LOAN AND SECURITY AGREEMENT
between
VERMONT PURE HOLDINGS, LTD., as Co-Borrower
and
VERMONT PURE SPRINGS, INC., as Co-Borrower
and
CORESTATES BANK, N.A., as Lender
April 8, 1998
TABLE OF CONTENTS
PAGE
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms............................................... 1
SECTION 1.02. Accounting Terms..................................................... 10
ARTICLE II
THE WORKING CAPITAL LINE OF CREDIT FACILITY
SECTION 2.01. Working Capital Line of Credit...................................... 10
SECTION 2.02. Borrowing Limits.................................................... 11
SECTION 2.03. Interest, Fees and Charges.......................................... 11
SECTION 2.04. Payment of the Working Capital Line of
Credit.............................................................. 12
SECTION 2.05. Working Capital Note................................................ 13
SECTION 2.06. Termination of the Working Capital Line
of Credit........................................................... 13
SECTION 2.07. Use and Disbursement of Proceeds.................................... 13
SECTION 2.08. Prepayments......................................................... 14
ARTICLE III
THE ACQUISITION FACILITY
SECTION 3.01. The Acquisition Facility............................................ 14
SECTION 3.02. Borrowing Conditions and Limits..................................... 14
SECTION 3.03. Interest............................................................ 16
SECTION 3.04. Repayment of the Acquisition Facility............................... 17
SECTION 3.05. Use of Proceeds of the Acquisition
Facility............................................................ 17
SECTION 3.06. Termination of the Acquisition Facility............................. 17
SECTION 3.07. Prepayments......................................................... 18
SECTION 3.08. Unused Facility Fee................................................. 18
ARTICLE IV
COLLATERAL
SECTION 4.01. Security Interests.................................................. 18
SECTION 4.02. Financing Statements and Other
Documents........................................................... 19
SECTION 4.03. Landlords' Waivers; Mortgagees'
Disclaimers......................................................... 19
SECTION 4.04. Insurance........................................................... 20
TABLE OF CONTENTS
PAGE
SECTION 4.05. Places of Business; Location of
Collateral.......................................................... 20
SECTION 4.06. Equipment and Inventory............................................. 20
SECTION 4.07. Patents, Copyrights and Trademarks.................................. 21
SECTION 4.08. Records and Reports................................................. 21
SECTION 4.09. Trade and Fictitious Names.......................................... 21
SECTION 4.10. Certain of the Bank's Rights........................................ 21
SECTION 4.11. Power of Attorney................................................... 21
SECTION 4.12. Notices............................................................. 21
SECTION 4.13. Insurance; Discharge of Taxes, etc.................................. 21
SECTION 4.14. Certain Waivers and Releases by the
Borrowers........................................................... 22
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.01. Conditions Precedent to Funding..................................... 22
SECTION 5.02. Additional Conditions Precedent..................................... 23
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Existence........................................................... 24
SECTION 6.02. Authorization....................................................... 24
SECTION 6.03. Validity............................................................ 24
SECTION 6.04. Financial Statements................................................ 24
SECTION 6.05. Litigation.......................................................... 25
SECTION 6.06. Agreements and Orders............................................... 25
SECTION 6.07. Contingent Liabilities.............................................. 25
SECTION 6.08. Taxes............................................................... 25
SECTION 6.09. Ownership and Encumbrances.......................................... 25
SECTION 6.10. Consents............................................................ 25
SECTION 6.11. ERISA............................................................... 26
SECTION 6.12. Operation of Business............................................... 26
SECTION 6.13. Disclosure.......................................................... 26
SECTION 6.14. Environmental Laws.................................................. 27
SECTION 6.15. Margin Stock........................................................ 27
SECTION 6.16. Securities Laws..................................................... 27
SECTION 6.17. Other Agreements.................................................... 27
SECTION 6.18. Labor Disputes and Casualties....................................... 27
SECTION 6.19. Representations Concerning Sureties................................. 27
TABLE OF CONTENTS
PAGE
ARTICLE VII
COVENANTS
SECTION 7.01. Financial and Other Information..................................... 28
SECTION 7.02. Insurance........................................................... 29
SECTION 7.03. Taxes and Other Claims.............................................. 29
SECTION 7.04. Encumbrances........................................................ 29
SECTION 7.05. Indebtedness........................................................ 30
SECTION 7.06. Loans and Investments............................................... 30
SECTION 7.07. Maintenance of Existence............................................ 30
SECTION 7.08. Compliance With Laws................................................ 30
SECTION 7.09. Maintenance of Property............................................. 31
SECTION 7.10. Inspection by the Bank.............................................. 31
SECTION 7.11. Reports............................................................. 31
SECTION 7.12. ERISA............................................................... 32
SECTION 7.13. Merger or Consolidation............................................. 32
SECTION 7.14. Disposal of Assets.................................................. 32
SECTION 7.15. Nature of Business.................................................. 32
SECTION 7.16. Environmental Laws.................................................. 32
SECTION 7.17. Ownership of Stock/Maintenance of
Management.......................................................... 32
SECTION 7.18. Funded Debt to Cash Flow............................................ 33
SECTION 7.19. Cash Flow Coverage.................................................. 33
SECTION 7.20. Funded Debt to Capitalization....................................... 33
SECTION 7.21 Interest Coverage................................................... 33
SECTION 7.22 Methodology for Calculation......................................... 33
SECTION 7.23. Capital Expenditures................................................ 33
SECTION 7.24. Deposit Accounts.................................................... 33
SECTION 7.25. Dividends, Capital Stock............................................ 34
ARTICLE VIII
DEFAULT
SECTION 8.01. Events of Default................................................... 34
SECTION 8.02 Cure of Default..................................................... 36
SECTION 8.03. Acceleration........................................................ 37
SECTION 8.04. Remedies Upon Default............................................... 37
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. No Waiver; Cumulative Remedies...................................... 38
SECTION 9.02. Amendments and Waivers.............................................. 38
SECTION 9.03. Notices............................................................. 38
SECTION 9.04. Costs and Expenses.................................................. 39
SECTION 9.05. Miscellaneous Payment Provisions.................................... 39
SECTION 9.06. Participation....................................................... 40
SECTION 9.07. Liability of Bank................................................... 40
SECTION 9.08. Governing Law....................................................... 40
SECTION 9.09. Headings............................................................ 41
SECTION 9.10. Continuing Representations.......................................... 41
SECTION 9.11. Binding Effect...................................................... 41
SECTION 9.12. Records............................................................. 41
SECTION 9.13. Indemnity........................................................... 41
SECTION 9.14. Waiver of Jury Trial................................................ 42
SECTION 9.15. Consent to Jurisdiction............................................. 42
SECTION 9.16. Regulatory Changes.................................................. 42
SECTION 9.17. Illegality.......................................................... 43
SECTION 9.18. Interpretation/Additional Borrowers................................. 43
SECTION 9.19. Integration......................................................... 43
EXHIBITS
EXHIBIT 1.01 - FORM OF SUBORDINATION AGREEMENT
EXHIBIT 4.05 - PLACES OF BUSINESS, LOCATIONS OF
COLLATERAL
EXHIBIT 4.07 - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
EXHIBIT 4.09 - TRADE OR FICTITIOUS NAMES
EXHIBIT 6.01 - AFFILIATES AND TRADENAMES
EXHIBIT 6.05 - LITIGATION
EXHIBIT 6.07 - CONTINGENT LIABILITIES
EXHIBIT 6.09 - EXISTING LIENS AND ENCUMBRANCES
EXHIBIT 6.11 - ERISA MATTERS
EXHIBIT 7.01 - COMPLIANCE CERTIFICATE
EXHIBIT 7.02 - EXISTING INSURANCE COVERAGE
EXHIBIT 7.05 - EXISTING INDEBTEDNESS
EXHIBIT 9.18 - JOINDER AND CONSENT
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT is made this 8th day of April, 1998, by and between
VERMONT PURE HOLDINGS, LTD., a Delaware business corporation with its chief
executive offices at Route ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ ("VPHL"), and VERMONT PURE SPRINGS, INC., a Delaware business corporation
with its chief executive offices at Route ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("VPSI") (jointly and severally, the "Borrowers"), and
CORESTATES BANK, N.A., a national banking association with offices at 1339
Chestnut Street, Philadelphia, Pennsylvania 19101- 7618 (the "Bank").
BACKGROUND
A. VPHL is a Delaware business corporation whose shares of stock are
publicly traded on the NASD small cap stock exchange, and whose sole asset
consists of one hundred percent (100%) of the issued and outstanding shares of
VPSI. VPSI is a Delaware business corporation that bottles, markets and
distributes natural spring water under the registered trademarks "Vermont Pure"
and "Hidden Spring" to retail consumer and home office markets, and whose
current market consists primarily of the New England, Mid-Atlantic and
Mid-Western states. The Borrowers are beverage companies that are involved in,
directly or indirectly, the manufacturing, packaging and distribution of spring
water and other beverages to homes and offices, and retail and wholesale
outlets.
B. VPSI also owns 100% of the issued and outstanding shares
of stock of Excelsior Springs Water Company, Inc., a New York
Corporation ("Excelsior") and A. M. Fridays, Inc., a New Hampshire
corporation ("AMF").
C. The Borrowers have requested that the Bank make available to them
certain credit facilities in the nature of a line of credit for (i) refinancing
a portion of their existing current funded debt, (ii) working capital purposes
and letters of credit, (iii) permitted acquisitions capital expenditures and to
refinance existing debt. Subject to all of the terms and conditions of this
Agreement and the other Loan Documents (as defined below), the Bank has agreed
to make these credit facilities available to the Borrowers only for the purposes
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound, the parties agree:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. In addition to other terms defined
elsewhere in this Agreement and the Background to this Agreement, the following
terms as used in this Agreement shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
Accounts has the meaning given to that term in the Uniform Commercial
Code, and includes Contract Rights and customer deposits.
Affiliate means any Person which directly or indirectly controls, is
controlled by or is under common control with any of the Borrowers or any
Subsidiary. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise. The term Affiliate includes Excelsior and AMF.
Acquisition means the purchase by the Borrowers for cash and/or
Permitted Seller Notes of assets or stock pursuant to any Permitted Acquisition.
Acquisition Documents means, in connection with any Permitted
Acquisition, any asset purchase agreement, stock purchase agreement or similar
agreement, and all other agreements, documents or instruments entered into or
delivered in connection with any Permitted Acquisition.
Acquisition Facility has the meaning given to that term in Section
3.01.
Acquisition Facility Note has the meaning given to that term in Section
3.01.
Adjusted Cash Flow means four (4) consecutive fiscal quarters of Cash
Flow, plus all owners salaries, bonuses, withdrawals and all other non recurring
expenses of any seller in connection with any Permitted Acquisitions.
Agreement means this Loan and Security Agreement, as the same may be
amended, modified, restated or supplemented from time to time.
Base Rate means the greater of (i) the Prime Rate, or (ii) the Federal
Fund Rate plus one-half of one percent (0.5%).
2
Business Day means a day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required to close under the laws of the
Commonwealth of Pennsylvania.
Calculated Number of Warrant Shares means that number which results
from (i) 50,000, divided by (ii) the average closing price of the common stock
of VPHL for the ten (10) trading days immediately prior to closing, less $3.00
per share.
Capital Expenditures means expenditures for any fixed assets or
improvements, replacements, substitutions or additions thereto which have a
useful life of more than one year, including assets acquired pursuant to a
Capital Lease.
Capitalization means book net worth of the Borrowers, computed in
accordance with GAAP, minus all Investments and all existing loans and advances
to, and guaranties of, the indebtedness of shareholders plus Subordinated Debt
and any Permitted Sellers Notes.
Capital Lease means any lease for property (real, personal or mixed)
under which such Person is the lessee and which, in accordance with GAAP, is or
should be capitalized on the books of such Person.
Cash Flow means, on a rolling four (4) quarter basis, all net income
before taxes, plus the sum of (i) interest expense, and (ii) depreciation and
amortization, and then plus or minus any and all extraordinary gains or losses,
and non-cash income or expenses, as the case may be, all as determined in
accordance with GAAP.
Cash Flow Coverage means, on a rolling four (4) quarter basis, the
ratio of Cash Flow to Fixed Charges.
Change of Control means the occurrence of an event such that, or
entering into an agreement whereby, any Person (or two or more Persons acting in
concert) shall have acquired beneficial ownership (including within the meaning
of Rules 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of more than forty-nine percent (49%) of the fully diluted
common stock of the applicable Borrower.
Chattel Paper has the meaning given to that term in the Uniform
Commercial Code.
Collateral means all of the property and assets of the Borrowers and
the Sureties described or referred to in Article IV, or in any of the Loan
Documents.
Contract Right means any right to payment under a contract not yet
earned by performance and not evidenced by an Instrument or Chattel Paper.
3
Credit Obligation means any obligation for the payment of borrowed
money (other than monies borrowed from the Bank), or the deferred purchase price
of property.
Current Assets means, at any date of determination, all assets which
would be classified as current assets in accordance with GAAP.
Current Liabilities means, at any date of determination, all
liabilities (including deferred charges and provisions for income taxes) which
would be classified as current liabilities in accordance with GAAP.
Current Maturities means that portion of Funded Debt which is
outstanding as of the applicable date, which matures on demand or within one
year from such date, as may or may not directly be renewed, extended or
refinanced, so as to be outstanding more than one year after such date.
Direct Loans has the meaning given to that term in Section 2.01.
Documents has the meaning given to that term in the Uniform Commercial
Code.
Environmental Laws means all current and future federal, state county,
regional, and local laws, statutes and ordinances, and all rules and regulations
thereunder, concerning protection of health or the environment, including, but
not limited to the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. ss.9601 et seq., the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. ss.6901 et seq., the Toxic Substances
Control Act, as amended is 15 U.S.C. ss.2601 et seq., and the Pennsylvania
Hazardous Sites Cleanup Act, 35 P.S. 6020.101 et seq.
Equipment has the meaning given to that term in the Uniform Commercial
Code.
ERISA means the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time, and the regulations and published
interpretations thereof.
ERISA Affiliate means any trade or business, whether or not
incorporated, which together with the Borrowers would be treated as a single
employer under Section 4001 of ERISA.
Eurocurrency Reserve Requirement means, for any LIBOR Loan for any
Interest Period therefor, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves (including any marginal, supplemental
or emergency reserves) are required to be maintained during such Interest Period
under Regulation D by the Bank against "Eurocurrency Liabilities" (as such term
is used in
4
Regulation D) but without benefit or credit of proration, exemptions, or offsets
that might otherwise be available to the Bank from time to time under Regulation
D. Without limiting the effect of the foregoing, the Eurocurrency Reserve
Requirement shall reflect any other reserves required to be maintained by the
Bank against (1) any category of liabilities that includes deposits by reference
to which the LIBOR Interest Rate for LIBOR Loans is to be determined, or (2) any
category of extension of credit or other assets that include LIBOR Loans.
Event of Default has the meaning given to that term in Section 8.01.
Excess Cash Flow means the excess of Cash Flow over Fixed Charges,
calculated annually at the end of each Borrower's fiscal year.
Federal Funds Rate means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16th of one percent) equal to the
weighted average of the rates of overnight federal funds transactions of members
of the Federal Reserve System arranged by a federal funds brokers, as published
for such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of Philadelphia; provided, however,
that if such rate is not so published for any day which is any Business Day, the
average of the quotations for such day and such transactions received by the
Bank from three (3) federal funds brokers recognized and selected by the Bank to
be used to determine the Federal Funds Rate.
Fixed Charges means the sum of Total Debt Service, plus taxes paid in
cash and non-financed Capital Expenditures.
Funded Debt means all Indebtedness and all Credit Obligations of the
Borrowers and all other liabilities of the Borrowers having a final maturity
date more than one year after the date thereof (or which is renewable or
extendible at the option of the Borrowers to a date more than one year from said
date of creation), including all final and serial maturities, prepayments and
sinking fund payments required to be made one year or less after the date of
determination thereof, notwithstanding the fact that any amount thereof is at
the time also included in Current Liabilities.
GAAP means generally accepted accounting principles in the United
States, applied on a consistent basis.
General Intangibles has the meaning given to that term in the Uniform
Commercial Code, and includes those items identified in the Security Agreement.
5
Guaranties means the guaranty agreements of even date pursuant to which
Excelsior and AMF each guaranty, and become sureties for, the full and final
payment of all Indebtedness.
Hazardous Substances means "hazardous substances" (as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss.9601 et seq., and the Pennsylvania Hazardous Sites Cleanup Act, 35 P.S.
6020.101 et seq.), "hazardous wastes" (as defined in the Resource Conservation
and Recovery Act, 42 U.S.C. ss.6901 et seq.), "toxic substances" (as defined in
the Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq.), and all other
pollutants and contaminants regulated or controlled by, or required to be
removed or remediated under any Environmental Law.
Indebtedness means and includes (i) all loans and other extensions of
credit by the Bank to any one or more of the Borrowers under the Working Capital
Line of Credit and the Acquisition Facility, and all interest and fees accrued
thereon or in connection therewith, (ii) all other indebtedness and other
obligations or undertakings now or hereafter owing by any one or more of the
Borrowers or their Affiliates to the Bank under this Agreement or the other Loan
Documents to which they are a party, and (iii) all other liabilities and
obligations of any one or more of the Borrowers or their Affiliates to the Bank
(including any past, present or future advances, readvances, substitutions,
extensions, renewals, interest, late charges, penalties, and fees of any and all
types) whether primary or secondary, absolute or contingent, direct or indirect,
joint, several, or independent, voluntary or involuntary, similar or dissimilar,
related or unrelated (including overdrafts), now or hereafter existing, due or
to become due, or held or to be held by the Bank for its own account or as agent
for others, whether created directly or acquired by negotiation, assignment or
otherwise.
Instruments has the meaning given to that term in the Uniform
Commercial Code.
Interest Coverage means the ratio of Cash Flow to Borrower's interest
expense for the twelve (12) consecutive month period immediately preceding the
date of determination.
Interest Period means, whenever any Indebtedness bears interest on the
basis of the LIBOR Interest Rate, a period of one, two, three or six calendar
months (in each case commencing on the first day of the first month of such
period) as selected by the Borrowers requesting the advance pursuant to this
Agreement.
Internal Revenue Code means the Internal Revenue Code of 1986, as the
same may be amended from time to time, and the regulations and published
interpretations thereof.
6
Inventory has the meaning given to that term in the Uniform Commercial
Code.
Investment means any loan or advance to (or purchase or acquisition of
the securities or obligations of) any Person, or the assumption of any liability
of any other Person which, in each of the foregoing cases, does not arise from
sales to such Person in the ordinary course of the Borrowers' business.
Investment Property has the meaning given to that term in the Uniform
Commercial Code.
Letter of Credit Agreement has the meaning given to that term in
Section 2.01.
Letters of Credit has the meaning given to that term in Section 2.01.
LIBOR Interest Rate means, for any Interest Period, the rate per annum
(rounded upward, if necessary, to the nearest 1/16 of one percent) determined by
the Bank to be equal to the quotient of (i) the London Interbank Offered Rate
for such Interest Period, divided by (ii) a number equal to 1.00 minus the
Eurocurrency Reserve Requirement for such Interest Period.
LIBOR Loan means any Loan when and to the extent that the interest rate
is determined by reference to the LIBOR Interest Rate.
Loans means all advances under the Working Capital Line of Credit and
the Acquisition Facility.
Loan Documents means this Agreement, the Notes, the Security
Agreements, the Stock Pledge Agreements, the Letter of Credit Agreement, the
Guaranties and any other agreements, documents or instruments now or hereafter
delivered to the Bank with respect to the Collateral and the Indebtedness by the
Borrowers or their Affiliates, or by any other person or entity now or hereafter
liable, directly or indirectly, for the Indebtedness.
London Interbank Offered Rate means, for any Interest Period, the rate
per annum determined in good faith by the Bank in accordance with its usual
procedures (which determination shall be conclusive) to be the average of the
rate per annum for deposits, in U.S. dollars, in the amount of $250,000 for a
period comparable to the Interest Period, offered to leading banks in the London
interbank market at approximately 11:00 a.m. London time, two Business Days
prior to the first day of the Interest Period.
Multiemployer Plan means a Plan described in Section 4001(a) (3) of
ERISA which covers employees of the Borrowers or an ERISA Affiliate.
7
Northeastern United States means the States of Pennsylvania,
New Jersey, New York, Connecticut, Massachusetts, Rhode Island,
Vermont, New Hampshire and Maine.
Notes means Acquisition Facility Note and the Working Capital Note,
together with any extensions, modifications, renewals, replacements, or
refinancing thereof, in whole or in part.
PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
Permitted Acquisitions means the acquisition by any one or more of the
Borrowers of assets constituting an entire business, or a division of any
Person, or the capital stock of any Person; provided, however, that any such
acquisition shall only be a Permitted Acquisition if (i) the consideration paid
consists solely of cash, Permitted Seller Notes and the Borrowers' common stock,
(ii) the assets acquired shall be in the same business lines in which the
Borrowers are already engaged, (iii) the assets acquired shall be for an entire
business, or division of such Person, and (iv) the total consideration paid or
to be paid in cash, Permitted Seller Notes and common stock does not exceed six
(6) times the seller's most recent two (2) fiscal year average Adjusted Cash
Flow.
Permitted Assumed Liabilities means those liabilities which would, in
accordance with GAAP, be classified as liabilities, and may also include
liabilities relating to bottling deposit liabilities, and payments to be made
for rent as required in connection with operating leases transferred in
connection with any Permitted Acquisition; provided, however, that the sum of
Permitted Assumed Liabilities (when added to the total consideration paid or to
be paid for a Permitted Acquisition), does not exceed six (6) times the Adjusted
Cash Flow of the seller.
Permitted Seller Notes means notes issued to sellers in connection with
any Permitted Acquisition and issued in accordance to conditions thereof, which
notes shall be unsecured and subordinated to the Indebtedness substantially in
the form of subordination agreement attached as Exhibit 1.01 to this Agreement.
Person means an individual, partnership, corporation, business trust,
estate joint stock company, trust, an incorporated association, joint venture,
governmental authority or any other person or entity of any nature whatsoever.
Plan means any plan established, maintained, or to which contributions
have been made, by any of the Borrowers or by an ERISA Affiliate.
8
Potential Default means any event or condition which with notice or the
passage of time (or both) would constitute an Event of Default.
Prime Rate means the floating annual rate of interest that is
designated from time to time by the Bank as its Prime Rate and used by the Bank
as a reference base with respect to different interest rates charged to
borrowers, it being understood that such rate may not be the lowest rate of
interest at which the Bank makes loans to other borrowers.
Prohibited Transaction means any transaction set forth in Section 406
of ERISA or Section 4975 of the Internal Revenue Code.
Real Property means the real property, appurtenances and improvements
thereto and all other rights (including mineral rights) arising out of or
relating to the real property owned by VPSI, located at and commonly known as
(i) ▇▇▇▇▇▇▇ Drive, Village of Randolph, Vermont, consisting of approximately 2
acres, and (ii) the ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ of Randolph, Vermont, consisting
of approximately 7.23 acres, and (iii) ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
consisting of approximately 65.7 acres and (iv) North ▇▇▇▇▇▇▇▇ Road, Village of
Randolph, Vermont, consisting of approximately 21.2 acres.
Reportable Event means any of the events set forth in Section 4043 of
ERISA.
Security Agreements means those Security Agreements and Trademark
Assignment Agreements of even date executed by each of the Borrowers and the
Sureties to the Bank, pursuant to which the Bank shall be granted a first
priority security interest in, lien on, and assignment of the Borrowers' and the
Sureties present and future assets of any nature, whether real, personal or
mixed.
Senior Management means, with respect to each Borrower, offices or
executive positions classified as the Chairman of the Board of Directors,
President, Chief Executive Officer, Chief Operating Officer or Chief Financial
Officer or individuals holding other offices but bearing responsibilities
ordinarily assumed by those with offices with the preceding titles.
Stock Pledge Agreements mean the agreements of even date pursuant to
which the Bank is granted a first priority security interest in, lien on and
assignment of all right, title and interest in all of the issued and outstanding
stock of any nature or type of VPSI, Excelsior and AMF.
Subsidiary means a corporation of which shares of stock having ordinary
voting power (other than stock having voting power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at
9
the time owned, or the management of which is otherwise controlled, directly or
indirectly thorough one or more intermediaries, by the Borrowers. The term
Subsidiary includes each of Excelsior and AMF, which are wholly owned
subsidiaries of VPSI.
Subordinated Debt means all indebtedness, Credit Obligations or other
liabilities of any nature of any one or more of the Borrowers to parties other
than the Bank, the terms and conditions of which have been subordinated in all
respects, in a form and substance satisfactory to the Bank, to the Indebtedness.
Sureties means, jointly and severally, Excelsior and AMF.
Total Debt Service means all interest expense for the year of
calculation, plus all payments of principal made during the year of calculation
with respect to obligations under notes, Capital Leases and other contractual
indebtedness.
Working Capital Line of Credit has the meaning given to that term in
Section 2.01.
Working Capital Note has the meaning given to that term in Section
2.05.
Uniform Commercial Code means the Uniform Commercial Code of
Pennsylvania, as the same may be amended from time to time, and any successor
statute.
SECTION 1.02. Accounting Terms. All accounting terms not specifically
defined in this Agreement shall be construed, and all calculations with respect
to accounting or financial matters shall be computed, in accordance with GAAP,
applied in a manner consistent with the application of the principles in the
preparation of the financial statements mentioned in Section 6.04.
ARTICLE II
THE WORKING CAPITAL LINE OF CREDIT FACILITY
SECTION 2.01. Working Capital Line of Credit.
Subject to the terms and conditions of this Agreement and the Loan Documents,
and in reliance upon the representations, warranties, covenants,
projections and other matters set forth in this Agreement and in
each of the Loan Documents, the Bank shall, provided that no Event
of Default or Potential Default has occurred and is continuing
uncured to the satisfaction of the Bank (i) make revolving loans
(the "Direct Loans") to the Borrowers for the purposes provided for
in Section 2.07(a) of this Agreement, in the maximum principal
amount of up to Two Million Dollars ($2,000,000), and (ii) within
the Two Million Dollars ($2,000,000) limit, but at no time
exceeding the Two Million Dollars ($2,000,000) in the aggregate,
10
issue commercial or standby letters of credit for the account of the Borrowers
("Letters of Credit") (collectively, the "Working Capital Line of Credit"). The
terms and conditions under which the Bank will agree to issue Letters of Credit
are also set forth in a Master Letter of Credit Agreement, dated of even date,
executed and delivered by the Borrowers to the Bank (the "Letter of Credit
Agreement").
SECTION 2.02. Borrowing Limits. The maximum amount outstanding under
the Working Capital Line of Credit shall at no time exceed Two Millon Dollars
($2,000,000). The Borrowers covenant and agree that, in the event that the
outstanding balance of the Direct Loans or any portion thereof should exceed, at
any time and for any reason the sum of Two Millon Dollars ($2,000,000) , or if
the face amount of Letters of Credit, together with the Direct Loans or any
portion thereof, should exceed, at any time and for any reason the sum of Two
Millon Dollars ($2,000,000), the full amount of such excess, together with any
interest and fees accrued and unpaid thereon or in connection therewith, shall
be immediately due and payable without demand or notice of any kind. Subject to
the foregoing and all other terms and conditions of this Agreement and the Loan
Documents, the Working Capital Line of Credit shall be available for borrowing,
repayment and reborrowing by the Borrowers. For all purposes under this
Agreement and the Loan Documents, the outstanding balance of the Working Capital
Line of Credit shall include not only the amount of the Direct Loans advanced,
but also all amounts available to be drawn or otherwise paid under Letters of
Credit, and the amounts of any unreimbursed drawings or the payments under
Letters of Credit.
SECTION 2.03. Interest, Fees and Charges.
(a) Each advance under the Working Capital Line of Credit with
respect to Direct Loans shall bear interest on the principal balance from time
to time outstanding at an annual rate based on one of the following interest
rate options, as selected by the Borrower requesting the advance:
(i) Base Rate Option: Interest shall accrue at
an annual rate equal to the Base Rate; or
(ii) LIBOR Rate Option: Interest shall accrue at
an annual rate equal to the LIBOR Interest Rate (for the Interest Period
selected by the Borrower requesting the advance) plus the applicable margin set
forth below, based upon the Borrowers' compliance with the financial covenants
set forth below:
11
Maximum Funded
Debt to Cash Flow Ratio Applicable Libor Margin
Less than 1.00 to 1.00 1.00%
Between 1.00 and 1.49 to 1.00 1.50%
Between 1.50 and 2.49 to 1.00 2.00%
Equal to or greater than 2.50 2.50%
to 1.00
(b) Interest shall be computed on the basis of the actual
number of days in the calendar year divided by 360, and the rate of interest
shall be adjusted (i) automatically and simultaneously with each change in the
Base Rate (in the case of the Base Rate Option) or (ii) on the first day of each
Interest Period, with such rate, as adjusted, to remain fixed for the duration
of the Interest Period (in the case of the LIBOR Rate Option).
(c) If the Borrowers wish an advance under the Working Capital
Line of Credit to be based on the LIBOR Rate Option, they shall give the Bank
not less than two (2) Business Days prior notice of such request.
(d) Letters of Credit shall be issued by the Bank and with
respect to each such Letter of Credit, the Bank shall charge to the Borrowers,
and the Borrowers shall pay upon issuance of such Letter of Credit, a commission
equal to the applicable percentage set forth below (based upon Borrowers'
compliance with the financial covenants set forth below) multiplied by the face
amount of such Letter of Credit on a per annum basis:
Maximum Funded Letter of Credit
Debt to Cash Flow Ratio Per Annum Percentage Fee
Less than 1.00 to 1.00 1.00%
Between 1.00 and 1.49 to 1.00 1.25%
Between 1.50 and 2.49 to 1.00 1.50%
Equal to or greater than 2.50 1.75%
to 1.00
With respect to each Letter of Credit, the Borrowers shall also pay to the Bank
all customary issuance, cable and other incidental charges issued from time by
the Bank.
SECTION 2.04. Payment of the Working Capital Line of Credit. Interest
on the amounts outstanding under the Working Capital Line of Credit shall be due
and payable on the first day of each month beginning May 1, 1998, continuing on
the first day of each month thereafter until all sums owing under the Working
Capital Line of Credit have been paid in full. Notwithstanding the
12
foregoing, interest with respect to Loans accruing interest at the Libor
Interest Rate shall be payable at the end of the applicable period to which the
advance made under the Libor Rate Option applies as set forth in Section
2.03(ii), above. The outstanding principal balance of the Working Capital Line
of Credit, and all interest and fees accrued and unpaid thereon or in connection
therewith shall be payable in full at any time (i) upon acceleration of the
foregoing Indebtedness made after the occurrence and during the continuance,
uncured to the satisfaction of the Bank, of an Event of Default, or (ii) in the
absence of such acceleration, upon termination of the Working Capital Line of
Credit pursuant to Section 2.06.
SECTION 2.05. Working Capital Note. The obligation of the Borrowers to
pay the outstanding balance of the Working Capital Line of Credit, and interest
and fees accrued thereon or in connection therewith shall be evidenced by a
promissory note, in form and substance satisfactory to the Bank, issued by
Borrowers to the Bank in the principal amount of Two Million Dollars
($2,000,000) (the "Working Capital Note").
SECTION 2.06. Termination of the Working Capital Line of Credit. The
availability of advances under Working Capital Line of Credit shall terminate on
March 31, 2003, unless extended by the Bank at its sole discretion upon notice
to the Borrowers; provided, however, that the Bank may also terminate the
Working Capital Line of Credit at any time upon the occurrence and during the
continuance of an Event of Default. Termination of the Working Capital Line of
Credit shall not terminate any rights or remedies available to the Bank, unless
and until the Indebtedness has been repaid finally and in full.
SECTION 2.07. Use and Disbursement of Proceeds.
(a) The Borrowers shall use the proceeds of the Working
Capital Line of Credit solely for working capital purposes of the Borrowers, as
well as for Capital Expenditures and the refinancing of debt existing as of the
date of the this Agreement.
(b) Advances under the Working Capital Line of Credit shall be
made by the Bank to the Borrowers pursuant to the Corestates Funds Manager - End
of Day Fund Sweep Agreement (the "Sweep Agreement"), a copy of which has been
executed and delivered by the Borrowers to the Bank. At such time that the Sweep
Agreement is no longer in effect and unless otherwise agreed by the Bank, the
Borrowers shall give the Bank at least one (1) Business Day's prior notice of
each advance requested under the Working Capital Line of Credit, specifying the
Borrower requesting the advance, the date and amount thereof, the interest rate
option or options which the Borrowers have elected, and the outstanding balance
with respect to which those interest rate options are to apply, and providing
such additional information as the Bank may
13
request. Notwithstanding the foregoing, the Borrowers must give the Bank not
less than two (2) Business Days prior notice with respect to borrowings that
will be based upon the LIBOR Rate Option. The Bank may disburse the proceeds of
any Direct Loans by crediting the amount thereof to one or more deposit accounts
of the Borrowers maintained with the Bank.
(c) The Bank shall not be obligated to disburse or have
outstanding at any one time under the Working Capital Line of Credit more than
three (3) Libor Loans.
SECTION 2.08. Prepayments. The Borrowers shall be entitled to prepay
the principal of the Working Capital Line of Credit, in whole or in part, at any
time and from time to time, but with interest accrued on the amount prepaid;
provided, however, that with respect to any portion of the Working Capital Line
of Credit for which the LIBOR Rate Option is applicable, the Borrowers shall pay
to the Bank any sums required under paragraph (b) of Section 9.13.
ARTICLE III
THE ACQUISITION LINE OF CREDIT
SECTION 3.01. The Acquisition Facility. Subject to the terms and
conditions of this Agreement and the Loan Documents, and in reliance upon the
representations, warranties, covenants, projections and other matters set forth
in this Agreement and in each of the Loan Documents, the Bank shall, provided
that no Event of Default or Potential Default has occurred and is continuing
uncured to the satisfaction of the Bank, make revolving loans to the Borrowers
in the maximum amount outstanding at any time of up to Fifteen Million Dollars
($15,000,000), reduced all times by all Indebtedness due and owing under or with
respect to the Working Capital Line of Credit (the "Acquisition Facility"). The
obligation of the Borrowers to repay extensions of credit in connection with the
Acquisition Facility shall be evidenced by the execution and delivery of a
promissory note, in the form and substance satisfactory to the Bank, issued by
the Borrowers to the Bank in the principal amount of Fifteen Million Dollars
($15,000,000) (the "Acquisition Facility Note").
SECTION 3.02. Borrowing Conditions and Limits. In addition to the
restrictions and conditions set forth in Section 3.01, above, the Bank shall
retain the right, at its sole reasonable discretion and based upon such
information as it may request with respect to prospective acquisition targets of
the Borrowers, to refuse or limit the amount of any advance under the
Acquisition Facility, unless:
(a) The aggregate amount of cash paid, Permitted Seller
Notes and VPHL's common stock issued by the Borrowers with respect
14
to a Permitted Acquisition will not exceed six (6) times the seller's most
recent two (2) year average Adjusted Cash Flow, and the cash paid with respect
to a Permitted Acquisition will not exceed four (4) times the seller's two (2)
year average Adjusted Cash Flow and provided further that the business
operations with respect to all such Permitted Acquisition or Acquisitions are
located in the Northeastern United States; and
(b) No Potential Default or Event of Default is in existence
at the time of the consummation of such Permitted Acquisition, or would exist
after giving effect to such Permitted Acquisition; and
(c) The Borrowers shall have given the Bank at least
thirty (30) days prior written notice of any proposed Permitted
Acquisition; and
(d) The Bank shall be satisfied with the nature and type of
assets being acquired in connection with any Permitted Acquisition, and shall be
satisfied, in its reasonable discretion, with the Acquisition Documents
governing any Permitted Acquisition, which shall include the submission of a
Borrower prepared, Acquisition due diligence checklist in a form and content
reasonably satisfactory to the Bank; and
(e) The Bank shall be satisfied that no liabilities
(contingent or otherwise) are being acquired in connection with any Permitted
Acquisition, except Permitted Assumed Liabilities; and
(f) The Borrowers shall grant to the Bank first priority
perfected security interests in all stock, property and assets acquired, or to
be acquired, by Borrowers in connection with the proposed Permitted Acquisition;
and
(g) The Borrowers shall be able to grant to the Bank a
perfected, first priority security interest in all property or other assets of
any nature to be acquired in connection with the proposed Permitted Acquisition;
and
(h) No Acquisition may be effected unless recalculations
(using historical Adjusted Cash Flow of the proposed Permitted Acquisition), are
made by the Borrowers for compliance with the financial covenants set forth in
this Agreement for the fiscal quarter most recently ended prior to the date of
such proposed Permitted Acquisition, and for the four (4) quarters most recently
ended prior to the date of such proposed Permitted Acquisition on a pro forma
basis, as if the respective proposed Permitted Acquisition had occurred on the
first day of such period, and such recalculations shall show that all such
covenants would have been complied with if the proposed Permitted Acquisition
had occurred on the first day of such period; and
15
(i) The Bank shall be satisfied, in its sole reasonable
discretion, with the amount of Cash Flow which results from the pro forma
recalculation of Cash Flow for the period of four (4) consecutive fiscal
quarters most recently ended prior to the date of such proposed Permitted
Acquisition, regardless of whether the Cash Flow Coverage covenant is complied
with; and
(j) The Borrowers believe, in their reasonable good faith,
that the financial covenants set forth in this Agreement will continue to be met
for the one (1) year period following the consummation of the proposed Permitted
Acquisition. The Borrowers shall provide to the Bank projections demonstrating
such compliance, and a certificate, signed by an officer of Senior Management,
certifying as to compliance with the requirements of preceding clauses.
Notwithstanding the foregoing, in the event that the Borrowers are in
compliance with the requirements of Sections 3.02(a), (b), (c) and (f), above,
they may consummate Permitted Acquisitions where the cash portion of the total
consideration paid is not in excess of One Million Dollars ($1,000,000), and the
aggregate cash consideration paid or to be paid for any such Permitted
Acquisition does not exceed Three Million Dollars ($3,000,000) during any twelve
(12) month fiscal period.
SECTION 3.03. Interest.
(a) Each advance under the Acquisition Facility shall bear
interest on the principal balance from time to time outstanding at an annual
rate based on one of the following interest rate options, as selected by the
Borrower requesting the advance:
(i) Base Rate Option: Interest shall accrue at
an annual rate equal to the Base Rate; or
(ii) LIBOR Rate Option: Interest shall accrue at
an annual rate equal to the LIBOR Interest Rate (for the Interest Period
selected by the Borrower requesting the advance) plus the amounts set forth
below, based upon the Borrowers' compliance with the financial covenants set
forth below:
Maximum Funded
Debt to Cash Flow Ratio Applicable Libor Margin
Less than 1.00 to 1.00 1.00%
Between 1.00 and 1.49 to 1.00 1.50%
Between 1.50 and 2.49 to 1.00 2.00%
Equal to or greater than 2.50 2.50%
to 1.00
16
(b) Interest shall be computed on the basis of the actual
number of days in the calendar year divided by 360, and the rate of interest
shall be adjusted (i) automatically and simultaneously with each change in the
Base Rate (in the case of the Base Rate Option) or (ii) on the first day of each
Interest Period, with such rate, as adjusted, to remain fixed for the duration
of the Interest Period (in the case of the LIBOR Rate Option).
(c) If the Borrowers' wish an advance under the Acquisition
Facility to be based upon the LIBOR Rate Option, they shall give the Bank not
less than two (2) Business Days prior notice of such request.
SECTION 3.04. Repayment of the Acquisition Facility.
Interest on the amounts outstanding under the Acquisition Facility
shall be due and payable on the first day of each month beginning May 1, 1998,
and continuing on the first day of each month thereafter until all sums owing
under the Acquisition Facility have been paid in full. Notwithstanding the
foregoing, interest with respect to Loans accruing interest at the Libor
Interest Rate shall be payable at the end of the applicable period to which the
advance made under the Libor Rate Option applies as set forth in Section 3.03
(a)(ii), above. The outstanding principal balance of all advances under the
Acquisition Facility, and all interest and fees accrued and unpaid thereon or in
connection therewith shall be payable in full at any time (i) upon the
acceleration of the foregoing Indebtedness made after the occurrence and during
the continuance, uncured to the satisfaction of the Bank, of an Event of
Default, or (ii) in the absence of such acceleration, upon termination of the
Acquisition Facility pursuant to Section 3.06.
SECTION 3.05. Use of Proceeds of the Acquisition Facility. The proceeds
of any advance under the Acquisition Facility shall be used solely to fund, in
whole or in part, Permitted Acquisitions, as well as for Capital Expenditures
and the refinancing of debt existing as of the date of the this Agreement. The
Bank shall not be obligated to disburse or have outstanding at any one time
under the Acquisition Facility more than three (3) Libor Loans.
SECTION 3.06. Termination of the Acquisition Facility.
---------------------------------------
The availability of advances under the Acquisition Facility shall
terminate on March 31, 2003, unless extended by the Bank by written
notice to the Borrowers; provided, however, that the Bank may also
-------- -------
terminate the availability of advances under the Acquisition
Facility at any time upon the occurrence and during the continuance
of Event of Default. Termination of availability of advances under
the Acquisition Facility shall not terminate any other rights or
remedies of the Bank, unless and until the Indebtedness has been
repaid finally and in full.
17
SECTION 3.07. Prepayments. The Borrowers shall be entitled to prepay
the principal of the Acquisition Facility, in whole or in part, at any time and
from time to time, but with interest accrued on the amount prepaid; provided,
however, that with respect to any portion of the Acquisition Facility for which
the LIBOR Rate Option is applicable, the Borrowers shall pay to the Bank any
sums required under paragraph (b) of Section 9.13.
SECTION 3.08. Unused Facility Fee. As and to the extent that the
availability under the Working Capital Line of Credit and the Acquisition
Facility is not used by the Borrowers during the term of its availability, the
Borrowers shall pay to the Bank a fee equal to 1/8 of one percent (0.125%) of
the amount of any such unused availability. This unused facility fee shall be
calculated, assessed and due and payable as of March 31, June 30, September 30,
and December 31 of each year, or the portion of any such year, during which
either the Working Capital Line of Credit or the Acquisition Facility is
available for use and borrowing by the Borrowers.
ARTICLE IV
COLLATERAL
SECTION 4.01. Security Interests. As security for the performance of
this Agreement, the Loan Documents and the repayment of the Indebtedness, the
Borrowers grant (or shall cause to be granted) to the Bank a first priority
(except as otherwise disclosed in the financial statements mentioned in Section
6.04 of this Agreement or set forth on the schedule attached as Exhibit 6.09 to
this Agreement) security interest in, lien on, and where appropriate, an
assignment of, all present and future Collateral, including:
(a) All of the Borrowers' and the Sureties' present and future
Accounts, Contract Rights, Instruments, Documents, Equipment (whether or not
constituting fixtures), General Intangibles, Chattel Paper Inventory and
Investment Property, whether now owned or hereafter acquired, as such property
may be more fully described in the Security Agreements dated of even date with
this Agreement and executed and delivered by the Borrowers and the Sureties to
the Bank; and
(b) Without limiting the general nature of Section 4.01(a),
above, all of the Borrowers' and the Sureties present and future customer lists,
supply information and records and related items, as well as the Borrowers' and
the Sureties right to enforce any present or future restrictive covenant,
covenant not to compete or related asset or right with any present or future
employee, officer, director, shareholder or other person affiliated with the
Borrowers and the Sureties; and
18
(c) All of the Borrowers' and the Sureties files, books,
ledgers, ledger cards, records, bills, invoices, receipts, deeds, certificates
or documents of ownership, warranties, bills of sale and all other data and data
storage systems and media pertaining to any of the Collateral; and
(d) All of the Borrowers' and the Sureties property or
property in which they have an interest, now or at any time hereafter in the
possession of the Bank, or any of their Affiliates (other than shareholders of
VPHL) or Subsidiaries, in any capacity and for any reason whatsoever; and
(e) All shares of stock (whether common, preferred or
otherwise), of the Borrowers and their Affiliates (other than shareholders of
VPHL), except for Vermont Pure Holdings, Ltd.; and
(f) A mortgage lien on, and an assignment of leases and rents
regarding the Real Property, encumbering all of the ownership interests in such
property, (including mineral and water rights); and
(g) Without limiting the general nature of Section 4.01 (a),
above, a first priority security interest in and lien on all of the Borrowers'
and their Affiliates' and Subsidiaries' present and future trademarks,
servicemarks, trade names, copyrights, patents, licenses and other property
commonly known as or classified as intellectual property, including (i) all of
the Borrowers' right, title and interest to the registered trademarks "Vermont
Pure" and "Hidden Spring" and (ii) all of Excelsior's right, title and interest
to the registered trademark "Excelsior".
(h) All proceeds and products of the Collateral and the
property described in the foregoing subsections of this Section 4.01, including
insurance, and all replacements to the Collateral.
SECTION 4.02. Financing Statements and Other Documents. The Borrowers
shall join (and shall cause their Affiliates to join with the Bank in executing
such financing statements, continuation statements and other agreements or
instruments (in form satisfactory to the Bank) under the Uniform Commercial Code
as the Bank may specify, and shall pay the cost of filing the same in such
public offices as the Bank shall designate.
SECTION 4.03. Landlords' Waivers; Mortgagees' Disclaimers. The
Borrowers shall, unless otherwise agreed to by the Bank, cause the owners and
the mortgagees of all premises occupied by it to execute and deliver to the Bank
instruments (in a form reasonably satisfactory to the Bank) by which such owners
waive their right to distrain on, and such mortgagees disclaim any interest in,
all of the Collateral.
19
SECTION 4.04. Insurance. The Borrowers shall maintain insurance, in
such amounts and with such insurance companies as are reasonably acceptable to
the Bank, insuring the Collateral against such risks as are specified by the
Bank. Each policy of insurance covering any of the Collateral shall (A) show the
Bank's security interest in such a manner that all payments for damage or loss
shall be paid directly to the Bank, including the designation of the Bank as
additional insured and loss payee, and (B) provide that it shall not be
terminated, reduced in amount or otherwise materially changed without at least
thirty (30) days' prior written notice to the Bank. Upon request by the Bank and
upon the execution of this Agreement, the Borrowers shall deliver to the Bank
satisfactory evidence of compliance with this Section.
SECTION 4.05. Places of Business; Location of Collateral.
(a) The Borrowers represent that the principal place of
business, chief executive office and the place where records are kept concerning
the Collateral is at Route ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, and that the Borrowers' Equipment and Inventory are kept at this
location, and at the other places of business listed in Exhibit 4.05.
(b) The Borrowers shall notify the Bank of (1) any change in
the location of any of their principal places of business or chief executive
offices, (2) any change in the places where they keep items of Equipment, or
Inventory or records concerning the Collateral, and (3) the establishment of any
new, or the discontinuance of any existing, place of business.
(c) The Borrowers shall not permit any of their Equipment to
be removed from the places mentioned in subsection (A) of this Section 4.05, or
any of their Inventory to be so removed, except in the ordinary course of
business.
SECTION 4.06. Equipment and Inventory.
(a) The Borrowers represent that they are the absolute owners
of their Inventory and Equipment, subject only to the security interests created
or referenced in this Agreement, and those liens referred to in Section 6.09 of
this Agreement.
(b) The Borrowers shall not dispose of any of their Equipment
(other than dispositions, in the ordinary course of business, of obsolete or
worn out Equipment, or sales or dispositions of vehicles during any fiscal year
in an aggregate amount of not greater than $75,000), or permit any Equipment
located at leased facilities to become a fixture or an accession to other goods.
(c) The Borrowers shall sell their Inventory only in the
ordinary course of business.
20
SECTION 4.07. Patents, Copyrights and Trademarks. The Borrowers and
Excelsior own, or have other rights with respect to, all patents, copyrights,
trademarks, tradenames, service marks and other intellectual property rights
used by them in the operation of their businesses, with all of the foregoing
being identified on Exhibit 4.07 to this Agreement.
SECTION 4.08. Records and Reports. The Borrowers shall
keep accurate and complete records of the Collateral, and provide
to the Bank such information about the Collateral as the Bank may
reasonably request.
SECTION 4.09. Trade and Fictitious Names. The Borrowers and the
Sureties employ no trade or fictitious names, nor have they employed any trade
or fictitious names within the last six (6) years, other than as set forth on
Exhibit 4.09 to this Agreement.
SECTION 4.10. Certain of the Bank's Rights.
----------------------------
If requested by the Bank, the Borrowers shall: (1) deliver to the Bank a list
of its Accounts, showing the names, addresses and telephone numbers
of account debtors, and a person or persons with the account debtor
to contact concerning the outstanding Account and the amounts owed
by them, respectively; (2) deliver to the Bank a copy, with such
duplicate copies as the Bank may request, of the invoice applicable
to each Account, bearing a statement that the Account has been
assigned to the Bank.
SECTION 4.11. Power of Attorney. With respect to the execution and
delivery of such agreements, documents or instruments which may be necessary or
desirable to obtain, maintain or perfect the rights granted to the Bank in the
Collateral, the Borrowers and the Sureties irrevocably appoint the Bank as their
attorney-in-fact with full power and authority to sign or endorse the name of
the Borrowers as may be necessary to accomplish the foregoing purposes.
SECTION 4.12. Notices. If notice of the sale, disposition or other
intended action by the Bank with respect to the Collateral is required by the
Uniform Commercial Code or other applicable law, any notice thereof sent to the
Borrowers at the addresses specified in Section 9.03 of this Agreement (or such
other address of the Borrowers as may from time to time be shown on the records
of the Bank) at least ten (10) Business Days prior to such action, shall
constitute reasonable notice to the Borrowers.
SECTION 4.13. Insurance; Discharge of Taxes, etc.
----------------------------------
The Bank shall have the right at any time and from time to time, without
notice to the Borrowers to: (A) obtain insurance covering any of
the Collateral, if the Borrower fails to do so; (B) discharge
taxes, liens, security interests or other encumbrances at any time
levied or placed on any of the Collateral, if the Borrowers fail to
do so; and (C) pay for the maintenance and preservation of any of
the Collateral, if the Borrowers fail to do so. The Borrowers
21
shall reimburse the Bank, on demand, for any payment made or any expense
incurred pursuant to this authorization. The Borrowers assign to the Bank all
right to receive the proceeds of insurance covering the Collateral, direct any
insurer to pay all such proceeds directly to the Bank and authorize the Bank to
endorse in the name of the Borrowers any draft for such proceeds.
SECTION 4.14. Certain Waivers and Releases by the Borrower. The
Borrowers (A) waive protest of all commercial paper at any time held by the Bank
on which they are in any way liable, notice of nonpayment at maturity of any and
all of its Accounts and, except where required hereby or by law, notice of
action taken by the Bank, and (B) release the Bank from all claims for loss or
damage caused by any failure to collect any Account or by any act or omission on
the part of the Bank or its officers, agents and employees, except gross
negligence or willful misconduct.
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.01. Conditions Precedent to Funding. As conditions precedent
to the funding of the Working Capital Line of Credit and the Acquisition
Facility, the Borrowers shall deliver or cause to be delivered to the Bank,
contemporaneously with or promptly after the execution and delivery of this
Agreement, in a form and substance satisfactory to the Bank and its counsel:
(a) The Notes;
(b) The Loan Documents;
(c) Certified copies of the articles of incorporation and
bylaws of the Borrowers and the Sureties, and all amendments thereto, and a
certificate of good standing evidencing the good standing of the Borrowers and
the Sureties as a domestic corporation under the laws of their respective states
of incorporation;
(d) Certified copies of all corporate action taken by the
Borrowers and the Sureties (including resolutions adopted by the Board of
Directors of the Borrowers and the Sureties) authorizing the execution, delivery
and performance of this Agreement and the other Loan Documents to which the
Borrowers or the Sureties are a party;
(e) An (i) opinion of counsel for the Borrowers as to the
matters mentioned in Sections 6.01, 6.02, 6.03, 6.05, 6.10 and 6.16 of this
Agreement, and such other matters as may be requested by the Bank, (ii) an
opinion of an attorney authorized to practice law in the State of Vermont as to
the obtaining of such necessary
22
permits and licenses as may be required to be obtained by the Borrowers under
Vermont law in connection with the operation of their business activities in the
State of Vermont;
(f) Warrants issued in favor of the Bank to purchase the
Calculated Number of Warrant Shares of common stock of VPHL;
(g) A fee in the amount of Eighteen Thousand Seven Hundred
Fifty Dollars ($18,750), ($9,375 of which has already been paid) in
consideration of the Bank making available the Loans and other credit facilities
provided for in this Agreement;
(h) Financial projections for the Borrowers operations
for the period ending not earlier than December 31, 2003;
(i) Satisfactory completion by the Bank of its due diligence
and other review of the Borrowers assets and properties (including review of the
Borrowers accountant prepared management letter, audits of the Collateral and
appraisals and environmental audits with respect to Real Property);
(j) Such other agreements, documents or instruments that the
Bank or its counsel may reasonably request.
SECTION 5.02. Additional Conditions Precedent.
As additional conditions precedent to the funding by the Bank of each Loan
and other extension of credit requested by the Borrowers under the
Working Capital Line of Credit and the Acquisition Facility
(including the funding of the initial Loan or any other extension
of credit):
(a) The representations and warranties made by the Borrowers
and the Sureties in this Agreement and the other Loan Documents shall be true
and correct on and as of the date of funding, with the same effect as though
made on and as of that date.
(b) No Event of Default or Potential Default shall have
occurred and be continuing or shall result from the funding of the disbursement.
(c) No material adverse change, as determined by the Bank in
its sole reasonable discretion, shall have occurred in the condition of the
Borrowers, financial or otherwise, since the date of this Agreement.
(d) The Bank shall have received such additional documents or
instruments and such additional approvals and opinions as the Bank may
reasonably request under the terms of this Agreement, the Loan Documents, or
otherwise.
23
Each request by the Borrowers for a loan or other extension of credit
under this Agreement shall constitute a certification by the Borrowers, as of
the date of such request, that all of the conditions in this Section 5.02 have
been satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement, the Borrowers
represent and warrant to the Bank that:
SECTION 6.01. Existence. Each Borrower and each Surety is a corporation
duly incorporated, validly existing and in good standing under the laws of its
state of incorporation as referred to in the Background of this Agreement, has
all requisite power and authority, corporate or otherwise, to conduct its
business and to own and operate its properties, and is duly qualified as a
foreign corporation to do business in, and is in good standing in, all
jurisdictions in which failure to so qualify would have a material adverse
effect on that Borrower's business. The Borrowers have no Subsidiaries or
Affiliates, except as described in the schedule attached as Exhibit 6.01.
SECTION 6.02. Authorization. The Borrowers and the Sureties have all
requisite power and authority to execute, deliver and perform this Agreement and
the other Loan Documents to which they are a party. The execution, delivery and
performance by the Borrowers and the Sureties of this Agreement and the other
Loan Documents to which they are a party have been duly authorized by all
necessary corporate action and do not and will not violate any provision of law
or of the articles of incorporation or bylaws of any of the Borrowers or the
Sureties, or result in a breach or constitute a default under any agreement,
indenture or instrument to which the Borrowers or the Sureties are a party, or
by which their properties may be bound or affected.
SECTION 6.03. Validity. This Agreement and the Loan Documents to which
the Borrowers and the Sureties are parties are legal, valid and binding
obligations of the Borrowers and the Sureties, enforceable in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization and similar equitable laws
and principles as may effect the rights of creditors generally.
SECTION 6.04. Financial Statements. The financial statements of the
Borrowers as of and for the period ended October 25, 1997, previously furnished
to the Bank, were prepared in accordance with GAAP, are complete and correct,
and fairly present the financial position and the results of operations of the
Borrowers as of that date and for the period then ended. Since October 25, 1997,
24
there has been no material adverse change in the financial position or results
of operations of the Borrowers from that set forth in the financial statements
as of that date and for the period then ending.
SECTION 6.05. Litigation. Except as disclosed in the schedule attached
as Exhibit 6.05, there are no actions or proceedings pending or, to the
knowledge of the Borrowers, threatened against or affecting any of the
Borrowers, or any of their properties, before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which are substantial in amount or which, if determined adversely,
would have a material adverse effect on the financial condition or business of
any Borrowers.
SECTION 6.06. Agreements and Orders. None of the Borrowers are in
default in the performance of any material agreement or instrument to which it
may be party or by which its properties may be bound or with respect to any
order, writ, injunction, or decree of any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
SECTION 6.07. Contingent Liabilities. The Borrowers have no material or
substantial contingent obligations or liabilities, for taxes or otherwise, that
are not disclosed by the financial statements mentioned in Section 6.04 or set
forth on the schedule attached as Exhibit 6.07.
SECTION 6.08. Taxes. The Borrowers have filed all tax returns and
reports (federal, state and local) required to be filed as of the date of this
Agreement and have paid all taxes, assessments and charges imposed upon them or
their operations or properties, or which they are required to withhold and pay
over (including payroll withholding taxes).
SECTION 6.09. Ownership and Encumbrances. The Borrowers and Excelsior
have title to, or valid leasehold interests in, all of their properties and
assets, real and personal, including the properties and assets reflected in the
financial statements mentioned in Section 6.04. None of the properties and
assets of any of the Borrowers are subject to any lien, encumbrance, security
interest or other claim of any nature, except liens and encumbrances in favor of
the Bank and existing liens and encumbrances disclosed by the financial
statements mentioned in Section 6.04, or set forth on the schedule attached as
Exhibit 6.09.
SECTION 6.10. Consents.
No authorization, consent, approval, license, exemption by or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be
necessary to the valid execution, delivery or performance by the Borrowers and
25
the Sureties of this Agreement or the other Loan Documents to which
they are a party.
SECTION 6.11. ERISA. The Borrowers are in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited Transaction has occurred and is continuing with respect to any
Plan; no notice of intent to terminate a Plan has been filed, nor has any Plan
been terminated except as set forth on Exhibit 6.11; no circumstances exist
which constitute grounds under Section 4042 of ERISA entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administrate, a
Plan, nor has the PBGC instituted any such proceedings; neither the Borrowers
nor any ERISA Affiliate has completely or partially withdrawn under Section 4201
or 4204 of ERISA from a Multiemployer Plan; the Borrowers and each ERISA
Affiliate has met its minimum funding requirements under ERISA with respect to
all of its Plans and the present value of all vested benefits under each Plan
exceeds the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA and the regulations thereunder for calculating the
potential liability of the Borrowers or any ERISA Affiliate to the PBGC or the
Plan under Title IV of ERISA; and neither the Borrowers nor any ERISA Affiliate
has incurred any liability to the PBGC under ERISA.
SECTION 6.12. Operation of Business. The Borrowers and Excelsior, as
applicable, possess (i) all material licenses, permits, certificates and other
governmental authorizations, and (ii) all franchises, trademarks, servicemarks,
trade names, copyrights and patents, or rights in any of the foregoing, adequate
for the conduct of their business as now conducted and presently proposed to be
conducted. To the best of the Borrower's knowledge, information and belief,
after reasonable inquiry, the Borrowers are also in compliance with all
statutes, laws, rules and regulations applicable to them in the operation of
their business, including all of the foregoing as may relate to their bottling
and labeling activities.
SECTION 6.13. Disclosure. No representation or warranty made by any of
the Borrowers or the Sureties in this Agreement or the other Loan Documents to
which they are a party is false or misleading in any material respect, or omits
to state any material fact necessary in order to make the statements in this
Agreement or the other Loan Documents not misleading. The Borrowers have
disclosed to the Bank in writing every fact that materially and adversely
affects their business or financial condition or their ability to perform their
obligations under this Agreement or the other Loan Documents to which they are a
party.
26
SECTION 6.14. Environmental Laws. The Borrowers have received all
permits and filed all notifications necessary to carry on their businesses under
and in compliance with all applicable Environmental Laws. The Borrowers have no
knowledge of, and have not given any written or oral notice to the Environmental
Protection Agency or any state or local agency regarding, any actual or
imminently threatened removal, spill, release or discharge of any Hazardous
Substances on properties owned or leased by any of the Borrowers or in
connection with the conduct of their business and operations. The Borrowers have
no knowledge of, and have not received any notice that they are potentially
responsible for costs of clean-up of any actual or imminently threatened spill,
release or discharge of any Hazardous Substances.
SECTION 6.15. Margin Stock. The Borrowers are not engaged in, nor do
they have as one of their substantial activities, the business of extending or
obtaining credit for the purpose of purchasing or carrying "margin stock" (as
that term is defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no proceeds of any Loan under this Agreement will be used
for such purpose or for the purpose of purchasing or carrying any shares of
margin stock.
SECTION 6.16. Securities Laws.
All shares of capital stock and all other securities of the Borrowers have been
offered and sold in accordance with registration and other applicable
requirements of all applicable federal and state securities laws.
SECTION 6.17. Other Agreements. The Borrowers are not a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction, which could have
a material adverse effect on their businesses, properties, assets, or condition,
financial or otherwise, or their ability to perform their obligations under this
Agreement or the other Loan Documents to which they are a party.
SECTION 6.18. Labor Disputes and Casualties.
-----------------------------
The Barrowers are not affected by any fire, explosion, accident, strike,
lockout, or other labor dispute, drought, storm, hail, earthquake, embargo,
act of public enemy, or other casualty (whether or not covered by
insurance) which materially and adversely affects their business,
properties, assets, or condition, financial or otherwise, or their
ability to perform their obligations under this Agreement or the
other Loan Documents to which they are a party.
SECTION 6.19. Representations Concerning Sureties.
All of the representations and warranties contained in the Loan Documents
executed by the Sureties are true, correct and complete. Additionally, other
than the trademark registered with the United States Patent and Trademark Office
at No. 1,668,735 and known as "Excelsior Spring Water", neither of the Sureties
maintain any assets or have any liabilities of any nature, do not presently
27
conduct business operations and are not currently contemplated by either the
Borrowers or the Sureties to conduct business operations in the future.
ARTICLE VII
COVENANTS
As long as any portion of the Indebtedness is or remains outstanding
and unpaid, or any of the Loans remain available for borrowing, the Borrowers
covenant and agree that, unless the Bank otherwise consents in writing:
SECTION 7.01. Financial and Other Information.
The Borrowers shall furnish or cause to be furnished to the Bank:
(a) within ninety (90) days after the close of each fiscal
year, (i) an income statement and statement of cash flow of the Borrowers for
such fiscal year, and a balance sheet of the Borrowers, on a consolidating
basis, as of the last day of such fiscal year, prepared in accordance with GAAP,
certified without qualification by independent certified public accountants
reasonably satisfactory to the Bank (it being understood that ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
Co., is acceptable to the Bank), (ii) the management letter prepared by
Borrowers independent public accountants issued in connection with any interim
or year-end financial statement, and (iii) a revised, updated budget, prepared
by Senior Management of the Borrowers, for the next five (5) fiscal years, which
budget shall take into account the effect of any Permitted Acquisitions;
(b) within forty-five (45) days after the close of each fiscal
quarter, a certification (in the form attached as Exhibit 7.01) prepared under
the direction of, and signed by, the Borrowers' Chief Financial Officer or Chief
Executive Officer, certifying that, to the best of his or her knowledge,
information and belief, no Event of Default or Potential Default has occurred or
is continuing under this Agreement or any of the Loan Documents;
(c) within forty-five (45) days after the close of each fiscal
month, an income statement and balance sheet of the Borrowers, on a
consolidating basis, for such month, and prepared by management of the Borrower
in accordance with GAAP which financial statement shall compare the Borrowers'
results of actual operations with the projected results of operations;
(d) within fifteen (15) days of the close of each fiscal
month, a certification as to the Borrowers' accounts payable,
Accounts and other accounts receivable;
28
(e) on or within five (5) days after filing, copies of the
Borrowers' 10K or 10Q reports filed with the Securities and Exchange Commission,
or any other filings from time to time by any one or more of the Borrowers with
the Securities and Exchange Commission; and
(f) with reasonable promptness, such other information
concerning the business, properties, and condition, financial or otherwise, of
the Borrowers as the Bank may from time to time reasonably request.
SECTION 7.02. Insurance. The Borrowers shall maintain insurance with
respect to their businesses and assets in such amounts, against such hazards,
and with such companies as is reasonable and customary and as may be
satisfactory to the Bank. All policies of insurance shall insure the Bank as its
interest may appear and shall bear a thirty (30) day notice of cancellation or
material change endorsements in favor of the Bank. Attached as Exhibit 7.02 are
details regarding all of the Borrower's current insurance coverage, and the
Borrowers further agree to provide to the Bank, as of or prior to each renewal
date with respect to such insurance policies, evidence of the existence of such
coverage, all of which shall be in a form and content reasonably satisfactory to
the Bank.
SECTION 7.03. Taxes and Other Claims. The Borrowers shall pay when due
all taxes, assessments and charges which are imposed upon them or their
operations or properties, or which they are required to withhold and pay over
(including, without limitation, payroll withholding taxes) and shall pay all
other claims which, if unpaid, might become liens or charges upon their
properties; provided, however, that the Borrowers shall not be required to pay
such taxes, assessments and charges so long as they (i) in good faith contest
the amount or validity and establish reserves against such taxes, assessments
and charges in kind and amount reasonably satisfactory to the Bank, and (ii)
cause any lien or other claim relating to any such taxes, assessments or charges
against the Borrowers to be subordinated to the Indebtedness, to the extent that
such lien or other claim would have a priority against any of the Collateral
that would be equal to, or higher than, the security interests and liens granted
to the Bank under this Agreement and the Loan Documents.
SECTION 7.04. Encumbrances. The Borrowers shall not create, incur,
assume or permit to exist any mortgage, pledge, charge, security interest, lien
or other encumbrance upon any of their properties or assets, whether now owned
or hereafter acquired, except: (i) liens for taxes or governmental claims which
are not yet due and payable or which are being contested in good faith and
subordinated as required by Section 7.03; (ii) existing liens and encumbrances
described in Section 6.09; (iii) liens and encumbrances in favor of the Bank.
29
SECTION 7.05. Indebtedness. The Borrowers shall not create, assume,
incur, or otherwise become liable for any indebtedness or other Credit
Obligations to any person or entity for money borrowed or the deferred purchase
price for assets other than: (i) loans from the Bank to the Borrowers; (ii)
indebtedness to shareholders or affiliates of the Borrowers, provided that such
indebtedness does not cause or result in an Event of Default under this
Agreement; (iii) trade indebtedness for the purchase of supplies and services in
the ordinary course of business; (iv) existing indebtedness disclosed in the
financial statements mentioned in Section 6.04 or on the schedule attached as
Exhibit 7.05; (v) Permitted Seller Notes; and (vi) indebtedness incurred in
connection with Capital Expenditures.
SECTION 7.06. Loans and Investments. The Borrowers shall not make any
loan to, capital contribution to or investment in, or endorse, guarantee or
otherwise become liable for the payment or performance of any liabilities or
obligations of, any person or entity (including, without limitation, any
officer, employee, shareholder, or director of the Borrowers), except that the
Borrowers may make: (i) guaranties to the Bank; (ii) endorsements of negotiable
instruments for deposit or collection in the ordinary course of business; (iii)
investments in direct obligations of the United States or any agency thereof
with maturities of one year or less from the date of acquisition, or commercial
paper of a domestic issuer rated at least "A-1" by Standard & Poor's Corporation
or "P-1" by ▇▇▇▇▇'▇ Investors Service, Inc., or certificates of deposit with
maturities of one year or less from the date of acquisition issued by a
federally insured commercial bank; (iv) pledges or deposits under workmen's
compensation laws, unemployment insurance laws or similar laws; (v) good faith
deposits in connection with bids, tenders, sales contracts, leases, statutory
obligations, appeal and performance bonds and other similar obligations not
incurred in connection with the borrowing of money or the obtaining of advances
or the payment of deferred purchase price of property.
SECTION 7.07. Maintenance of Existence. The Borrowers shall preserve
and maintain their corporate existence and good standing in the jurisdiction of
their incorporation, and qualify and remain qualified as a foreign corporations
in each jurisdiction in which such qualification is required.
SECTION 7.08. Compliance With Laws. The Borrowers shall comply in all
respects with all statutes, laws, rules and regulations applicable to them in
the operation of their businesses (including the Fair Labor Standards Act, as
amended, and all statutes, laws, rules and regulations relating to the Borrowers
bottling and labeling activities) or with regard to their ownership of their
properties and assets.
30
SECTION 7.09. Maintenance of Property. The Borrowers shall maintain all
of their properties and assets in good condition and repair and shall make all
reasonable and necessary repairs, replacements and improvements to their
properties and assets, so that their businesses may be properly conducted at all
times.
SECTION 7.10. Inspection by the Bank. The Borrowers shall permit the
Bank or its agents at any reasonable time to inspect during normal business
hours their properties and to examine their books and records and make copies or
extracts therefrom, and to discuss their affairs with their directors, officers,
employees, agents and accountants; provided, however, that the Bank's right to
inspect as set forth in this Section 7.10 shall exist at any time the Bank may
deem appropriate after the occurrence and during the continuance of an Event of
Default.
SECTION 7.11. Reports.
The Borrowers shall furnish to the Bank:
(a) as soon as possible, and in any event within two (2)
Business Days after any Borrower becomes aware of the occurrence of any Event of
Default or Potential Default, a written statement by the Borrowers' Chief
Executive Officer or Chief Financial Officer setting forth details of the Event
of Default or Potential Default and the action which is proposed to be taken
with respect thereto;
(b) as soon as possible, and in any event within five (5)
Business Days after receiving knowledge thereof, written notice of any action,
suit and proceeding before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, affecting any
Borrower which involves $200,000 or more or would materially adversely affect
the business, properties or condition, financial or otherwise, of any Borrower,
if adversely determined;
(c) as soon as possible, and in any event within five (5)
Business Days after any Borrower becomes aware of the occurrence of any event
that would cause any representation or warranty made by any Borrower in this
Agreement or the other Loan Documents to be untrue, a written statement by the
Borrowers' Chief Executive Officer or Chief Financial Officer setting forth the
details of such event and the action which is proposed to be taken with respect
thereto; and
(d) as soon as possible, and in any event within five (5)
Business Days after any Borrower becomes aware of the occurrence of a material
adverse change in their business, properties or condition, financial or
otherwise, a written statement by the Borrowers' Chief Executive Officer or
Chief Financial Officer, setting forth the details of such material adverse
change and the action which is proposed to be taken with respect thereto.
31
SECTION 7.12. ERISA.
The Borrowers shall comply with all applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan.
SECTION 7.13. Merger or Consolidation. Except for those types of
acquisitions contemplated within the Acquisition Facility provided for by
Article III of this Agreement, the Borrowers shall not become a partner or
participant in any partnership or joint venture, or merge or consolidate with or
into any other corporation, or permit any other corporation to merge into any
Borrower, or acquire, in a transaction analogous in purpose or effect to a
merger or consolidation, all or substantially all of the assets or securities of
any other person, corporation, division, or business enterprise.
SECTION 7.14. Disposal of Assets. The Borrowers shall not sell, convey,
lease, assign, transfer or otherwise dispose of, voluntarily or involuntarily,
all or any portion of their assets, other than (i) the sale of Inventory in the
ordinary course of business, (ii) sales of coolers in the ordinary course of
business, and (iii) as permitted pursuant to Section 4.06(b) of this Agreement.
SECTION 7.15. Nature of Business. The Borrowers shall not make any
material change in the nature of their businesses as conducted at the date of
this Agreement or, without at least thirty (30) days prior written notice to the
Bank, change their name.
SECTION 7.16. Environmental Laws. The Borrowers shall comply with all
applicable Environmental Laws and shall immediately notify the Bank of any
actual or alleged failure to comply with or perform, breach, violation or
default under any applicable Environmental Laws.
SECTION 7.17. Ownership of Stock/Maintenance of Management. The
Borrowers shall not cause, permit, suffer or allow to exist any Change in
Control, or enter into any agreement contemplating or providing for a Change in
Control. Notwithstanding the foregoing, if either or both of the Borrowers shall
enter into any agreement contemplating or providing for a Change in Control, it
is understood and agreed that (so long as no other Potential Default or Event of
Default has then occurred and is continuing) (i) the availability of advances
under the Acquisition Facility shall immediately terminate, without the need for
further notice from the Bank, and (ii) the Borrowers shall continue to have
borrowing availability under the Working Capital Line of Credit at the interest
rate provided in Section 2.03 hereof, subject to the terms and conditions of
this Agreement (including but not limited to Section 8.04(b) of this Agreement)
and the Loan Documents; provided, however, that in all cases all Indebtedness
owing to the Bank shall, unless the Bank otherwise agrees in writing, be paid in
full immediately prior to, or simultaneously with, any Change in
32
Control. The Borrowers shall also maintain at all times Senior
Management reasonably satisfactory to the Bank.
SECTION 7.18. Funded Debt to Cash Flow. The Borrowers shall maintain,
on a consolidated basis, a ratio of Funded Debt to Cash Flow of not more than:
(i) 4.25 to 1 from the date of this Agreement through July 25, 1998; (ii) 3.95
to 1 from July 26, 1998, through October 31, 1998; (iii) 3.50 to 1 from November
1, 1998 through October 30, 1999; and (iv) 3.00 to 1 at October 31, 1999 and at
the end of each fiscal year thereafter.
SECTION 7.19. Cash Flow Coverage.
The Borrowers shall maintain, a minimum ratio of four (4) quarters Cash Flow to
Fixed Charges of not less than 1.25 to 1.0.
SECTION 7.20. Funded Debt to Capitalization.
The Borrowers shall maintain, on a consolidated basis, a ratio of Funded Debt to
Capitalization of not more than 2.00 to 1.00.
SECTION 7.21 Interest Coverage. Borrowers shall at all times maintain
Interest Coverage Ratio of not less than 3.25 to 1.0.
SECTION 7.22 Methodology for Calculation. The calculations made
pursuant to Sections 7.18, 7.19, 7.20 and 7.21 shall be tested as of the end of
each fiscal quarter, on a rolling, prior four fiscal quarter basis. For purposes
of the calculations in Sections 7.18, 7.19 and 7.21, Permitted Acquisitions
consummated during the fiscal quarter will use such Permitted Acquisitions most
recently ended Adjusted Cash Flow.
SECTION 7.23. Capital Expenditures. With respect to the fixed assets,
including, for these purposes, water coolers, the Borrowers shall not expend or
become obligated to expend for fixed assets (by purchase or financing lease) an
amount which would cause the aggregate amount expended by the Borrowers for the
fixed assets (including the annual rental liability for the financing lease of
fixed assets and the annual deferred portion of any purchase price) to exceed
the amount of the VPSI's depreciation for the immediately preceding fiscal year.
SECTION 7.24. Deposit Accounts. As additional compensation to the Bank,
and in consideration of the rate of interest and fees being charged by the Bank
to the Borrowers on and in connection with this Agreement and other
Indebtedness, the Borrowers and their Affiliates shall maintain their primary
deposit accounts with the Bank. The Bank agrees that all charges, fees and
assessments levied in connection with any one or more such accounts shall be
consistent with those assessed by the Bank for similar type accounts.
33
SECTION 7.25. Dividends, Capital Stock. The Borrowers shall not declare
or pay, directly or indirectly, any dividends, or make any other distribution of
payment (whether in cash, property, securities or accommodation thereof) with
respect to (whether by reduction of capital or otherwise) any shares of capital
stock of the Borrowers, or any options, warrants, rights or added equity
securities or agreements relating to any capital stock, or set apart any sum for
the payment of any of the foregoing purposes.
ARTICLE VIII
DEFAULT
SECTION 8.01. Events of Default.
The occurrence of any one or more of the following events shall constitute an
"Event of Default" under this Agreement:
(a) Any Borrower fails to pay the outstanding balance of the
Working Capital Line of Credit or any portion of the Acquisition Facility when
due, or any other portion of the Indebtedness when due; or
(b) Any Borrower fails to observe or perform any other
agreements, conditions, undertakings or covenants in this Agreement or the Loan
Documents to be observed or performed by the Borrowers; or
(c) Any representation or warranty made in this Agreement or
the Loan Documents, or furnished by any Borrower in connection with making this
Agreement or the Loan Documents or in compliance with their provisions, proves
to have been false or erroneous in any material respect when made or deemed
made; or
(d) Any Borrower becomes insolvent or unable to pay its or
their debts as they mature, or files a voluntary petition or suffers any
involuntary petition to be filed against it or them under any provision of any
state or federal bankruptcy or insolvency statute (and, in the case of an
involuntary petition, such petition is not dismissed within sixty (60) days
after filing), or makes an assignment for the benefit of its or their creditors,
or applies for or consents to the appointment of a receiver or custodian for its
or their assets, or any attachment or garnishment is initiated or filed against
its or their properties or assets and is not released discharged or bonded
against within thirty (30) days thereafter; or
(e) Any Borrower fails to pay any Credit Obligation owing by
it in excess of (whether individually or in the aggregate) $50,000, or any
interest or premium thereon, when due (whether such Credit Obligation has become
due by scheduled maturity, by required prepayment, by acceleration, by demand or
otherwise) or fails to perform any term, covenant or agreement on its part to be
performed
34
under any agreement or instrument evidencing or securing or relating to any such
Credit Obligation when required to be performed, if the effect of such failure
is to accelerate the maturity of such Credit Obligation; or
(f) Any of the following events occurs or exists with respect
to any Borrower or any ERISA Affiliate: (i) any Prohibited Transaction involving
any Plan; (ii) any Reportable Event with respect to any Plan; (iii) the filing
under Section 4041 of ERISA of a notice of intent to terminate any Plan or the
termination of any Plan; (iv) any event or circumstance that might constitute
grounds entitling the PBGC to institute proceedings under Section 4042 of ERISA
for the termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; (v) complete or
partial withdrawal under Section 4201 or 4202 of ERISA from a Multiemployer Plan
or the reorganization, insolvency, or termination of any Multiemployer Plan; and
in each case above, such event or condition, together with all other events or
conditions, if any, could in the opinion of the Bank subject any Borrower to any
tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC or
otherwise (or any combination thereof) which in the aggregate would have a
material adverse effect on the financial connection, properties, or operations
of any Borrower; or
(g) Any one or more of the Borrowers terminates or has
terminated any distributorship or brokerage arrangement representing 15% or more
of the total revenues of such Borrower for the immediately preceding twelve (12)
month period unless, within forty-five (45) days of receiving notice or
obtaining knowledge of such termination, the Borrowers provide to the Bank
projections (satisfactory to the Bank) indicating that such lost revenues will
not cause or result in a Potential Default or Event of Default (it being
understood that such projections shall include, among other items, a compliance
certificate showing the anticipated effect of such loss on such Borrower's
revenues, and such projections contain assumptions satisfactory to the Bank); or
(h) The Borrowers make allowance for (or, in accordance with
GAAP, should make allowance for), any write-down of the value of their assets in
an amount equal to or greater than two and one-half percent (2.50%) of their net
sales, for the applicable fiscal year; or
(i) Any Borrower expresses an attempt to terminate, revoke or
disclaim responsibility for any of the Indebtedness, or their liability under
this Agreement or any of the Loan Documents; or
(j) (i) A judgment or judgments in excess of $200,000,
individually or in the aggregate, is entered against any Borrower provided that
such judgment or judgments shall have become final
35
after the expiration or non-pursuit of available appeals, and assuming during
such appeal process that execution upon, or enforcement of, such judgment or
judgments has been stayed), or (ii) the property of any Borrower becomes subject
of any attachment, garnishment, levy or lien in excess of $200,000, whether
individually or in the aggregate; or
(k) A substantial part of the property of any of the
Borrowers is taken or condemned by any governmental authority, or
(l) Except as permitted by this Agreement, any Borrower sells,
assigns or otherwise transfers, or attempts to sell, assign or otherwise
transfer any of its right, title or interest in any of its assets of properties,
without the prior written consent of the Bank; or
(m) Any Borrower shall be in breach of, or lack full
compliance with, any law, statute, rule or regulation applicable to it or them
which, in the Bank's reasonable judgment, would impair their ability to perform
their obligations to the Bank;
(n) Any default, subject to any applicable notice and cure
period, otherwise occurs under the Loan Documents, which Events of Default are
incorporated by reference in this Agreement; or
(o) If the Bank determines, reasonably and in good faith, that
an event or series of events has occurred, or a condition or series of
conditions exists which has had, or is likely to have, a material adverse effect
on the financial condition or credit worthiness of any Borrower, or on the
ability of any Borrower to perform its obligations under this Agreement or any
of the Loan Documents; or
(p) A default occurs, and after the expiration of any
applicable notice and cure period, under any other agreement, document, or
instrument now or hereafter executed and delivered to the Bank by any other
person or entity now or hereafter liable, directly or indirectly, for the
Indebtedness.
SECTION 8.02. Cure of Default. The exercise by the Bank of its remedies
as set forth or referenced in Sections 8.03 and 8.04 below shall be subject to
the Borrower's right to cure such default as, and to the extent, set forth
below:
(a) With respect to defaults under clauses (b), (f), (m) and
(o) in Section 8.01, above, the Borrowers shall have the right to cure such
defaults (if cure can be effected to the reasonable satisfaction the Bank, and
provided further that the Borrower is using its best efforts to effectuate a
cure) within fifteen (15) days after notice of default with respect thereto has
been given by the Bank (which notice, if initially given by means other than in
36
writing, shall be promptly confirmed in writing by the Bank); provided, however,
that no cure period is available for the existence of an Event of Default by
virtue of (i) exceeding the borrowing limitations set forth in Article II or
Article III of this Agreement, or (ii) failure to comply with the financial
covenants set forth in Sections 7.18, 7.19, 7.20, 7.21, 7.22, 7.23 and 7.25 of
this Agreement.
During any cure or grace period set forth in the Section 8.02, the Bank
shall refrain from the exercise of remedies provided to it upon default as
provided in Sections 8.03 and 8.04 below; provided, however, that the Bank may,
during such cure period:
(i) to the extent necessary to protect its security
interest in the Collateral, exercise its right of set-off against
assets or accounts in its possession, custody or control;
(ii) refrain from making additional advances under the
Loans; and
(iii) take all actions with respect to the Collateral necessary for
the protection of its interest therein including, if required, based upon a
reasonable and good faith determination made by the Bank that the value of the
Collateral is threatened, the exercise of default remedies set forth in Sections
8.03 and 8.04 below.
SECTION 8.03. Acceleration. Upon the occurrence of any Event
of Default or at any time during the continuance of any Event of Default, the
Bank may, at its election, declare all or any portion of the Indebtedness to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are expressly waived by the Borrowers.
SECTION 8.04. Remedies Upon Default.
(a) Upon the occurrence of any Event of Default and after the
expiration of any applicable grace and cure periods (but subject to the
provisions of Section 8.02, above) or at any time during the continuance of any
Event of Default, the Bank, in addition to the rights specifically granted in
this Agreement or now or hereafter existing in equity, at law, by virtue of
statute or otherwise, may at its election exercise the rights and remedies under
the Loan Documents, or any other agreement, document, or instrument between the
Borrowers and the Bank, in accordance with their respective provisions.
(b) Upon the occurrence and during the continuance of any
Event of Default after the expiration of any applicable grace and cure periods,
interest on all of the Indebtedness shall accrue at the Base Rate plus three
percent (3.00%) per annum (the "Default Rate"); provided, however, that the
Default Rate shall not go into
37
effect until ten days after the date upon which a payment is due under the
Working Capital Line of Credit or the Acquisition Facility if (i) the Sweep
Agreement is in effect, (ii) the Borrowers have not made such payment due under
the Working Capital Line of Credit or the Acquisition Facility, (iii) there is
availability under the Working Capital Line of Credit which is equal to or more
than the amount which is due by the Borrowers at the time the Bank debits from
the Working Capital Line of Credit the amount of such payment due, and (iv)
other than non-payment referred to herein, no other Event of Default exists. Any
amounts debited by the Bank from the Working Capital Line of Credit pursuant to
this Section shall be deemed a Direct Loan.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. No Waiver; Cumulative Remedies.
------------------------------
No course of dealing and no failure or delay of the Bank in exercising any
right, power or remedy under this Agreement or the Loan Document
shall operate as a waiver thereof or shall affect any other or
future exercise thereof or the exercise of any other right, power
or remedy nor shall any single or partial exercise of any such
right, power or remedy or any abandonment or discontinuance of such
exercise preclude any other or further exercise thereof or of any
other right, power or remedy under this Agreement or the Loan
Documents. The rights, powers and remedies of the Bank in this
Agreement are cumulative and not exclusive of any rights, powers,
or remedies which the Bank may otherwise have.
SECTION 9.02. Amendments and Waivers. The provisions of this Agreement
and the Loan Documents may be modified or amended only by a written agreement
entered into by the Borrowers and the Bank, and may be waived only by a written
waiver signed by the Bank. No waiver, modification or amendment shall extend to
or affect any obligation not expressly waived, modified or amended, or impair
any right of the Bank related to such obligation.
SECTION 9.03. Notices. All notices, requests, demands and other
communications that this Agreement or any other Loan Document requires or
permits shall be in writing and shall (other than a borrowing requests and other
communications in the ordinary course of the lending relationship), be given by
hand delivery, telecopier, certified mail, return receipt requested, or by
recognized overnight delivery services to the parties at their address specified
above, or at such other address as shall be designated by a party in a notice
complying with the terms of this Section 9.03. Notices, requests, demands and
other communications provided in accordance with the provisions of this
Agreement shall be effective (i) in the case of hand delivery, upon delivery of
the notice and receipt of the appropriate signature obtained to the
38
recipient of such notice, (ii) if sent by telecopier, when the transmission is
sent and the appropriate confirmation has been received, (iii) in the case of
certified mail, return receipt requested, the date upon which the notice has
been accepted by the party receiving notice, and (iv) in the case of delivery by
recognized overnight delivery service, on the next day after the notice has been
given to such service for sending.
SECTION 9.04. Costs and Expenses. The Borrowers agree to pay on demand:
(a) all reasonable costs and expenses of the Bank in connection with the
preparation, execution, delivery and administration of this Agreement, the Loan
Documents and all other instruments and documents to be delivered under or in
connection with this Agreement, and any waivers or supplements or amendments
thereto, including the reasonable fees and expenses of counsel, fees and
expenses of appraisers, accountants and other professionals, costs of property
and lien searches; and (b) all costs and expenses of the Bank in connection with
the enforcement of this Agreement, the Loan Documents, and all other instruments
and documents to be delivered under or in connection with this Agreement,
including the fees and expenses of counsel and fees and expenses of appraisers,
accountants, and other professionals. Such costs and expenses shall include all
costs and expenses (including the fees and expenses of counsel for the Bank)
incurred in connection with: (A) the protection, exercise or enforcement of the
Bank's rights, and (B) the assertion, protection, exercise or enforcement of the
Bank's rights in any proceeding under the United States Bankruptcy Code,
including without limitation the preparation, filing and prosecution of (i)
proofs of claim, (ii) motions for relief from the automatic stay, (iii) motions
for adequate protection and (iv) complaints, answers and other pleadings in
adversary proceedings by or against the Bank or relating in any way to any of
the Collateral. With respect to any right granted to the Bank to perform or
cause to be performed environmental audits or assessments of any of the Real
Property, it is agreed that costs and expenses of the nature set forth in this
Section 9.04 shall (i) after the occurrence and during the continance of any
Event of Default or Potential Default, be borne by the Borrowers, and (ii) if an
Event of Default or Potential Default has not occurred and is not then
continuing, the Bank shall only be entitled to charge such costs to the Borrower
if, at the time it is requesting such environmental audit, it has a good faith
reason to believe that such audit is necessary under the circumstances. As of
the date of this Agreement, the Bank has no reason to believe that such an
environmental audit is currently necessary or advisable.
SECTION 9.05. Miscellaneous Payment Provisions.
(a) All payments to be made by the Borrowers under or in
connection with the Indebtedness shall be made to the Bank in immediately
available funds, without set-off, counterclaim,
39
deduction or withholding, at such offices of the Bank or at such other places as
may be directed by the Bank.
(b) Whenever any payment to be made by the Borrowers under or
in connection with the Indebtedness is stated to be due on a day that is not a
Business Day, such payment shall be made on the next day that is a Business Day,
and such extension of time shall be involved in the computation of interest or
fees due from the Borrowers.
(c) If at any time any payment made by the Borrowers under or
in connection with the Indebtedness is rescinded or must otherwise be returned
by the Bank for any reason, including, but not limited to, the insolvency,
bankruptcy, or reorganization of any Borrowers, the rights of the Bank shall be
reinstated as though payment had not been made.
(d) If any payment to be made by the Borrowers under or in
connection with the Indebtedness is not paid on or before the due date thereof,
then in addition to and not in limitation of any other rights or remedies
available to the Bank, the Bank may impose a late charge equal to the greater of
$15.00 or one percent (1.00%) of the amount due and not paid on the due date.
(e) The Borrowers authorize the Bank to charge, when due,
against any deposit account of any Borrower with the Bank, any payments
(including payments of interest and fees) to be made by the Borrowers under or
in connection with the Indebtedness.
SECTION 9.06. Participation. The Bank may assign to one or more banks
or other entities all or any part of, or may grant participation to one or more
banks or other entities of all or any part of, the Indebtedness and, to the
extent of any such assignment or participation, unless otherwise stated in such
assignment or participation, the assignee and participant shall have the same
rights and benefits under this Agreement as it would have if it were the Bank
under this Agreement.
SECTION 9.07. Liability of Bank. The Borrowers and their Affiliates
agree that the Bank shall not have any liability (in tort or otherwise) for any
lost profits or other consequential damage sustained by any Borrower or
Affiliate as a result of any action taken or omitted by the Bank or any of its
officers, agents, or employees in connection with the administration or
enforcement of this Agreement, or the Loan Documents, other than for acts of
gross negligence or willful misconduct.
SECTION 9.08. Governing Law. This Agreement shall be governed in all
respects by the laws in effect in the Commonwealth of Pennsylvania (without
regard to the principles of conflicts of law), and for all purposes shall be
construed in accordance with such laws.
40
SECTION 9.09. Headings. The headings used in this Agreement are for
convenience of reference only, and shall not affect the construction or
interpretation of this Agreement. Unless otherwise indicated, all references to
Sections and Exhibits shall be construed as references to sections of and
exhibits to this Agreement.
SECTION 9.10. Continuing Representations. All agreements,
representations, warranties and covenants made by the Borrowers in this
Agreement or in any certificate or other document delivered to the Bank in
connection with this Agreement, shall be continuing as long as the Indebtedness
shall remain outstanding and unpaid; provided, however, that the covenants set
forth in Sections 9.04, 9.07, and 9.13 through 9.15 shall survive the payment of
the Indebtedness.
SECTION 9.11. Binding Effect. This Agreement shall be binding upon and
operate for the benefit of the Borrowers and the Bank, and their respective
successors and assigns; provided, however, that the Borrowers may not assign or
delegate any of their rights or obligations without the prior written consent of
the Bank.
SECTION 9.12. Records. The outstanding balance of the Indebtedness, and
the unpaid interest and fees accrued thereon or in connection therewith, shall
at all times be ascertained from the records of the Bank, which shall be
conclusive evidence thereof absent protest by the Borrowers, within ten (10)
days after receipt of any document which the Borrowers believe to be in error,
which protest shall set forth with specificity the error or errors which the
Borrowers believe to exist in the records of the Bank.
SECTION 9.13. Indemnity.
(a) The Borrowers and the Sureties shall indemnify the Bank
against any loss or expense which the Bank may sustain or incur as a consequence
of any default by any Borrower or Surety in the performance or observance of any
term, condition, covenant or undertaking contained in this Agreement or the Loan
Documents to be observed or performed by any Borrower or Surety (including the
failure to pay when due, by acceleration or otherwise, any principal, interest,
fees, or other amount due under this Agreement or the other Loan Documents).
(b) In addition to and not in limitation of the provisions of
paragraph (a) of this Section 9.13, and notwithstanding anything to the contrary
contained in this Agreement, if any LIBOR Loan is repaid in whole or in part
prior to the last day of the Interest Period applicable thereto, whether
repayment is voluntary or involuntary, by acceleration or otherwise, the
Borrowers shall indemnify and hold harmless the Bank from and against all
losses, costs, and expenses resulting from such
41
repayment. Such indemnification shall include any loss (including loss of
margin) or expense arising from the reemployment of funds obtained by the Bank
or from fees payable to terminate deposits from which such funds were obtained.
For the purpose of calculating amounts payable to the Bank under this paragraph
(b) the Bank shall be deemed to have actually funded the LIBOR Loan through the
purchase of a deposit bearing interest at the LIBOR Interest Rate in an amount
equal to the amount of the LIBOR Loan and having a maturity comparable to the
applicable Interest Period; provided, however, that the Bank may fund each of
the LIBOR Loans in any manner as it sees fit, and the foregoing assumption shall
be utilized only for the calculation of amounts payable under this paragraph
(b).
SECTION 9.14. Waiver of Jury Trial. THE BORROWERS AND THE SURETIES
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR THE LOAN DOCUMENTS, OR ANY PROCEEDING
IN ANY WAY ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE LOAN
DOCUMENTS, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, AND THE BORROWERS
AND THE SURETIES AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE
A COURT AND NOT BEFORE A JURY.
SECTION 9.15. Consent to Jurisdiction. THE BORROWERS AND THE SURETIES
SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
COMMONWEALTH OF PENNSYLVANIA FOR THE DETERMINATION OF ANY CONTROVERSY ARISING
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE LOAN DOCUMENTS, AND THE
BORROWERS AND THE SURETIES WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT, OR
OTHER PROCESS IN AN ACTION IN ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
COMMONWEALTH OF PENNSYLVANIA AND AGREE THAT ALL SERVICE THEREOF MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.
SECTION 9.16. Regulatory Changes. In the event that the introduction of
or any change in (i) the judicial, administrative, or other governmental
interpretation of any law or regulation or (ii) compliance by the Bank or any
corporation controlling the Bank with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law)
has the effect of requiring an increase in the amount of capital required or
expected to be maintained by the Bank or any corporation controlling the Bank,
and the Bank determines that such increase is based upon its obligations under
this Agreement, and other similar obligations, the Borrowers shall pay to the
Bank such additional amount as shall be certified by the Bank to be the amount
allocable to the Bank's obligations to the Borrowers under this Agreement. The
Bank will notify the Borrowers of any event occurring after the date of this
Agreement that will entitle the Bank to compensation pursuant to this Section
9.16 as promptly as practicable after it obtains knowledge of such event and
determines to request such compensation. Any determination by the Bank for
42
purposes of this Section 9.16 of the effect of any increase in the amount of
capital required to be maintained by the Bank and of the amount allocable to the
Bank's obligations to the Borrowers under this Agreement shall be conclusive,
provided that such determination is made on a reasonable basis.
SECTION 9.17. Illegality. Notwithstanding any other provision in this
Agreement or any Loan Document, if the Bank determines that any applicable law,
rule, or regulation, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank (or its lending officer) with any request or directive
(whether or not having the force of law) or any such authority, central bank, or
comparable agency shall make it unlawful or impossible for the Bank (or its
lending officer) to (1) maintain its commitment, then upon notice to the
Borrowers by the Bank the commitment of the Bank shall terminate; or (2)
maintain or fund its LIBOR Loans, then upon notice to the Borrowers by the Bank
the outstanding principal amount of the LIBOR Loans, together with interest
accrued thereon, and any other amounts payable to the Bank under this Agreement
shall be repaid (a) immediately upon demand of the Bank if such change or
compliance with such request, in the judgment of the Bank, requires immediate
repayment; or (b) at the expiration of the last Interest Period to expire before
the effective date of any such change or request.
SECTION 9.18. Interpretation/Additional Borrowers.
-----------------------------------
This Agreement and the other Loan Documents shall be construed as one
agreement and shall be interpreted so as to expand, rather than
contract, the rights of the Bank; provided, however, that in the
-------- -------
event of inconsistency, the provisions of this Agreement shall
supersede and control the provisions of the other Loan Documents.
The use of the words "include", "including" and the like are
intended to be used as words of illustration, and shall not
construed as words of limitation. All references to a Borrower or
Borrowers shall be deemed to be joint and several references to
each of the Borrowers as identified in the Background to this
Agreement. Any one or more Persons now or hereafter acquired by
any of the Borrowers shall automatically be deemed to be a Borrower
for purposes of this Agreement and all of the Loan Documents. In
order to evidence this undertaking, such newly acquired Persons
shall, within five (5) Business Days of being acquired by any one
or more of the Borrowers, execute the certificate attached as
Exhibit 9.18.
SECTION 9.19. Integration. This Agreement and the other Loan Documents
constitute the entire agreement and understanding between the Borrowers and the
Bank related to the subject matter of this Agreement, and supersede all prior
proposals, negotiations, agreements, and understandings relating to such subject
matter.
43
The Borrowers acknowledge that, in entering into this Agreement, they are not
relying on any statement, representation, warranty, covenant, or agreement of
any kind made by the Bank or any employee or agent of the Bank, other than the
agreements of the Bank set forth in this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
Attest: VERMONT PURE HOLDINGS, LTD.
[Corporate Seal]
By
Title
Attest: VERMONT PURE SPRINGS, INC.
[Corporate Seal]
By:
Title
CORESTATES BANK, N.A.
By
▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
The Undersigned, being identified in the above Agreement as Sureties,
do hereby confirm and agree to be bound by all terms, conditions,
representations, warranties, covenants and other matters set forth in the above
Loan and Security Agreement which refer to them, in addition to the other
undertakings agreed to by the Sureties in the Loan Documents signed by them.
ATTTEST EXCELSIOR SPRINGS WATER COMPANY,
INC.
__________________ By: _____________________________
[Corporate Seal]
44
ATTEST: A. M. FRIDAYS, INC.
__________________ By: _____________________________
[Corporate Seal]
45
EXHIBIT 1.01
SUBORDINATION AGREEMENT
[See Attached]
46
EXHIBIT 4.05
PLACES OF BUSINESS, LOCATIONS OF COLLATERAL
[See Attached]
47
EXHIBIT 4.07
PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
[See attached]
48
EXHIBIT 4.09
TRADE OR FICTITIOUS NAMES
Other than trademarks listed in Exhibit 4.07 to this
Agreement, the licensed names are as follows: "Happy",
"Greatwater", "Coffee Time" and "AKVA."
49
EXHIBIT 6.01
AFFILIATES AND TRADENAMES
Vermont Pure Springs, Inc. is a subsidiary of Vermont
Pure Holdings, Ltd. A.M. Fridays, Inc. and Excelsior Springs Water
Company, Inc. are wholly owned subsidiaries of Vermont Pure
Springs, Inc.
50
EXHIBIT 6.05
LITIGATION
In February 1996, VPSI commenced an action entitled Vermont
Pure Springs, Inc. v. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ in Orange Superior Court
in the State of Vermont. The court assigned the case Docket No. S-33-2-96 Occv.
VPSI alleged that the defendants, who were former employees of VPSI, breached
their contractual and common law obligations concerning unfair competition and
preservation of Company trade secrets. VPSI sought damages and injunctive
relief. On April 1, 1996, the Orange Superior Court entered a preliminary
injunction against both defendants prohibiting their participation in a
competing venture known as Montpelier Springs or disclosing any confidential
information of VPSI to a third party. The court denied VPSI's request for a writ
of attachment. Defendant ▇▇▇▇▇▇▇ has filed a counterclaim and a third party
complaint against VPSI's president and VPSI seeking compensatory damages and
punitive damages of not less than $250,000 and attorneys' fees for alleged
breach of contract and unfair trade competition. Defendant ▇▇▇▇▇▇▇ has filed a
counterclaim seeking unspecified damages and attorneys' fees. The case is in the
discovery phase and it is unclear when it will proceed to a trial on the merits.
VPSI does not believe that the counterclaims have any merit and intends to
pursue the litigation and defend itself vigorously.
In addition, VPSI has brought suit in Massachusetts against a
company doing business as Vermont Gold for trademark infringement. Vermont Gold
is a startup company. The case is tentatively scheduled to go to trial in May
and is presently in the discovery phase.
Neither of these suits is expected to have a material
financial impact on VPSI.
51
EXHIBIT 6.07
CONTINGENT LIABILITIES
VPSI currently has an appeal outstanding with the Vermont
Department of Taxes concerning $220,000 of outstanding use taxes, interest and
penalties. The issue is that the department does not interpret the manufacturing
exemption under the code to include bottling. VPSI has rejected a settlement
offer by the commissioner and is considering a counteroffer. Effective January,
1998, the statute has been amended to include water bottling but the change is
not retroactive. VPSI has not reported this in its financial statements because
most of the total amount concerns capital equipment and would be depreciated
and, as a result, would be immaterial.
Also, VPSI has two acquisition notes outstanding that are
based on the performance of the acquired entities. The first, was due March 10,
1998 to Greatwater Refreshment Services in the amount of $75,000. It is prorated
up or down based on sales of $700,000 for the year ended that date. VPSI
reported sales of $670,000 and the former owner is now auditing that number.
Nothing has been paid yet. The second, a note for $200,000 payable May 1, 1999
to Happy Ice Corporation is based on EBITDA of the acquired company being at
least $400,000 for the first two years of operation. Through 21 months, EBITDA
is approximately $50,000. VPSI does not anticipate having to pay any of the
potential liability.
52
EXHIBIT 6.09
EXISTING LIENS AND ENCUMBRANCES
[See Attached]
53
EXHIBIT 6.11
ERISA MATTERS
None.
54
EXHIBIT 7.01
COMPLIANCE CERTIFICATE
[See Attached]
55
EXHIBIT 7.02
EXISTING INSURANCE COVERAGE
[See Attached]
56
EXHIBIT 7.05
EXISTING INDEBTEDNESS
[See Attached]
57
EXHIBIT 9.18
JOINDER AND CONSENT
The undersigned, having been acquired by __________ on or about
____________, 199_, do hereby execute this Joinder and Consent for purposes of
being deemed in all respects a "Borrower" pursuant to that Loan and Security
Agreement dated August __, 1997 between CoreStates Bank, as Lender, and Vermont
Pure Holdings, Inc. and Vermont Pure Springs, Inc., as co-Borrowers, as that
agreement may have been amended or modified from time to time. Without limiting
the general nature of the foregoing, the undersigned acknowledged that their
execution of this joinder and consent makes them for all purposes a "Borrower"
under the aforementioned agreement liable for repayment of all of the
Indebtedness and otherwise obligated under all of the Loan Documents as a
signatory. The undersigned shall further execute and deliver to the Bank,
immediately upon request, such further agreements, documents or instruments as
the Bank may request to further evidence this joinder and consent.
By:
Title:
