addition, each
Borrower shall enter into agreements with LaSalle Bank for standard cash
management services, and such Borrower shall be responsible for all normal
charges assessed thereon.
(k) PATRIOT ACT, BANK SECRECY ACT AND OFFICE OF FOREIGN ASSETS
CONTROL.
As required by federal law and the Lender's policies and
practices, Lender may need to obtain, verify and record certain customer
identification information and documentation in connection with opening or
maintaining accounts, or establishing or continuing to provide services and each
Borrower agrees to provide such information. In addition, and without limiting
the foregoing sentence, each Borrower shall (a) ensure, and cause each
Subsidiary to ensure, that no Person who owns a controlling interest in or
otherwise controls any Borrower or any Subsidiary is or shall be listed on the
Specially Designated Nationals and Blocked Person List or other similar lists
maintained by the Office of Foreign Assets Control ("OFAC"), the Department of
the Treasury or included in any Executive Orders, (b) not use or permit the use
of the proceeds of the Loans to violate any of the foreign asset control
regulations of OFAC or any enabling statute or Executive Order relating thereto,
and (c) comply, and cause each Subsidiary to comply, with all applicable Bank
Secrecy Act ("BSA") laws and regulations, as amended.
(l) FARM PRODUCT SUPPLIERS.
Each Borrower shall promptly (but in no event less than ten
(10) days prior to the occurrence thereof) notify Lender of such Borrower's
intention to purchase Farm Products from a Farm Product Supplier other than one
of the Farm Product Suppliers set forth on Schedule 11(x).
13. NEGATIVE COVENANTS.
Until payment and satisfaction in full of all Liabilities and
termination of this Loan Agreement, unless Borrowers obtain Lender's prior
written consent waiving or modifying any of Borrowers' covenants hereunder in
any specific instance, each Borrower agrees as follows:
(a) GUARANTIES.
No Borrower shall assume, guarantee or endorse, or otherwise
become liable in connection with, the obligations of any Person other than
obligations arising under this Loan Agreement, except by endorsement of
instruments for deposit or collection or similar transactions in the ordinary
course of business.
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(b) INDEBTEDNESS.
No Borrower shall create, incur, assume or become obligated
(directly or indirectly), for any loans or other indebtedness for borrowed money
other than the Loans, except that a Borrower may (i) borrow money from a Person
other than Lender on an unsecured and subordinated basis if a subordination
agreement in favor of Lender and in form and substance satisfactory to Lender is
executed and delivered to Lender relative thereto; (ii) maintain its present
indebtedness listed on Schedule 11(n) hereto; (iii) incur unsecured indebtedness
to trade creditors in the ordinary course of business; (iv) incur purchase money
indebtedness or capitalized lease obligations in connection with Capital
Expenditures permitted pursuant to subsection 14(c) hereof; (v) incur operating
lease obligations requiring payments not to exceed Fifty Thousand and 00/100
Dollars ($50,000.00) in the aggregate during any Fiscal Year of Borrowers;
provided however, that, with respect to operating lease obligations for motor
vehicles used for the transport and delivery of Borrowers' raw materials,
Inventory and finished goods, such payment limitation shall be Four Hundred
Thousand and 00/100 Dollars ($400,000.00) for any Fiscal Year of Borrowers; and
(vi) make payments on account of the Permitted Indebtedness, in accordance with
the Intercreditor Documents, as applicable; provided, however, that
notwithstanding anything to the contrary contained herein and in the St. Albans
Subordination Agreement, if Borrowers raise in excess of $6,000,000 in new
equity capital, fifty percent (50%) of the amount of new equity capital in
excess of such $6,000,000 may be utilized to make payments on account of the
Long Term St. Albans Payable.
(c) LIENS.
No Borrower shall grant or permit to exist (voluntarily or
involuntarily) any lien, claim, security interest or other encumbrance
whatsoever on any of its assets, other than Permitted Liens.
(d) MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER
TRANSACTIONS OUTSIDE THE ORDINARY COURSE OF BUSINESS.
No Borrower shall (i) enter into any merger or consolidation;
(ii) change its state of organization or enter into any transaction which has
the effect of changing its state of organization (iii) sell, lease or otherwise
dispose of any of its assets other than in the ordinary course of business; (iv)
purchase the stock, other equity interests or all or a material portion of the
assets of any Person or division of such Person; or (v) enter into any other
transaction outside the ordinary course of such Borrower's business including,
without limitation, any purchase, redemption or retirement of any shares of any
class of its stock or any other equity interest. No Borrower shall form any
Subsidiaries or enter into any joint ventures or partnerships with any other
Person.
(e) DIVIDENDS AND DISTRIBUTIONS.
No Borrower or any Subsidiary shall declare or pay any
dividend or other distribution (whether in cash or in kind) on any class of its
stock.
(f) INVESTMENTS; LOANS.
No Borrower shall purchase or otherwise acquire, or contract
to purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States; nor shall a Borrower lend or
otherwise advance funds to any Person except for advances made to employees,
officers and directors for travel and other expenses arising in the ordinary
course of business.
(g) FUNDAMENTAL CHANGES, LINE OF BUSINESS.
No Borrower shall amend its organizational documents or change
its Fiscal Year or enter into a new line of business materially different from
such Borrower's current business.
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(h) EQUIPMENT.
No Borrower shall (i) permit any Equipment acquired after the
date of this Loan Agreement (other than Equipment acquired with proceeds of
loans provided by UPS) to become a Fixture to real property unless such real
property is owned by such Borrower and is subject to a mortgage in favor of
Lender or unless other arrangements satisfactory to Lender are made between
Lender and UPS (or any other Person having a senior lien or interest in the real
property to which such Equipment becomes a Fixture), or if such real property is
leased, is subject to a landlord's agreement in favor of Lender on terms
acceptable to Lender, or (ii) permit any Equipment acquired after the date of
this Loan Agreement (other than Equipment acquired with proceeds of loans
provided by UPS) to become an accession to any other personal property unless
such personal property is subject to a first priority lien in favor of Lender,
or unless other arrangements satisfactory to Lender in its sole discretion are
made between Lender and UPS (or any other Person having a senior lien or
security interest in the personal property to which such Equipment becomes an
accession.
(i) AFFILIATE TRANSACTIONS.
Except as set forth on Schedule 11(i) hereto or as permitted
pursuant to subsection 11(c) hereof, no Borrower shall conduct, permit or suffer
to be conducted, transactions with Affiliates other than transactions for the
purchase or sale of Inventory or services in the ordinary course of business
pursuant to terms that are no less favorable to such Borrower than the terms
upon which such transactions would have been made had they been made to or with
a Person that is not an Affiliate.
(j) SETTLING OF ACCOUNTS.
Each Borrower shall not settle or adjust any Account
identified by such Borrower as an Eligible Account or with respect to which the
Account Debtor is an Affiliate without the consent of Lender, provided, that
following the occurrence of an Event of Default that has not been waived in
writing by Lender, such Borrower shall not settle or adjust any Account without
the consent of Lender.
(k) MANAGEMENT FEES; COMPENSATION.
No Borrower shall (i) pay any management or consulting fees to
any Persons, other than the Lucille Administrative Fee, an existing consulting
agreement with Gennaro Falivene, and consulting fees and other remuneration to
third-party consultants in arms-length transactions having an aggregate value
per year of not more than $200,00, or (ii) pay annual aggregate compensation,
whether as salary, bonus or otherwise, to all directors or officers of such
Borrower in excess of one hundred ten percent (110%) of the aggregate
compensation, whether as salary, bonus or otherwise, to all directors, and
officers of such Borrower in effect on the Closing Date for the first year and
one hundred ten percent (110%) of the prior year's aggregate compensation amount
for each subsequent year. The aggregate annual compensation amount(s) shall be
adjusted each year for the net addition or loss of directors or officers.
(l) AMENDMENTS TO SUBORDINATED DEBT AND INTERCREDITOR DOCUMENTS.
No Borrower shall enter into any amendment, waiver or
modification of the UPS Debt Documents or the Intercreditor Documents without
the prior written consent of Lender.
(m) ERISA.
No Borrower shall (i) (x) maintain, or permit any member of
the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on Schedule 13(m), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the IRC, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the IRC, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan that could result in any
material liability of such Borrower or any member of the Controlled Group or the
imposition of a lien on the property of such Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 13(m), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Lender of the occurrence of
any Termination Event, (viii) fail to comply, in all material respects, or
permit a member of the Controlled Group to fail to comply, in all material
respects, with the requirements of ERISA or IRC or other applicable laws in
respect of any Plan, (ix) fail to meet, or permit any member of the Controlled
Group to fail to meet, all minimum funding requirements under ERISA or IRC or
postpone or delay or allow any member of the Controlled Group to postpone or
delay any funding requirement with respect of any Plan except as permitted by
applicable laws, in each event (i) through (ix) which would be reasonably likely
to result in a Material Adverse Effect.
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(n) AASI SECURITIES.
No Borrower, or any Affiliate or Subsidiary of a Borrower,
shall use any portion of the proceeds of the Loans, either directly or
indirectly, for the purpose of (i) purchasing any securities underwritten or
privately placed by ABN AMRO Securities (USA) Inc. ("AASI"), an Affiliate of
Lender, (ii) purchasing from AASI any securities in which AASI makes a market,
or (iii) refinancing or making payments of principal, interest or dividends on
any securities issued by Borrower or any Affiliate, and underwritten, privately
placed or dealt in by AASI.
(o) EXPANSION FACILITIES.
No Borrower, or any Subsidiary of a Borrower, shall commence
or otherwise obligate itself to commence the construction of any expansion
facilities, buildings or other real property improvements unless Borrowers shall
have first obtained Lender's prior written consent and Borrowers shall have
first obtained binding commitments for financing from third party lenders on
terms reasonably acceptable to Lender, in amounts sufficient to fully and
properly complete such expansion facilities, building or other real property
improvements.
(p) RECEIPT OF DONATED FOOD.
No Borrower shall apply for Donated Food relating to a
particular order from a Recipient Agency for finished goods, or relating to the
delivery of any finished goods to a Recipient Agency, unless and until such
finished goods have been delivered to and accepted by the Recipient Agency, and
only to the extent that such Donated Food constitutes a reimbursement to such
Borrower for the prior use by such Borrower of its raw material inventory in the
processing and manufacture of such finished goods. In the event that Donated
Food is received by a Borrower prior to application therefor, such Donated Food
shall be segregated from such Borrower's other inventory and shall not be
considered Eligible Inventory.
14. FINANCIAL COVENANTS.
Each Borrower shall maintain and keep in full force and effect
each of the financial covenants set forth below:
(a) TANGIBLE NET WORTH.
Borrowers, on a consolidated basis, will maintain as of the
end of each calendar month a Tangible Net Worth of not less than the amount
shown below opposite such month or period of months; "TANGIBLE NET WORTH" being
defined for purposes of this subsection as Borrowers' shareholders' equity
(including retained earnings) less the book value of all intangible assets,
other assets and prepaid assets, as determined solely by Lender on a consistent
basis plus the amount of any LIFO reserve plus the amount of any debt
subordinated to Lender, all as determined under GAAP, consistently applied, on a
basis consistent with the financial statement dated September 30, 2004 except as
set forth herein:
Period Tangible Net Worth
------ ------------------
October 1, 2004 through and including March 31, 90% of Tangible Net Worth for September 30, 2004
2005
April 1, 2005 through and including March 31, 90% of Tangible Net Worth for September 30, 2004, plus 85%
2006 of Net Income (not less than $0) for the six months ended
March 31, 2005.
April 1, 2006 through and including March 31, Tangible Net Worth for March 31, 2005 plus 85% of Net
2007 Income (not less than $0) for Fiscal Year ending
March 31, 2006.
April 1, 2007 through and including March 31, Tangible Net Worth for March 31, 2006, plus 85% of Net
2008 Income (not less than $0) for Fiscal Year ending
March 31, 2007.
April 1, 2008 through and including March 31, Tangible Net Worth for March 31, 2007, plus 85% of Net
2009 Income (not less than $0) for Fiscal Year ending
March 31, 2008.
April 1, 2009 through and including November 30, Tangible Net Worth for March 31, 2008, plus 85% of Net
2009 Income (not less than $0) for Fiscal Year ending March 31,
2009.
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(b) FIXED CHARGE COVERAGE.
Borrowers, on a consolidated basis, will maintain as of the
end of each calendar month a ratio of their FC Numerator to Fixed Charges of not
less than the ratio shown below opposite such month with respect to the twelve
(12) month period then ended, provided that the applicable period being tested
on the month ending (i) December 31, 2004, will be for the six (6) months then
ended, (ii) January 31, 2005, will be for the seven (7) months then ended, (iii)
February 28, 2005, will be for the eight (8) months then ended, (iv) March 31,
2005, will be for the nine (9) months then ended, (v) April 30, 2005, will be
for the ten (10) months then ended, and (vi) May 31, 2005, will be for the
eleven (11) months then ended:
Month Ended Fixed Charge Coverage Ratio
----------- ---------------------------
December 31, 2004.................. 1.00 to 1.00
January 31, 2005................... 1.00 to 1.00
February 28, 2005.................. 1.00 to 1.00
March 31, 2005..................... 1.10 to 1.00
April 30, 2005..................... 1.10 to 1.00
May 31, 2005....................... 1.10 to 1.00
June 30, 2005...................... 1.10 to 1.00
July 31, 2005...................... 1.10 to 1.00
August 31, 2005.................... 1.10 to 1.00
September 30, 2005................. 1.10 to 1.00
October 31, 2005................... 1.10 to 1.00
November 30, 2005.................. 1.10 to 1.00
December 31, 2005.................. 1.10 to 1.00
January 31, 2006................... 1.10 to 1.00
February 28, 2006.................. 1.10 to 1.00
March 31, 2006 and................. 1.25 to 1.00
thereafter
(c) CAPITAL EXPENDITURE LIMITATIONS.
Borrowers and their Subsidiaries shall not make any (i)
Capital Expenditures (including all Unfunded Capital Expenditures) if, after
giving effect to such Capital Expenditure, the aggregate cost of all Capital
Expenditures would exceed Four Hundred Thousand Dollars ($400,000) during the
Fiscal Year ending March 31, 2005, Two Million Eight Hundred Thousand Dollars
($2,800,000) during the Fiscal Year ending March 31, 2006, and Four Hundred
Twenty Thousand Dollars ($420,000) during the fiscal year ending March 31, 2007
and for each Fiscal Year thereafter, and (ii) Unfunded Capital Expenditures if,
after giving effect to such Unfunded Capital Expenditure, the aggregate cost of
all Unfunded Capital Expenditures would exceed Four Hundred Thousand Dollars
($400,000) during the Fiscal Year ending March 31, 2005, One Million Two Hundred
Thousand Dollars ($1,000,000) during the Fiscal Year ending March 31, 2006, and
Four Hundred Twenty Thousand Dollars ($420,000) during the fiscal year ending
March 31, 2007 and for each Fiscal Year thereafter.
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15. DEFAULT.
The occurrence of any one or more of the following events
shall constitute an "EVENT OF DEFAULT" by Borrowers hereunder:
(a) PAYMENT.
The failure of any Obligor to pay when due, declared due, or
demanded by Lender in accordance with the terms hereof, any of the Liabilities.
(b) BREACH OF THE LOAN DOCUMENTS.
The failure of any Obligor to perform, keep or observe any of
the covenants, conditions, promises, agreements or obligations of such Obligor
under this Loan Agreement or any of the Other Agreements.
(c) BREACHES OF OTHER OBLIGATIONS.
The failure of any Obligor to perform, keep or observe any of
the covenants, conditions, promises, agreements or obligations of such Obligor
under any other agreement with any Person.
(d) BREACH OF REPRESENTATIONS AND WARRANTIES.
The making or furnishing by any Obligor to Lender of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with the Loan Documents or in connection with any other
agreement between such Obligor and Lender, which is untrue or misleading in any
respect.
(e) LOSS OF COLLATERAL.
The loss, theft, damage or destruction of, or (except as
permitted hereby) sale, lease or furnishing under a contract of service of, any
of the Collateral having a value in excess of $25,000, excluding any
Non-Material Equipment Casualty.
(f) LIEN, LEVY, SEIZURE OR ATTACHMENT.
The creation (whether voluntary or involuntary) of, or any
attempt to create, any lien or other encumbrance upon any of the Collateral,
other than Permitted Liens, or the making or any attempt by any Person to make
any levy, seizure or attachment upon any of the Collateral.
(g) BANKRUPTCY OR SIMILAR PROCEEDINGS.
The commencement of any proceedings in bankruptcy by or
against any Obligor or for the liquidation or reorganization of any Obligor, or
alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or for the readjustment or arrangement of any Obligor's debts, whether
under the United States Bankruptcy Code or under any other law, whether state or
federal, now or hereafter existing, for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings against
such Obligor is involuntary, such action shall not constitute an Event of
Default unless such proceedings are not dismissed within thirty (30) days after
the commencement of such proceedings, though Lender shall have no obligation to
make Loans to or issue or cause to be issued Letters of Credit on behalf of a
Borrower during such thirty (30) day period or, if earlier, until such
proceedings are dismissed. .
(h) APPOINTMENT OF RECEIVER.
The appointment of a receiver or trustee for any Obligor, for
any of the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation, limited liability company or a partnership; provided, however, that
if such appointment or commencement of proceedings against such Obligor is
involuntary, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed within thirty
(30) days after the commencement of such proceedings, though Lender shall have
no obligation to make Loans to or issue or cause to be issued Letters of Credit
on behalf of a Borrower during such thirty (30) day period or, if earlier, until
such appointment is revoked or such proceedings are dismissed.
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(i) JUDGMENT.
The entry of any judgment or order against any Obligor which
remains unsatisfied or undischarged and in effect for thirty (30) days after
such entry without a stay of enforcement or execution.
(j) DEATH OR DISSOLUTION OF OBLIGOR.
The death of any Obligor who is a natural Person, or of any
general partner who is a natural Person of any Obligor which is a partnership,
or any member who is a natural Person of any Obligor which is a limited
liability company or the dissolution of any Obligor which is a partnership,
limited liability company, corporation or other entity.
(k) DEFAULT OR REVOCATION OF GUARANTY.
The occurrence of an event of default under, or the revocation
or termination of, any agreement, instrument or document executed and delivered
by any Person to Lender pursuant to which such Person has guaranteed to Lender
the payment of all or any of the Liabilities or has granted Lender a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities.
(l) CRIMINAL PROCEEDINGS.
The institution in any court of a criminal proceeding against
any Obligor, or the indictment of any Obligor for any crime.
(m) CHANGE OF MANAGEMENT.
If, at any time, Jay Rosengarten (i) shall cease to serve in
his capacity as Chief Executive Officer of each Borrower, (ii) shall cease to be
responsible for the management of each Borrower, or (iii) dies or becomes
disabled or incapacitated, and is not replaced within 120 days with a successor
approved by Lender.
(n) MATERIAL ADVERSE CHANGE.
Any material adverse change in the Collateral, business,
property, assets, prospects, operations or condition, financial or otherwise of
any Obligor, as determined by Lender in its sole judgment or the occurrence of
any event which, in Lender's sole judgment, could have a Material Adverse
Effect.
(o) DEFAULTS UNDER OTHER INDEBTEDNESS.
The occurrence of a default or an event of default under any
other agreement or instrument evidencing indebtedness for borrowed money in
excess of $50,000 executed or delivered by a Borrower or pursuant to which
agreement or instrument such Borrower or its properties is or may be bound
including, without limitation, the UPS Debt Documents and the Intercreditor
Documents.
(p) ERISA EVENTS.
If any Reportable Event shall have occurred or any Plan shall
be terminated within the meaning of Title IV of ERISA, or a trustee shall be
appointed by the appropriate United States District Court to administer any
Plan, the PBGC shall institute proceedings to terminate any Plan, or there shall
be a withdrawal from any Multiemployer Plan, and there shall be a Material
Adverse Effect in the case of any event described in this paragraph.
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(q) DISSOLUTION OF ANY BORROWER.
The occurrence of any event specified in a Borrower's
organizational documents that may result in such Borrower's dissolution or
liquidation or a Borrower shall file a certificate of dissolution or shall be
liquidated, dissolved or wound-up or shall commence or have commenced against it
any action or proceeding for dissolution, winding up or liquidation.
(r) BUSINESS INTERRUPTION.
The operations of a Borrower's manufacturing facility are
interrupted at any time for more than seven (7) consecutive Business Days,
unless such Borrower shall (i) be entitled to receive for such period of
interruption, proceeds of business interruption insurance sufficient to assure
that its per diem cash needs during such period is at least equal to its average
per diem cash needs for the consecutive three month period immediately preceding
the initial date of interruption and (ii) receive such proceeds in the amount
described in clause (i) preceding not later than thirty (30) days following the
initial date of any such interruption; provided, however, that notwithstanding
the provisions of clauses (i) and (ii) of this paragraph, an Event of Default
shall be deemed to have occurred if such Borrower shall be receiving the
proceeds of business interruption insurance for a period of thirty (30)
consecutive days.
(s) ST. ALBANS LC
The expiration or termination of the St. Albans LC prior to
the full and indefeasible payment, satisfaction, and discharge of Term Loan A. .
16. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in
subsection 15(g) or 15(h) hereof, all of the Liabilities shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all Liabilities may, at the option of
Lender, and without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, Lender may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu of,
any rights and remedies expressly granted in this Loan Agreement or in any of
the Other Agreements and all of Lender's rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law. In particular, but not by way
of limitation of the foregoing, Lender may, without notice, demand or legal
process of any kind, take possession of any or all of the Collateral (in
addition to Collateral of which it already has possession), wherever it may be
found, and for that purpose may pursue the same wherever it may be found, and
may enter onto any of Borrowers' premises where any of the Collateral may be,
and search for, take possession of, remove, keep and store any of the Collateral
until the same shall be sold or otherwise disposed of, and Lender shall have the
right to store the same at any of Borrowers' premises without cost to Lender. At
Lender's request, each Borrower shall, at Borrowers' expense, assemble the
Collateral and make it available to Lender at one or more places to be
designated by Lender and reasonably convenient to Lender and such Borrower. Each
Borrower recognizes that if a Borrower fails to perform, observe or discharge
any of its Liabilities under the Loan Documents, no remedy at law will provide
adequate relief to Lender, and agrees that Lender shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages. Any notification of intended disposition of any of the
Collateral required by law will be deemed to be a reasonable authenticated
notification of disposition if given at least ten (10) days prior to such
disposition and such notice shall (i) describe Lender and the applicable
Borrower(s), (ii) describe the Collateral that is the subject to the intended
disposition, (iii) state the method of the intended disposition, (iv) state that
the applicable Borrower(s) is entitled to an accounting of the Liabilities and
state the charge, if any, for an accounting and (v) state the time and place of
any public disposition or the time after which any private sale is to be made.
Lender may disclaim any warranties that might arise in connection with the sale,
lease or other disposition of the Collateral and has no obligation to provide
any warranties at such time. Any Proceeds of any disposition by Lender of any of
the Collateral may be applied by Lender to the payment of expenses in connection
with the Collateral, including, without limitation, legal expenses and
reasonable attorneys' fees, and any balance of such Proceeds may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect.
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(c) Lender shall have no obligation to marshal any Collateral or to
seek recourse against or satisfaction of any of the Liabilities from one source
before seeking recourse against or satisfaction from another source. The net
cash proceeds resulting from Lender's exercise of any of the foregoing rights to
liquidate all or substantially all of the Collateral, including any and all
collections (after deducting all of Lender's expenses related thereto), shall be
applied by Lender to such of the Liabilities and in such order as Lender shall
elect in its sole and absolute discretion, whether due or to become due.
Borrowers shall remain liable to Lender for any deficiencies.
(d) To the extent permitted by law and not otherwise prohibited by
contracts with third parties, each Borrower hereby grants to Lender, for use by
Lender solely in connection with the preservation or sale of any Collateral, a
license or other right to use, without charge by any Obligor or Subsidiary
thereof, all computer software, copyrights, labels, trade secrets, service
marks, patents, advertising materials and other rights, assets and materials
used by such Borrower and needed in connection with the preservation or sale of
such Collateral.
17. CONDITIONS PRECEDENT.
The obligation of Lender to fund the initial Revolving Loan, the
Term Loans and to issue or cause to be issued the initial Letter of Credit, if
any, is subject to the satisfaction or waiver on or before the date hereof of
the following conditions precedent:
(a) Lender shall have received each of the agreements, opinions,
reports, approvals, consents, certificates and other documents set forth on the
closing document list attached hereto as Schedule 17(a) (the "CLOSING DOCUMENT
LIST") in each case in form and substance satisfactory to Lender;
(b) Since July 1, 2004, no event shall have occurred which has had
or could reasonably be expected to have a Material Adverse Effect on any
Obligor, as determined by Lender in its sole discretion;
(c) Lender shall have received payment in full of all fees and
expenses payable to it by Borrowers or any other Person in connection with this
Loan Agreement and any Other Agreement, on or before disbursement of the initial
Loans hereunder;
(d) Lender shall have determined that immediately after giving
effect to (A) the making of the initial Loans, including without limitation the
Term Loans and the Revolving Loans, if any, requested to be made on the date
hereof, (B) the issuance of the initial Letter of Credit, if any, requested to
be made on such date, (C) the payment of all fees due upon such date and (D) the
payment or reimbursement by Borrowers of Lender for all closing costs and
expenses incurred in connection with the transactions contemplated hereby,
Borrowers have Excess Availability of not less than One Million Dollars
($1,000,000);
(e) Lender shall have received a certificate from each Borrower's
chief executive officer or chief financial officer, pursuant to which such
officer shall certify that in calculating the Excess Availability described in
subsection 17(d) above, all taxes which were due and owing and remained unpaid,
and all accounts payable which were unpaid more than thirty (30) days after the
due dates thereof as of the close of business on the date of calculation of
Excess Availability (excluding the Long Term St. Albans Payable), were treated
as additional Revolving Loans outstanding on such date;
(f) Lender shall have received duly executed agreements establishing
the Lock Box and Lock Box Account with LaSalle Bank for the collection or
servicing of the Accounts and proceeds of the Collateral;
(g) Lender shall have completed Collateral examinations and received
written appraisals, the results of which shall be satisfactory in form and
substance to Lender, of the Accounts, Inventory, General Intangibles, Investment
Property and Equipment of Borrowers, and all books and records in connection
therewith;
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(h) There shall exist no default in any obligations or in compliance
with any applicable legal requirement of any Borrower (other than those
disclosed to Lender in writing on or prior to the date hereof, including, but
not limited to, defaults relating to the Long Term St. Albans Payable);
(i) Lender shall be satisfied with its due diligence review and
investigation of the business and financial affairs of each Borrower and its
management, and its pre-closing audit of Borrowers;
(j) Lender shall have received the executed legal opinion of Breslow
and Walker, LLP in form and substance satisfactory to Lender (including, without
limitation, enforceability and perfection issues with respect to the Collateral)
and each Borrower hereby authorizes and directs such counsel to deliver such
opinions to Lender;
(k) Lender shall have received landlord, processor or warehouseman
agreements, as appropriate, satisfactory to Lender with respect to all premises
leased by a Borrower or controlled by any of their processors, suppliers or
customers at which books and records, Inventory and Equipment are located;
(l) Lender shall have received licensor consent letters satisfactory
to Lender with respect to the trademarks licensed to Borrower pursuant to a
license agreement;
(m) Lender shall have received in form and substance satisfactory to
Lender, certified copies of each Borrower's (i) casualty insurance policies,
together with loss payable endorsements on Lender's standard form of loss payee
endorsement naming Lender as lender loss payee, (ii) liability insurance
policies, together with endorsements naming Lender as additional insured, (iii)
key person life insurance policies on the life of Jay Rosengarten, together with
collateral assignments of such policies and each such policy shall be in an
aggregate amount of at least $1,000,000, (iv) accounts receivable credit
insurance policies, together with collateral assignments of such policies and
loss payable endorsements on Lender's standard form of loss payee endorsement
naming Lender as lender loss payee, and (v) certificates of insurance, in form
and substance satisfactory to Lender, which reflect the coverage scope and
limits of the aforementioned insurance policies and Lender's interest as loss
payee, additional insured and assignee, as appropriate, with respect to such
policies;
(n) Each document (including, without limitation, any Uniform
Commercial Code financing statement and filings with the United State Patent and
Trademark Office or any similar state authority) required by this Loan
Agreement, any Other Agreement or under law or reasonably requested by Lender to
be filed, registered or recorded in order to create, in favor of Lender, a
perfected security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested, and Lender
shall have received an acknowledgment copy, or other evidence satisfactory to
it, of each such filing, registration or recordation and satisfactory evidence
of the payment of any necessary fee, tax or expense relating thereto;
(o) (i) No litigation, investigation or proceeding before or by any
arbitrator or Governmental Authority shall be continuing or threatened against
any Borrower or against the officers or directors of any Borrower (A) in
connection with the Loan Documents or any of the transactions contemplated
thereby and which, in the reasonable opinion of Lender, is deemed material or
(B) which if adversely determined, could, in the reasonable opinion of Lender,
have a Material Adverse Effect on such Borrower; and (ii) no injunction, writ,
restraining order or other order of any nature materially adverse to any
Borrower or the conduct of its business or inconsistent with the due
consummation of the transactions contemplated by the Loan Documents shall have
been issued by any Governmental Authority;
(p) Lender shall have reviewed all material contracts of each
Borrower including, without limitation, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Lender;
(q) Each Borrower shall be in material compliance with all
applicable laws and regulations;
(r) No Event of Default shall exist;
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(s) All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Loan Agreement shall be satisfactory in form and substance
to Lender and its counsel;
(t) Lender shall have received and reviewed updated financial
projections of the Borrowers based on the Borrowers' new capital structure,
together with financial projections for the second and third years of the Term,
calculated on an annual basis, and such financial statements and projections
shall be in form and substance satisfactory to Lender;
(u) Lender shall have received and reviewed copies of the loan
documents relating to indebtedness of the Borrowers remaining after the date of
the initial disbursement of the Loans, including, but not limited to, the
executed UPS Debt Documents and Intercreditor Documents, all of which shall be
in form and substance satisfactory to Lender;
(v) Lender shall be satisfied with the results of its
investigations, verifications and creditworthiness inquiries of Borrowers'
customers and suppliers;
(w) Lender shall have received evidence that Borrowers have
established their primary operating accounts with LaSalle Bank and entered into
agreements with LaSalle Bank for the provisions of standard cash management
services;
(x) Lender shall have received the St. Albans LC; and
(y) Lender shall have received evidence from Borrowers, including
without limitation a certification from the President of Borrowers, that (i)
inter-company indebtedness' in the approximate amount of $8,889,947 due from
Lucille Vermont to Lucille has been contributed to the capital of Lucille
Vermont by Lucille, such that there exists no outstanding inter-company
indebtedness due from Lucille Vermont to Lucille, other than ordinary course
monthly obligations in connection with the rendering of certain general and
administrative services by Lucille for Lucille Vermont, and (ii) Lucille Farms
of Heuvelton, Inc., a wholly owned inactive subsidiary of Lucille, has been
merged with and into Lucille, with Lucille as the surviving corporation.
(z) The Obligors shall have executed and delivered to Lender all
such other documents, instruments and agreements, which Lender determines are
reasonably necessary to consummate the transactions contemplated hereby.
18. JOINT AND SEVERAL LIABILITY.
(a) Notwithstanding anything to the contrary contained herein, all
Liabilities of each Borrower hereunder shall be joint and several obligations of
Borrowers.
(b) Notwithstanding any provisions of this Loan Agreement to the
contrary, it is intended that the joint and several nature of the Liabilities of
Borrowers and the liens and security interests granted by Borrowers to secure
the Liabilities, not constitute a "Fraudulent Conveyance" (as defined below).
Consequently, Lender and Borrowers agree that if the Liabilities of a Borrower,
or any liens or security interests granted by such Borrower securing the
Liabilities would, but for the application of this sentence, constitute a
Fraudulent Conveyance, the Liabilities of such Borrower and the liens and
security interests securing such Liabilities shall be valid and enforceable only
to the maximum extent that would not cause such Liabilities or such lien or
security interest to constitute a Fraudulent Conveyance, and the Liabilities of
such Borrower and this Loan Agreement shall automatically be deemed to have been
amended accordingly. For purposes hereof, "FRAUDULENT CONVEYANCE" means a
fraudulent conveyance under Section 548 of Chapter 11 of Title II of the United
States Code (11 U.S.C. ss. 101, et seq.), as amended (the "BANKRUPTCY CODE") or
a fraudulent conveyance or fraudulent transfer under the applicable provisions
of any fraudulent conveyance or fraudulent transfer law or similar law of any
state, nation or other Governmental Authority, as in effect from time to time.
(c) Each Borrower assumes responsibility for keeping itself informed
of the financial condition of the each other Borrower, and any and all endorsers
and/or guarantors of any instrument or document evidencing all or any part of
such other Borrower's Liabilities and of all other circumstances bearing upon
the risk of nonpayment by such other Borrowers of their Liabilities and each
Borrower agrees that Lender shall not have any duty to advise such Borrower of
information known to Lender regarding such condition or any such circumstances
or to undertake any investigation not a part of its regular business routine. If
Lender, in its sole discretion, undertakes at any time or from time to time to
provide any such information to a Borrower, Lender shall not be under any
obligation to update any such information or to provide any such information to
such Borrower on any subsequent occasion.
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(d) Lender is hereby authorized, without notice or demand and
without affecting the liability of a Borrower hereunder, to, at any time and
from time to time, (i) renew, extend, accelerate or otherwise change the time
for payment of, or other terms relating to a Borrower's Liabilities or otherwise
modify, amend or change the terms of any promissory note or other agreement,
document or instrument now or hereafter executed by a Borrower and delivered to
Lender; (ii) accept partial payments on a Borrower's Liabilities; (iii) take and
hold security or collateral for the payment of a Borrower's Liabilities
hereunder or for the payment of any guaranties of a Borrower's Liabilities or
other liabilities of a Borrower and exchange, enforce, waive and release any
such security or collateral; (iv) apply such security or collateral and direct
the order or manner of sale thereof as Lender, in its sole discretion, may
determine; and (v) settle, release, compromise, collect or otherwise liquidate a
Borrower's Liabilities and any security or collateral therefor in any manner,
without affecting or impairing the obligations of the other Borrowers. Lender
shall have the exclusive right to determine the time and manner of application
of any payments or credits, whether received from a Borrower or any other
source, and such determination shall be binding on such Borrower. All such
payments and credits may be applied, reversed and reapplied, in whole or in
part, to any of a Borrower's Liabilities as Lender shall determine in its sole
discretion without affecting the validity or enforceability of the Liabilities
of the other Borrowers.
(e) Each Borrower hereby agrees that, except as hereinafter
provided, its obligations hereunder shall be unconditional, irrespective of (i)
the absence of any attempt to collect a Borrower's Liabilities from any Borrower
or any guarantor or other action to enforce the same; (ii) the waiver or consent
by Lender with respect to any provision of any instrument evidencing Borrowers'
Liabilities, or any part thereof, or any other agreement heretofore, now or
hereafter executed by a Borrower and delivered to Lender; (iii) failure by
Lender to take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or collateral for Borrowers' Liabilities;
(iv) the institution of any proceeding under the Bankruptcy Code, or any similar
proceeding, by or against a Borrower or Lender's election in any such proceeding
of the application of Section 1111(b)(2) of the Bankruptcy Code; (v) any
borrowing or grant of a security interest by any Borrower as
debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Lender's claim(s) for repayment of any of Borrowers' Liabilities; or (vii) any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
(f) No payment made by or for the account of a Borrower including,
without limitations, (i) a payment made by such Borrower on behalf of another
Borrower's Liabilities or (ii) a payment made by any other person under any
guaranty, shall entitle such Borrower, by subrogation or otherwise, to any
payment from such other Borrower or from or out of such other Borrower's
property and such Borrower shall not exercise any right or remedy against such
other Borrower or any property of such other Borrower by reason of any
performance of such Borrower of its joint and several obligations hereunder.
19. INDEMNIFICATION.
Each Borrower agrees to defend (with counsel satisfactory to
Lender), protect, indemnify and hold harmless Lender, each affiliate or
subsidiary of Lender, and each of their respective shareholders, members,
officers, directors, managers, employees, attorneys and agents (each an
"INDEMNIFIED PARTY") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature (including, without limitation, the
disbursements and the reasonable fees of counsel for each Indemnified Party in
connection with any investigative, administrative or judicial proceeding,
whether or not the Indemnified Party shall be designated a party thereto), which
may be imposed on, incurred by, or asserted against, any Indemnified Party
(whether direct, indirect or consequential and whether based on any federal,
state or local laws or regulations, including, without limitation, securities
laws and regulations, Environmental Laws and commercial laws and regulations,
under common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Loan Agreement or any Other Agreement, or any
act, event or transaction related or attendant thereto, the making or issuance
and the management of the Loans or any Letters of Credit or the use or intended
use of the proceeds of the Loans or any Letters of Credit; provided, however,
that no Borrower shall have any obligation hereunder to any Indemnified Party
with respect to matters caused by or resulting from the willful misconduct or
gross negligence of such Indemnified Party. To the extent that the undertaking
to indemnify set forth in the preceding sentence may be unenforceable because it
is violative of any law or public policy, each Borrower shall satisfy such
undertaking to the maximum extent permitted by applicable law. Any liability,
obligation, loss, damage, penalty, cost or expense covered by this indemnity
shall be paid to each Indemnified Party on demand, and, failing prompt payment,
shall, together with interest thereon at the highest rate then applicable to
Loans hereunder from the date incurred by each Indemnified Party until paid by
Borrowers, be added to the Liabilities of Borrowers and be secured by the
Collateral. The provisions of this Section 19 shall survive the satisfaction and
payment of the other Liabilities and the termination of this Loan Agreement.
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20. NOTICES.
All written notices and other written communications with respect to
this Loan Agreement shall be sent by ordinary, certified or overnight mail, by
telecopy or delivered in person, and in the case of Lender shall be sent to it
at:
LaSalle Business Credit, LLC
Two Commerce Square, Suite 2610
2001 Market Street
Philadelphia, PA 19103
Attention: District Credit Manager
with a copy to:
Stradley Ronon Stevens & Young, LLP
2600 One Commerce Square
Philadelphia PA 19103
Attention: Gary P. Scharmett, Esq.
Telephone: (215) 564-8046
Facsimile: (215) 564-8120
and
LaSalle Business Credit, LLC
135 S. LaSalle Street
Suite 425
Chicago, Illinois 60603-4105
Attention: Steven Fenton, Esq.
Telephone: (312) 904-7435
Facsimile: (312) 904-6109
and in the case of Borrowers, shall be sent to them at their respective
principal places of business set forth on Exhibit A hereto or as otherwise
directed by Borrowers in writing, with a copy in all cases to Breslow & Walker,
LLP, 100 Jericho Quadrangle, Jericho, New York 11753, Attn. Howard Breslow,
Esquire. All notices shall be deemed received upon actual receipt thereof or
refusal of delivery.
21. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.
The Loan Documents are submitted by Borrowers to Lender for Lender's
acceptance or rejection at Lender's principal place of business as an offer by
Borrowers to borrow monies from Lender now and from time to time hereafter, and
shall not be binding upon Lender or become effective until accepted by Lender,
in writing, at said place of business. If so accepted by Lender, the Loan
Documents shall be deemed to have been made at said place of business. THE LOAN
DOCUMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA AS TO INTERPRETATION, ENFORCEMENT, VALIDITY,
CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION,
THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF
THE SECURITY INTERESTS IN COLLATERAL LOCATED OUTSIDE OF THE COMMONWEALTH OF
PENNSYLVANIA, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT
JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If any provision of this Loan
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or remaining
provisions of this Loan Agreement.
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To induce Lender to accept this Loan Agreement, each Borrower
irrevocably agrees that, subject to Lender's sole and absolute election, ALL
ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR
RELATED TO THIS LOAN AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF PHILADELPHIA, COMMONWEALTH
OF PENNSYLVANIA. EACH BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION
OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. EACH
BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT
ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH BORROWER, AT THE
ADDRESS SET FORTH FOR NOTICE IN THIS LOAN AGREEMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED. EACH BORROWER HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION
BROUGHT AGAINST SUCH BORROWER BY LENDER IN ACCORDANCE WITH THIS SECTION.
22. MODIFICATION AND BENEFIT OF AGREEMENT.
The Loan Documents may not be modified, altered or amended except by
an agreement in writing signed by each Borrower or such other Person who is a
party to such Other Agreement and Lender. No Borrower may sell, assign or
transfer this Loan Agreement, or the Other Agreements or any portion thereof,
including, without limitation, such Borrower's rights, titles, interest,
remedies, powers or duties hereunder and thereunder. Each Borrower hereby
consents to Lender's sale, assignment, transfer or other disposition, at any
time and from time to time hereafter, of this Loan Agreement, or the Other
Agreements, or of any portion thereof, or participations therein, including,
without limitation, Lender's rights, titles, interest, remedies, powers and/or
duties and agrees that it shall execute and deliver such documents as Lender may
request in connection with any such sale, assignment, transfer or other
disposition.
23. HEADINGS OF SUBDIVISIONS.
The headings of subdivisions in this Loan Agreement are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of this Loan Agreement.
24. POWER OF ATTORNEY.
Each Borrower acknowledges and agrees that its appointment of Lender
as its attorney and agent-in-fact for the purposes specified in this Loan
Agreement is an appointment coupled with an interest and shall be irrevocable
until all of the Liabilities are satisfied and paid in full and this Loan
Agreement is terminated.
25. CONFIDENTIALITY.
Lender hereby agrees to use commercially reasonable efforts to
assure that any and all information relating to such Borrower which is (i)
furnished by such Borrower to Lender (or to any affiliate of Lender); and (ii)
non-public, confidential or proprietary in nature, shall be kept confidential by
Lender or such affiliate in accordance with applicable law; provided, however,
that such information and other credit information relating to such Borrower may
be distributed by Lender or such affiliate to Lender's or such affiliate's
directors, managers, officers, employees, attorneys, affiliates, assignees,
participants, auditors, agents and regulators, and upon the order of a court or
other Governmental Authority having jurisdiction over Lender or such affiliate,
to any other party. Each Borrower and Lender further agree that this provision
shall survive the termination of this Loan Agreement. Notwithstanding the
foregoing, each Borrower hereby consents to Lender publishing a tombstone or
similar advertising material relating to the financing transaction contemplated
by this Loan Agreement.
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26. COUNTERPARTS.
This Loan Agreement, any of the Other Agreements and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed an original, but all of which
counterparts together shall constitute but one agreement.
27. ELECTRONIC SUBMISSIONS.
Upon not less than thirty (30) days' prior written notice (the
"APPROVED ELECTRONIC FORM Notice"), Lender may permit or require that any of the
documents, certificates, forms, deliveries or other communications, authorized,
required or contemplated by the Loan Documents, be submitted to Lender in
"APPROVED ELECTRONIC FORM" (as hereafter defined), subject to any reasonable
terms, conditions and requirements in the applicable Approved Electronic Forms
Notice. For purposes hereof "ELECTRONIC FORM" means e-mail, e-mail attachments,
data submitted on web-based forms or any other communication method that
delivers machine readable data or information to Lender, and "APPROVED
ELECTRONIC FORM" means an Electronic Form that has been approved in writing by
Lender (which approval has not been revoked or modified by Lender) and sent to
Borrowers in an Approved Electronic Form Notice. Except as otherwise
specifically provided in the applicable Approved Electronic Form Notice, any
submissions made in an applicable Approved Electronic Form shall have the same
force and effect that the same submissions would have had if they had been
submitted in any other applicable form authorized, required or contemplated by
the Loan Documents.
28. WAIVER OF JURY TRIAL; CONFESSION OF JUDGMENT; OTHER WAIVERS.
(a) EACH BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY
TO THIS LOAN AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE
COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY A BORROWER OR LENDER OR WHICH, IN
ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP
BETWEEN A BORROWER AND LENDER. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST
PROFITS OR OTHER SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
(b) CONFESSION OF JUDGMENT. EACH BORROWER HEREBY
IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS ATTORNEY OR BY THE
PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA
OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON THE OCCURRENCE OF AN EVENT
OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR SUCH BORROWER AND CONFESS
AND ENTER JUDGMENT AGAINST SUCH BORROWER IN FAVOR OF LENDER IN ANY JURISDICTION
WHERE SUCH BORROWER OR ANY OF ITS PROPERTY IS LOCATED FOR THE AMOUNT OF ALL
OBLIGATIONS AND OTHER SUMS DUE OR TO BECOME DUE BY SUCH BORROWER TO LENDER UNDER
THIS AGREEMENT, TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS
(INCLUDING ATTORNEYS' FEES), WITH OR WITHOUT DECLARATION, WITHOUT STAY OF
EXECUTION AND WITH RELEASE OF ALL ERRORS AND THE RIGHT TO ISSUE EXECUTION
FORTHWITH, AND FOR DOING SO THIS AGREEMENT OR A COPY HEREOF VERIFIED BY
AFFIDAVIT SHALL BE SUFFICIENT WARRANT. EACH BORROWER HEREBY WAIVES ALL RELIEF
FROM ANY APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW IN FORCE OR
HEREAFTER ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED BY ANY
EXERCISE THEREOF, AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO TIME
AS OFTEN AS THERE IS OCCASION THEREFOR UNTIL ALL SUMS DUE AND OWING HEREUNDER
ARE FULLY PAID, PERFORMED, DISCHARGED AND SATISFIED.
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EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS
LENDER, BY ITS ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD
IN THE COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY
LAW, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO
APPEAR FOR SUCH BORROWER, AS WELL AS FOR ANY PERSONS CLAIMING UNDER, BY OR
THROUGH SUCH BORROWER, IN AN ACTION OR ACTIONS FOR REPLEVIN OR OTHER APPROPRIATE
ACTION AGAINST SUCH BORROWER TO CONFESS AND ENTER JUDGMENT AGAINST SUCH
BORROWER, FOR RECOVERY OF POSSESSION OF ANY OR ALL OF THE COLLATERAL AND/OR THE
PROCEEDS THEREOF, TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS
(INCLUDING ATTORNEYS' FEES), WITHOUT THE NECESSITY OF FILING ANY BOND AND
WITHOUT STAY OF EXECUTION OR APPEAL AND WITH RELEASE OF ALL ERRORS AND FOR DOING
SO THIS AGREEMENT OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT
WARRANT, WHEREUPON A JUDGMENT AND/OR WRIT OF POSSESSION AND/OR REPLEVIN OR OTHER
APPROPRIATE PROCESS TO OBTAIN POSSESSION OF SUCH COLLATERAL MAY BE ISSUED
FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER. THIS AUTHORITY AND
POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS THERE IS OCCASION THEREFOR
UNTIL ALL SUMS DUE AND OWING HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND
SATISFIED.
(c) Each Borrower hereby waives demand, presentment, protest
and notice of nonpayment, and further waives the benefit of all valuation,
appraisal and exemption laws.
(d) Each Borrower hereby waives the benefit of any law
that would otherwise restrict or limit Lender or any affiliate of Lender in the
exercise of its right, which is hereby acknowledged and agreed to, to set-off
against the Liabilities, without notice at any time hereafter, any indebtedness,
matured or unmatured, owing by Lender or such affiliate of Lender to such
Borrower, including, without limitation any Deposit Account at Lender or such
affiliate.
(e) EACH BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND
HEARING OF ANY KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS
THE COLLATERAL OF SUCH BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH
OR LEVY UPON SUCH COLLATERAL.
(f) Lender's failure, at any time or times hereafter, to
require strict performance by a Borrower of any provision of this Loan Agreement
or any of the Other Agreements shall not waive, affect or diminish any right of
Lender thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of an Event of Default under this Loan Agreement
or any default under any of the Other Agreements shall not suspend, waive or
affect any other Event of Default under this Loan Agreement or any other default
under any of the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different kind or character. No delay on
the part of Lender in the exercise of any right or remedy under this Loan
Agreement or any Other Agreement shall preclude other or further exercise
thereof or the exercise of any right or remedy. None of the undertakings,
agreements, warranties, covenants and representations of Borrowers contained in
this Loan Agreement or any of the Other Agreements and no Event of Default under
this Loan Agreement or default under any of the Other Agreements shall be deemed
to have been suspended or waived by Lender unless such suspension or waiver is
in writing, signed by a duly authorized officer of Lender and directed to
Borrowers specifying such suspension or waiver.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Loan Agreement as of the date first written above.
LASALLE BUSINESS CREDIT, LLC
By: /s/ William H. Moul, Jr.
----------------------------------
Name: William H. Moul, Jr.
Title: Vice President
LUCILLE FARMS, INC.
By: /s/ Jay Rosengarten
----------------------------------
Name: Jay Rosengarten
Title: Chief Executive Officer
LUCILLE FARMS OF VERMONT, INC.
By: /s/ Jay Rosengarten
----------------------------------
Name: Jay Rosengarten
Title: Chief Executive Officer
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EXHIBIT A - BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security Agreement
of even date herewith among LUCILLE FARMS, INC., a Delaware corporation
("LUCILLE") and LUCILLE FARMS OF VERMONT, INC., a Vermont corporation ("LUCILLE
VERMONT") (collectively, "BORROWERS") and LASALLE BUSINESS CREDIT, LLC
("LENDER").
A. (1) Lucille's business locations (please indicate which location is the
principal place of business and at which locations originals and all
copies of Lucille's books, records and accounts are kept).
a. 150 River Road, Montville, New Jersey 07045 - principal place of
business and location at which books, records and accounts are kept.
b. Swanton Industrial Park, Swanton, VT
(2) Lucille Vermont's Business Locations (please indicate which location
is the principal place of business and at which locations originals and
all copies of Lucille Vermont's books, records and accounts are kept).
a. Swanton Industrial Park, Swanton, VT (principal place of business
and location at which most of the books, records and accounts are
kept).
b. 150 River Road, Montville, New Jersey 07045. (Some current bills are
held at this location.)
B. (1) Other locations of Collateral (including, without limitation,
warehouse locations, processing locations, consignment locations) and all
post office boxes of Lucille. Please indicate the relationship of such
location to Lucille (i.e., public warehouse, processor, etc.).
a. PO Box 517, Montville, NJ - post office box
(2) Other locations of Collateral (including, without limitation,
warehouse locations, processing locations, consignment locations) and all
post office boxes of Lucille Vermont. Please indicate the relationship of
such location to Lucille Vermont (i.e., public warehouse, processor,
etc.).
a. Vermont Commercial Warehouse, 75 Boyer Circle, Williston, VT 05495 -
public warehouse
b. PO Box 125, Swanton, VT - post office box
C. (1) Bank Accounts of Lucille (other than those at LaSalle Bank National
Association):
Bank (with address) Account Number Type of Account
------------------- -------------- ---------------
Bank of New York 6104987832 Operating
100 Monroe Street
Boonton, NJ 07005
(973) 335-6220
(2) Bank Accounts of Lucille Vermont (other than those at LaSalle
Bank National Association):
Bank (with address) Account Number Type of Account
------------------- -------------- ---------------
a. Bank of NY 6101119694 Misc. Account
100 Monroe Street
Boonton, NJ 07005
(973) 335-6220
b. Chittenden Bank 045002640 Expense Account
Two Burlington Square
Burlington, VT 05402
(802) 660-1332
c. Chittenden Bank 4-56-06015 Payroll Account
Two Burlington Square
Burlington, VT 05402
(802) 660-1332
EXHIBIT 2(A) - REVOLVING NOTE
REVOLVING NOTE
$7,000,000.00
December __, 2004
This Revolving Note (this "NOTE") is executed and delivered under and
pursuant to the terms of that certain Loan and Security Agreement dated as of
the date hereof (as amended, modified, supplemented or restated from time to
time, the "LOAN AGREEMENT") by and among Lucille Farms, Inc., a Delaware
corporation ("LUCILLE") and Lucille Farms of Vermont, Inc., a Vermont
corporation (`LUCILLE VERMONT") (collectively, jointly and severally,
"BORROWERS"), and LASALLE BUSINESS CREDIT, LLC ("LENDER"),. Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the
Loan Agreement.
FOR VALUE RECEIVED, Borrowers, jointly and severally, promise to pay to
the order of Lender, at Lender's offices located at Two Commerce Square, Suite
2610, 2001 Market Street, Philadelphia, PA 19103, or at such other place as the
holder hereof may from time to time designate to Borrowers in writing:
(i) the principal sum of SEVEN MILLION AND 00/100 DOLLARS
($7,000,000.00), or if different from such amount, the unpaid principal balance
of Revolving Loans as may be due and owing from time to time under the Loan
Agreement, payable in accordance with the provisions of the Loan Agreement,
subject to acceleration upon the occurrence of an Event of Default under the
Loan Agreement, or earlier termination of the Loan Agreement pursuant to the
terms thereof; and
(ii) interest on the principal amount of this Note from time to time
outstanding, payable at the applicable interest rate for Revolving Loans in
accordance with the provisions of the Loan Agreement. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, interest
shall be payable at the applicable interest rate for Revolving Loans then in
effect under the Loan Agreement plus two percent (2%). In no event, however,
shall interest hereunder exceed the maximum interest rate permitted by law.
This Note is the Revolving Note referred to in the Loan Agreement and
is secured, inter alia, by the liens and security interests granted pursuant to
the Loan Agreement and the Other Agreements, is entitled to the benefits of the
Loan Agreement and the Other Agreements, and is subject to all of the
agreements, terms and conditions therein contained.
This Note may be voluntarily prepaid, in whole or in part, on the terms
and conditions set forth in the Loan Agreement.
If an Event of Default under paragraphs 15(g) or 15(h) of the Loan
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with attorneys' fees if the collection hereof is placed
in the hands of an attorney to obtain or enforce payment hereof. If any other
Event of Default shall occur under the Loan Agreement or any of the Other
Agreements which is not cured within any applicable grace period, then this Note
may, as provided in the Loan Agreement, be declared to be immediately due and
payable, without notice, together with attorneys' fees, if the collection hereof
is placed in the hands of an attorney to obtain or enforce payment hereof.
EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS
ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR
SUCH BORROWER AND CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER IN FAVOR OF
LENDER IN ANY JURISDICTION WHERE SUCH BORROWER OR ANY OF ITS PROPERTY IS LOCATED
FOR THE AMOUNT OF ALL OBLIGATIONS AND OTHER SUMS DUE OR TO BECOME DUE BY SUCH
BORROWER TO LENDER UNDER THIS INSTRUMENT, TOGETHER WITH COSTS OF SUIT AND WITH
ACTUAL COLLECTION COSTS (INCLUDING ATTORNEYS' FEES), WITH OR WITHOUT
DECLARATION, WITHOUT STAY OF EXECUTION AND WITH RELEASE OF ALL ERRORS AND THE
RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO THIS INSTRUMENT OR A COPY
HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. EACH BORROWER HEREBY
WAIVES ALL RELIEF FROM ANY APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW
IN FORCE OR HEREAFTER ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED
BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO
TIME AS OFTEN AS THERE IS OCCASION THEREFOR UNTIL ALL SUMS DUE AND OWING
HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND SATISFIED.
EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS
ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR
SUCH BORROWER, AS WELL AS FOR ANY PERSONS CLAIMING UNDER, BY OR THROUGH SUCH
BORROWER, IN AN ACTION OR ACTIONS FOR REPLEVIN OR OTHER APPROPRIATE ACTION
AGAINST SUCH BORROWER TO CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER, FOR
RECOVERY OF POSSESSION OF ANY OR ALL OF THE COLLATERAL AND/OR THE PROCEEDS
THEREOF, TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS (INCLUDING
ATTORNEYS' FEES), WITHOUT THE NECESSITY OF FILING ANY BOND AND WITHOUT STAY OF
EXECUTION OR APPEAL AND WITH RELEASE OF ALL ERRORS AND FOR DOING SO THIS
INSTRUMENT OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT,
WHEREUPON A JUDGMENT AND/OR WRIT OF POSSESSION AND/OR REPLEVIN OR OTHER
APPROPRIATE PROCESS TO OBTAIN POSSESSION OF SUCH COLLATERAL MAY BE ISSUED
FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER. THIS AUTHORITY AND
POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS THERE IS OCCASION THEREFOR
UNTIL ALL SUMS DUE AND OWING HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND
SATISFIED.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
Borrower expressly waives any presentment, demand, protest, notice of
protest, or notice of any kind except as expressly provided in the Loan
Agreement.
LUCILLE FARMS, INC.
By:
------------------------------------
Name:
Title: President
LUCILLE FARMS OF VERMONT, INC.
By:
------------------------------------
Name:
Title: President
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
On the ____ day of December, 2004, before me personally came
___________, to me known, who being by me duly sworn, did depose and say that he
is the President of LUCILLE FARMS, INC. a Delaware corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the directors of said corporation.
- --------------------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
On the ____ day of December, 2004, before me personally came
___________, to me known, who being by me duly sworn, did depose and say that he
is the President of LUCILLE FARMS OF VERMONT, INC. a Delaware corporation
described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the directors of said corporation.
- --------------------------------------------------
Notary Public
EXHIBIT 2(B) - TERM NOTE A
$2,000,000.00
December __, 2004
This Term Note A (this "NOTE") is executed and delivered under and
pursuant to the terms of that certain Loan and Security Agreement dated as of
the date hereof (as amended, modified, supplemented or restated from time to
time, the "LOAN AGREEMENT") by and among Lucille Farms, Inc., a Delaware
corporation ("LUCILLE") and Lucille Farms of Vermont, Inc., a Vermont
corporation (`LUCILLE VERMONT") (collectively, jointly and severally,
"Borrowers"), and LASALLE BUSINESS CREDIT, LLC ("LENDER"),. Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the
Loan Agreement.
FOR VALUE RECEIVED, Borrowers, jointly and severally, promise to pay to
the order of Lender, at Lender's offices located at Two Commerce Square, Suite
2610, 2001 Market Street, Philadelphia, PA 19103, or at such other place as the
holder hereof may from time to time designate to Borrowers in writing:
(i) the principal sum of TWO million AND 00/100 DOLLARS
($2,000,000.00), or if different from such amount, the unpaid principal balance
of Term Loan A as may be due and owing from time to time under the Loan
Agreement, payable in accordance with the provisions of the Loan Agreement,
subject to acceleration upon the occurrence of an Event of Default under the
Loan Agreement or earlier termination of the Loan Agreement pursuant to the
terms thereof; and
(ii) interest on the principal amount of this Note from time to time
outstanding, payable at the applicable interest rate for Term Loan A in
accordance with the provisions of the Loan Agreement. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, interest
shall be payable at the applicable interest rate for Term Loan A then in effect
under the Loan Agreement plus two percent (2%). In no event, however, shall
interest hereunder exceed the maximum interest rate permitted by law.
This Note is Term Note A referred to in the Loan Agreement and is
secured, inter alia, by the liens and security interests granted pursuant to the
Loan Agreement and the Other Agreements, is entitled to the benefits of the Loan
Agreement and the Other Agreements, and is subject to all of the agreements,
terms and conditions therein contained.
This Note may be voluntarily prepaid, in whole or in part, on the terms
and conditions set forth in the Loan Agreement.
If an Event of Default under paragraphs 15(g) or 15(h) of the Loan
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with attorneys' fees if the collection hereof is placed
in the hands of an attorney to obtain or enforce payment hereof. If any other
Event of Default shall occur under the Loan Agreement or any of the Other
Agreements which is not cured within any applicable grace period, then this Note
may, as provided in the Loan Agreement, be declared to be immediately due and
payable, without notice, together with attorneys' fees, if the collection hereof
is placed in the hands of an attorney to obtain or enforce payment hereof.
EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS
ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR
SUCH BORROWER AND CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER IN FAVOR OF
LENDER IN ANY JURISDICTION WHERE SUCH BORROWER OR ANY OF ITS PROPERTY IS LOCATED
FOR THE AMOUNT OF ALL OBLIGATIONS AND OTHER SUMS DUE OR TO BECOME DUE BY SUCH
BORROWER TO LENDER UNDER THIS INSTRUMENT, TOGETHER WITH COSTS OF SUIT AND WITH
ACTUAL COLLECTION COSTS (INCLUDING ATTORNEYS' FEES), WITH OR WITHOUT
DECLARATION, WITHOUT STAY OF EXECUTION AND WITH RELEASE OF ALL ERRORS AND THE
RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO THIS INSTRUMENT OR A COPY
HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. EACH BORROWER HEREBY
WAIVES ALL RELIEF FROM ANY APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW
IN FORCE OR HEREAFTER ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED
BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO
TIME AS OFTEN AS THERE IS OCCASION THEREFOR UNTIL ALL SUMS DUE AND OWING
HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND SATISFIED.
EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS
ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR
SUCH BORROWER, AS WELL AS FOR ANY PERSONS CLAIMING UNDER, BY OR THROUGH SUCH
BORROWER, IN AN ACTION OR ACTIONS FOR REPLEVIN OR OTHER APPROPRIATE ACTION
AGAINST SUCH BORROWER TO CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER, FOR
RECOVERY OF POSSESSION OF ANY OR ALL OF THE COLLATERAL AND/OR THE PROCEEDS
THEREOF, TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS (INCLUDING
ATTORNEYS' FEES), WITHOUT THE NECESSITY OF FILING ANY BOND AND WITHOUT STAY OF
EXECUTION OR APPEAL AND WITH RELEASE OF ALL ERRORS AND FOR DOING SO THIS
INSTRUMENT OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT,
WHEREUPON A JUDGMENT AND/OR WRIT OF POSSESSION AND/OR REPLEVIN OR OTHER
APPROPRIATE PROCESS TO OBTAIN POSSESSION OF SUCH COLLATERAL MAY BE ISSUED
FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER. THIS AUTHORITY AND
POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS THERE IS OCCASION THEREFOR
UNTIL ALL SUMS DUE AND OWING HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND
SATISFIED.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
Borrower expressly waives any presentment, demand, protest, notice of
protest, or notice of any kind except as expressly provided in the Loan
Agreement.
LUCILLE FARMS, INC.
By:
------------------------------------
Name:
Title: President
LUCILLE FARMS OF VERMONT, INC.
By:
------------------------------------
Name:
Title: President
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
On the ____ day of December, 2004, before me personally came
___________, to me known, who being by me duly sworn, did depose and say that he
is the President of LUCILLE FARMS, INC. a Delaware corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the directors of said corporation.
.........
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
On the ____ day of December, 2004, before me personally came
___________, to me known, who being by me duly sworn, did depose and say that he
is the President of LUCILLE FARMS OF VERMONT, INC. a Delaware corporation
described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the directors of said corporation.
- --------------------------------------------------
Notary Public
EXHIBIT 2(C) - TERM NOTE B
$1,000,000.00
December __, 2004
This Term Note B (this "NOTE") is executed and delivered under and
pursuant to the terms of that certain Loan and Security Agreement dated as of
the date hereof (as amended, modified, supplemented or restated from time to
time, the "LOAN AGREEMENT") by and among Lucille Farms, Inc., a Delaware
corporation ("LUCILLE") and Lucille Farms of Vermont, Inc., a Vermont
corporation (`LUCILLE VERMONT") (collectively, jointly and severally,
"Borrowers"), and LASALLE BUSINESS CREDIT, LLC ("LENDER"),. Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the
Loan Agreement.
FOR VALUE RECEIVED, Borrowers, jointly and severally, promise to pay to
the order of Lender, at Lender's offices located at Two Commerce Square, Suite
2610, 2001 Market Street, Philadelphia, PA 19103, or at such other place as the
holder hereof may from time to time designate to Borrowers in writing:
(i) the principal sum of ONE million AND 00/100 DOLLARS
($1,000,000.00), or if different from such amount, the unpaid principal balance
of Term Loan A as may be due and owing from time to time under the Loan
Agreement, payable in accordance with the provisions of the Loan Agreement,
subject to acceleration upon the occurrence of an Event of Default under the
Loan Agreement or earlier termination of the Loan Agreement pursuant to the
terms thereof; and
(ii) interest on the principal amount of this Note from time to time
outstanding, payable at the applicable interest rate for Term Loan b in
accordance with the provisions of the Loan Agreement. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, interest
shall be payable at the applicable interest rate for Term Loan A then in effect
under the Loan Agreement plus two percent (2%). In no event, however, shall
interest hereunder exceed the maximum interest rate permitted by law.
This Note is Term Note B referred to in the Loan Agreement and is
secured, inter alia, by the liens and security interests granted pursuant to the
Loan Agreement and the Other Agreements, is entitled to the benefits of the Loan
Agreement and the Other Agreements, and is subject to all of the agreements,
terms and conditions therein contained.
This Note is subject to mandatory prepayment and may be voluntarily
prepaid, in whole or in part, on the terms and conditions set forth in the Loan
Agreement.
If an Event of Default under paragraphs 15(g) or 15(h) of the Loan
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with attorneys' fees if the collection hereof is placed
in the hands of an attorney to obtain or enforce payment hereof. If any other
Event of Default shall occur under the Loan Agreement or any of the Other
Agreements which is not cured within any applicable grace period, then this Note
may, as provided in the Loan Agreement, be declared to be immediately due and
payable, without notice, together with attorneys' fees, if the collection hereof
is placed in the hands of an attorney to obtain or enforce payment hereof.
EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS
ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR
SUCH BORROWER AND CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER IN FAVOR OF
LENDER IN ANY JURISDICTION WHERE SUCH BORROWER OR ANY OF ITS PROPERTY IS LOCATED
FOR THE AMOUNT OF ALL OBLIGATIONS AND OTHER SUMS DUE OR TO BECOME DUE BY SUCH
BORROWER TO LENDER UNDER THIS INSTRUMENT, TOGETHER WITH COSTS OF SUIT AND WITH
ACTUAL COLLECTION COSTS (INCLUDING ATTORNEYS' FEES), WITH OR WITHOUT
DECLARATION, WITHOUT STAY OF EXECUTION AND WITH RELEASE OF ALL ERRORS AND THE
RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO THIS INSTRUMENT OR A COPY
HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. EACH BORROWER HEREBY
WAIVES ALL RELIEF FROM ANY APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW
IN FORCE OR HEREAFTER ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED
BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO
TIME AS OFTEN AS THERE IS OCCASION THEREFOR UNTIL ALL SUMS DUE AND OWING
HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND SATISFIED.
EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS
ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR
SUCH BORROWER, AS WELL AS FOR ANY PERSONS CLAIMING UNDER, BY OR THROUGH SUCH
BORROWER, IN AN ACTION OR ACTIONS FOR REPLEVIN OR OTHER APPROPRIATE ACTION
AGAINST SUCH BORROWER TO CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER, FOR
RECOVERY OF POSSESSION OF ANY OR ALL OF THE COLLATERAL AND/OR THE PROCEEDS
THEREOF, TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS (INCLUDING
ATTORNEYS' FEES), WITHOUT THE NECESSITY OF FILING ANY BOND AND WITHOUT STAY OF
EXECUTION OR APPEAL AND WITH RELEASE OF ALL ERRORS AND FOR DOING SO THIS
INSTRUMENT OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT,
WHEREUPON A JUDGMENT AND/OR WRIT OF POSSESSION AND/OR REPLEVIN OR OTHER
APPROPRIATE PROCESS TO OBTAIN POSSESSION OF SUCH COLLATERAL MAY BE ISSUED
FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER. THIS AUTHORITY AND
POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS THERE IS OCCASION THEREFOR
UNTIL ALL SUMS DUE AND OWING HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND
SATISFIED.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
Borrower expressly waives any presentment, demand, protest, notice of
protest, or notice of any kind except as expressly provided in the Loan
Agreement.
LUCILLE FARMS, INC.
By:
------------------------------------
Name:
Title: President
LUCILLE FARMS OF VERMONT, INC.
By:
------------------------------------
Name:
Title: President
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
On the ____ day of December, 2004, before me personally came
___________, to me known, who being by me duly sworn, did depose and say that he
is the President of LUCILLE FARMS, INC. a Delaware corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the directors of said corporation.
- --------------------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
On the ____ day of December, 2004, before me personally came
___________, to me known, who being by me duly sworn, did depose and say that he
is the President of LUCILLE FARMS OF VERMONT, INC. a Delaware corporation
described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the directors of said corporation.
- --------------------------------------------------
Notary Public
EXHIBIT 2(D) - CAPITAL EXPENDITURE NOTE
$---------
______ __, 200_
This Capital Expenditure Note (this "NOTE") is executed and delivered
under and pursuant to the terms of that certain Loan and Security Agreement
dated December ____, 2004 (as amended, modified, supplemented or restated from
time to time, the "LOAN AGREEMENT") by and among Lucille Farms, Inc., a Delaware
corporation ("LUCILLE") and Lucille Farms of Vermont, Inc., a Vermont
corporation (`LUCILLE VERMONT") (collectively, jointly and severally,
"BORROWERS"), and LASALLE BUSINESS CREDIT, LLC ("LENDER"),. Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the
Loan Agreement.
FOR VALUE RECEIVED, Borrowers, jointly and severally, promise to pay to
the order of Lender, at Lender's offices located at Two Commerce Square, Suite
2610, 2001 Market Street, Philadelphia, PA 19103, or at such other place as the
holder hereof may from time to time designate to Borrowers in writing:
(i) the principal sum of __________________ DOLLARS ($__________), or
if different from such amount, the unpaid principal balance of the Capital
Expenditure Loan evidenced hereby as may be due and owing in accordance with the
provisions of the Loan Agreement, subject to acceleration upon the occurrence of
an Event of Default under the Loan Agreement or earlier termination of the Loan
Agreement pursuant to the terms thereof; and
(ii) interest on the principal amount of this Note from time to time
outstanding, payable at the applicable interest rate for Equipment Loans in
accordance with the provisions of the Loan Agreement. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, interest
shall be payable at the applicable interest rate for Equipment Loans then in
effect under the Loan Agreement plus two percent (2%). In no event, however,
shall interest hereunder exceed the maximum interest rate permitted by law.
This Note is a Capital Expenditure Note referred to in the Loan
Agreement and is secured, inter alia, by the liens and security interests
granted pursuant to the Loan Agreement and the Other Agreements, is entitled to
the benefits of the Loan Agreement and the Other Agreements, and is subject to
all of the agreements, terms and conditions therein contained.
This Note is subject to mandatory prepayment and may be voluntarily
prepaid, in whole or in part, on the terms and conditions set forth in the Loan
Agreement.
If an Event of Default under paragraphs 15(g) or 15(h) of the Loan
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with attorneys' fees if the collection hereof is placed
in the hands of an attorney to obtain or enforce payment hereof. If any other
Event of Default shall occur under the Loan Agreement or any of the Other
Agreements which is not cured within any applicable grace period, then this Note
may, as provided in the Loan Agreement, be declared to be immediately due and
payable, without notice, together with attorneys' fees, if the collection hereof
is placed in the hands of an attorney to obtain or enforce payment hereof.
EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS
ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR
SUCH BORROWER AND CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER IN FAVOR OF
LENDER IN ANY JURISDICTION WHERE SUCH BORROWER OR ANY OF ITS PROPERTY IS LOCATED
FOR THE AMOUNT OF ALL OBLIGATIONS AND OTHER SUMS DUE OR TO BECOME DUE BY SUCH
BORROWER TO LENDER UNDER THIS INSTRUMENT, TOGETHER WITH COSTS OF SUIT AND WITH
ACTUAL COLLECTION COSTS (INCLUDING ATTORNEYS' FEES), WITH OR WITHOUT
DECLARATION, WITHOUT STAY OF EXECUTION AND WITH RELEASE OF ALL ERRORS AND THE
RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO THIS INSTRUMENT OR A COPY
HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. EACH BORROWER HEREBY
WAIVES ALL RELIEF FROM ANY APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW
IN FORCE OR HEREAFTER ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED
BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO
TIME AS OFTEN AS THERE IS OCCASION THEREFOR UNTIL ALL SUMS DUE AND OWING
HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND SATISFIED.
EACH BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS LENDER, BY ITS
ATTORNEY OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR
SUCH BORROWER, AS WELL AS FOR ANY PERSONS CLAIMING UNDER, BY OR THROUGH SUCH
BORROWER, IN AN ACTION OR ACTIONS FOR REPLEVIN OR OTHER APPROPRIATE ACTION
AGAINST SUCH BORROWER TO CONFESS AND ENTER JUDGMENT AGAINST SUCH BORROWER, FOR
RECOVERY OF POSSESSION OF ANY OR ALL OF THE COLLATERAL AND/OR THE PROCEEDS
THEREOF, TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS (INCLUDING
ATTORNEYS' FEES), WITHOUT THE NECESSITY OF FILING ANY BOND AND WITHOUT STAY OF
EXECUTION OR APPEAL AND WITH RELEASE OF ALL ERRORS AND FOR DOING SO THIS
INSTRUMENT OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT,
WHEREUPON A JUDGMENT AND/OR WRIT OF POSSESSION AND/OR REPLEVIN OR OTHER
APPROPRIATE PROCESS TO OBTAIN POSSESSION OF SUCH COLLATERAL MAY BE ISSUED
FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER. THIS AUTHORITY AND
POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS THERE IS OCCASION THEREFOR
UNTIL ALL SUMS DUE AND OWING HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND
SATISFIED.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
Borrower expressly waives any presentment, demand, protest, notice of
protest, or notice of any kind except as expressly provided in the Loan
Agreement.
LUCILLE FARMS, INC.
By:
------------------------------------
Name:
Title: President
LUCILLE FARMS OF VERMONT, INC.
By:
------------------------------------
Name:
Title: President
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
On the ____ day of ________, 200_, before me personally came
___________, to me known, who being by me duly sworn, did depose and say that he
is the President of LUCILLE FARMS, INC. a Delaware corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the directors of said corporation.
- --------------------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
On the ____ day of ______, 200_, before me personally came ___________,
to me known, who being by me duly sworn, did depose and say that he is the
President of LUCILLE FARMS OF VERMONT, INC. a Delaware corporation described in
and which executed the foregoing instrument; and that he signed his name thereto
by order of the directors of said corporation.
- --------------------------------------------------
Notary Public
EXHIBIT 9(C) - COMPLIANCE CERTIFICATE
This Certificate is submitted pursuant to subsection 9(c) of that certain
Loan and Security Agreement ("Loan Agreement") of even date herewith among
LUCILLE FARMS, INC., a Delaware corporation ("LUCILLE") and LUCILLE FARMS OF
VERMONT, INC., a Vermont corporation ("LUCILLE VERMONT") (collectively,
"BORROWERS") and LASALLE BUSINESS CREDIT, LLC ("LENDER").
The undersigned hereby certifies to Lender that as of the date of this
Certificate:
1. The undersigned is the _____________________ of Borrowers.
2. There exists no event or circumstance which is, or which with the
passage of time, the giving of notice, or both would constitute an Event of
Default, as that term is defined in the Loan Agreement, or, if such an event or
circumstance exists, a writing attached hereto specifies the nature thereof, the
period of existence thereof and the action that Borrower has taken or proposes
to take with respect thereto.
3. No material adverse change in the condition, financial or otherwise,
business, property, or results of operations of Borrowers has occurred since
[DATE OF LAST COMPLIANCE CERTIFICATE/LAST FINANCIAL STATEMENTS DELIVERED PRIOR
TO CLOSING], or, if such a change has occurred, a writing attached hereto
specifies the nature thereof and the action that Borrowers have taken or
proposes to take with respect thereto.
4. Borrowers are in compliance with the representations, warranties and
covenants in the Loan Agreement, or, if Borrowers are not in compliance with any
representations, warranties or covenants in the Loan Agreement, a writing
attached hereto specifies the nature of such noncompliance, the period of
existence thereof and the action that Borrowers have taken or proposes to take
with respect thereto.
5. The financial statements of each Borrower being concurrently
delivered herewith have been prepared in accordance with generally accepted
accounting principles consistently applied and there have been no material
changes in accounting policies or financial reporting practices of such Borrower
since [DATE OF THE LAST COMPLIANCE CERTIFICATE/DATE OF LAST FINANCIAL STATEMENTS
DELIVERED PRIOR TO CLOSING] or, if any such change has occurred, such changes
are set forth in a writing attached hereto.
6. Attached hereto is a true and correct calculation of the financial
covenants contained in the Loan Agreement.
--------------------------------------------
By
------------------------------------------
Title
---------------------------------------
--------------------------------------------
By
------------------------------------------
Title
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SCHEDULE 1A
LONG TERM ST. ALBANS PAYABLES
Goods Sold and Delivered by St. Albans - August 1, 2003 - August 31, 2003
Invoice # Period Amount
--------- ------ ------
13793 8/1/03-8/15/03 $ 560,784.33
13844 8/16/03-8/31/03 $1,085,715.11
13846 8/16/03-8/31/03 187,205.57
13848 8/16/03-8/31/03 ( 54,705.53)
-------------
$1,778,962.48
Less: Payments 178,962.48
-------------
$1,500,000.00
=============
SCHEDULE 1B - PERMITTED LIENS
1. Liens in favor of UPS Capital Business Credit f/k/a First International
Bank, N.A., subject to and in accordance with the UPS Intercreditor
Agreement.
2. Liens in favor of St. Albans Cooperative Creamery, Inc. relating to the
UPS Equipment, Lucille Vermont's real property located in Swanton,
Vermont, and certain intangibles relating to such real property.
3. Liens in favor of American Technologies Credit relating to lease for
computer hardware and software, etc. (Monthly payment $2,890.40 -
creditor contends that lease extended through June 2005 - Borrower
contending lease ended June 2004 and additional payments inadvertently
made - per creditor Borrower has right to purchase at end of lease for
$5,368.98 plus tax whenever lease ends).
4. Liens in favor of Crown Credit Company relating to operating lease for
forklift, transfer cart and roller stand. (Rental charge of $714.66 per
month 5 year lease expiring 12/31/08.)
5. Liens in favor of Hyster Credit Company/Lifetech Handling, Inc.
relating to operating lease for fork lift. (Rental charge of $478.05
per month).
6. Liens in favor of General Electric Capital Corporation relating to
capital lease for conveyor system, centrifugal pump and motor, storage
silo, transfer chute, pasteurizer unit, etc. Lease 4087397-001- monthly
payment $972.26 - last payment 11/1/04 - remaining balance $0; lease
4087397-002- monthly payment $3,006.48 - last payment 6/1/05 -
remaining balance $17,542.77; lease 4087397-003 - monthly payment
$2,221.38 - last payment 8/1/05 - remaining balance $17,063.12; lease
4087397-004 - monthly payment $1,056.68 - last payment 9/1/05 -
remaining balance $9,088.46.
7. Inchoate Producers' Liens arising by operation of law under Title 6,
Chapter 159, Section 2901 of the Vermont Statutes, but only to the
extent that a notice under Section 2902 of such Title and Chapter has
not been filed.
SCHEDULE 11(G) - COMMERCIAL TORT CLAIMS
None
SCHEDULE 11(H) - CONSENTS AND PERMITS
See letter attached hereto from State of Vermont, Agency of Natural
Resources, Department of Environmental Conservation, Air Pollution Control
Division.
SCHEDULE 11(I) - AFFILIATE TRANSACTIONS
Gennaro Falivene provides consulting services to Lucille Vermont
pursuant to a written Consulting Agreement.
SCHEDULE 11(J) - NAMES & TRADE NAMES
Lucille Farms, Inc. was formerly known as Lucille Farms Distribution
Corp., which name was changed in May 1993 to Lucille Farms, Inc.
SCHEDULE 11(K) - EQUIPMENT
See Schedule 1B.
SCHEDULE 11(N) - INDEBTEDNESS
See Schedule 1B.
SCHEDULE 11(P) - PARENT, SUBSIDIARIES AND AFFILIATES
Lucille owns 100% of the outstanding capital stock of Lucille Vermont.
The following persons own five percent (5%) or more of the voting
control or equity interests of Lucille (based upon the outstanding shares of
Common Stock (3,137,937 shs) and non-voting convertible Class B Preferred Stock
(583 shs):
Common Stock Preferred Stock
------------ ---------------
Alfonso Falivene 419,587(1) --
St. Albans 333,333(2) 583
Gennaro Falivene 280,652(2) --
Estate of Philip Falivene 200,017 --
B&W Investment Associates 193,799 --
- -------------------------
(1) Includes 7,500 shares owned by his wife and 20,000 shares owned by one of
his children.
(2) As of June 28, 2004, may have sold shares since such date.
SCHEDULE 11(T) - ENVIRONMENTAL MATTERS
See Schedule 11(h)
SCHEDULE 11(X) - FARM PRODUCT SUPPLIERS
Lucille Vermont purchases its supply of milk through the offices of St.
Albans, which through a marketing agreement with its member farms acts as the
agent for such farms. Lucille Vermont has no privity or dealings directly with
the farms, and is not aware of the specific farms from which milk is delivered
to it on a daily basis. Lender acknowledges that Borrowers have made no effort
to determine the identity of the farms from which Borrowers obtain their milk.
SCHEDULE 17(A) - CLOSING DOCUMENT CHECKLIST
See attached