SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended January 31, 2003
Commission File No. 000-31797
VERMONT PURE HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 03-0366218
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Route 66; PO Box C; Randolph, VT 05060
(Address of principal executive offices) (Zip Code)
(802) 728-3600 (Registrant's
telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------------- ------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class March 10, 2003
Common Stock, $.001 Par Value 21,271,536
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
INDEX
Page Number
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
January 31, 2003 (unaudited) and
October 31, 2002 3
Consolidated Statements of Operations
(unaudited) for the Three Months
ended January 31, 2003 and 2002 4
Consolidated Statements of Cash Flows
(unaudited) for the Three Months ended
January 31, 2003 and 2002 5
Notes to Consolidated Financial Statements
(unaudited) 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-15
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 16-17
Item 4. Controls and Procedures 17
Part II - Other Information 18-22
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures and Certifications 23-25
2
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, October 31,
2003 2002
------------------ ----------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 198,729 $ 652,204
Accounts receivable - net 7,644,029 7,547,444
Inventories 3,565,255 4,067,740
Current portion of deferred tax asset 2,303,000 2,356,000
Other current assets 972,699 1,202,064
-------------------- ------------------
TOTAL CURRENT ASSETS 14,683,712 15,825,452
-------------------- ------------------
PROPERTY AND EQUIPMENT - net of accumulated depreciation 21,128,624 21,676,520
-------------------- ------------------
OTHER ASSETS:
Goodwill 70,578,012 70,427,887
Other intangible assets - net of accumulated amortization 685,281 648,089
Deferred tax asset 468,000 479,000
Other assets 314,748 277,123
-------------------- ------------------
TOTAL OTHER ASSETS 72,046,041 71,832,099
-------------------- ------------------
TOTAL ASSETS $ 107,858,377 $ 109,334,071
==================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long term debt $ 4,881,813 $ 4,881,817
Accounts payable 2,479,532 3,508,062
Accrued expenses 2,464,254 2,640,226
Current portion of customer deposits 176,738 178,937
Unrealized gain on derivatives 746,586 842,898
-------------------- ------------------
TOTAL CURRENT LIABILITIES 10,748,923 12,051,940
Long term debt, less current portion 46,069,326 46,539,557
Customer deposits 2,768,899 2,803,340
-------------------- ------------------
TOTAL LIABILITIES 59,587,148 61,394,837
-------------------- ------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $.001 par value, 500,000
authorized shares, none issued and outstanding - -
Common stock - $.001 par value, 50,000,000
authorized shares, 21,271,536 issued and outstanding
shares at January 31, 2003 and 21,235,927 at October 31, 2002 21,272 21,236
Additional paid in capital 57,151,783 57,023,093
Accumulated deficit (8,155,240) (8,262,197)
Accumulated other comprehensive loss (746,586) (842,898)
-------------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 48,271,229 47,939,234
-------------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 107,858,377 $ 109,334,071
==================== ==================
3
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended January 31,
-------------------------------------
2003 2002
----------------- -----------------
(unaudited)
NET SALES $ 15,077,433 $ 14,692,163
COST OF GOODS SOLD 7,398,280 6,730,615
----------------- -----------------
GROSS PROFIT 7,679,153 7,961,548
----------------- -----------------
OPERATING EXPENSES:
Selling, general and administrative expenses 6,037,961 6,015,366
Advertising expenses 299,765 327,301
Amortization 35,933 58,050
Other compensation 38,997 52,400
----------------- -----------------
TOTAL OPERATING EXPENSES 6,412,656 6,453,117
----------------- -----------------
INCOME FROM OPERATIONS 1,266,497 1,508,431
----------------- -----------------
OTHER INCOME (EXPENSE):
Interest (1,087,174) (1,185,169)
Miscellaneous 3,810 203,700
----------------- -----------------
TOTAL OTHER EXPENSE, NET (1,083,364) (981,469)
----------------- -----------------
INCOME BEFORE INCOME TAX EXPENSE 183,133 526,962
INCOME TAX EXPENSE 76,176 216,921
----------------- -----------------
NET INCOME $ 106,957 $ 310,041
================= =================
NET INCOME (LOSS) PER SHARE - BASIC $ 0.01 $ 0.01
================= =================
NET INCOME (LOSS) PER SHARE - DILUTED $ 0.00 $ 0.01
================= =================
WEIGHTED AVERAGE SHARES USED IN COMPUTATION - BASIC 21,247,797 21,060,348
================= =================
WEIGHTED AVERAGE SHARES USED IN COMPUTATION - DILUTED 21,972,722 22,021,469
================= =================
4
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended January 31,
----------------------------------
2003 2002
---------------- ----------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 106,957 $ 310,041
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 1,238,913 1,032,062
Amortization 35,933 58,051
Change in deferred tax asset (64,000) -
Gain on disposal of property and equipment (3,535) (19,475)
Non cash compensation 38,997 52,400
Changes in assets and liabilities (net of effect of acquisitions):
Accounts receivable 71,939 416,326
Inventories 502,484 (571,332)
Other current assets 357,364 1,118,317
Other assets (140,251) (64,211)
Accounts payable (1,028,530) (1,563,164)
Accrued expenses (344,483) (498,877)
Customer deposits (36,639) (60,162)
---------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 735,149 209,976
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (691,017) (1,914,721)
Proceeds from sale of property and equipment 3,535 20,000
Cash used for acquisitions - net of cash acquired (120,625) (4,987,073)
---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (808,107) (6,881,794)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit borrowings 1,800,000 2,788,093
Proceeds from debt - 4,200,000
Principal payments of debt (2,270,246) (885,404)
Exercise of stock options - 133,150
Proceeds from sale of common stock 89,729 97,046
---------------- ----------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (380,517) 6,332,885
---------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (453,475) (338,933)
CASH AND CASH EQUIVALENTS - beginning of year 652,204 1,099,223
---------------- ----------------
CASH AND CASH EQUIVALENTS - end of period $ 198,729 $ 760,290
================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 1,089,597 $ 1,159,394
================ ================
Cash paid for taxes $ 76,126 $ 505,604
================ ================
The attached notes are an integral part of these consolidated financial statements.
5
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion
of management contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial
position, results of operations, and cash flows for the periods
presented. The results have been determined on the basis of generally
accepted accounting principles and practices applied consistently with
the Annual Report on Form 10-K of Vermont Pure Holdings, Ltd. (the
"Company") for the year ended October 31, 2002.
Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted. The accompanying
consolidated financial statements should be read in conjunction with
the financial statements and notes thereto incorporated by reference
from the Company's Annual Report on Form 10-K for the year ended
October 31, 2002.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of
FASB Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting
for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. The disclosure
requirements apply to all companies for fiscal years ending after
December 15, 2002. The interim disclosure provisions are effective for
financial reports containing financial statements for interim periods
beginning after December 15, 2002. The provisions of this will not
affect the Company's financial position and results of operations.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others.
FIN 45 requires that upon issuance of a guarantee, the guarantor must
recognize a liability for the fair value of the obligation it assumes
under that guarantee. FIN 45 also requires additional disclosures by a
guarantor in its interim and annual financial statements about the
obligations associated with guarantees issued. The disclosure
requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002. The recognition and
measurement provisions are effective on a prospective basis to
guarantees issued or modified after December 31, 2002. The adoption of
this interpretation is not expected to have a material impact on the
Company's consolidated financial statements.
6
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN
46"), Consolidation of Variable Interest Entities. FIN 46 provides
guidance on the identification of entities for which control is
achieved through means other than through voting rights, variable
interest entities, and how to determine when and which business
enterprises should consolidate variable interest entities. This
interpretation applies immediately to variable interest entities
created after January 31, 2003. It applies in the first fiscal year or
interim period beginning after June 15, 2003, to variable interest
entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. The adoption of this interpretation
is not expected to have a material impact on the Company's
consolidated financial statements.
3. PROMOTIONAL ALLOWANCES
Effective February 1, 2001, the Company adopted the provisions of
Emerging Issues Task Force ("EITF") Issue No. 01-09, "Accounting for
Consideration Given by a Vendor to a Customer or a Reseller of the
Vendor's Products." EITF 01-09 codifies and reconciles EITF Issue No.
00-14, "Accounting for Certain Sales Incentives," Issue 3 of Issue No.
00-22, "Accounting for `Points' and Certain Other Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products or
Services to Be Delivered in the Future" and EITF No. 00-25, "Vendor
Income Statement Characterization of Consideration Paid to a Reseller
of the Vendor's Products."
The effect of the adoption of EITF Issue No. 01-09 was to reduce sales
by $495,002 during the three months ended January 31, 2002.
Three months ended January 31,
-----------------------------------------
2003 2002
---- ----
Gross Sales $15,410,517 $15,187,165
Promotion ( 333,084) ( 495,002)
---------- ----------
Net Sales $15,077,433 $14,692,163
=========== ===========
In addition to reducing sales, the adoption of the EITF also resulted
in a reduction of advertising expenses by $495,002 for the three
months ended January 31, 2002. This reclassification had no impact on
operating income.
4. SEGMENTS
The segments are identifiable based on the types of products and their
distribution channels.
Retail - Characterized by the sale of water in small, portable
containers that are constructed from clear polyethylene terephthalate
(PET) plastic. Bottle sizes range from 8 oz. to 1.5 L. These products
are sold to wholesale beverage distributors, supermarkets and
convenience stores.
7
Home and Office - Characterized by the sale of five-gallon bottles of
water and water coolers delivered by the Company's trucks and
employees, and other products that are sold through this distribution
channel which are ancillary to the primary product, such as office
refreshments.
The Company allocates costs directly when possible and uses various
applicable allocation methods to allocate shared costs. There are no
inter-segment revenues for the periods reported.
For the three months ended January 31,
Home & Office Retail Total
(000's $) 2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
Sales $11,518 $11,555 $3,559 $3,137 $15,077 $14,692
Cost of Goods Sold 4,824 4,466 2,574 2,265 7,398 6,731
------------ ------------ ---------- ---------- ------------ -------------
Gross Profit 6,694 7,089 985 872 7,679 7,961
Operating Expenses 5,232 5,342 1,181 1,111 6,413 6,453
------------ ------------ ---------- ---------- ------------ -------------
Operating Income (Loss) 1,462 1,747 (196) (239) 1,266 1,508
Interest (Expense) (783) (853) (304) (332) (1,087) (1,185)
Other Income 4 204 4 204
------------ ------------ ---------- ---------- ------------ -------------
Income (Loss) Before Taxes $ 683 $ 894 $ (500) $ (367) $ 183 $ 527
============ ============ ========== ========== ============ =============
5. DEBT
During the three months ended January 31, 2003 the Company borrowed
$1,800,000 from its working capital line of credit with Webster Bank.
As of January 31, 2003 the total obligation outstanding under this
facility was $750,000. In addition, letters of credit totaling
$636,264 secured by the line were issued on the Company's behalf,
reducing the availability of the line by that amount.
On March 5, 2003 the Company signed a new bank agreement with Webster
Bank, M&T Bank, BankNorth and Rabobank. This new agreement
restructures existing debt and increases credit capacity. (see note
10).
8
6. COMPREHENSIVE INCOME
The following table summarizes the computations reconciling net income
to comprehensive income for the three months ended January 31, 2003
and 2002:
Three Months Ended January 31,
-----------------------------------------
2003 2002
---- ----
Net Income $106,957 $310,041
Other Comprehensive Income
Unrealized gain on derivatives designated
as cash flow hedges 96,312 161,745
-------- --------
Comprehensive Income $203,269 $471,786
======== ========
7. EMPLOYEE STOCK PURCHASE PLAN
On June 15, 1999 the Company's shareholders approved the "Vermont Pure
Holdings, Ltd. 1999 Employee Stock Purchase Plan." On January 1, 2001,
employees commenced participation in the plan. The total number of
shares issued under this plan during the three months ended January
31, 2003 was 26,325.
8. EARNINGS PER SHARE AND WEIGHTED AVERAGE SHARES
The Company considers outstanding in-the-money stock options as
potential common stock in its calculation of diluted earnings per
share and uses the treasury stock method to calculate the applicable
number of shares. The following calculation provides the
reconciliation of the denominators used in the calculation of basic
and fully diluted earnings per share:
Three Months Ended January 31,
------------------------------------
2003 2002
---- ----
Net Income $ 106,957 $ 310,041
-------------- --------------
Denominator:
Basic Weighted Average Shares
Outstanding 21,247,797 21,060,348
Effect of Stock Options 724,925 961,148
-------------- --------------
Diluted Weighted Average Shares
Outstanding 21,972,722 22,021,496
============== ==============
Basic Earnings Per Share $.01 $.01
Diluted Earnings Per Share $.00 $.01
9
9. LEGAL SETTLEMENT
DesCartes/Endgame Systems
On July 27, 2000 the Company filed a lawsuit in Vermont Federal
District Court against Descartes Systems/Endgame Solutions for
non-performance under a professional services agreement. In the suit,
the Company alleged that the vendor did not adequately perform the
services rendered in connection with approximately $500,000 of unpaid
billings. Descartes filed a motion to dismiss the case arguing that
the Vermont Federal District Court is not the proper jurisdiction due
to the fact that Descartes is located in Ontario Canada and that the
case should be arbitrated there.
In an order dated April 11, 2001, the District Court granted
Descartes' Motion to dismiss the case. In September 2002, the parties
agreed to limit damages to $200,000 for the Company and $400,000 to
Descartes and agreed to binding arbitration. In January 2003, the
Company agreed to pay $50,000 to Descartes in full settlement of the
litigation. In conjunction with the settlement, the parties released
each other from any further liability in the case. A gain of $150,000
was recognized in the first quarter of 2003 since the Company had set
up a reserve for settlement of the suit that exceeded the final amount
paid.
10. SUBSEQUENT EVENTS
Senior Debt Refinancing
On March 5, 2003 the Company refinanced its credit facility with
Webster Bank and other participants. The new credit facility
refinanced $28.5 million of existing senior debt, provides a working
capital line of $6.5 million for a term of two years, and makes
available up to $15 million to be used for acquisitions and the
partial repayment of the outstanding 12% subordinated notes. Of the
$15 million, up to $10 million is available for acquisitions in the
Company's Home and Office delivery segment, and up to $5 million is
available for the repayment of subordinated debt if the Company is
able to achieve specified financial performance targets in fiscal year
2003. If the targets are not met, there would be no further scheduled
principal payments on the subordinated debt until 2008 when the full
senior facility is due.
Compliance with Financial Covenants of the Company's Bank Agreement
The Company's Loan and Security Agreement requires that it be in
compliance with certain financial covenants at the end of each fiscal
quarter. The Company was in compliance with all of its financial
covenants at the end of the first quarter except the debt service
coverage ratio. The bank waived the covenant for the period. The debt
service covenant has been modified in the new banking arrangement
discussed above. Under the new formula, the Company is in compliance
with the covenant.
10
PART I - Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto as filed in our Annual Report on Form
10-K for the year ended October 31, 2002.
Forward-Looking Statements
When used in the Form 10-Q and in our future filings with the Securities and
Exchange Commission, the words or phrases "will likely result," "we expect,"
"will continue," "is anticipated," "estimated," "project," "outlook," or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. We caution
readers not to place undue reliance on any such forward-looking statements, each
of which speaks only as of the date made. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. Among
these risks are water supply and bottling capacity constraints in the face of
significant growth, dependence on outside distributors, and reliance on
commodity price fluctuations as they influence raw material pricing. We have no
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.
Results of Operations
During our second fiscal quarter of 2002 we adopted several recent accounting
pronouncements that significantly affect the way we account for sales and
promotional expenses but have no effect on the reported earnings. Traditionally,
we have accounted for certain promotional programs, defined in the
pronouncements, as expenses. Accordingly, we have excluded these allowances from
both sales and operating expenses in our Consolidated Statement of Operations
for the 2002 periods presented herein.
For the Three Months Ended January 31, 2003 (First Quarter)
Sales - Sales for the first quarter of fiscal year 2003 were $15,077,000
compared to $14,692,000 for the same period of fiscal year 2002, an increase of
$385,000, or 3%. We adjusted sales and promotional costs down by $495,000 for
the first quarter of 2002 in accordance with the changes above to be consistent
with 2003 results. The adjustments had no effect on net income for the period.
Sales for the home and office segment for the first quarter of fiscal 2003 were
$11,518,000 compared to $11,555,000 for the corresponding period of fiscal year
2002, a decrease of $37,000. The decrease was primarily the result of lower
demand for our products and services in this market especially in the core
southern New England area. Of the total home and office sales for the quarter,
water sales totaled $5,448,000, a decrease of 1% from the same period a year ago
and equipment rental was $2,147,000, a decrease of 3% over the combined total
for the same period a year ago. Sales of coffee and other products were
$3,923,000 for the first quarter of fiscal 2003, an increase of 2% compared to
the same period a year ago. Management believes that the overall small decrease
in sales is due to the general slowdown in economic conditions in the
Northeastern United States.
11
Sales for the retail segment for the first quarter of fiscal 2003 were
$3,559,000 compared to $3,137,000 for the corresponding period of fiscal year
2002, an increase of $422,000, or 13%. For the first quarter of the fiscal year,
sales of private label brands increased 60% compared to the same period a year
ago. Growth of private label brands reflects strong demand for the respective
labels in the marketplace. We are continuing our strategy to maintain our
position as a premier private label spring water provider in the Northeastern
United States. Sales of the Vermont Pure brand decreased 52% compared to the
first quarter a year ago. The decrease was a result of decreasing distribution
options in existing markets. Sales of the Hidden Spring brand increased 2% for
the first quarter compared to the same period last year. Average net selling
prices of retail-size products for the three months ended January 31, 2003
decreased 7% compared to the corresponding period in fiscal year 2002. The
decrease in average selling price was primarily attributable to the competitive
nature of the branded product market, lower prices for private label products,
in general, and the addition of a one-gallon size product.
Cost of Goods Sold/Gross Profit - For the three months ended January 31, 2003,
cost of goods sold was $7,398,000 compared to $6,731,000 for the same period in
fiscal 2002, or an increase of 10%. Gross profit for the first quarter of 2003
was $7,679,000 compared to $7,962,000 for the corresponding period a year ago, a
decrease of $283,000, or 4%. As a percentage of sales, gross profit for the
first quarter was 51% in 2003 and 54% in 2002. The decrease in gross profit is a
result of a higher sales mix of retail-size products and a lower gross profit
rate on those products. In addition, home and office related products
experienced higher costs resulting in a lower gross margin. Gross profit for the
home and office segment was $6,694,000, or 58% of sales, in the first quarter of
fiscal 2003 compared to $7,089,000, or 61% of sales, for the comparable period
in 2002. The decrease in gross profit for the home and office segment was
primarily due to a 1% decrease in average selling price per bottle, higher costs
related to the reorganization of production and distribution in the upstate New
York region and higher service costs associated with maintaining a consistent
customer base with lower sales volume per customer. Gross profit for the retail
segment was $985,000, or 28% of sales, in the first quarter of fiscal 2003
compared to $872,000, or 28% of sales, for the comparable period in 2002. The
increase in gross profit for the retail segment was the result of higher sales
volume. Although average selling prices decreased, product costs benefited from
a volume price reduction for bottles for the calendar year 2002 that accrued
during the quarter. This reduction will not be available in future quarters
unless it is probable that certain volume incentives will be attained. The
retail segment continues to experience distribution and price competition in the
marketplace particularly from large multinational food and beverage companies.
Operating Expenses - For the three months ended January 31, 2003, compared to
the corresponding period in fiscal year 2002, total operating expenses were
$6,413,000 and $6,453,000, respectively, a decrease of $40,000. Selling, general
and administrative expenses ("SG&A") increased by $23,000, or 1%, in the first
quarter compared to the corresponding period a year ago. The increase in SG&A
was primarily due to increased legal, accounting, and other outside services
related to our status as a public company. SG&A expenses for the quarter were
$4,964,000 for the home and office segment in the first quarter of 2003 compared
to $5,035,000 for the same period in the prior year. Included in the home and
office segment is a gain of $150,000 from the settlement of a lawsuit with a
former software provider. The gain was derived from reversal of the unused
portion of a reserve for settlement of the suit. SG&A expenses for the retail
segment was $1,074,000 for the retail segment in the first quarter compared to
$980,000 for the same period a year ago, an increase of 10%. This increase was a
result of higher freight and warehouse costs related to increased sales.
Advertising and promotional expenses decreased $27,000, or 8%, during the first
quarter of 2003 compared to the corresponding period a year earlier. The
decrease was primarily due to a decrease in advertising in the retail segment as
result of a higher mix of private label products. Advertising costs in the home
and office segment totaled $194,000 in the period compared to $197,000 a year
ago. Promotion and advertising for the retail segment totaled $106,000 in the
period compared to $130,000 a year ago.
12
For the first quarter of fiscal year 2003, amortization decreased $21,000 to
$36,000 from $58,000 for the same period a year ago. The decrease was a result
of the expiration of the term of certain agreements associated with acquisitions
in prior years.
Income from Operations - Income from operations for the first quarter of fiscal
2003 was $1,266,000 as compared to $1,508,000 for the corresponding period last
year, a decrease of $242,000, or 16%. The decrease in income is primarily the
result of higher cost of sales. Income from operations in the home and office
segment decreased to $1,462,000 in the first quarter of 2003 from $1,747,000 in
the first quarter of 2002 primarily because of lower sales, a lower gross margin
percentage, and higher operating expenses. The loss from operations in the
retail segment improved to $196,000 in the first quarter of 2003 compared to a
loss of $239,000 in the first quarter of 2002. The decrease in the loss is
attributable to higher sales for the period.
Other Income/Expense - Interest expense decreased $98,000 to $1,087,000 in the
first quarter of fiscal 2003 from $1,185,000 in the first quarter of fiscal year
2002. The decrease in interest expense was a result of significantly lower
interest rates on the Company's senior debt as well as lower total debt. We
recognized other income of $204,000 in the first quarter 2002 on the sale of a
trademark.
Income Before Income Taxes - Income before taxes for the three months ended
January 31, 2003 was $183,000 compared to income before taxes of $527,000 for
the corresponding period last year. The decrease is attributable to lower sales
and higher cost of sales.
Income Tax/Net Income - We accrued income tax expense at an effective rate of
approximately 40% for the quarters ended January 31, 2003 and 2002 resulting in
tax expense of $76,000 and $217,000, respectively. Net income for the quarter
was $107,000 in 2003 compared to $310,000 in 2002, a decrease of $203,000, or
65%.
13
Liquidity and Capital Resources
As of January 31, 2003 we had working capital of $3,935,000 compared to
$3,774,000 on October 31, 2002, an increase of $161,000. The small increase in
working capital was generated by positive cash flow from operations and a
decrease in inventory netted with a reduction in accounts payable and accrued
expenses. We used $691,000 for equipment purchases during the quarter. Our
working capital requirements for capital expenditures have diminished this year
after installation of a second bottling line in 2002. Substantially all capital
spending in the first quarter was for equipment used in the normal course of
business. The most significant of these items are bottles, coolers and brewers.
We borrowed up to $1,800,000 from our operating line of credit as a source of
cash during the three month period to fulfill operating and capital needs. As of
January 31, 2003, there was an outstanding balance of $750,000 as well as
$636,000 committed for letters of credit on the operating line. In addition,
regularly scheduled principal payments continued to be made on senior debt.
During the first quarter of 2003, we paid $1,210,000 for scheduled debt
repayments to Webster Bank. We were in compliance with all of our financial
covenants at the end of the first quarter except the debt service coverage
ratio. The bank waived the covenant for the period. The debt service covenant
has been modified in the new banking arrangement discussed above. Under the new
formula, we are in compliance with the covenant.
On March 5, 2003 we refinanced our credit facility with Webster Bank and other
participants. The new credit facility refinances $28.5 million of existing
senior debt, provides a working capital line of $6.5 million for a term of two
years, and makes available up to $15 million to be used for acquisitions and the
partial repayment of our outstanding 12% subordinated notes. Of the $15 million,
up to $10 million is available for acquisitions in our Home and Office delivery
segment, and up to $5 million is available for the repayment of subordinated
debt if we are able to achieve specified financial performance targets in fiscal
year 2003. If the targets are not met, there would be no further scheduled
principal payments on the subordinated debt until 2008 when the full senior
facility is paid. We expect that cash on hand and the cash generated from future
operations combined with the operating line of credit with Webster Bank will
provide sufficient capital for routine operations and growth in the future.
However, no assurance can be given that this will be the case and that adequate
financing at reasonable interest rates will be secured if more cash is needed.
Our deferred tax asset was reduced by $64,000 as a result current tax liability.
We have $2,771,000 remaining as a balance reflecting the cumulative current
benefit of future tax loss carryforwards. We expect this amount to be recognized
over the next two years.
We continue to pursue an active program of evaluating acquisition opportunities
in our existing home and office markets. If the right opportunities become
available, we anticipate using our capital resources and financing from outside
sources to complete desirable acquisitions.
14
Recent economic conditions have provided both opportunities and challenges. As
noted, poor economic conditions resulted in decreased sales in the home and
office segment. Continued negative economic changes in the northeastern United
States may adversely affect our financial results in the future. Inflation has
had no material impact on our performance. Since we have relied on debt to
finance our acquisition strategy, low market interest rates have significantly
reduced our interest costs. While interest rates are expected to stay low in the
immediate future and until economic conditions improve, we continue to be
exposed to market rates. See item 3 for a discussion of interest rate risk.
15
PART I - Item 3
QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to the Company's operations result primarily from changes
in interest rates and commodity prices.
Interest Rate Risks
At January 31, 2003, we had approximately $12,100,000 of long term debt subject
to variable interest rates. Under the loan and security agreement with Webster
Bank, we paid interest at a rate of LIBOR plus a margin of 1.5% through March 5,
2003. The margin was adjusted to 2% on March 5, 2003 based on the new financing
arrangement with Webster Bank. A hypothetical 100 basis point increase in the
LIBOR rate would result in an additional $121,000 of interest expense on an
annualized basis. Conversely, a decrease would result in a proportionate
interest cost savings.
We use interest rate "swap" agreements to curtail variable interest rate risk.
On November 3, 2000, we entered into a swap agreement with Webster Bank to fix
$8,000,000 of our long term debt at 8.82% interest for three years. On April 2,
2001, we entered into a swap agreement with Webster Bank to fix an additional
$4,000,000 of our long term debt at 8.53% interest for three years. On July 24,
2001, we entered into a swap agreement with Webster Bank to fix an additional
$4,000,000 of our long term debt at 7.25% interest for three years.
In aggregate, at our current applicable margin, we have fixed the interest rate
on this $16,000,000 of debt at 8% over the next eighteen months. Currently, this
is above market rates though the agreements are based on three year rate
projections. The swaps are intended to stabilize our cash flow and expenses but
ultimately may cost more or less in interest than if we had carried all of our
debt at a variable rate over the swap term. Our new financing arrangement
requires us to fix at least half of our outstanding senior debt. Future low
rates may compel us to fix the interest rate on a higher portion of our senior
debt in order to further stabilize cash flow and expenses.
Commodity Price Risks
Plastic - PET
In December 2002, we executed a new four year agreement with our bottle
supplier. The contract allows the vendor to pass-on to us any resin price
increases. These prices are related to supply and demand market factors for PET
and, to a lesser extent, the price of petroleum, an essential component of PET.
A hypothetical resin price increase of $.05 per pound would result in an
approximate price increase per bottle of $.002 or, at current volume levels,
$200,000 a year.
Coffee
The cost of our coffee purchases are dictated by commodity prices. We enter into
contracts to mitigate market fluctuation of these costs by fixing the price for
certain periods. Currently we have fixed the price of our anticipated supply
through June 2003 at "green" prices ranging from $.61-$.74 per pound. We are not
insulated from price fluctuations beyond that date. At our existing sales
levels, an increase in pricing of $.10 per pound would increase our total cost
for coffee $75,000. In this case, competitors that had fixed pricing might have
a competitive advantage.
16
Fuel We own and operate vehicles to deliver product to customers. The cost of
fuel to operate these vehicles fluctuates over time. We have entered into a
contract fixing approximately the cost for 25% of the total fuel anticipated to
be purchased during fiscal 2003. The contract fixes fuel costs for the year
(spread evenly) at an average base cost before additives and taxes of $0.85 per
gallon. Based on consumption in 2002, we anticipate that a $0.10 increase per
gallon in fuel cost would result in an increase to operating costs of
approximately $50,000.
We also pay for fuel indirectly by hiring carriers to deliver product though we
do not have contracts with them. While the impact of a change in prices is less
predictable because of the absence of a contractual arrangement, we know that
fuel prices affect freight rates. Based on experience and estimates, we
anticipate that a $.10 per gallon increase in fuel costs would result in
additional freight cost of approximately $25,000 per year.
Recent geopolitical events have caused increases in fuel prices that have
increased the Company's costs in the first and second quarters of 2003. As
mentioned above, the increase in the cost of petroleum related products also
increases the cost of PET bottles that the Company purchases. If fuel prices
stay elevated for a prolonged period of time, no assurance can be given that the
Company will be able to effectively pass these increased costs to its customers.
PART I - Item 4.
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of management,
including the Chairman and Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of our "disclosure
controls and procedures," which are defined under SEC rules as controls and
other procedures of a company that are designed to ensure that information
required to be disclosed by a company in the reports that it files under the
Exchange Act is recorded, processed, summarized and reported within required
time periods. Based upon that evaluation, the Chairman and Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective.
(b) Changes in Internal Controls
There were no significant changes in our internal controls or other factors that
could significantly affect these controls subsequent to the date of their
evaluation.
17
PART II - Other Information
Item 1 - Legal Proceedings
In March of 1999, we contracted with Descartes Systems Group, Inc., or
Descartes, an Ontario corporation, to provide professional services related to
the design, installation, maintenance, operation and training for computer
hardware and software. The computer hardware and software was marketed to us as
a product that would provide computerized management of our direct distribution
system through our delivery network, and associated billing and accounting
functions.
On July 27, 2000, we filed a lawsuit against Descartes and an affiliate of
Descartes entitled Vermont Pure Holdings, Ltd. v. Descartes Systems Group, Inc.
and Endgame Systems, Inc. f/k/a DSD Solutions, Inc., in the United States
District Court for the District of Vermont. The action is docketed as Civil
Action No. 2:00-CV-269. We sought monetary damages against Descartes and Endgame
in an amount exceeding $100,000 for our losses associated with failures of the
systems and services provided by the defendants. In addition, we sought a
declaratory judgment invalidating the defendant's demand for payments in the
amount of $411,841.
The defendants filed a Motion to Dismiss the case arguing that the Federal court
does not have the proper jurisdiction and the case should be arbitrated in
Ontario, Canada. In an order dated April 11, 2001, the District Court granted
Descartes' Motion to Dismiss the case. Subsequently, the parties reached an
agreement to arbitrate the case in the State of Florida and agreed to limit
damages to $200,000 for the Company and $400,000 to Descartes.
In January, 2003 the two parties settled the case and executed a general
release. As a condition of the settlement, we made a final payment of $50,000 to
Descartes.
Item 2 - Changes in Securities
(a) None.
(b) None.
(c) None.
Item 3 - Defaults upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------
None.
Item 5 - Other Information
None.
18
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Merger and Contribution by and among
Vermont Pure Holdings, Ltd., Crystal Rock Spring Water
Company, VP Merger Parent, Inc., VP Acquisition Corp., and
the stockholders named therein, dated as of May 5, 2000.
(Incorporated by reference to Appendix A to the Form S-4
Registration Statement filed by Vermont Pure Holdings, Ltd.,
f/k/a VP Merger Parent, Inc., File No. 333-45226, on
September 6, 2000 (the "S-4 Registration Statement").)
2.2 Amendment to Agreement and Plan of Merger and Contribution
by and among Vermont Pure Holdings, Ltd., Crystal Rock
Spring Water Company, VP Merger Parent, Inc., VP Acquisition
Corp., and the stockholders named therein, dated as of
August 28, 2000. (Incorporated by reference to Exhibit 2.1
of the S-4 Registration Statement.)
2.3 Amendment to Agreement and Plan of Merger and Contribution
by and among Vermont Pure Holdings, Ltd., Crystal Rock
Spring Water Company, VP Merger Parent, Inc., VP Acquisition
Corp. and the stockholders named therein, dated as of
September 20, 2000. (Incorporated by reference to Exhibit
2.2 of the Report on Form 8-K filed by the Company on
October 19, 2000 (the "Merger 8-K").)
3.1 Certificate of Incorporation of the Company. (Incorporated
by reference to Exhibit B to Appendix A to the Proxy
Statement included in the S-4 Registration Statement.)
3.2 Certificate of Amendment of Certificate of Incorporation of
the Company filed October 5, 2000. (Incorporated by
reference to Exhibit 4.2 of the Merger 8-K.)
3.3 By-laws of the Company. (Incorporated by reference from
Exhibit 3.3 to Form 10-Q for the Quarter ended July 31,
2001.)
4.1 Registration Rights Agreement among the Company, Peter K.
Baker, Henry E. Baker, John B. Baker and Ross Rapaport.
(Incorporated by reference to Exhibit 4.6 of the Merger
8-K.)
19
Exhibit
Number Description
10.1* 1993 Performance Equity Plan. (Incorporated by reference
from Exhibit 10.9 of Registration Statement 33-72940.)
10.2* 1998 Incentive and Non-Statutory Stock Option Plan, as
amended. (Incorporated by reference to Appendix C to the
Proxy Statement included in the S-4 Registration statement.)
10.3* 1999 Employee Stock Purchase Plan. (Incorporated by
reference to Exhibit A of the 1999 Proxy Statement of
Vermont Pure Holdings, Ltd.)
10.4* Employment Agreement between the Company and Timothy G.
Fallon. (Incorporated by reference to Exhibit 10.13 of the
S-4 Registration Statement.)
10.5* Employment Agreement between the Company and Bruce S.
MacDonald. (Incorporated by reference to Exhibit 10.14 of
the S-4 Registration Statement.)
10.6* Employment Agreement between the Company and Peter K. Baker.
(Incorporated by reference to Exhibit 10.15 of the S-4
Registration Statement.)
10.7* Employment Agreement between the Company and John B. Baker.
(Incorporated by reference to Exhibit 10.16 of the S-4
Registration Statement.)
10.8* Employment Agreement between the Company and Henry E. Baker.
(Incorporated by reference to Exhibit 10.17 of the S-4
Registration Statement.)
10.9 Lease of Buildings and Grounds in Watertown, Connecticut
from the Baker's Grandchildren Trust. (Incorporated by
reference to Exhibit 10.22 of the S-4 Registration
Statement.)
10.10 Lease of Grounds in Stamford, Connecticut from Henry E.
Baker. (Incorporated by reference to Exhibit 10.24 of the
S-4 Registration Statement.)
10.11 Lease of Building in Stamford, Connecticut from Henry E.
Baker. (Incorporated by reference to Exhibit 10.23 of the
S-4 Registration Statement.)
10.12 Loan and Security Agreement between the Company and Webster
Bank, M &T Bank, Banknorth Group, and Rabobank dated March
5, 2003.
10.13
Form of Term Note from the Company to Webster Bank and
participants dated March 5, 2003.
20
Exhibit
Number Description
10.14 Amended and Restated Subordinated Promissory Note from the
Company to Henry E. Baker dated March 5, 2003.
10.15 Amended and Restated Subordinated Promissory Note from the
Company to Joan Baker dated March 5, 2003.
10.16 Amended and Restated Subordinated Promissory Note from the
Company to John B. Baker dated March 5, 2003.
10.17 Amended and Restated Subordinated Promissory Note from the
Company to Peter K. Baker dated March 5, 2003.
10.18 Amended and Restated Subordinated Promissory Note from the
Company to Ross S. Rapaport, Trustee, dated March 5, 2003.
10.19 Subordination and Pledge Agreement from Henry E. Baker to
Webster Bank dated March 5, 2003.
10.20 Subordination and Pledge Agreement from Joan Baker to
Webster Bank dated March 5, 2003.
10.21 Subordination and Pledge Agreement from John B. Baker to
Webster Bank dated November 1, 2001.
10.22 Subordination and Pledge Agreement from Peter K. Baker to
Webster Bank dated March 5, 2003.
10.23 Subordination and Pledge Agreement from Ross S. Rapaport,
Trustee, to Webster Bank dated March 5, 2003.
10.24** Agreement between Vermont Pure Springs, Inc. and
Zuckerman-Honickman Inc. dated December 12, 2002.
(Incorporated by reference to Exhibit 10.24 of Form 10-K for
the year ended October 31, 2002.)
10.25 Form of Acquisition/Capital Line of Credit Note from the
Company to Webster Bank and participants dated March 5,
2003.
10.26 Form of Revolving Line of Credit Note from the Company to
Webster Bank and participants dated March 5, 2003.
21
Exhibit
Number Description
10.27*** Form of Indemnification Agreements, dated November 1, 2002,
between the Company and the following Directors and
Officers:
Henry E. Baker
John B. Baker
Peter K. Baker
Phillip Davidowitz
Timothy G. Fallon
Robert C. Getchell
David Jurasek
Carol R. Lintz
Bruce S. MacDonald
David R. Preston
Ross S. Rapaport
Norman E. Rickard
Beat Schlagenhauf
(Incorporated by reference to Exhibit 10.27 of Form 10-K for
the year ended October 31, 2002.)
10.28 Waiver from Webster Bank in reference to the debt service
coverage covenant for the period ending January 31, 2002
pursuant to the Amended and Restated Loan and Security
Agreement and extension to the Amended and Restated Line of
Credit Note between the Company and Webster Bank.
99.1 Certification of Chief Executive Officer pursuant to 18
U.S.C.ss.1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley act of 2002.
99.2 Certification of Chief Financial Officer pursuant to 18
U.S.C.ss.1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley act of 2002.
* Relates to compensation
** Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. ***
The form contains all material information concerning the agreement and the only
differences are the name and the contact information of the director or officer
who is party to the agreement.
(b) Reports on Form 8-K
None.
22
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: March 17, 2003
Randolph, Vermont
VERMONT PURE HOLDINGS, LTD.
By: /s/ Bruce S. MacDonald
Bruce S. MacDonald
Vice President, Chief Financial Officer
(Principal Accounting Officer and Principal
Financial Officer)
23
CERTIFICATION
PURSUANT TO SECTION 302
OF THE
SARBANES-OXLEY ACT OF 2002
I, Timothy G. Fallon, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vermont Pure Holdings,
Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: March 17, 2003
/s/ Timothy G. Fallon
Timothy G. Fallon
Chief Executive Officer
24
CERTIFICATION
PURSUANT TO SECTION 302
OF THE
SARBANES-OXLEY ACT OF 2002
I, Bruce S. MacDonald, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vermont Pure Holdings,
Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: March 17, 2003
/s/ Bruce S. MacDonald
Bruce S. MacDonald
Chief Financial Officer
25
Vermont Pure Holdings, Ltd.
Quarterly Report on Form 10-Q
for the Quarter Ended January 31, 2003
Exhibits Filed Herewith
Exhibit
Number Description
10.12 Loan and Security Agreement between the Company and Webster
Bank, M &T Bank, Banknorth Group, and Rabobank dated March
5, 2003.
10.13 Form of Term Note from the Company to Webster Bank dated
March 5, 2003.
10.14 Amended and Restated Subordinated Promissory Note from the
Company to Henry E. Baker dated March 5, 2003.
10.15 Amended and Restated Subordinated Promissory Note from the
Company to Joan Baker dated March 5, 2003.
10.16 Amended and Restated Subordinated Promissory Note from the
Company to John B. Baker dated March 5, 2003.
10.17 Amended and Restated Subordinated Promissory Note from the
Company to Peter K. Baker dated March 5, 2003.
10.18 Amended and Restated Subordinated Promissory Note from the
Company to Ross S. Rapaport, Trustee, dated March 5, 2003.
10.19 Subordination and Pledge Agreement from Henry E. Baker to
Webster Bank dated March 5, 2003.
10.20 Subordination and Pledge Agreement from Joan Baker to
Webster Bank dated March 5, 2003.
10.21 Subordination and Pledge Agreement from John B. Baker to
Webster Bank dated November 1, 2001.
10.22 Subordination and Pledge Agreement from Peter K. Baker to
Webster Bank dated March 5, 2003.
10.23 Subordination and Pledge Agreement from Ross S. Rapaport,
Trustee, to Webster Bank dated March 5, 2003.
10.25 Form of Acquisition/Capital Line of Credit Note from the
Company to Webster Bank and participants dated March 5,
2003.
26
Exhibit
Number Description
10.26 Form of Revolving Line of Credit Note from the Company to
Webster Bank and participants dated March 5, 2003
10.28 Waiver from Webster Bank in reference to the debt service
coverage covenant for the period ending January 31, 2002
pursuant to the Amended and Restated Loan and Security
Agreement and extension to the Amended and Restated Line of
Credit Note between the Company and Webster Bank.
99.1 Certification of Chief Executive Officer pursuant to 18
U.S.C.ss.1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley act of 2002.
99.2 Certification of Chief Financial Officer pursuant to 18
U.S.C.ss.1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley act of 2002.
27
Exhibit 10.12
LOAN AND SECURITY AGREEMENT
This Agreement made as of the 5th day of March, 2003, by and among VERMONT
PURE HOLDINGS, LTD., a Delaware corporation with an office at Catamount
Industrial Park, Route 66, Randolph, Vermont 05060 ("Holdings"), CRYSTAL ROCK
SPRING WATER COMPANY, a Connecticut corporation with an office at 1050
Buckingham Street, Watertown, Connecticut 06795 ("Crystal Rock"), and VERMONT
PURE SPRINGS, INC., a Delaware corporation with an office at Catamount
Industrial Park, Route 66, Randolph, Vermont 05060 ("VPS", and collectively with
Holdings and Crystal Rock, the "Obligors"), each of the lenders which is a
signatory hereto (individually, together with its successors and assigns, a
"Lender" and collectively, the "Lenders") and WEBSTER BANK, a federally
chartered savings bank with an office at 145 Bank Street, Waterbury, Connecticut
06702, as agent for the Lenders (in such capacity, together with its successors
and assigns in such capacity, the "Agent").
WHEREAS, the Obligors have requested that the Lenders provide a term loan
in the amount of $28,500,000 to refinance existing debt, an acquisition/capital
asset line of credit in an amount up to $15,000,000 to fund the acquisition of
entities or capital assets and the repayment of Subordinated Debt and a
revolving line of credit in an amount up to $6,500,000 to fund short term
working capital needs; and
WHEREAS, the Lenders are willing to provide such loans on the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION 1. Definitions, Accounting Terms and Financial Covenants.
-----------------------------------------------------
1.1 Definitions. For purposes of this Agreement, the following terms
shall have the meanings specified below:
a. "Acquisition" means the acquisition of all the stock or other
ownership interests of, or all or substantially all of the
assets or a line of business of, any entity.
b. "Acquisition/Capital Asset Line of Credit" means the
$15,000,000 credit facility evidenced by the Acquisition/
Capital Asset Line of Credit Notes.
c. "Acquisition/Capital Asset Line of Credit Advance" shall mean
an Acquisition/Capital Asset Line of Credit Advance as
defined in Section 2.3(d).
d. "Acquisition/Capital Asset Line of Credit Notes" means the
promissory notes of Obligors payable to the order of the
Lenders dated the Date of Closing in an aggregate original
principal amount of up to $15,000,000, as the same may be
amended or amended and restated from time to time.
e. "Additional Collateral" means (i) all General Intangibles,
including Payment Intangibles and Software and all Supporting
Obligations related thereto, (as such terms are defined in
the Uniform Commercial Code as in effect in Connecticut from
time to time) of every kind and description of the Obligors,
including without limitation federal, state and local tax
refund claims of all kinds, whether now existing or hereafter
arising; (ii) all of Obligors' Deposit Accounts, Letter of
Credit Rights and all Supporting Obligations related thereto
(as such terms are defined in the Uniform Commercial Code as
in effect in Connecticut from time to time), whether now
owned or hereafter created, wherever located, together with
the rights to withdraw from said Deposit Accounts and make
deposits to the same and the right to draw under Letters of
Credit; (iii) all monies, securities, instruments, cash and
other property of Obligors and the proceeds thereof, now or
hereafter held or received by, or in transit to, any Lender
from or for Obligors, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of
Obligors' deposits (general or special, balances, sums,
proceeds and credits of Obligors with any Lender at any
time existing); (iv) all interests in real property held or
owned by Obligors, including all leasehold interests; (v) all
rights under contracts and license agreements for water; (vi)
all books, records, customer lists, ledger cards, computer
programs, computer tapes, disks, printouts and records, and
other property and general intangibles at any time evidencing
or relating to any of the foregoing, whether now in existence
or hereafter created; (vii) all other personal property and
fixtures of the Obligors, whether now existing or hereafter
arising or created; and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing.
f. "Additional Costs" shall mean Additional Costs as defined in
Section 2.8(e).
g. "Adirondack" means Adirondack Coffee Service, Inc., a New
York corporation.
h. "Affiliate" means (i) any person or entity directly or
indirectly controlling or controlled by or under direct or
indirect common control with any Obligor or any other
obligor of the Obligations, as the case may be (including,
without limitation, any respective director or executive
officer of any Obligor or any other obligor of the
Obligations, as the case may be), (ii) any spouse, immediate
family member or other relative who has the same principal
residence of any person described in clause (i) above, (iii)
any trust in which any such person or entity described in
clauses (i) or (ii) above has a beneficial interest and (iv)
any corporation or other organization of which any such
persons or entities described in clauses (i) or (ii) above
collectively own more than ten percent (10%) of the voting
securities of such entity.
2
i. "Agency Agreement" means the Agency Agreement among the
Lenders and the Agent dated the Date of Closing, as the same
may be amended from time to time.
j. "Amortization Date" means the date two years from the Date of
Closing.
k. "Applicable Law" shall mean the law in effect as of the date
hereof provided, however, that in the event there is a
change in the law which results in a higher permissible rate
of interest, then this Agreement and the Notes shall be
governed by such new law as of its effective date.
l. "Applicable Margin" means:
(i) 2.25% if the ratio of Senior Funded Debt to
EBITDA is greater than 2.5 to 1.0;
(ii) 2.00% if the ratio of Senior Funded Debt to
EBITDA is greater than 2.0 to 1.0 and less
than or equal to 2.5 to 1.0;
(iii) 1.75% if the ratio of Senior Funded Debt to
EBITDA is greater than 1.5 to 1.0 and less
than or equal to 2.0 to 1.0; and
(iv) 1.25% if the ratio of Senior Funded Debt to
EBITDA is less than or equal to 1.5 to 1.0.
The Applicable Margin on the date of this Agreement
is 2.00% and shall continue to be the Applicable
Margin until a new Applicable Margin is determined
and goes into effect as hereinafter set forth. A new
Applicable Margin shall be determined semiannually:
(i) 120 days after the end of each fiscal year of
Holdings, commencing with the fiscal year ending
October 31, 2002, based upon the audited fiscal year
end financial statements for that fiscal year
provided to Agent within 90 days after the end of
that fiscal year as required in this Agreement, and
(ii) 75 days after the end of each second fiscal
quarter of Holdings, based upon the quarterly
financial statements for that second fiscal quarter
provided to Agent within 45 days after the end of
that fiscal quarter as required in this Agreement.
Such Applicable Margin will automatically go into
effect for each Interest Period commencing after the
date of determination and shall continue in effect
until a new Applicable Margin is determined and goes
3
into effect; provided, however, that if the audited
fiscal year end financial statements required in this
Agreement are not provided to Agent within 120 days
after the end of any fiscal year or the second
quarter financial statements required in this
Agreement are not provided to Agent within 75 days
after the end of any second fiscal quarter, as the
case may be, the Agent shall not be required to
adjust the Applicable Margin and the Applicable
Margin that will go into effect for each Interest
Period commencing after that 120th day or 75th day,
as the case may be, shall be 2.25% until a new
Applicable Margin is determined and goes into effect
unless otherwise agreed to by the Lenders.
Notwithstanding the foregoing, when determining the
Applicable Margin on the date of this Agreement and
120 days after October 31, 2002, the amount of Senior
Funded Debt to be used in such determinations shall
be the amount of Senior Funded Debt on the Date of
Closing after giving effect to the funding of the
Loans.
m. "Assignee" shall mean Assignee as defined in Section 9.3.
n. "Business Day" means any day other than a Saturday, Sunday or
day which shall be in the State of Connecticut a legal
holiday or day on which commercial banks in Hartford,
Connecticut are required or authorized by law to close.
o. "Capital Assets" means assets that, in accordance with GAAP,
are required or permitted to be depreciated or amortized on
Holdings' consolidated balance sheet.
p. "Capital Expenditures" mean expenditures for purchase,
acquisition or lease of Capital Assets.
q. "Capital Leases" means capital leases, conditional sales
contracts and other title retention agreements relating to
the purchase or acquisition of Capital Assets.
r. "Code" means the Internal Revenue Code of 1986, as amended, or
any successor federal tax code, and any reference to any
provision shall be deemed to include a reference to any
successor provision or provisions.
s. "Collateral" means Receivables, Inventory, Equipment, Patents,
Trademarks, Investment Property, Additional Collateral, and
the Premises, but excluding personal property subject to a
purchase money lien permitted by Section 6.1 hereof to the
extent the terms of such purchase money lien prohibit further
liens or encumbrances.
4
t. "Crystal-Waterville" means Crystal-Waterville, Inc., a
Connecticut corporation.
u. "Current Assets" means current assets determined in accordance
with GAAP.
v. "Current Liabilities" means current liabilities determined in
accordance with GAAP.
w. "Current Maturities of Long Term Debt" means the current
maturity of long term Indebtedness paid or payable during the
applicable period.
x. "Current Ratio" means the ratio of Current Assets to Current
Liabilities.
y. "Date of Closing" means March 5, 2003.
z. "Debt Service Coverage Ratio" means, for the relevant period,
the ratio of (i)(A) EBITDA, minus (B) Dividends, minus (C)
Capital Expenditures to the extent such Capital Expenditures
are not financed, plus (or minus) (D) the net increase
(or decrease) in customer deposits, plus (E) proforma EBITDA
agreed to in writing by the Agent relating to new
Acquisitions as set forth in Section 6.17 hereof, minus (F)
cash taxes to (ii) (A) Current Maturities of Long Term Debt,
plus (B) the current portion of Capital Lease payments, plus
(C) interest expense on all Indebtedness which is not
Subordinated Debt plus (D) interest expense paid on
Subordinated Debt.
aa. "Dividends" means the payment of any dividend or other
distribution by Holdings in respect of its capital stock in
cash or other property (excepting distributions in the form
of such stock) or the redemption or acquisition of any such
stock.
bb. "Documentation Agent" means M&T Bank in such capacity,
together with its successors and assigns in such capacity.
cc. "EBITDA" means, for the relevant period, income from
continuing operations (excluding extraordinary items of
income and the write-down of closing costs associated with
loans refinanced by the Loans but including any extraordinary
items of loss) before deduction for interest and taxes,
depreciation and amortization.
dd. "Environmental Laws" means any and all applicable federal,
state and local environmental, health or safety statutes,
laws, regulations, rules, ordinances, guidances, policies and
rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies,
bureaus or departments which may now or hereafter have
jurisdiction over any of the Obligors or any of the Obligors'
property and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common
law rulings and determinations, relating to injury to, or the
5
protection of, real or personal property or human health or
the environment, including, without limitation, all
requirements pertaining to reporting, licensing, permitting,
investigation, remediation and removal of emissions,
discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants
whether solid, liquid or gaseous in nature, into the
environment or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of such Hazardous Materials, chemical substances,
pollutants or contaminants.
ee. "Equipment" means all Equipment, Farm Products and Fixtures
(as such terms are defined in the Uniform Commercial Code as
in effect in Connecticut on the date of this Agreement),
including all machinery, equipment, furniture, fixtures,
tools, parts, supplies and motor vehicles, now owned and
hereafter acquired, by Obligors of whatsoever name, nature,
kind or description, wherever located, and all additions and
accessions thereto and replacements or substitutions
therefore, and all proceeds thereof and all proceeds of any
insurance thereon.
ff. "ERISA" means the Employee Retirement Income Security Act of
1974 and all rules and regulations promulgated pursuant
thereto, as the same may from time to time be supplemented or
amended.
gg. "Event of Default" shall have the meaning assigned in Section
7 hereof.
hh. "Excelsior" means Excelsior Spring Water Company, Inc., a New
York corporation.
ii. "GAAP" means generally accepted accounting principles in the
United States of America, as from time to time in effect.
jj. "Guaranties" means the Guaranty Agreements dated the Date of
Closing executed by the Guarantors in favor of Lenders, as
the same may be amended, amended and restated or reaffirmed
from time to time.
kk. "Guarantors" means Adirondack, Excelsior and Crystal-
Waterville.
6
ll. "Hazardous Material" means any substance: (i) the presence of
which requires or may hereafter require notification,
investigation, monitoring or remediation under any
Environmental Law; (ii) which is or becomes defined as a
"hazardous waste", "hazardous material" or "hazardous
substance" or "toxic substance" or "pollutant" or
"contaminant" under any present or future Environmental Law
or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.) and any
applicable local statutes and the regulations promulgated
thereunder; (iii) which is toxic, explosive, corrosive,
reactive, ignitable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and is or becomes regulated
by any governmental authority, agency, department,
commission, board, agency or instrumentality of any foreign
country, the United States, any state of the United States,
or any political subdivision thereof to the extent any of the
foregoing has or had jurisdiction over any Obligor or any
Obligor's property; or (iv) without limitation, which
contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls.
mm. "Indebtedness" means (i) obligations for borrowed money, (ii)
obligations representing the deferred purchase price of
property other than accounts payable arising in the ordinary
course of Obligors' business on terms customary in the trade,
(iii) obligations, whether or not assumed, secured by a lien
on, or payable out of the proceeds or production from,
property now or hereafter owned or acquired by Obligors, (iv)
obligations which are evidenced by bonds, debentures, notes,
acceptances, or other instruments, (v) Capital Lease
obligations, (vi) guaranties of the obligations of other
parties, other than in connection with the endorsement of
negotiable instruments in the ordinary course of business,
and (vii) obligations under letters of credit and
reimbursement agreements.
nn. "Indemnifiable Liabilities" shall mean Indemnifiable
Liabilities as defined in Section 9.1.
oo. "Indemnitees" shall mean Indemnitees as defined in Section
9.1.
pp. "Interest Period" means with respect to any amount bearing
interest at the LIBOR Rate, an available period of one (1)
month, provided that:
(i) if any Interest Period would otherwise end
on a day that is not a Business Day, such
Interest Period shall end on the immediately
following Business Day unless such Business
Day would be in the next month in which case
such Interest Period shall end on the
preceding Business Day; and
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a
day for which there is no numerically
corresponding day in the calendar month at
the end of such Interest Period) shall end
on the last Business Day of a calendar
month.
7
qq. "Inventory" means all Inventory and Goods and all Supporting
Obligations related thereto (as such terms are defined in the
Uniform Commercial Code as in effect in Connecticut from time
to time) of whatsoever name, nature, kind or description now
owned and hereafter acquired by Obligors, wherever located,
including without limitation all contract rights with respect
thereto and documents representing the same, all goods held
for sale or lease or to be furnished under contracts of
service, finished goods, raw materials, materials used or
consumed by Obligors, parts, supplies, and all wrapping,
packaging, advertising and shipping materials and any
documents relating thereto, and all labels and other devices,
names and marks affixed or to be affixed thereto for purposes
of selling or of identifying the same or the seller or
manufacturer thereof, and all right, title and interest of
Obligors therein and thereto, and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing.
rr. "Investment Property" means all investment property (as such
term is defined in the Uniform Commercial Code as adopted in
Connecticut from time to time) of whatever type or nature now
owned or hereafter acquired by the Obligors, including
without limitation, all certificated securities, all
uncertificated securities, all security entitlements, all
security accounts, all commodity contracts, all commodity
accounts and all financial assets of every type and
nature and all rights thereto or therein, and all financial
accounts of every type and nature and all rights thereto or
therein, and all Supporting Obligations (as such term is
defined in the Uniform Commercial Code as adopted in
Connecticut from time to time) related thereto and all
proceeds and products thereof, including without limitation,
all insurance proceeds and fidelity bond proceeds related
thereto.
ss. "IRS" means the United States Internal Revenue Service.
tt. "Lender's Commitment Percentage" shall mean for each Lender,
the percentage listed next to such Lender's name on Schedule
1.1tt.
uu. "LIBOR Rate" means, with respect to any LIBOR Rate Loan for
each applicable Interest Period, the rate per annum
determined by the Agent to be equal to the quotient of (a)
the London Interbank Offered Rate for such LIBOR Rate Loan
for such Interest Period, divided by (b) one (1) minus the
Reserve Percentage for such Interest Period, expressed as
follows:
LIBOR Rate = London Interbank Offered Rate
1 - Reserve Percentage
vv. "LIBOR Rate Loan" means any Loan or portion thereof the
principal amount of which bears interest at a rate equal to
the LIBOR Rate plus the Applicable Margin.
8
ww. "Loan Account" shall mean Loan Account as defined in Section
2.2 (e)(1).
xx. "Loans" means the Term Loan, the Revolving Line of Credit and
the Acquisition/Capital Asset Line of Credit.
yy. "Loan Documents" means this Agreement, the Notes, the
Guaranties and all other documents evidencing, securing,
guarantying or relating to the Loans.
zz. "London Interbank Offered Rate" means, with respect to any
applicable Interest Period, the rate per annum (rounded
upward, if necessary, to the nearest 1/32 of one percent) as
determined on the basis of the offered rates for deposits in
U.S. dollars, for a principal amount and having a borrowing
date and a maturity date comparable to such Interest Period
for such amount which appears on the Telerate page 3750 as of
approximately 11:00 a.m. London time on the day that is two
London Banking Days preceding the first day of such Interest
Period; provided, however, if the rate described above does
not appear on the Telerate System on any applicable interest
determination date, the London Interbank Offered Rate shall
be the rate (rounded upwards as described above, if
necessary) for deposits in U.S. dollars for a period and a
principal amount substantially equal to the interest period
on the Reuters Page "LIBO" (or such other page as may replace
the LIBO Page on that service for the purpose of displaying
such rates) for such a principal amount, as of approximately
11:00 a.m. (London Time), on the day that is two (2) London
Banking Days prior to the beginning of such Interest Period.
"Banking Day" shall mean, in respect of any city, any date on
which commercial banks are open for business in that city. If
both the Telerate and Reuters system are unavailable, then
the rate for that date will be determined on the basis of the
offered rates for deposits in U.S. dollars for a period of
time and a principal amount comparable to such Interest
Period for such principal amount which are offered by four
major banks in the London interbank market selected by the
Agent at approximately 11:00 a.m. London time, on the day
that is two (2) London Banking Days preceding the first day
of such Interest Period. The principal London office of each
of the four major London banks will be requested to provide a
quotation of its U.S. dollar deposit offered rate. If at
least two such quotations are provided, the rate for that
date will be the arithmetic mean of the quotations. If fewer
than two quotations are provided as requested, the rate for
that date will be determined on the basis of the rates quoted
for loans in U.S. dollars to leading European banks for a
period of time and a principal amount comparable to such
Interest Period and such principal amount offered by major
banks in New York City at approximately 11:00 a.m. New York
City time, on the day that is two London Banking Days
preceding the first day of such Interest Period. In the event
that Agent is unable to obtain any such quotation as provided
above, it will be deemed that the LIBOR Rate pursuant to such
Interest Period cannot be determined.
9
aaa. "Managers" means Managers as defined in Section 6.7.
bbb. "Mortgage" means the Open-End Mortgage Deed and Security
Agreement dated the Date of Closing from VPS to Agent
covering the Premises, as the same may be amended or amended
and restated from time to time.
ccc. "Net Income" means net income as determined in accordance with
GAAP.
ddd. "Net Loss" means net loss as determined in accordance with
GAAP.
eee. "Notice of Borrowing" shall mean Notice of Borrowing as
defined in Section 2.2 (e)(1).
fff. "Notes" means the Term Notes, the Revolving Line of Credit
Notes and the Acquisition/Capital Asset Line of Credit Notes.
ggg. "Obligations" means and includes all loans, advances,
interest, indebtedness, liabilities, obligations, guaranties,
covenants and duties at any time owing by Obligors to any
Lender or the Agent of every kind and description, whether or
not evidenced by any note or other instrument, whether or not
for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter arising, including, but not limited to, the Loans
and all other indebtedness, liabilities and obligations
arising under this Agreement and the other Loan Documents,
all swap agreements and all costs, expenses, fees, charges
and attorneys', paralegals' and professional fees incurred in
connection with any of the foregoing, or in any way connected
with, involving or relating to the preservation, enforcement,
protection or defense of, or realization under this
Agreement, the Notes, any of the other Loan Documents, the
Collateral and the rights and remedies hereunder or
thereunder, including without limitation, all costs and
expenses incurred in inspecting or surveying the Premises, or
conducting environmental studies or tests, and in connection
with any "workout" or default resolution negotiations
involving legal counsel or other professionals and any re-
negotiation or restructuring of any of the Obligations.
hhh. "Patents" means all of Obligors' right, title and interest,
present and future, in and to (a) all letters patent of the
United States or any other country, all right, title and
interest therein and thereto, and all registrations and
recordings thereof, including without limitation
applications, registrations and recordings in the United
States Patent and Trademark Office or in any similar office
or agency of the United States or any state thereof or any
other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Obligors; and (b)
all reissues, continuations, continuations-in-part or
extensions thereof and all licenses thereof; and all proceeds
of the foregoing and all proceeds of any insurance on the
foregoing.
10
iii. "PBGC" means the Pension Benefit Guaranty Corporation.
jjj. "Permitted Encumbrances" means the liens and encumbrances
listed on Schedule 4.5 and those permitted pursuant to
Section 6.1 hereof; provided, however, that none of the
Permitted Encumbrances shall be amended or modified in any
way adverse to any Lender or the Agent without the prior
written consent of Agent.
kkk. "Plan" means any employee benefit plan or other plan
maintained for employees of any of the Obligors or any
related entity covered by Title I of ERISA.
lll. "Premises" means the following real property owned by VPS:
Route 66 Factory, Randolph, VT
Chase Road, Randolph, VT
North Randolph Road, Randolph, VT
Alice E. LaFrance, Route 66, Randolph, VT
(approximately 5 acres) Gary LaFrance, Route 66,
Randolph, VT (approximately 20 acres)
mmm. "Prime Rate" means the variable per annum rate of interest so
designated from time to time by Agent as its prime rate. The
Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate being charged to any
customer.
nnn. "Prime Rate Loan" means any Loan or portion thereof the
principal amount of which bears interest at a rate equal to
the Prime Rate. The interest rate on each Prime Rate Loan
shall change immediately, without notice or demand of any
kind to Obligors, each time that the Prime Rate changes so
that the rate of interest on a Prime Rate Loan is at all
times equal to the Prime Rate.
ooo. "Prior Encumbrances" means the mortgages, security interests,
pledges, liens, encumbrances or other charges listed in
Section A of Schedule 4.5.
ppp. "Property" means all property and assets of Obligors.
11
qqq. "Receivables" means (i) all of Obligors' now owned and
hereafter acquired, present and future, Accounts, Chattel
Paper, Documents, Instruments and Supporting Obligations
related thereto, (as such terms are defined in the Uniform
Commercial Code as in effect in Connecticut from time to
time) and contract rights, including without limitation all
obligations to Obligors for the payment of money, whether
arising out of Obligors' sale of goods or rendition of
services or otherwise (all hereinafter called "Accounts")
and all proceeds of the foregoing and all proceeds of any
insurance on the foregoing; (ii) all of Obligors' rights,
remedies, security and liens, in, to and in respect of the
Accounts, present and future, including without limitation,
rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party, guaranties or other
contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any debtor
or obligor in any way obligated on or in connection with any
Accounts, and credit and other insurance, and all proceeds of
the foregoing and all proceeds of any insurance on the
foregoing; and (iii) all of Obligors' right, title and
interest, present and future, in, to and in respect of all
goods relating to, or which by sale have resulted in,
Accounts, including without limitation all goods described in
invoices or other documents or instruments with respect to,
or otherwise representing or evidencing any Accounts, and all
returned, reclaimed or repossessed goods, and all proceeds of
the foregoing and all proceeds of any insurance on the
foregoing.
rrr. "Reimbursement Agreement" shall mean Reimbursement Agreement
as defined in Section 2.4(b).
sss. "Request for Advance" shall mean Request for Advance as
defined in Section 2.3(e)(1).
ttt. "Reserve Percentage" means the maximum effective percentage in
effect on such day as prescribed by the Board of Governors of
the Federal Reserve System for determining the reserve
requirement (including all basic, supplemental, marginal
and other reserves) which is imposed on member banks of the
Federal Reserve System with respect to "Euro-currency
Liabilities" as defined in Regulation D. With respect to the
LIBOR Rate, any change in the interest rate because of a
change in the Reserve Percentage shall become effective,
without notice or demand of any kind, on the date on which
such change in the Reserve Percentage becomes effective.
uuu. "Revolving Line of Credit" means the $6,500,000 credit
facility evidenced by the Revolving Line of Credit Notes.
12
vvv. "Revolving Line of Credit Advance" shall mean the definition
assigned in Section 2.2(d).
www. "Revolving Line of Credit Notes" means the promissory notes of
Obligors dated the Date of Closing payable to the order of
the Lenders in an aggregate original principal amount of up
to $6,500,000, as the same may be amended or amended and
restated from time to time.
xxx. "Senior Funded Debt" means all Indebtedness of Obligors other
than Subordinated Debt, including, without limitation, the
average daily outstanding principal amount of the Revolving
Line of Credit (or the prior line of credit) for the fiscal
quarter then ended and the immediately preceding three fiscal
quarters.
yyy. "Standby Letter of Credit" means a standby letter of credit
issued by the Agent for the account of any Obligor in
accordance with the terms of this Agreement.
zzz. "Stock Pledge Agreement" means the Stock Pledge Agreement
dated the Date of Closing from Holdings to Agent, as the same
may be amended or amended and restated from time to time.
aaaa. "Subordinated Debt" means debt of any of the Obligors which
has been subordinated in payment to the Obligations pursuant
to a subordination agreement which is satisfactory in form
and substance to the Agent.
bbbb. "Subordinated Encumbrances" means the mortgages, security
interests, pledges, liens, encumbrances or other charges
listed in Section B of Schedule 4.5.
cccc. "Subordinated Lenders" means (i) Henry E. Baker, (ii) Joan A.
Baker, (iii) John B. Baker, (iv) Peter K. Baker and (v) Ross
S. Rapaport, not individually but as Trustee of the Peter K.
Baker Life Insurance Trust, the John B. Baker Insurance Trust
and U/T/A/ dated December 16, 1991 F/B/O Joan Baker et al
(the "Trustee").
dddd. "Subsidiary" means any corporation, limited liability company,
partnership or other entity, a majority of whose outstanding
stock, membership interests, partnership interests or other
ownership interests having voting power to elect the board of
directors or other governing body or person of such entity
shall at any time be owned or controlled by the Obligors.
eeee. "Term Loan" means the $28,500,000 loan evidenced by the Term
Notes.
13
ffff. "Term Notes" means the promissory notes of the Obligors
payable to the order of the Lenders dated the Date of Closing
in an aggregate original principal amount of $28,500,000.
gggg. "Termination Date" means:
(i) with respect to the Revolving Line of Credit
or any Revolving Line of Credit Note, April
1, 2005;
(ii) with respect to the Acquisition/Capital
Asset Line of Credit or any
Acquisition/Capital Asset Line of Credit
Note, February 29, 2008; and
(iii) with respect to the Term Loan or any Term
Note, February 29, 2008.
hhhh. "Trademarks" means all of Obligors' right, title and interest,
present and future, in and to (i) all trademarks, trade
names, trade styles, service marks, prints and labels on
which said trademarks, trade names, trade styles and service
marks have appeared or appear, designs and general
intangibles of like nature, now existing or hereafter adopted
or acquired, all right, title and interest therein and
thereto, and all registrations and recordings thereof,
including without limitation applications, registrations and
recordings in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any
State thereof, or any other country or any political
subdivision thereof, all whether now owned or hereafter
acquired by Obligors; (ii) all reissues, extensions or
renewals thereof and all licenses thereof; and (iii) the
goodwill of the business symbolized by each of the
Trademarks, and all customer lists and other records of
Obligors relating to the distribution of products bearing the
Trademarks; and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing.
1.2 Accounting Terms. Unless otherwise defined, all accounting terms shall
be construed, and all computations or classifications of assets
and liabilities and of income and expenses shall be made or determined
in accordance with GAAP except as otherwise stated in Section 6.15.
1.3 Financial Covenants. All financial covenants in this Agreement shall apply
with respect to, and shall be measured in accordance with, the
consolidated financial statements of Holdings. All financial covenants in
this Agreement shall be tested commencing April 30, 2003.
14
SECTION 2. The Loan Transactions.
2.1 The Term Loan.
a. Amount. Lenders shall loan to Obligors the sum of TWENTY EIGHT
MILLION FIVE HUNDRED THOUSAND DOLLARS ($28,500,000).
b. Obligations to Repay. Obligors' obligations to repay the Term
Notes and the terms and conditions of the Term Loan are as
contained in this Agreement and the Term Notes, the form of
which is attached to this Agreement as EXHIBIT 2.1.
c. Use of Proceeds. The proceeds of the Term Loan shall be used to
refinance existing Webster Bank term loans.
d. Interest Rate. The principal amount outstanding under the Term
Loan shall bear interest, subject to and in accordance with the
terms of this Agreement and the Term Notes, at a per annum rate
equal to a fixed rate equal to the LIBOR Rate (as determined for
each Interest Period applicable thereto) for available Interest
Periods of one (1) month plus the Applicable Margin, provided,
however, that notwithstanding anything else herein to the
contrary, the initial Interest Period shall be from the Date of
Closing until April 5, 2003. All computations of interest on the
Term Notes shall be made on the basis of a three hundred sixty
(360) day year and the actual number of days elapsed.
e. Advances. The full amount of the Term Loan shall be advanced on
the Date of Closing by the Lenders in accordance with their
respective Lender's Commitment Percentages up to the principal
amount of their respective Term Notes. Neither any Lender nor
Agent shall be responsible for advancing any amount of the Term
Loan to be made by any other Lender hereunder.
f. Continuation of Interest Periods. Any LIBOR Rate Loan under the
Term Notes shall be continued as such (less the amount of
principal that is due and payable at the end of such expiring
Interest Period) for an Interest Period of one (1) month at the
end of each Interest Period, provided that no LIBOR Rate Loan
may be continued as such: (i) at a time when any Event of
Default (or event or condition which would constitute an Event
of Default but for the giving of notice or passage of time or
both) has occurred and is continuing and (ii) after the date
that is one (1) month prior to the Termination Date, in which
event the principal amount under the Term Notes shall bear
interest as a Prime Rate Loan.
15
g. Payments of Interest. Monthly payments of interest on the Term
Notes shall be due and payable in arrears on the fifth day of
each month (or if such day is not a Business Day, on the first
Business Day thereafter) until the entire principal amount of
the Term Loan is paid in full.
h. Payments of Principal. Obligors shall pay monthly installments
of principal on the Term Notes on the fifth day of each month
(or if such day is not a Business Day, on the first Business Day
thereafter), commencing April 5, 2003, in the amounts of:
(1) $212,500 for each month from April 2003 through March 2004;
(2) $291,667 for each month from April 2004 through March 2005;
(3) $325,000 for each month from April 2005 through March 2006;
(4) $333,333 for each month from April 2006 through March 2007;
(5) $354,167 for each month from April 2007 through February 2008.
If not sooner paid, the aggregate outstanding principal amount of the
Term Notes, together with all accrued and unpaid interest thereon and
any other fees or charges then due, shall be due and payable on the
Termination Date.
i. Prepayments.
(1) Obligors may prepay the principal amount of the Term Loan,
or any portion thereof, only upon at least three (3)
Business Days prior written notice to Agent (which notice
shall be irrevocable and shall state the amount to be
prepaid). If Obligors refinance the Term Loan, or any part
thereof, with any other entity, Obligors shall pay to Agent
a prepayment premium equal to
(i) two percent (2%) of the amount prepaid if the
prepayment is made within one year from the Date of
Closing;
(ii) one percent (1%) of the amount prepaid if the
prepayment is made more than one year but less than
two years from the Date of Closing.
(2) If any prepayment of a LIBOR Rate Loan occurs on a day other
than the last day of the Interest Period, Obligors shall pay
to Agent, upon request of Agent, such amount or amounts as
shall be sufficient (in the reasonable opinion of Agent) to
compensate Lenders for any loss, cost, or expense incurred
as a result of: (i) any payment on a date other than the
last day of the Interest Period; and (ii) any failure by any
Obligor to make a prepayment on the date for payment
specified in any Obligor's written notice.
16
(3) In the event of any prepayments, the Obligors shall pay all
accrued interest on the principal amount being paid to the
date of the prepayment and, in the case of prepayments in
full, all fees, charges, costs, expenses and other amounts
then due hereunder.
(4) Any partial prepayment shall be applied against principal
payments in the inverse order of maturity and shall not
reduce the monthly payments of principal due under the Term
Loan.
(5) If by reason of an Event of Default, Agent elects to declare
the Notes to be immediately due and payable, then any
prepayment premiums and other amounts which would have been
due if a prepayment been made at that time shall become
due and payable in the same manner as though the Obligors
had exercised such right of prepayment.
2.2 The Revolving Line of Credit.
a. Amount. Lenders may loan to any of the Obligors, and any Obligor
may borrow from Lenders, from time to time in accordance with the
terms of this Agreement, up to SIX MILLION FIVE HUNDRED THOUSAND
DOLLARS ($6,500,000) less (a) the maximum amount available to be
drawn under all issued and outstanding Standby Letters of Credit
(assuming all conditions for drawing have been satisfied) at the
time of such borrowing under the Revolving Line of Credit, and
(b) all amounts drawn under issued Standby Letters of Credit for
which the Lenders has not been reimbursed by the Obligors at the
time of such borrowing under the Revolving Letter of Credit.
Obligors may repay and reborrow advances that are made under the
Revolving Line of Credit, subject, however, to the prepayment
terms contained below.
b. Obligations to Repay. Obligors' obligations to repay the
Revolving Line of Credit Notes and the terms and conditions of
the Revolving Line of Credit are as contained in this Agreement
and the Revolving Line of Credit Notes, the form of which is
attached to this Agreement as EXHIBIT 2.2.
c. Use of Proceeds. The proceeds of the Revolving Line of Credit
shall only be used for general short term working capital
purposes.
17
d. Interest Rate. Each advance under the Revolving Line of Credit
(each a "Revolving Line of Credit Advance") shall bear interest,
at Obligors' option subject to and in accordance with the terms
of this Agreement and the Revolving Line of Credit Notes, at a
per annum rate equal to either (a) a fixed rate equal to the
LIBOR Rate (as determined for each Interest Period applicable
thereto) for available Interest Periods of one (1) month plus
the Applicable Margin, or (b) a variable rate equal to the Prime
Rate. All computations of interest on the Revolving Line of
Credit Notes shall be made on the basis of a three hundred sixty
(360) day year and the actual number of days elapsed.
e. Requests for Advances.
(1) Except as set forth below in section 2.2 e.(2) of this
Agreement, whenever an Obligor desires an advance, such
Obligor shall notify Agent (which notice shall be
irrevocable) by telephone, facsimile or in writing, of the
desired borrowing. Such notice (the "Notice of Borrowing")
shall specify the date of the proposed borrowing, whether
such borrowing is to bear interest initially as a LIBOR Rate
Loan or a Prime Rate Loan and the amount requested, which
amount shall be in a minimum amount of $100,000. Each Notice
of Borrowing must be received by Agent no later than 10:00
a.m., Hartford, Connecticut time (a) at least three (3)
Business Days' prior to the day such borrowing is requested
if such borrowing is to be a LIBOR Rate Loan or (b) on the
day of such borrowing if such borrowing is to be a Prime Rate
Loan. Any Notice of Borrowing that is not in writing shall be
followed by a written confirmation by such Obligor, provided
that if such written confirmation differs in any respect from
the action taken by Agent, the records of Agent shall
control, absent manifest error. Obligors shall not have more
than four (4) LIBOR Rate Loans under the Revolving Line of
Credit outstanding at any one time. Each Revolving Line of
Credit Advance shall be made by the Lenders in accordance
with their respective Lender's Commitment Percentages up to
the maximum principal amount of their respective Revolving
Line of Credit Notes. Neither any Lender nor Agent shall be
responsible for advancing any amount of any Revolving Line of
Credit Advance to be made by any other Lender hereunder.
Agent shall enter each Revolving Line of Credit Advance as a
debit on a loan account maintained by Obligors with Agent
(the "Loan Account"). Agent may also record in the Loan
Account, in accordance with customary banking procedures, all
fees, accrued and unpaid interest, late fees, usual and
customary bank charges for the maintenance and administration
of accounts maintained by Obligors and other fees and charges
which are properly chargeable to Obligors in connection with
the Revolving Line of Credit Advances and all payments,
subject to collection, made by Obligors on account of or to
Agent.
19
(2) In addition, Webster Bank will automatically make advances
under the Revolving Line of Credit without any additional
notice in order to honor checks drawn upon the Loan Account
by any of the Obligors up to an aggregate amount outstanding
at any one time of $1,000,000; provided, however, that all
advances under this Section 2.2e.(2) and all other advances
under the Revolving Line of Credit shall not exceed the
maximum amount of the Revolving Line of Credit and all
advances under this Section 2.2e.(2) and Webster Bank's
Lender's Commitment Percentage of all other advances under
the Revolving Line of Credit shall not exceed the maximum
amount of the Revolving Line of Credit Note payable to
Webster Bank. All such advances shall be Prime Rate Loans and
shall otherwise be subject to all the terms and conditions of
this Agreement and the Revolving Line of Credit Note with
Webster Bank.
(3) Obligors' right to request advances under the Revolving Line
of Credit shall terminate on the Termination Date unless
sooner terminated by Agent in accordance with the terms of
this Agreement.
f. Conversion of Loans and Continuation of Interest Periods. Unless
an Obligor elects to convert any Revolving Line of Credit Advance
to a different type of loan by providing the notice required
below, any Prime Rate Loan shall be continued as such and any
LIBOR Rate Loan shall be continued as such for an Interest Period
of one (1) month upon the expiration of the then current Interest
Period, provided that no LIBOR Rate Loan may be continued as
such, no new LIBOR Rate Loan may be selected by Obligors and no
Prime Rate Loan shall be converted to a LIBOR Rate Loan: (i) at a
time when any Event of Default (or event or condition which would
constitute an Event of Default but for the giving of notice or
passage of time or both) has occurred and is continuing and (ii)
after the date that is one (1) month prior to the Termination
Date, in which event the principal amount under the Revolving
Line of Credit shall bear interest as a Prime Rate Loan. Any
Obligor may elect from time to time to convert (a) a LIBOR Rate
Loan under the Revolving Line of Credit to a Prime Rate Loan and
(b) a Prime Rate Loan under the Revolving Line of Credit to a
LIBOR Rate Loan as provided in this section. An Obligor shall
exercise such election by giving the Agent not less than three
(3) Business Days prior irrevocable written notice of such
election; provided that any such conversion of a LIBOR Rate Loan
to a Prime Rate Loan shall only be made on the last Business Day
of the then current Interest Period with respect thereto.
Notwithstanding the foregoing, no Prime Rate Loan made pursuant
to an advance under Section 2.2e.(2) shall be converted to a
LIBOR Rate Loan.
19
g. Payments of Interest. Monthly payments of interest shall be due
and payable in arrears on the last day of each Interest Period
with respect to LIBOR Rate Loans and on the first day of each
month with respect to Prime Rate Loans until all Loans are paid
in full.
h. Payments of Principal. If not sooner paid, the aggregate
outstanding principal amount of the Revolving Line of Credit
Notes, together with all accrued and unpaid interest thereon and
any other fees or charges then due, shall be due and payable on
the Termination Date.
i. Prepayments.
(1) Except as set forth in the following sentence, Obligors may
prepay the principal amount under the Revolving Line of
Credit, or any portion thereof, only upon at least three (3)
Business Days prior written notice to Agent (which notice
shall be irrevocable and shall state the amount to be
prepaid). Any checks payable to the order of any of the
Obligors which are properly deposited with Webster Bank in
the Loan Account shall, upon becoming immediately available
funds, be automatically applied as a prepayment of any
outstanding Prime Rate Loan made pursuant to Section 2.2.e.
(2) of this Agreement without the requirement of any notice.
In the event there is no Prime Rate Loan made pursuant to
Section 2.2.e.(2) of this Agreement outstanding at such time,
such amount shall be deposited in the Loan Account and
invested in accordance with any applicable cash management
agreement among Obligors and Webster Bank.
(2) If any prepayment of a LIBOR Rate Loan occurs on a day other
than the last day of the Interest Period, Obligors shall pay
to Agent, upon request of Agent, such amount or amounts as
shall be sufficient (in the reasonable opinion of Agent) to
compensate Lenders for any loss, cost, or expense incurred as
a result of: (i) any payment on a date other than the last
day of the Interest Period; and (ii) any failure by any
Obligor to make a prepayment on the date for payment
specified in any Obligor's written notice.
(3) In the event of any prepayments, the Obligors shall pay all
accrued interest on the principal amount being paid to the
date of the prepayment and, in the case of prepayments in
full, all fees, charges, costs, expenses and other amounts
then due hereunder.
20
(4) If by reason of an Event of Default, Agent elects to declare
the Notes to be immediately due and payable, then any
prepayment premiums and other amounts which would have been
due if a prepayment been made at that time shall become
due and payable in the same manner as though the Obligors had
exercised such right of prepayment.
2.3 The Acquisition/Capital Asset Line of Credit.
a. Amount. Lenders may loan to any of the Obligors, and any Obligor
may borrow from Lenders, from time to time in accordance with
the terms of this Agreement, up to FIFTEEN MILLION DOLLARS
($15,000,000). Obligors may not repay and reborrow advances that
are made under the Acquisition/Capital Asset Line of Credit.
b. Obligations to Repay. Obligors' obligations to repay the
Acquisition/Capital Asset Line of Credit Notes and the terms and
conditions of the Acquisition/Capital Asset Line of Credit are
as contained in this Agreement and the Acquisition/Capital Asset
Line of Credit Notes, the form of which is attached to this
Agreement as EXHIBIT 2.3.
c. Use of Proceeds. The proceeds of the Acquisition/Capital Asset
Line of Credit shall only be used to fund Acquisitions within
the home and office business segment of the food and beverage
industry and non-real estate Capital Expenditures in an
aggregate amount of up to ten million dollars ($10,000,000)
and to prepay up to five million dollars ($5,000,000) of
Subordinated Debt owed to the Subordinated Lenders.
d. Interest Rate. Each advance under the Acquisition/Capital Asset
Line of Credit (each an "Acquisition/Capital Asset Line of
Credit Advance") shall bear interest, subject to and in
accordance with the terms of this Agreement and the Acquisition/
Capital Asset Line of Credit Notes, at a per annum rate equal to
a fixed rate equal to the LIBOR Rate (as determined for each
Interest Period applicable thereto) for available Interest
Periods of one (1) month plus the Applicable Margin, provided,
however, that notwithstanding anything else herein to the
contrary, all Interest Periods which commence in March of 2005
shall end on March 31, 2005. All computations of interest on the
Acquisition/Capital Asset Line of Credit Notes shall be made on
the basis of a three hundred sixty (360) day year and the actual
number of days elapsed.
21
e. Requests for Advances.
(1) Whenever an Obligor desires an Acquisition/Capital Asset Line
of Credit Advance, such Obligor shall notify Agent (which
notice shall be irrevocable) in writing of the desired
borrowing. Such notice (the "Request for Advance") shall
specify the date of the proposed borrowing, the proposed use
of such borrowing and the amount requested, which amount
shall be in a minimum amount of $100,000. The Agent shall
promptly notify the Lenders of such Request for Advance and
the contents thereof.
(2) Each amount requested under the Acquisition/Capital Asset
Line of Credit to fund an Acquisition or a Capital
Expenditure shall not exceed 75% of the purchase price of
such Acquisition or such Capital Expenditure and shall not
exceed in the aggregate with all other such requests
$10,000,000. Each Request for Advance in connection therewith
must be received by Agent no later than 10:00 a.m., Hartford,
Connecticut time at least five (5) Business Days' prior to
the day such borrowing is requested (provided, however, that
if such Acquisition or Capital Expenditure requires the
consent of the Agent pursuant to Section 6.4 or 6.20 of this
Agreement, such consent has previously been obtained) and
must be accompanied by the following: (a) a copy of the
purchase agreement or purchase orders and invoices relating
to such Acquisition or Capital Expenditure, (b) evidence
satisfactory to the Agent that, at the time of such
Acquisition or Capital Expenditure, (i) the Obligor will
acquire good title to such entity or assets, (ii) the Obligor
will have physical possession of any such assets, (iii) the
Obligor will obtain title to such entity or assets free and
clear of any pledge, lien, lease, encumbrance or charge of
any kind whatsoever, other than in favor of the Agent, and
(iv) the Agent will have a valid, duly perfected, first
priority lien in such entity or assets, and (c) such other
documents as the Agent may reasonably require. At the time of
funding such Acquisition/Capital Asset Line of Credit
Advance, Obligor shall confirm, and provide such additional
documentation that the Agent may reasonably require, that the
statements in clauses (b)(i) through (b)(iv) in the preceding
sentence are true and accurate and shall pay all reasonable
costs and expenses incurred by the Agent in connection with
such Acquisition/Capital Asset Line of Credit Advance.
22
(3) The amount requested under the Acquisition/Capital Asset Line
of Credit to prepay Subordinated Debt owed to the
Subordinated Lenders shall not exceed in the aggregate
$5,000,000. The Request for Advance in connection therewith
must be received by Agent no later than 10:00 a.m., Hartford,
Connecticut time at least five (5) Business Days' prior to
the day such borrowing is requested and must be accompanied
by (unless previously delivered to the Agent) the following:
(a) the financial statements, report and statement required
by Section 5.8a for the fiscal year ending October 31, 2003
which reflect an EBITDA of at least $14,300,000 excluding (i)
EBITDA relating to any Acquisitions consummated in the fiscal
year ending October 31, 2003 which have a purchase price in
excess of $1,000,000 and (ii) the write-down of closing costs
associated with loans refinanced by the Loans, (b) the
compliance certificate required by Section 5.8c for the
fiscal year ending October 31, 2003 certifying compliance
with all financial covenants and that no Event of Default or
event which with the giving of notice or the passage of time
would constitute an Event of Default exists, (c) internally
prepared financial statements for the fiscal year ending
October 31, 2003 certified by the President, Chief Executive
Officer or Chief Financial Officer of Holdings as being
accurate and fairly presenting the financial condition of
Holdings and its Subsidiaries which reflect that each of the
retail and home and office delivery business segments have
met both its projected sales and its projected operating
profits in accordance with the projections delivered to Agent
on the Date of Closing, and (d) detailed budgets and
projections for the fiscal year ending on October 31, 2004
approved by the Board of Directors of Holdings and reasonably
acceptable to Agent which reflect continued compliance with
all financial covenants contained in this Agreement.
(4) Obligors shall not have more than four (4) LIBOR Rate Loans
under the Acquisition/Capital Asset Line of Credit
outstanding at any one time. Each Acquisition/Capital Asset
Line of Credit Advance shall be made by the Lenders in
accordance with their respective Lender's Commitment
Percentages up to the maximum principal amount of their
respective Acquisition/Capital Asset Line of Credit Notes.
Neither any Lender nor Agent shall be responsible for
advancing any amount of any Acquisition/Capital Asset Line of
Credit Advance to be made by any other Lender hereunder.
Agent shall enter each Acquisition/Capital Asset Line of
Credit Advance as a debit on the Loan Account. Agent may also
record in the Loan Account, in accordance with customary
banking procedures, all fees, accrued and unpaid interest,
late fees, usual and customary bank charges for the
maintenance and administration of accounts maintained by
Obligors and other fees and charges which are properly
chargeable to Obligors in connection with the Acquisition/
Capital Asset Line of Credit Advances and all payments,
subject to collection, made by Obligors on account of or to
Agent.
23
(5) Obligors' right to request advances under the Acquisition/
Capital Asset Line of Credit shall terminate on the
Amortization Date unless sooner terminated by Agent in
accordance with the terms of this Agreement.
f. Continuation of Interest Periods. Any LIBOR Rate Loan under the
Acquisition/Capital Asset Line of Credit Notes shall be
continued as such (less the amount of principal that is due and
payable at the end of such expiring Interest Period) for an
Interest Period of one (1) month at the end of each Interest
Period, provided that no LIBOR Rate Loan may be continued as
such: (i) at a time when any Event of Default (or event or
condition which would constitute an Event of Default but for the
giving of notice or passage of time or both) has occurred and is
continuing and (ii) after the date that is one (1) month prior
to the Termination Date, in which event the principal amount
under the Acquisition/Capital Asset Line of Credit Notes shall
bear interest as a Prime Rate Loan.
g. Payments of Interest. Prior to April 1, 2005, monthly payments
of interest on the Acquisition/Capital Asset Line of Credit
Notes shall be due and payable in arrears on the last day of
each Interest Period with respect to LIBOR Rate Loans and, in
the event LIBOR Rate Loans are no longer available in accordance
with the terms of this Agreement, on the first day of each month
with respect to Prime Rate Loans. Commencing on April 1, 2005,
monthly payments of interest on the Acquisition/Capital Asset
Line of Credit Notes shall be due and payable in arrears on the
first day of each month (or if such day is not a Business Day,
on the first Business Day thereafter) until the entire principal
amount of the Acquisition/Capital Asset Line of Credit Loan is
paid in full.
h. Payments of Principal. Obligors shall pay monthly installments
of principal under the Acquisition/Capital Asset Line of Credit
Notes on the first day of each month (or if such day is not a
Business Day, on the first Business Day thereafter), commencing
May 1, 2005, in the amounts of:
(1) one twelfth of ten percent (10%) of the principal amount
outstanding under the Acquisition/Capital Asset Line of
Credit on the Amortization Date for each month from May 2005
through April 2006;
o
(2) one twelfth of fifteen percent (15%) of the principal amount
outstanding under the Acquisition/Capital Asset Line of
Credit on the Amortization Date for each month from May 2006
through April 2007;
24
(3) one twelfth of twenty percent (20%) of the principal amount
outstanding under the Acquisition/Capital Asset Line of
Credit on the Amortization Date for each month from May 2007
through February 2008.
If not sooner paid, the aggregate outstanding principal amount of the
Acquisition/Capital Asset Line of Credit Notes, together with all
accrued and unpaid interest thereon and any other fees or charges then
due, shall be due and payable on the Termination Date.
i. Prepayments.
(1) Obligors may prepay the principal amount of the Acquisition/
Capital Asset Line of Credit, or any portion thereof, only
upon at least three (3) Business Days prior written notice to
Agent (which notice shall be irrevocable and shall state
the amount to be prepaid). If Obligors refinance the
Acquisition/Capital Asset Line of Credit, or any part
thereof, with any other entity, Obligors shall pay to Agent
a prepayment premium equal to
(i) two percent (2%) of the amount prepaid if the
prepayment is made within one year from the Date of
Closing;
(ii) one percent (1%) of the amount prepaid if the
prepayment is made more than one year but less than
two years from the Date of Closing.
(2) If any prepayment of a LIBOR Rate Loan occurs on a day other
than the last day of the Interest Period, Obligors shall pay
to Agent, upon request of Agent, such amount or amounts as
shall be sufficient (in the reasonable opinion of Agent) to
compensate Lenders for any loss, cost, or expense incurred as
a result of: (i) any payment on a date other than the last
day of the Interest Period; and (ii) any failure by any
Obligor to make a prepayment on the date for payment
specified in any Obligor's written notice.
(3) In the event of any prepayments, the Obligors shall pay all
accrued interest on the principal amount being paid to the
date of the prepayment and, in the case of prepayments in
full, all fees, charges, costs, expenses and other amounts
then due hereunder.
25
(4) Any partial prepayment shall be applied against principal
payments in the inverse order of maturity and shall not
reduce the monthly payments of principal due under the
Acquisition/Capital Asset Line of Credit.
(5) If by reason of an Event of Default, Agent elects to declare
the Notes to be immediately due and payable, then any
prepayment premiums and other amounts which would have been
due if a prepayment been made at that time shall become
due and payable in the same manner as though the Obligors had
exercised such right of prepayment.
2.4 Standby Letters of Credit.
a. Amount. Subject to the terms and conditions contained in this
Agreement, Agent on behalf of the Lenders and in reliance upon
the agreement of the Lenders set forth in Section 2.4 h. hereof
agrees, in its individual capacity, to issue Standby Letters of
Credit for drawing in U.S. Dollars for the account of Obligors,
from time to time during the term of the Revolving Line of
Credit in an amount not to exceed the lesser of (i) $6,500,000,
less (a) the aggregate principal amount outstanding under the
Revolving Line of Credit Notes at the time of issuance of the
Standby Letter of Credit, (b) the maximum amount available to
be drawn under all previously issued and outstanding Standby
Letters of Credit (assuming all conditions for drawing have been
satisfied) at the time of issuance of the Standby Letter of
Credit, and (c) all amounts drawn under previously issued
Standby Letters of Credit for which the Lender has not been
reimbursed by the Obligors at the time of issuance of the
Standby Letter of Credit, or (ii) $1,000,000.
b. Notices of Issuance. Requests for the issuance of Standby
Letters of Credit (or to amend, renew or extend an outstanding
Standby Letter of Credit) may be made only once per Business Day
and shall be made on notice, given not later than 11:00 a.m.
(Hartford, Connecticut time) two (2) Business Days prior to the
date of the proposed issuance or amendment, renewal or
extension, by any Obligor to Agent. Each such notice (which
notice shall be irrevocable and binding on the Obligors) of
issuance, amendment, renewal or extension shall be by telephone,
confirmed immediately in writing, or by telex or telecopier,
specifying therein the (i) requested date of such issuance,
amendment, renewal or extension (which shall be a Business Day),
(ii) requested principal amount of such Standby Letter of Credit
in U.S. Dollars, (iii) requested expiration date of such Standby
Letter of Credit (which shall comply with subsection (c) below),
(iv) whether such Standby Letter of Credit is renewable, and (v)
names and addresses of the intended account party and the
beneficiary of such Standby Letter of Credit, and shall be
accompanied by a fully executed application and agreement for
letter of credit as Agent may require of Obligors for use in
connection with such requested Standby Letter of Credit (each a
"Reimbursement Agreement") and such Obligor's payment of the
Agent's then current Standby Letter of Credit fee. If the
requested form of such Standby Letter of Credit is acceptable to
Agent, Agent will make such Standby Letter of Credit available
to such Obligor at its office referred to in the first paragraph
of this Agreement or as otherwise agreed with such Obligor in
connection with such issuance. In the event and to the extent
that the provisions of any Reimbursement Agreement shall
conflict with this Agreement, the provisions of this Agreement
shall govern.
26
c. Form of Letter of Credit. Each Standby Letter of Credit shall,
among other things, (i) be in a form acceptable to Agent, and
(ii) be governed by, and shall be construed in accordance with,
the laws or rules designated in such Standby Letter of Credit,
or if no such laws or rules are designated, the Uniform Customs
and, as to matters not governed by the Uniform Customs, the laws
of the State of Connecticut (without regard to its conflict of
laws rules).
d. Expiry Dates. Each Standby Letter of Credit shall provide that
it expires no later than the close of business seven days prior
to the expiration date for the Revolving Line of Credit, unless
such Standby Letter of Credit expires by its terms on an earlier
date.
e. Payment for Standby Letter of Credit Draws. Agent shall have the
right (but not the obligation), in its sole and absolute
discretion, to effect reimbursement by Obligors to Agent of any
payment made by Agent in connection with a drawing made under a
Standby Letter of Credit which is not reimbursed to Agent within
the time specified for reimbursement in the applicable
Reimbursement Agreement by making an advance on the Revolving
Line of Credit for the account of the Obligors. Each such
advance shall bear interest at the Prime Rate. Agent shall
endeavor to give Obligors forty-eight (48) hours prior notice
before making such an advance pursuant to this Section 2.4 e.
but failure to provide such notice shall not affect Agent's
right to make such an advance.
f. No Liability of Lender. Obligors assume all risks of the acts or
omissions of any beneficiary or transferee of any Standby Letter
of Credit with respect to the use of such Standby Letter of
Credit, and Obligors' obligations with respect to payments made
by Agent under any Standby Letter of Credit shall be absolute,
unconditional and irrevocable, irrespective of: (i) any lack of
validity or enforceability of any Standby Letter of Credit, or
any term or provision therein, alleged by a party other than
27
Agent; (ii) the existence of any dispute, claim, setoff, defense
or other right that Obligors or any other person may have
against the beneficiary under any Standby Letter of Credit,
Agent, any Lender or any other person, whether in connection
with this Agreement, any other Loan Document or any other
related or unrelated agreement or transaction; (iii) any draft
or other document presented under a Standby Letter of Credit
proving to be forged, fraudulent, invalid or, subject to the
provisions of the next paragraph, insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
or (iv) any error, omission, interruption or delay in any
transmission, dispatch or delivery of any message or advice,
however transmitted, in connection with any Standby Letter of
Credit.
Without limiting the generality of the foregoing, it is
expressly understood and agreed that the absolute and
unconditional obligation of Obligors hereunder to reimburse
Standby Letter of Credit drawings will not be excused by the
negligence of Agent or any Lender. However, the foregoing
shall not be construed to excuse Agent from liability to
Obligors to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby
waived by Obligors to the fullest extent permitted by law)
suffered by Obligors that are caused by (x) Agent's willful
misconduct or gross negligence in determining whether documents
presented under any Standby Letter of Credit comply with the
terms of the Standby Letter of Credit, or (y) Agent's willful
failure to make lawful payment under a Standby Letter of Credit
after presentation to it of a draft or documents strictly
complying with the terms and conditions of such Standby Letter of
Credit. It is understood that Agent may, subject to the standard
of gross negligence or willful misconduct, accept documents
that appear on their face to be in order, without
responsibility for further investigation, regardless of any
notice or information to the contrary and, in making any payment
under any Standby Letter of Credit (1) Agent's exclusive reliance
on the documents presented to it under such Standby Letter of
Credit as to any and all matters set forth therein, including
reliance on the amount of any draft presented under such Standby
Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and
whether or not any document presented pursuant to such Standby
Letter of Credit proves to be insufficient in any respect, if
such document on its face appears to be in order, and whether or
not any other statement or any other document presented pursuant
to such Standby Letter of Credit proves to be forged or invalid
or any statement therein proves to be inaccurate or untrue in any
respect whatsoever, and (2) any noncompliance in any immaterial
respect of the documents presented under such Standby Letter of
Credit with the terms thereof shall, in each case, be deemed not
to constitute willful misconduct or gross negligence of Agent.
28
g. Interim Interest. If Agent shall make any payment in respect of a
Standby Letter of Credit, then, unless Obligors shall reimburse
such payment in full on the date specified for reimbursement in
the applicable Reimbursement Agreement, the unpaid amount thereof
shall bear interest for each day from and including the date of
such payment to but excluding the date of payment, at the Prime
Rate.
h. Reimbursement Obligations of Lenders. Each Lender severally
agrees that it shall be absolutely liable, without regard to the
occurrence of any Event of Default, any event which with the
giving of notice, the passage of time, or both, would become an
Event of Default or any other condition precedent whatsoever, to
the extent of such Lender's Commitment Percentage, to reimburse
the Agent on demand for the amount of each draft paid by the
Agent under each Standby Letter of Credit to the extent that
such amount is not reimbursed by the Obligors within the time
specified for reimbursement in the applicable Reimbursement
Agreement, except to the extent that honoring such draft
constitutes gross negligence or willful misconduct of Agent. No
later than 3:00 p.m. (Boston time) on the Business Day next
following the receipt of such demand, each Lender shall make
available to the Agent, at the Agent's office, in immediately
available funds, such Lender's Commitment Percentage of such
unpaid draft, together with an amount equal to the product of (a)
the average, computed for the period referred to in clause (c)
below, of the weighted average interest rate paid by the Agent
for federal funds acquired by the Agent during each day included
in such period, times (b) the amount equal to such Lender's
Commitment Percentage of such unpaid draft, times (c) a fraction,
the numerator of which is the number of days that elapse from and
including the date the Agent paid the draft presented for honor
or otherwise made payment to the date on which such Lender's
Commitment Percentage of such unpaid draft shall become
immediately available to the Agent, and the denominator of which
is 360. Each such payment made by a Lender shall be treated as
the purchase by such Lender of a participating interest in the
Agent's right to reimbursement under the applicable Reimbursement
Agreement in an amount equal to such payment. Each Lender shall
share in accordance with its participating interest in any
interest which accrues pursuant to Section 2.4 g. hereof and in
any payments made by Obligors in connection therewith. The
responsibility of the Agent to the Lenders shall be only to
determine that the documents (including each draft) delivered
under each Standby Letter of Credit in connection with such
presentment shall be in conformity in all material respects with
such Standby Letter of Credit. Agent shall pay to each Lender its
Lender's Commitment Percentage of any annual commission (but not
any fee or commission in connection with the issuance of such
Standby Letter of Credit) received by Agent from the Obligors in
connection with such Standby Letter of Credit promptly after such
receipt by Agent.
29
2.5 Payments to Agent. Obligors shall make all payments due under this
Agreement and the Notes to Agent and Agent shall distribute such
payments to the Lenders in accordance with the Agency Agreement.
2.6 Illegality. Notwithstanding any other provisions hereof, if any
applicable law or governmental regulation, guideline, order or
directive, or any change therein or in the interpretation or
application thereof by any governmental authority charged with the
interpretation or the administration thereof (whether or not having
the force of law) shall make it unlawful for any Lender to make or
maintain LIBOR Rate Loans as contemplated by this Agreement and the
Notes: (i) the obligation of the Lenders to continue LIBOR Rate
Loans shall forthwith be canceled, and (ii) such amounts then
outstanding shall be automatically converted, without notice, to
Prime Rate Loans on the last day of the then current Interest Period
or within such earlier time as required by law. If any such
conversion of LIBOR Rate Loans is made on a day that is not the last
Business Day of the then current Interest Period applicable thereto,
Obligors shall pay the Agent such amount or amounts required
pursuant to Section 2.9 below.
2.7 Basis for Determining LIBOR Inadequate or Unfair. In the event that
the Agent shall have determined (which determination, absent
manifest error, shall be conclusive and binding upon Obligors) that
(i) by reason of circumstances affecting the LIBOR market, adequate
and reasonable means do not exist for determining the LIBOR Rate, or
(ii) Dollar deposits in the relevant amount and for the relevant
maturity are no longer available to the Lenders in the LIBOR market,
or (iii) the continuation of LIBOR Rate Loans has been made
impractical or unlawful by the occurrence of a contingency that
materially and adversely affects the LIBOR market, or (iv) the LIBOR
Rate will not adequately and fairly reflect the cost to the Lenders
of maintaining LIBOR Rate Loans, or (v) the LIBOR Rate shall no
longer represent the effective cost to the Lenders of U.S. Dollar
deposits in the relevant market for deposits in which it regularly
participates, the Agent shall give the Obligors notice of such
determination as soon as practicable. If such notice is given all
LIBOR Rate Loans shall be automatically converted, without notice,
to Prime Rate Loans effective on the last Business Day of the then
current Interest Period applicable thereto. Until such notice has
been withdrawn, the LIBOR Rate shall not be continued.
2.8 Increased Costs. In the event that applicable law, treaty or
regulation or directive from any government, governmental agency or
regulatory authority, or any change therein or in the interpretation
or application thereof, or compliance by any Lender or Agent with
any request or directive (whether or not having the force of law)
from any central bank or government, governmental agency or
regulatory authority, shall:
30
a. subject any Lender or Agent to any tax of any kind whatsoever
(except taxes on the overall net income of such entity) with
respect to this Agreement, any Note or any of the loans made by
it, or change the basis of taxation of payments to any Lender or
Agent in respect thereof (except for changes in the rate of tax
on the overall net income of such entity);
b. impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirements against assets held by,
deposits or other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other acquisition
of funds by, any office of any Lender or Agent, including
(without limitation) pursuant to Regulations of the Board of
Governors of the Federal Reserve System; or
c. in the opinion of any Lender or Agent, cause any Note or any loan
made under any Note or this Agreement to be included in any
calculations used in the computation of regulatory capital
standards; or
d. impose on any Lender or Agent any other condition;
e. and the result of any of the foregoing is to increase the cost to
any Lender or Agent, by an amount that such entity deems to be
material, of making, converting into, continuing and/or
maintaining the Loans and the Notes or to reduce the amount of
any payment (whether of principal, interest or otherwise) in
respect of any of such Loans, then, in any case, the Obligors
shall promptly pay such entity, upon its demand, such additional
amounts necessary to compensate such entity for such additional
costs or such reduction in payment, as the case may be
(collectively the "Additional Costs"). The Lender or Agent
affected thereby shall certify the amount of such Additional
Costs to the Obligors, and such certification, absent manifest
error, shall be deemed conclusive. In determining such amount,
the Lender or Agent affected thereby shall use any reasonable
averaging and attribution methods.
2.9 Indemnity. The Obligors agree to indemnify the Lenders and Agent and
to hold the Lenders and Agent harmless from any loss (including any
of the additional costs referred to above and any lost profits) or
expense that it may sustain or incur as a consequence of (i) a
default by any Obligor in the payment of the principal of or
interest due on any Note, (ii) the making of a prepayment of any
principal amount bearing interest based upon the LIBOR Rate on
a day which is not the last day of the then current Interest Period
applicable thereto or (iii) the failure by the Obligors to complete
a borrowing of or conversion into a LIBOR Rate Loan after notice
thereof has been given, including, but not limited to, in each case
any such loss or expense arising from the reemployment of funds
obtained by it or from fees, interest or other amounts payable to
terminate the deposits from which such funds were obtained. The
Agent shall prepare a certificate as to any additional amounts
payable to it pursuant to this Section, which certificate shall be
submitted by the Agent to the Obligors and shall, absent manifest
error, be deemed conclusive.
31
2.10 Tax Indemnity. All payments made by the Obligors under this
Agreement and the Notes shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges,
fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority (as
hereafter defined), excluding net income taxes and franchise taxes
(imposed in lieu of net income taxes) imposed on any Lender as a
result of a present or former connection between such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from such Lender having
executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any Note). If any such
non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to any Lender hereunder or
under any Note, the amounts so payable to such Lender shall be
increased to the extent necessary to yield to such Lender (after
payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified
in this Agreement. Whenever any Non-Excluded Taxes are payable by
the Obligors, as promptly as possible thereafter the Obligors shall
send to such Lender a certified copy of an original official receipt
received by the Obligors showing payment thereof. If the Obligors
fail to pay any Non-Excluded Taxes when due to the appropriate
taxing authority or fail to remit to such Lender the required
receipts or other required documentary evidence, the Obligors shall
indemnify such Lender for any incremental taxes, interest or
penalties that may become payable by such Lender as a result of any
such failure. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder. As used in this Section,
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
2.11 Lawful Interest. All agreements between Obligors and Lenders are
hereby expressly limited so that in no event whatsoever, whether by
reason of acceleration of maturity of the indebtedness evidenced
hereby or otherwise, shall the amount paid or agreed to be paid to
any Lender or Agent for the use or the forbearance of the
indebtedness evidenced hereby exceed the maximum permissible under
applicable law. As used herein, the term "applicable law" shall
mean the law in effect as of the date hereof provided, however,
that in the event there is a change in the law which results in a
higher permissible rate of interest, then this Agreement and the
Notes shall be governed by such new law as of its effective date.
32
In this regard, it is expressly agreed that it is the intent of
Obligors and Lenders in the execution, delivery and acceptance
of each Note to contract in strict compliance with the laws of the
State of Connecticut from time to time in effect. If, under or from
any circumstances whatsoever, fulfillment of any provision hereof,
of any Note or of any of the Loan Documents at the time of
performance of such provision shall be due, shall involve
transcending the limit of such validity prescribed by applicable
law, then the obligation to be fulfilled shall automatically be
reduced to the limits of such validity, and if under or from any
circumstances whatsoever any Lender or the Agent should ever
receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be
applied to the reduction of the principal balance evidenced hereby
and not to the payment of interest. This provision shall control
every other provision of all agreements between Obligors, the
Lenders and the Agent.
2.12 Due Date; Late Charge. If any Note or any payment hereunder or
under any Note becomes due on a day which is not a Business Day,
the due date of such Note or payment shall be extended to the next
succeeding Business Day and such extension of time shall be
included in computing interest and fees in connection with such
payment. Without limiting the Agent's and Lenders' rights and
remedies with respect to the Event of Default that will have
occurred, if the entire amount of any required principal and/or
interest payment is not paid in full within fifteen (15) days after
the same is due, Obligors shall pay to the Agent a late fee equal
to the greater of five percent (5%) of the required payment or
fifteen dollars ($15.00).
2.13 Direct Debit of Principal and Interest. Obligors agree that
Agent may directly debit any Obligor's accounts held by Webster
Bank for any principal or interest payment on any Obligation when
such Obligation becomes due and payable.
2.14 Agency Fees. The Obligors shall pay to the Agent on the Date of
Closing and on each anniversary thereof an annual agency fee in the
amount of Twenty Thousand Dollars ($20,000).
2.15 Unused Fee. The Obligors shall pay to the Agent for the benefit of
the Lenders by July 10, 2003, October 10, 2003, January 10, 2004
and April 10, 2004 a fee equal to one quarter of one percent
(0.25%) of the difference obtained by subtracting from $10,000,000
the average daily principal amount outstanding on the Acquisition/
Capital Asset Line of Credit (excluding any amount used to prepay
Subordinated Debt) for the three full calendar months prior to such
payment date. The Obligors shall pay to the Agent by July 10, 2004,
October 10, 2004, January 10, 2005 and April 10, 2005 a fee equal
to one quarter of one percent (0.25%) of the difference obtained by
subtracting from $15,000,000 the average daily principal amount
outstanding on the Acquisition/Capital Asset Line of Credit for
the three full calendar months prior to such payment date.
33
2.16 Interest Rate Hedge. The Obligors must hedge their interest rate
exposure on at least fifty percent (50%) of the principal balance
at any time outstanding under the Term Loan and the Acquisition/
Capital Asset Line of Credit by entering into an interest rate
hedge agreement with Webster Bank or another counterparty
acceptable to Agent. Any documentation relating to such hedge shall
contain standard provisions, including make whole provisions,
acceptable to Agent.
2.17 Several Obligations of Lenders. The obligations of the Lenders
under the Notes, this Agreement and the other Loan Documents are
the several obligations of each Lender in accordance with and to
the extent of such Lender's Lender's Commitment Percentage and are
not the joint obligations of the Lenders. The relation of the
Lenders under this Agreement, the Agency Agreement and the other
Loan Documents shall not create any joint venture or partnership
among the Lenders.
2.18 Replacement of Lenders. If any Lender (an "Affected Lender")
fails to make available to Agent its share of any advance for any
Loan, the Obligors may, so long as no Event of Default or event
which with the giving of notice or the passage of time would
constitute an Event of Default has occurred and is then continuing,
within ninety (90) days of such failure, by notice (a "Replacement
Notice") in writing to the Agent and the Lenders (i) request the
Affected Lender to cooperate with the Obligors in obtaining a
replacement Lender satisfactory to non-Affected Lenders having an
aggregate Lender's Commitment Percentage equal to or greater than
fifty percent (50%), the Agent and the Obligors (the "Replacement
Lender"); (ii) request the non-Affected Lenders to acquire and
assume all of the Affected Lender's Loans as provided herein, but
none of such Lenders shall be under an obligation to do so; or
(iii) designate a Replacement Lender approved by non-Affected
Lenders having an aggregate Lender's Commitment Percentage equal to
or greater than fifty percent (50%) and the Agent, which consent
shall not be unreasonably withheld or delayed. If any satisfactory
Replacement Lender shall be obtained, and/or if any one or more of
the non-Affected Lenders shall agree to acquire and assume all of
the Affected Lender's Loans, then such Affected Lender shall sell
to such Replacement Lender or non-Affected Lenders, as the case may
be, at par value, such Affected Lender's Notes and its interests in
the Loans, based upon the outstanding principal amounts thereof at
the time of purchase, plus, to the extent actually paid by Obligors
and collected by Agent, such Affected Lender's pro-rata share in
accordance with its Lender's Commitment Percentage of interest,
fees (excluding agency fees), late charges, costs and expenses and
minus such Affected Lender's pro-rata share in accordance with its
Lender's Commitment Percentage of costs and expenses owed to the
Agent and not reimbursed by the Obligors. The Replacement Lender or
non-Affected Lenders, as the case may be, shall also pay to the
Agent at the time of purchase such Affected Lender's pro-rata share
in accordance with its Lender's Commitment Percentage of costs
and expenses owed to the Agent and not reimbursed by the Obligors.
The Agent shall distribute to such Affected Lender the Affected
Lender's Lender's Commitment Percentage of such unpaid interest,
fees, late charges, costs and expenses and unreimbursed costs and
expenses owed to the Agent if and when such amounts are collected
by Agent from the Obligors. In the event of any purchase of an
Affected Lender's Notes and interests in the Loans pursuant to this
Section, notwithstanding any provisions of the Loan Documents,
including the Notes, the Affected Lender shall not be entitled to
any prepayment premium or fee in connection with such purchase. At
the time of purchase, the Affected Lender shall deliver its Notes
to the Agent with appropriate endorsements thereon and the
Obligors, the Lenders and the Agent shall execute amendments to
this Agreement, the Agency Agreement and any of the other Loan
Documents which Agent deems appropriate to evidence the purchase of
such Affected Lender's Notes and interests in the Loans and the
Obligors shall issue replacement Notes to such Replacement Lender
and/or non-Affected Lenders, as the case may be. Upon any such
purchase and payment to the Affected Lender of the purchase price
therefore, all rights and obligations of the Affected Lender under
this Agreement, the Agency Agreement and the other Loan Documents,
other than the right to receive payments from the Agent as set
forth in this section if and when such amounts are collected by
Agent from the Obligors and its rights and obligations relating to
indemnification, shall terminate.
34
SECTION 3. Collateral.
3.1 As security for the payment and performance of all Obligations,
Obligors hereby grant to Agent:
a. A first priority security interest in all of the Collateral,
subject only to the Prior Encumbrances.
b. A first priority security interest in all proceeds of any and all
insurance on the Collateral.
c. A first priority security interest in all proceeds and products
of any item or type of the Collateral, subject only to Prior
Encumbrances.
3.2 Grant of Mortgage. VPS shall grant to Agent the Mortgage.
3.3 Pledge of Subsidiary Stock. Holdings shall pledge to Agent the
stock it owns in Crystal Rock and VPS pursuant to the Stock Pledge
Agreement.
3.4 Location of Collateral. All Collateral is and will be owned by
Obligors, free of all liens and encumbrances other than Permitted
Encumbrances and liens granted to the Agent and shall be kept by
Obligors at the Premises and at the locations listed on Schedule
3.4. Obligors will not, without Agent's prior written approval,
remove the Collateral therefrom, except for the purposes of sale in.
the ordinary course of business. All bottling facilities of the
Obligors are identified as such on Schedule 3.4, the tenant for each
leased location is as identified on Schedule 3.4 and the location of
each public warehouse is identified as such on Schedule 3.4.
35
3.5 Defend Collateral. Obligors shall defend the Collateral against all
claims and demands of all persons at any time claiming the same or
any interest therein and, in the event the Agent's security interest
in the Collateral, or any part thereof, would be impaired by an
adverse decision, allow the Agent to contest or defend any such
claim or demand in the Obligors' names and Obligors agree to pay,
upon demand, the Agent's reasonable costs, charges and expenses,
including, without limitation, attorney's fees, in connection
therewith.
3.6 Financing Statements. From time to time, at the request of the
Agent, Obligors shall execute, if necessary, deliver and file one or
more financing statements on Form UCC-1 or other instruments, and do
all other reasonable acts as the Agent deems necessary or desirable
to perfect fully or to keep perfected its security interest in the
Collateral and pay, upon demand, all reasonable expenses, including,
without limitation, attorney's fees, incurred by the Agent in
connection therewith. The Obligors hereby irrevocably appoint the
Agent their attorney-in-fact to execute, if necessary, and file all
such UCC-1 forms or other instruments, documents or agreements
deemed necessary or desirable to fully perfect or keep perfected
the Agent's security interest in the Collateral.
3.7 Further Assurances Re Inventory. Obligors shall perform any and all
reasonable steps requested by Agent to perfect Agent's security
interest in the Inventory, such as leasing warehouses to Agent or
Agent's assignee, placing and maintaining signs, appointing
custodians, executing and filing financing, amendment or
continuation statements in form and substance satisfactory to Agent,
maintaining stock records and transferring Inventory to warehouses.
Upon the occurrence and during a continuance of an Event of Default,
if any Inventory is in the possession or control of any of Obligors'
agents or processors, Obligors shall notify such agents or
processors of Agent's security interest therein, and, upon request,
instruct them to hold all such Inventoryfor Agent's account and
subject to Agent's instructions. A physical listing of all
Inventory, wherever located, shall be taken by Obligors at least
annually and whenever requested by Agent, and a copy of each such
physical listing shall be provided to Agent. Agent may examine and
inspect the Inventory upon reasonable notice during business hours.
3.8 Further Assurance Re Receivables. Obligors shall place notations
upon Obligors' books of account to disclose the assignment of all
Receivables to Agent or Agent's security interest therein and shall
perform all other reasonable steps requested by Agent to create and
maintain in Agent's favor a valid first priority security interest,
assignment or lien in, of or on all Receivables and all other
security held by or for Agent.
36
3.9 Guaranties. The Obligations shall be jointly and severally
unconditionally guarantied by the Guarantors as provided in the
Guaranties executed by each of them.
3.10 Revised Article 9. In connection with the revised Article 9 of the
Uniform Commercial Code substantially in the form approved in 1998
by the American Law Institute and the National Conference of
Commissioners on Uniform State Law ("Revised Article 9"), the
Obligors hereby acknowledge and agree with the Agent as follows:
a. In applying the law of any jurisdiction in which Revised Article
9 is in effect, the Collateral is all assets of the Obligors,
whether or not within the scope of Revised Article 9. The
Collateral shall also include, without limitation, the following
categories of assets as defined in Revised Article 9: goods
(including inventory, equipment and any accessions thereto),
instruments (including promissory notes), documents, accounts
(including health-care-insurance receivables), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-
credit rights (whether or not the letter of credit is evidenced
by a writing), commercial tort claims, securities and all other
investment property, general intangibles (including payment
intangibles and software), supporting obligations and any and all
proceeds of any thereof, wherever located, whether now owned and
hereafter acquired. If the Obligors (or any of them) shall at any
time, whether or not Revised Article 9 is in effect in any
particular jurisdiction, acquire a commercial tort claim, as
defined in Revised Article 9, the Obligors shall immediately
notify the Agent in a writing signed by the Obligors of the brief
details thereof and grant to the Agent in such writing a security
interest therein and in the proceeds thereof, all upon the terms
of this Agreement, with such writing to be in form and substance
satisfactory to the Agent. The Agent may at any time and from
time to time, pursuant to the provisions of this Agreement, file
financing statements, continuation statements and amendments
thereto that describe the Collateral as "all assets of the
Obligors" or words of similar effect and which contain any other
information required by Part 5 of Revised Article 9 for the
sufficiency or filing office acceptance of any financing
statement, continuation statement or amendment, including whether
each Obligor is an organization, the type of organization and any
organization identification number issued to each of the
Obligors. The Obligors shall furnish any such information to the
Agent promptly upon request. Any such financing statements,
continuation statements or amendments may be signed by the Agent
on behalf of the Obligors (or any of them), as provided in this
Agreement, and may be filed at any time in any jurisdiction
whether or not Revised Article 9 is then in effect in that
jurisdiction.
37
b. The Obligors shall at any time and from time to time, whether or
not Revised Article 9 is in effect in any particular
jurisdiction, take such steps as the Agent may reasonably request
for the Agent (a) to obtain an acknowledgement, in form and
substance satisfactory to the Agent, of any bailee having
possession of any of the Collateral that the bailee holds such
Collateral for the Agent, (b) to obtain "control" of any
investment property, deposit accounts, letter-of-credit rights or
electronic chattel paper (as such terms are defined in Revised
Article 9 with corresponding provisions in ss.ss. 9-104, 9-105,
9-106 and 9-107 relating to what constitutes "control" for such
items of Collateral), with any agreements establishing control to
be in form and substance satisfactory to the Agent, and (c)
otherwise to insure the continued perfection and priority of the
Agent's security interest in any of the Collateral and of the
preservation of its rights therein, whether in anticipation and
following the effectiveness of Revised Article 9 in any
jurisdiction.
c. Nothing contained herein shall be construed to narrow the scope
of the security interest granted hereby in any of the Collateral
or the perfection or priority thereof or to impair or otherwise
limit any of the rights, powers, privileges or remedies of the
Agent hereunder except as (and then only to the extent)
specifically mandated by Revised Article 9 to the extent then
applicable.
3.11 Security Interest and License re Intangibles. The Obligors hereby
grant to the Agent a security interest in and following the
occurrence and during the continuance of an Event of Default, a
non-exclusive license and right to use any and all patents,
copyrights, tradenames, trademarks and all applications therefor,
and licenses to any patent, copyright, tradename or trademark that
the Obligors now owns, has the right to use (to the extent permitted
by the governing document) or may hereafter own or acquire the right
to use (to the extent permitted by the governing document). The
Agent's security interest and non-exclusive license, as set forth in
this subparagraph, shall specifically include all rights of the
Obligors which may be necessary in order for the Agent to exercise
or get the full benefit and value from the security interest set
forth in this Agreement.
3.12 Mortgages on Real Estate. At least thirty (30) days prior to any
purchase of real estate by any of the Obligors, the Obligors shall
deliver to Agent notice of such intended purchase and all
documentation and information which the Agent shall request in
connection with such real estate, which documentation and
information may include, without limitation, environmental reports,
engineering reports, title reports, zoning reports and surveys. If
the Agent so requests, which it may do in its sole and absolute
discretion, the Obligors will deliver to Agent at the time of
purchase a mortgage on the real estate being purchased in form and
content satisfactory to Agent together with, if the Agent so
requests, a title insurance policy in form and content satisfactory
to Agent insuring the lien of the mortgage as a valid first priority
mortgage lien, an opinion letter relating to such real estate and
mortgage in form and substance satisfactory to Agent and such other
documentation as Agent may reasonably request.
38
3.13 Water Contracts and Licenses. At least ten (10) days prior to
entering into any material contract or license agreement by any of
the Obligors relating to the supply of water, the Obligors shall
deliver to Agent notice of such intended action and a complete copy
of such contract or license agreement. All such contracts and
license agreements shall specifically state that they are assignable
to the Agent as security for the Obligations and to any subsequent
lenders and Obligors shall take all steps necessary to complete such
assignment to Agent, including, without limitation, the execution
and delivery to Agent of an assignment of such contract or license
agreement in form and content satisfactory to Agent.
3.14 Acquisitions. At least ten (10) days prior to consummation of an
Acquisition which does not require the consent of the Agent pursuant
to Section 6.4 and for which the Obligors are not requesting an
advance under the Acquisition/Capital Asset Line of Credit, the
Obligors shall deliver to Agent notice of such intended Acquisition
and such other information as Agent shall request in connection with
such Acquisition. Without in any way waiving or limiting the other
covenants and requirements contained in this Agreement and the other
Loan Documents, the Obligors shall take all actions reasonably
requested by Agent in connection with any Acquisition to perfect
Agent's security interest in the stock or other ownership interests
or assets acquired in such Acquisition.
3.15 Costs and Expenses. Obligors will pay upon demand all costs and
expenses incurred by Agent, including, without limitation,
reasonable counsel fees, in connection with any of the actions set
forth in this Section 3.
SECTION 4. Representations, Warranties and General Covenants. On the date hereof
and in order to induce Lenders and Agent to enter into this Agreement, Obligors
represent, warrant and covenant the following:
4.1 Organization and Qualification. Each Obligor is and will continue to
be a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is and
will continue to be duly qualified and licensed to do business in
each other state in which the nature of its business makes such
qualification necessary. Each Obligor has all requisite material
permits, authorizations and licenses, without unusual restrictions
or limitations, to own, operate and lease its properties and to
conduct the business in which it is presently engaged, all of which
are in full force and effect.
39
4.2 Corporate Records. The Certificate of Incorporation and all
amendments thereto of each Obligor have been duly filed and are in
proper order. All capital stock issued by each Obligor and
outstanding has been properly issued and is fully paid and non-
assessable, and all books and records of each Obligor, including
but not limited to its minute books, bylaws, and books of account,
are accurate and up to date in all material respects and will be so
maintained.
4.3 Power and Authority. Each Obligor has the corporate power to
execute, deliver and carry out the terms of the Loan Documents and
to incur the Obligations and has taken all necessary corporate
action to authorize the execution, delivery and performance by it of
the Loan Documents.
4.4 No Legal Bar. The execution and delivery of the Loan Documents and
compliance by Obligors with the terms and provisions thereof do not,
on the date hereof, violate any provision of any existing law or
regulation or any writ or decree of any court or governmental
instrumentality, or any agreement or instrument to which any of the
Obligors is a party or which is binding upon any of them or their
assets, and will not result in the creation or imposition of any
lien, security interest, charge or encumbrance of any nature
whatsoever upon or in any of their assets, except as contemplated by
the Loan Documents; no consent of any other party, and, other than
the filing of UCC-1 financing statements and the Mortgage, no
consent, license, approval or authorization of or registration or
declaration with any governmental bureau or agency, is required in
connection with the execution, delivery, performance, validity and
enforceability of any of the Loan Documents; and the Loan Documents,
upon the execution and delivery thereof and the execution or
acceptance thereof by the Lenders and Agent, will be legal, valid,
binding and enforceable obligations of the Obligors in accordance
with their respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws of general application affecting enforcement
of creditors' rights generally and the remedy of specific
performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and the discretion of the court.
4.5 Title; No Liens. Except as set forth on Schedule 4.5, each of the
Obligors has good and marketable title to all of its Property that
it owns, subject to no mortgage, security interest, pledge, lien,
encumbrance or other charge.
4.6 No Litigation. Except as set forth on Schedule 4.6, there is
no litigation, administrative proceeding, hearing or to the
knowledge of the Obligors, investigation of or before any
governmental body presently pending or, to the knowledge of any of
the Obligors, threatened against it or any of its Property and if
all of the matters set forth on Schedule 4.6 were determined
adversely to the Obligors, such adverse determinations, either
individually or in the aggregate, would not have a material adverse
effect on the Obligors, their businesses or their Property taken as
a whole or on the Loan Documents or the rights and remedies granted
therein.
40
4.7 No Default. None of the Obligors are, on the date hereof, in
default with respect to the payment or performance of any of their
Obligations or other Indebtedness or in the performance of any
covenants or conditions to be performed by any of them pursuant to
the terms and provisions of any Loan Documents or in any material
respect, any other indenture, agreement or instrument to which any
of them are a party or by which any of them are bound, and none of
the Obligors has received a notice of default under any of the
foregoing.
4.8 Compliance with Laws. Each Obligor has complied in all material
respects with all applicable laws, ordinances, rules and regulations
of the United States of America, and all states, counties,
municipalities and agencies of any governmental authority thereof.
4.9 Taxes. Each Obligor has filed or caused to be filed or obtained
extensions for the filing of, and will continue to file and cause to
be filed, all federal, state and local tax returns required by law
to be filed, and has paid and will continue to pay all taxes shown
to be due and payable on such returns or on any assessment made
against it, except if being contested in good faith, if adequate
provision has been made therefor on its books of account and if
requested by Agent, a reserve satisfactory to Agent has been set
aside to pay such taxes, interest, penalties and costs associated
therewith. No claims have been asserted with respect to such taxes
which are not reflected in the financial statements which have been
furnished by Obligors to Lenders.
4.10 Financial Condition. The Obligors have submitted to Lenders various
financial statements and information as of October 31, 2001 and
subsequent Form 10-Qs through the date hereof, and represent that
all of such financial information is true and correct; that such
financial information fairly presents the consolidated financial
condition and results of operations of Holdings and its Subsidiaries
as of the dates thereof and for the periods indicated therein; that
such financial statements have been prepared in accordance with GAAP
and practices consistently maintained throughout the periods
involved; and that, as of the date of such financial information,
there were no material unrealized or anticipated losses from any
unfavorable commitments of any of the Obligors and that there has
been no material adverse change in the business or Property or in
the condition, financial or otherwise, of any of the Obligors from
that set forth in such financial statements other than as disclosed
in subsequent financial statements which will have been previously
delivered to each Lender.
41
4.11 Accuracy of Representations. To the best of the Obligors' knowledge,
after due inquiry, no representation or warranty by any of the
Obligors contained in any certificate or other document furnished or
to be furnished by it pursuant to this Agreement or in connection
with the transactions contemplated under this Agreement, contains,
or at the time of delivery will contain, any untrue statement of
material fact or omits or will omit to state a material fact
necessary to make it not misleading in light of the circumstances
under which it was made.
4.12 Trade Names and Chief Executive Offices. Each of the Obligors
operates its business under the trade names set forth for it on
Schedule 4.12 and has not used within the last five years and does
not currently use any other trade names. The chief executive office
of each Obligor and its principal place of business is at the
address set forth for that Obligor at the beginning of this
Agreement.
4.13 Parents, Affiliates or Subsidiaries. Holdings has no parent
corporation and none of the Obligors have any Affiliates or
Subsidiaries other than each other, Computer Designed Systems, Inc.
and Adirondack, Excelsior and Crystal-Waterville. Crystal Rock and
VPS are wholly owned Subsidiaries of Holdings. Adirondack and
Excelsior are wholly owned Subsidiaries of VPS. Crystal-Waterville
is a wholly owned Subsidiary of Crystal Rock. Crystal Rock owns
approximately twenty-one percent (21%) of the outstanding stock of
Computer Designed Systems, Inc.
4.14 Agreements Regarding Stock. None of the Obligors has any agreements
pertaining to the issuance, purchase or sale of its capital stock,
except as set forth on Schedule 4.14.
4.15 Collective Bargaining Agreements. None of the Obligors is a party
to any collective bargaining agreements.
4.16 Subsequent Advances Under the Loans. Each request by any Obligor for
an advance under the Revolving Line of Credit or the Acquisition/
Capital Asset Line of Credit or for the issuance of a Standby Letter
of Credit shall constitute a representation by such Obligor to
Lenders and Agent that (a) either (i) all of the representations and
warranties contained in this Agreement shall have continued to be
true and accurate in all material respects to and including the date
of such borrowing as though made on and as of such date or (ii) any
changes in any material respect to such representations and
warranties have been disclosed in writing to the Agent and
individually or in the aggregate could not reasonably be foreseen to
result in a material adverse change to the Collateral or in the
business, properties, condition or operations, financial or
otherwise, of any Obligor; (b) no event has occurred and is
continuing, or would exist as a result of the proposed borrowing,
which constitutes an Event of Default hereunder or would constitute
such an Event of Default but for the giving of notice or passage of
time; (c) each Obligor has performed all of the agreements on its
part contained in the Loan Documents and required to be performed by
it on or prior to the date of such borrowing; and (d) the corporate
resolutions authorizing the Loan Documents and the underlying
transactions remain in full force and effect and have not been
modified or amended in any respect.
42
4.17 Saleable Value of Assets. The fair saleable value of the assets of
each Obligor, after giving effect to the transactions contemplated
by the Loan Documents, will be in excess of its debts (including
contingent, subordinated, unmatured and unliquidated liabilities).
4.18 Sufficient Cash Flow. Each Obligor has, and after giving effect to
the transactions contemplated by the Loan Documents each Obligor
will have, sufficient cash flow to continue to operate its business
in the ordinary course as heretofore conducted, make the payments
called for by the Loan Documents and pay all other debts, including
but not limited to payments under the Notes, supplier payments,
pension and other employee benefit plan liabilities, business
expenses and taxes, as the same shall become due.
4.19 No Hindrance. None of the Obligors has any intent to hinder, delay
or defraud any entity to which it is or will become indebted.
4.20 Capitalization. None of the Obligors, after giving effect to the
transactions contemplated by the Loan Documents, will be engaged in
any business or transaction or is about to engage in any business or
transaction for which it has unreasonably small capital.
4.21 Ability to Pay Debts. None of the Obligors, after giving effect to
the transactions contemplated by the Loan Documents, intends to
incur nor does it believe that it will incur debts beyond its
ability to pay as they become due.
4.22 Ownership of Property. None of the Obligors has in its possession
any personal property of which it is not the actual owner, except as
described on Schedule 4.22.
4.23 Benefit of Loans. Each Obligor shall receive material direct and
indirect benefits from the making of any portion of the Loans to any
of the Obligors and a satisfactory financial condition and
successful business operations of each Obligor benefits, directly
and indirectly, each of the other Obligors.
4.24 Adirondack, Excelsior and Crystal-Waterville. None of Adirondack,
Excelsior or Crystal-Waterville is an operating entity or has any
assets, liabilities or revenues.
4.25 Compliance with Land Use Permits. The Obligors are in material
compliance with all land use permits relating to the Premises.
4.26 Revised Article 9 Information. The type of organization of each
Obligor, the state of organization of each Obligor, the
organizational identification number of each Obligor for Revised
Article 9 purposes in each such state of organization and the
Federal Employer Identification number of each Obligor is set forth
on Schedule 4.26.
4.27 Water Contracts and Licenses. All of Obligors' material contracts
and license agreements relating to the supply of water to any of the
Obligors are listed on Schedule 4.27, all such material contracts
and license agreements are in full force and effect and have not
been amended or modified in any respect, no Obligor and, to the
knowledge of the Obligors, no other party thereto is in default with
respect thereto, and true and complete copies of all such material
contracts and license agreements have been provided to Agent.
43
SECTION 5. Affirmative Covenants. Obligors covenant and agree that, so long as
any of the Obligations shall remain outstanding, they will perform and observe
each and all of the covenants and agreements herein set forth, unless waived in
writing by Agent.
5.1 Payments Under this Agreement and the other Loan Documents. Each
Obligor will make punctual payment of all monies and will faithfully
and fully keep and perform all of the terms, conditions, covenants
and will be bound in all respects as obligor under this Agreement
and the other Loan Documents. All Obligations shall be direct and
primary obligations of each Obligor and each Obligor shall be
jointly and severally liable for all Obligations. Notwithstanding
any term or provision of this Agreement, the Notes or the other Loan
Documents to the contrary, the Obligations of each Obligor shall not
exceed the maximum amount for which such Obligor can be liable
without rendering the Obligations of such Obligor voidable under
applicable law relating to fraudulent conveyance or fraudulent
transfer or similar laws affecting the rights of creditors
generally.
5.2 Information, Access to Books, and Inspection. Each Obligor will
furnish to each Lender such information regarding the business
affairs and financial condition of the Obligors as such Lender may
reasonably request and give any representative of any Lender access
during normal business hours to, and permit him/her to examine and
copy, make extracts from, and audit any and all books, records and
documents in the possession of Obligors relating to their affairs
and to inspect any of the Property so long as each Lender and its
representative agrees to maintain the confidentiality of such
information.
5.3 Payment of Liabilities. Each Obligor will pay and discharge at or
before their maturity all taxes, assessments, rents, claims, debts
and charges, except where the same may be contested in good faith,
will maintain, in accordance with GAAP, appropriate reserves for the
accrual of any of the same and if requested by Agent, will set aside
a reserve satisfactory to Agent to pay such contested amounts and
all taxes, interest, penalties and costs associated therewith.
44
5.4 Corporate Existence, Properties. Each Obligor will continue to
conduct its business as presently conducted; will do or cause to be
done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises, and will
comply with all laws applicable thereto; will maintain all licenses,
patents and other rights necessary for the operation of its
business; will at all times maintain, preserve and protect all
franchises, patents, trademarks, trade names and water rights and
will preserve, to the extent deemed necessary or appropriate by
Obligors in their reasonable business judgment, all of the remainder
of its Property used or useful in the conduct of its business and
will keep the same in good condition and repair (normal wear and
tear and obsolescence excepted), and from time to time will
reasonably make, or cause to be made, all needful and proper
repairs, renewals, replacements, betterments and improvements
thereto, and will pay or cause to be paid, except when the same may
be contested in good faith, all rent due on premises where any
Property is held or may be held, so that the business carried on in
connection therewith may be continuously conducted.
5.5 Insurance. Each Obligor will have and maintain casualty insurance at
all times with respect to all Property and all Collateral against
risks of fire (including so-called extended coverage), theft and
such risks as Agent may reasonably require, business interruption
insurance as Agent may reasonably require, public liability
insurance as Agent may reasonably require and flood insurance as
Agent may reasonably require, containing such terms, in such form,
in such amounts (including 100% of the full insurable value of
buildings, improvements and personal property with respect to
casualty insurance) and for such periods, and written by such
companies as may reasonably be satisfactory to Agent, such insurance
to be payable to Agent and Obligors as their interests may appear.
Each policy of insurance shall have a mortgagee and loss payee
endorsement providing:
a. That loss or damage, if any under the policy, shall be payable to
Agent, as secured party, as its interests may appear;
b. That the insurance as to the interest of Agent shall not be
invalidated by any act or neglect of the insured or owner of the
property described in said policy, nor by any foreclosure, or
other proceeding, nor by any change in the title of ownership of
said property, nor by the occupation of the premises where the
property is located for purposes more hazardous than are
permitted by said policy;
c. That, if the policy is canceled at any time by the insurance
carrier, in such case the policy shall continue in force for the
benefit of Agent for not less than thirty (30) days after written
notice of cancellation to Agent from the insurance carrier; and
45
d. That the policy will not be reduced or canceled at the request of
the insured nor will said loss payee endorsement be amended or
deleted without thirty (30) days' prior written notice to Agent
from the insurance carrier.
Upon the occurrence and during the continuance of any Event of
Default, Agent may act as attorney for the Obligors in obtaining,
adjusting, settling, and canceling such insurance and receiving and
endorsing any drafts. Each Obligor hereby assigns to Agent any and all
monies which may become due and payable under any policy insuring the
Collateral covered by this Agreement, including return of unearned
premiums, and hereby directs any insurance company issuing any such
policy to make payment directly to Agent and authorizes Agent, at its
option except to the extent that either of the next two sentences
apply,: (i) to apply such monies in payment on account of any
Obligation hereunder, whether or not due, and remit any surplus to
Obligors; or (ii) to return said funds to Obligors for the purpose of
replacement of the Collateral. Upon the damage, destruction or loss of
any personal property which constitutes Collateral in an aggregate
amount of $250,000 or less, Agent agrees that it will return said
funds to Obligors for the purpose of replacement of the Collateral
with new Collateral of the same value and utility if no event which
constitutes or which with notice or lapse of time, or both, would
constitute an Event of Default has occurred and the damage,
destruction or loss has not materially impaired the business
operations of any of the Obligors. If the damage, destruction or loss
of any personal property which constitutes Collateral exceeds an
aggregate amount of $250,000, Agent agrees that it will return said
funds to Obligors for the purpose of replacement of the Collateral
with new Collateral of the same value and utility but only on the
following conditions: (i) no event which constitutes or which with
notice or lapse of time, or both, would constitute an Event of Default
has occurred, (ii) the damage, destruction or loss has not materially
impaired the business operations of any of the Obligors, (iii) Agent
has approved the plans and specifications for the replacement
Collateral, (iv) funds are released to the Obligors as the replacement
progresses in accordance with Agent's customary procedures for
financings of property such as the replacement Collateral. Each
Obligor will also at all times maintain necessary workers'
compensation insurance and such other insurance as may be required by
law or as may be reasonably required in writing by Agent.
Obligors will furnish Agent with certificates or other evidence
satisfactory to Agent of compliance with the foregoing insurance
provisions on the Date of Closing and thirty (30) days prior to each
anniversary of the Date of Closing.
5.6 Compliance with Laws. Each Obligor shall comply in all material
respects with all laws, ordinances, rules or regulations, applicable
to it, of all federal, state or municipal governmental authorities,
instrumentalities or agencies including, without limitation, ERISA,
the United States Occupational Safety and Health Act of 1970, as
amended, and all federal, state, county and municipal laws,
ordinances, rules and regulations relating to the environment or the
employment of labor, as such may be amended.
5.7 Notices. Obligors will promptly give notice in writing to each
Lender of: (a) the occurrence of any event which constitutes or
which with notice or lapse of time, or both, would constitute an
Event of Default under this Agreement or any of the other Loan
Documents; (b) the occurrence of any material adverse change in the
business, properties or the condition or operations, financial or
otherwise, of any of the Obligors, or the occurrence of any event
which is reasonably likely to result in such a material adverse
change, in each case specifying such change or event; (c) any court
or governmental orders, notices, claims, investigations, litigation
and proceedings received by or involving any of the Obligors in
which the aggregate amount involved is $100,000 or more and not
covered by insurance; (d) any material dispute which may exist
between any of the Obligors and any governmental regulatory body or
any other party; and (e) any proposed or actual change in the names,
identities or corporate structure of any of the Obligors.
5.8 Financial Statements. Obligors shall deliver or cause to be
delivered to each Lender:
a. As soon as available and in any event within ninety (90) days
after the close of each fiscal year of Holdings, audited
consolidated and consolidating financial statements including a
balance sheet as of the close of such fiscal year and statements
of operations and changes in stockholders' equity and changes in
cash flows for the year then ended, all on a comparative basis
with corresponding statements for the preceding fiscal year and
prepared in conformity with GAAP, applied on a basis consistent
with that of the preceding year, and accompanied by a report
thereon, containing an opinion, unqualified as to scope, of a
firm of independent certified public accountants selected by
Holdings and reasonably acceptable to Agent, stating that the
financial statements fairly present in all material respects the
consolidated financial condition and results of operation of
Holdings and its Subsidiaries as of the end of the fiscal year
and for the period then ended.
b. As soon as available and in any event within forty-five (45) days
after the end of each fiscal quarter in each fiscal year,
Holdings' Form 10Q as filed with the Securities Exchange
Commission and a consolidated balance sheet of Holdings and its
Subsidiaries as of the close of such fiscal quarter and
consolidating statements of operations and changes in cash flows
for that portion of the fiscal year-to-date then ended, all on a
comparative basis with the budget and prepared in conformity with
GAAP, applied on a basis consistent with that of the preceding
period, and which shall be certified by the President, Chief
Executive Officer or Chief Financial Officer of Holdings as being
accurate and fairly presenting the financial condition of
Holdings and its Subsidiaries.
47
c. Together with the statements and reports referred to in sub-
paragraphs a. and b. above, a written statement from the
President, Chief Executive Officer or Chief Financial Officer of
Holdings certifying compliance with all financial covenants and
reflecting all computations in connection therewith and
certifying that there exists no Event of Default, or any event
but for the giving of notice or the passage of time would
constitute an Event of Default.
d. As soon as available and in any event within ninety (90) days
after the close of each fiscal year of Holdings, detailed budgets
and projections for the current fiscal year of Holdings, VPS and
Crystal Rock approved by the Board of Directors of Holdings.
e. As soon as available and in any event within ten (10) days after
the end of each month, a report in a form acceptable to Agent
reflecting retail sales versus the budget for such sales,
detailed between branded and private label.
f. From time to time, promptly upon any Lender's written request,
such other information about the financial condition and
operations of Obligors as such Lender may reasonably request, in
form and detail reasonably satisfactory to such Lender.
5.9 Operating Accounts. Obligors shall maintain their primary operating
and disbursement accounts with Webster Bank and shall utilize the
cash management services provided by Webster Bank or any other
Lender, including, at Obligors' option, automated "sweep" and
investment features. VPS may retain a local depository relationship
for collection and payroll purposes.
5.10 Pension Plans.
a. No event, including but not limited to any "reportable event", as
that term is defined in Section 4043 of ERISA, exists in
connection with any of its Plans and any entities related to it
under Section 414(b), (c), (m), (n) or (o) of the Code has
occurred which might constitute grounds for termination of any
such Plan by the PBGC, or for the appointment by the appropriate
United States District Court of a trustee to administer any such
Plan. A list of all of the Obligors' Plans are attached hereto on
Schedule 5.10;
48
b. No "prohibited transaction" within the meaning of Section 406 of
ERISA or Section 4975 of the Code exists or will exist upon the
execution and delivery of this Agreement and the other Loan
Documents, or the performance by the parties hereto or thereto of
their respective duties and obligations hereunder and thereunder;
c. Each Obligor shall do all acts, including, but not limited to,
making all contributions necessary to maintain compliance with
ERISA and the Code, and agrees not to terminate any Plan in a
manner or do or fail to do any act which could result in the
imposition of a lien on any of its properties pursuant to Section
4068 of ERISA;
d. None of the Obligors sponsors or maintains, and has never
contributed to, and has not incurred any withdrawal liability
under a "multi employer plan" as defined in Section 3 of ERISA
and none has any written or verbal commitment of any kind to
establish, maintain or contribute to any "multi employer plan"
under the Multi Employer Pension Plan Amendments Act of 1980;
e. None of the Obligors has any unfunded liability in contravention
of ERISA and the Code;
f. Each of the Plans complies currently, and has complied in the
past, in all material respects, both as to form and operation,
with its terms and with the provisions of the Code and ERISA, and
all applicable regulations thereunder and all applicable rules
issued by the Internal Revenue Service, U.S. Department of Labor
and the PBGC and as such, is and remains a "qualified" plan under
the Code;
g. No actions, suits or claims are pending (other than routine
claims for benefits) against any Plan or the assets of any Plan;
h. Each Obligor has performed in all material respects all
obligations required to be performed by it under any Plan set
forth in Schedule 5.10 and it is not in default or in violation
of any Plan, and has no knowledge of any such default or
violation by any other party to any such Plans;
i. No liability has been incurred by any Obligor to the PBGC or to
participants or beneficiaries on account of any termination of a
Plan subject to Title IV of ERISA, no notice of intent to
terminate a Plan has been filed by (or on behalf of) it pursuant
to Section 4041 of ERISA and no proceeding has been commenced by
the PBGC pursuant to Section 4042 of ERISA;
j. The reporting and disclosure provisions of the Securities Act of
1933 and Securities Exchange Act of 1934 have been complied with
for all Plans, to the extent applicable.
49
5.11 Environmental Matters.
a. Each Obligor has obtained all permits, licenses and other
authorizations which are required under all Environmental Laws.
Each Obligor is in compliance with the terms and conditions of
all such permits, licenses and authorizations, and is, to the
best of its knowledge, also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code,
plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
b. No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and, to the knowledge of the
Obligors, no investigation or review is pending or threatened by
any governmental or other entity with respect to any alleged
failure by any Obligor to have any permit, license or
authorization required in connection with the conduct of its
business or with respect to any Environmental Laws, including
without limitation, Environmental Laws relating to the
generation, treatment, storage, recycling, transportation,
disposal or release of any Hazardous Materials.
c. No oral or written notification of a release of a Hazardous
Material has been filed by or against any Obligor and to the best
of each Obligor's knowledge, no property now or previously owned,
leased or used by it is listed or proposed for listing on the
Comprehensive Environmental Response, Compensation and Liability
Inventory of Sites or National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, or on any similar state or federal list
of sites requiring investigation or clean-up.
d. There are no liens or encumbrances arising under or pursuant to
any Environmental Laws on any of the property or properties owned
by any Obligor, and no governmental actions have been taken or
are in process which could subject any of such properties to such
liens or encumbrances or, as a result of which any Obligor would
be required to place any notice or restriction relating to the
presence of Hazardous Materials at any property owned by it in
any deed to such property.
50
e. Neither Obligors nor, to the best of their knowledge, any
previous owner, tenant, occupant or user of any property owned by
any Obligor, has (i) engaged in or permitted any operations or
activities upon or any use or occupancy of such property, or any
portion thereof, for the purpose of or in any way involving the
release, discharge, refining, dumping or disposal (whether legal
or illegal, accidental or intentional) of any Hazardous Materials
in an amount required to be reported to any governmental agency
or authority on, under, in or about such property, or (ii)
transported or had transported any Hazardous Materials to such
property except to the extent such Hazardous Materials are
commonly used in day-to-day operations of such property and, in
such case, in compliance with, all applicable Environmental Laws;
(iii) engaged in or permitted any operations or activities which
would allow the facility to be considered a treatment, storage or
disposal facility as that term is defined in 40 CFR 264 and 265,
(iv) engaged in or permitted any operations or activities which
would cause any property now owned, leased or used by it to
become subject to any state transfer act, or (v) constructed,
stored or otherwise located Hazardous Materials on, under, in or
about any property now owned, leased or used by it except to the
extent commonly used in day-to-day operations of such properties
and, in such case, in compliance with all applicable
Environmental Laws. Further, to the best of Obligors' knowledge,
no Hazardous Materials have migrated from other properties upon,
about or beneath any property now owned, leased or used by any of
them.
SECTION 6. Negative Covenants. So long as any Obligations remain outstanding and
unpaid, Obligors covenant and agree that they will not without the express
written consent of Agent:
6.1 Limitation on Liens. Incur or permit to exist any lien, mortgage,
security interest, pledge, charge or other encumbrance against
the Property, whether now owned or hereafter acquired (including,
without limitation, any lien or encumbrance relating to any
response, removal or clean-up of any toxic substances or
hazardous wastes), except: (a) liens, mortgages, security
interests, charges or other encumbrances in favor of Agent or
specifically permitted in writing by Agent; (b) liens or pledges
incidental to the conduct of business or the ownership of
properties and assets (including liens or pledges in connection
with worker's compensation, unemployment insurance and other like
laws, warehousemen's and attorneys' liens and statutory
landlords' liens) and liens to secure the performance of bids,
tenders or trade contracts, or to secure statutory obligations,
surety or appeal bonds or other liens of like general nature
incurred in the ordinary course of business and not in connection
with the borrowing of money provided in each case, the obligation
secured is not overdue; (c) tax liens which are being contested
in good faith with the prior written consent of Agent and against
which, if requested by Agent, Obligors shall maintain reserves in
amounts and in form (book, cash, bond or otherwise) satisfactory
to Agent; (d) the liens existing on the Date of Closing which are
listed on Schedule 4.5; and (e) purchase money security interests
pursuant to which the amount financed and secured thereby does
not exceed $250,000 in any one fiscal year.
51
6.2 Limitation on Other Borrowing. Incur, create, assume or permit
to exist any Indebtedness other than (a) Indebtedness to the
Lenders pursuant to this Agreement, (b) Indebtedness existing on
the Date of Closing which is listed on Schedule 6.2, (c) purchase
money indebtedness pursuant to which the amount financed does not
exceed $250,000 in any one fiscal year, and (d) advances made
from any Obligor to any other Obligor.
6.3 Limitation on Contingent Liabilities. Become liable as guarantor,
surety, endorser or otherwise for, or agree to purchase,
repurchase or assume, any obligation of any person, firm or
corporation, except for endorsement of commercial paper and
negotiable instruments for deposit, collection, or discount in
the ordinary course of business.
6.4 Limitation on Advances and Investments. Make or suffer to exist
any advances or loans to, or any investments in (by transfers of
property, contributions to capital, purchase of stock or
securities or evidence of indebtedness, acquisition of assets or
business or otherwise) any person, firm or corporation, including
officers or employees of Obligors, other than (a) Capital
Expenditures permitted by Section 6.20, (b) advances for employee
business expenses in the ordinary course of business, (c)
advances or loans to another Obligor, (d) investments in U. S.
Treasury obligations, Certificates of Deposits issued by banks
domiciled in the United States and securities pursuant to Agent's
automatic sweep investment account, in each case in the ordinary
course of business, (e) the existing investments in Mac Casualty
Ltd. and Computer Designed Systems, Inc. as of the Date of
Closing and (f) Acquisitions of businesses within the home and
office business segment of the food and beverage industry which
derive seventy-five percent (75%) or more of their revenues from
the home and office delivery of bottled water and refreshment
products and for which, in any one transaction, the total
purchase price does not exceed $4,000,000, the amount borrowed
under the Acquisition/Capital Asset Line of Credit does not
exceed $3,000,000 and the total amount of the purchase price
funded by internally generated cash does not exceed $1,000,000
and after giving effect to which, as certified in a written
statement from the President, Chief Executive Officer or Chief
Financial Officer of Holdings delivered to Agent prior to such
Acquisition demonstrating compliance with all financial covenants
on a proforma basis after taking into account such Acquisition
and reflecting all computations in connection therewith, no Event
of Default, or event which with the giving of notice or the
passage of time would constitute an Event of Default, shall have
occurred. None of the Obligors shall enter into any joint
venture.
6.5 Limitation on Fundamental Changes. Merge or consolidate with or
into any other firm or corporation; dissolve or liquidate; change
substantially their lines of business; change their names;
convey, sell, lease or otherwise dispose of all or substantially
all of their property, assets or business.
52
6.6 Limitation on Affiliates and Subsidiaries. Acquire, form or
dispose of any Subsidiary or Affiliate or acquire all, or
substantially all or any material portion of the stock or assets
of any other person, firm, corporation, corporate division or
business entity other than (i) Acquisitions permitted by Section
6.4, provided, however, that Obligors have given prior written
notice thereof to Agent and have taken, at Obligors' sole cost
and expense, all steps reasonably required by Agent to perfect
the Agent's security interest in the stock or assets acquired,
(ii) the disposition of Mac Casualty Ltd. or Computer Designed
Systems, Inc. or any interest therein with written notice
thereof to Agent and (iii) the dissolution of Adirondack,
Excelsior or Crystal-Waterville; provided, however, that Obligors
have given prior written notice thereof to Agent.
6.7 Limitation on Changes in Management. Make or consent to a
material change in the manner in which the business of the
Obligors is conducted or make or consent to a change in
management so that any of Timothy G. Fallon, Bruce S. MacDonald,
John Baker or Peter Baker (the "Managers") are no longer actively
involved in the management of the Obligors; provided, however,
the Agent will not unreasonably withhold its consent to a
suitable replacement to any of the Managers approved by the Board
of Directors of Holdings. Each Manager shall be a party to an
employment contract that is satisfactory to Agent at the time of
entering into or amending such contract.
6.8 Limitation on Disposition of Assets. Sell, exchange or otherwise
dispose of any Property, other than finished goods and inventory
in the ordinary course of business and obsolete equipment no
longer used or useful in the conduct of business which is
replaced by equipment of at least equivalent value which is
subject to a valid perfected first priority security interest in
the Agent; provided, however, that Obligors need not replace any
such equipment if it is unnecessary to do so in the business
judgment of the Obligors and the proceeds thereof are applied to
the outstanding principal balance on the Term Loan.
6.9 Limitation on Dividends and Distributions. Declare or pay any
Dividend (unless payable in capital stock of Holdings) or
authorize or make any other distribution on or with respect to
any shares of capital stock of Holdings, whether now or hereafter
outstanding.
6.10 Limitation on Acquisition of Stock of Holdings. Purchase, acquire
or redeem, or make any commitment to purchase, acquire or redeem,
any of the capital stock of Holdings, whether now or hereafter
outstanding.
6.11 Limitation on Officer Compensation. Pay direct or indirect
compensation to any officer or director, whether bonus,
commission, stock distribution, or otherwise (but specifically
excluding salary), which would, after giving effect thereto,
constitute an Event of Default hereunder.
53
6.12 Limitation on Transactions with Affiliates. Other than the
Subordinated Debt with the Subordinated Lenders and the
Subordinated Encumbrances related thereto, employment contracts,
the grant of stock options, the existing arrangements with Mac
Casualty Ltd. and Computer Designed Systems, Inc. and the lease
of property in Watertown and Stamford, Connecticut, enter into,
or be a party to, any transaction with any Affiliate (including,
without limitation, transactions involving the purchase, sale or
exchange of property, the rendering of services or the sale of
stock) except in the ordinary course of business pursuant to the
reasonable requirements of the Obligors and upon fair and
reasonable terms no less favorable to the Obligors than Obligors
would obtain in a comparable arm's-length transaction with a
person other than an Affiliate.
6.13 Limitation on Change of Name or Location. Change their corporate
names or conduct any of their business under any trade name or
style other than as set forth on Schedule 4.12 or change their
chief executive offices, principal places of business or other
places of business or the locations of the Collateral or records
relating to the Collateral from those locations set forth in
Section 3.4 and Section 4.12; provided, however, that Obligors
may do any of the foregoing, other than change their chief
executive offices or principal places of business, if Obligors
give at least thirty (30) days prior written notice thereof to
Agent and take, prior to any such change, at Obligors' sole cost
and expense, all steps reasonably required by Agent to maintain
Agent's perfection of its first priority security interest in the
Collateral.
6.14 Mandatory Prepayment. Permit the aggregate outstanding principal
amount of the Revolving Line of Credit Notes to exceed, at any
time, six million five hundred thousand dollars ($6,500,000) less
(a) the maximum amount available to be drawn under all issued and
outstanding Standby Letters of Credit (assuming all conditions
for drawing have been satisfied), and (b) all amounts drawn under
issued Standby Letters of Credit for which the Agent has not been
reimbursed by the Obligors and, in the event any advances are
outstanding in excess of such amount, prepay on any day so much
of the outstanding principal amount which is in excess thereof.
6.15 Limitation on Changes in Accounting Methods. Make or consent to a
material change in their method of accounting unless such change
is required by GAAP; provided, however, that if any such change
would affect the calculation of any of the financial covenants
contained in this Agreement, the Obligors shall continue to
provide financial statements without such change for the purpose
of calculating compliance with the financial covenants until such
time as the financial covenants are adjusted by agreement of the
Obligors and the Lenders to take into account such change
required by GAAP.
54
6.16 Senior Funded Debt to EBITDA. Permit the ratio of Senior Funded
Debt to EBITDA to be greater than 3.00 to 1.00 as of the end of
any fiscal quarter. This ratio shall be tested as of the end of
each fiscal quarter, commencing with the fiscal quarter ending
April 30, 2003, for the fiscal quarter then ended and the
immediately preceding three fiscal quarters. Projected EBITDA for
each new Acquisition for the first year after such Acquisition as
agreed upon by the Agent and the Obligors will also be included
in this calculation. Such projected EBITDA will consist of 75% of
the year one adjusted EBITDA (after cost eliminations). For every
quarter of actual operations in the first year after such
Acquisition, the projected EBITDA for those quarters will be
replaced by the actual EBITDA.
6.17 Debt Service Coverage Ratio. Permit its Debt Service Coverage
Ratio to be less than 1.2 to 1.0. This ratio shall be tested as
of the end of each fiscal quarter, commencing with the fiscal
quarter ending April 30, 2003, for the fiscal quarter then ended
and the immediately preceding three fiscal quarters.
Notwithstanding the foregoing, for the fiscal quarter ending
April 30, 2003, the Current Maturities of Long Term Debt included
in the calculation of the Debt Service Coverage Ratio shall be
the actual current maturity of long term Indebtedness paid during
the month of April multiplied by twelve (12), and for the next
three fiscal quarters, the Current Maturities of Long Term Debt
included in the calculation of the Debt Service Coverage Ratio
shall be the actual current maturity of long term Indebtedness
paid during such quarter multiplied by four (4). Projected EBITDA
for each new Acquisition for the first year after such
Acquisition as agreed upon by the Agent and the Obligors will
also be included in this calculation. Such projected EBITDA will
consist of 75% of the year one adjusted EBITDA (after cost
eliminations). For every quarter of actual operations in the
first year after such Acquisition, the projected EBITDA for those
quarters will be replaced by the actual EBITDA.
6.18 Current Ratio. Permit at any time its Current Ratio to be less
than 1.0 to 1.0.
6.19 Net Losses. Permit any Net Loss. This covenant shall be tested as
of the end of the second, third and fourth fiscal quarters, for
the fiscal quarter then ended (not on a year to date basis), of
each fiscal year.
6.20 Capital Expenditures. Permit Capital Expenditures in any fiscal
year, on a non cumulative basis, to exceed the lesser of (i)
$3,000,000 plus Net Income or (ii) $5,000,000; provided, however,
that the portions of expenditures for Acquisitions and Capital
Assets funded with advances under the Acquisition/Capital Asset
Line of Credit shall be excluded from such calculation. This
covenant shall be tested as of the end of each fiscal year,
commencing with the fiscal year ending October 31, 2003.
6.21 Adirondack, Excelsior and Crystal-Waterville. Permit any of
Adirondack, Excelsior or Crystal-Waterville to conduct any
business, acquire any assets or incur any liabilities.
55
SECTION 7. Default.
7.1 The occurrence of any of the following events will constitute an
Event of Default under this Agreement:
a. The failure by Obligors to pay any installment of principal
and/or interest due under any of the Loans or any of the
other Obligations when due and payable.
b. The failure by Obligors to pay taxes, if any, due on any
indebtedness under the Loans or any tax or assessment upon any
collateral securing the Obligations, on or before the same shall
become due and payable.
c. The failure of Obligors (i) to observe or perform any affirmative
covenant contained in Section 5 of this Agreement other than
sections 5.5 and 5.7 and such failure continues for a period of
thirty (30) days, provided that Obligors at all times diligently
pursue the cure of such failure or (ii) to observe or perform any
other covenant contained in this Agreement, including, without
limitation, sections 5.5 and 5.7, or in any of the other Loan
Documents.
d. The occurrence of an Event of Default as defined in or under any
of the other Loan Documents.
e. The filing by or against any Obligor of any petition,
arrangement, reorganization, or the like under any insolvency or
bankruptcy law, or the adjudication of any Obligor as a bankrupt
(and if such filing is involuntary, the failure to have same
dismissed within sixty (60) days from the date of filing), or the
making of an assignment for the benefit of creditors, or the
appointment of a receiver for any part of Obligors' properties or
the admission in writing by any Obligor of its inability to pay
debts as they become due.
f. The breach of any material warranty or the untruth or inaccuracy
of any material representation of any Obligor contained in the
Loan Documents.
g. The occurrence of a default beyond any applicable grace or cure
period under, or demand for the payment of, any other note or
obligation of any Obligor to any Lender.
h. The failure by any Obligor to make payment on any Indebtedness
with an outstanding principal balance in excess of $25,000 due to
any party other than any Lender, beyond any grace period provided
with respect thereto, or upon demand, or the failure to perform
any other term, condition, or covenant contained in any agreement
under which any such Indebtedness is created, the effect of which
failure is to cause or permit the holder of such Indebtedness to
cause such Indebtedness to become due and payable prior to its
date of maturity.
56
i. The dissolution, liquidation or termination of existence of any
Obligor.
j. The passage or enforcement of any federal, state, or local law or
the rendition of a final decision of any court (other than a law
or decision with respect to a tax upon the general revenues or
income of any Lender) in any way directly changing or affecting
any of the Loans or lessening the net income thereon in a fashion
which is not corrected or reimbursed by Obligors.
k. The passage or enforcement of any federal, state, or local law or
the rendition of a final decision of any court in any way
impairing any Lender's ability to charge and collect the interest
stated in the Notes, including without limitation, the ability to
vary the interest payable under the Notes in accordance with
their terms.
l. A judgment or judgments for the payment of money shall be
rendered against any Obligor, any such judgment or judgments
shall remain unsatisfied and in effect for a period of thirty
(30) consecutive days without a stay of execution and either the
amount of such judgment or judgments is in excess of $25,000 or
any attachment or execution occurs on any property of any of the
Obligors with respect to such judgment or judgments.
m. The occurrence of a material adverse change to the Collateral or
in any business, properties, condition or operations, financial
or otherwise, of any Obligor.
n. The invalidity or asserted invalidity by any of the Obligors or
Guarantors of any of the Loan Documents.
7.2 No Further Advances. Upon the happening and during the
continuance of any Event of Default specified above,
notwithstanding any other provision herein to the contrary,
Obligors shall not be entitled to any further advances under the
Revolving Line of Credit or the Acquisition/Capital Asset Line of
Credit or the issuance of any Standby Letters of Credit and, at
the option of the Agent, the entire unpaid balance owed under the
Loans, the Notes and the Loan Documents and under any other note
or other documents evidencing the same, plus any other sums owed
hereunder, shall become and shall thereafter be immediately due
and payable without presentment, demand, protest, notice of
protest, or other notice of dishonor of any kind, all of which
are hereby expressly waived by Obligors.
57
Notwithstanding the foregoing, upon an Event of Default pursuant
to Section 7.1e., the entire unpaid balance owed under the Loans,
the Notes and the Loan Documents and under any other note or
other documents evidencing the same, plus any other sums owed
hereunder, shall automatically become and shall thereafter be
immediately due and payable and the commitments of the Lenders to
make advances hereunder shall be terminated. Failure to exercise
such option shall not constitute a waiver of the right to
exercise the same in the event of any subsequent default. Upon
the occurrence of any Event of Default, without in any way
affecting any Lender's or Agent's other rights and remedies, or
after maturity or judgment, the interest rate applicable to each
of the Loans shall automatically change without notice to a rate
per annum equal to four percentage points (4%) above the
otherwise then applicable rate. The Agent shall endeavor to give
the Obligors prompt notice of the acceleration of the unpaid
balance owed under the Loans, the Notes and the Loan Documents
but failure to give such notice shall not affect any action taken
by Agent and Agent shall not incur any liability for any failure
to deliver such notice.
7.3 Rights of Agent. In the event of the occurrence and during the
continuance of an Event of Default (a) Agent will have the right
to take possession of the Collateral and to maintain such
possession on Obligors' premises or to remove the Collateral or
any part thereof to such places as Agent may desire. If Agent
exercises its right to take possession of the Collateral,
Obligors will, upon Agent's demand, assemble the Collateral and
make it available to Agent at a place reasonably convenient to
both parties; (b) Agent shall have, in addition to all other
rights provided herein, the rights and remedies of a secured
party under the Uniform Commercial Code; (c) Agent may sell and
deliver any or all Receivables and any or all other security and
Collateral held by Agent or for Agent at public or private sale,
for cash, upon credit or otherwise, at such prices and upon such
terms as Agent deems advisable, at Agent's sole discretion; and
(d) in addition to all other sums due Agent, Obligors will pay to
Agent all costs and expenses incurred by Agent, including
attorneys' fees, to obtain or enforce payment of Receivables or
the Obligations, or in the prosecution or defense of any action
or proceeding either against Agent or any Lender or against any
Obligor concerning any matter arising out of or connected with
this Agreement or the Collateral or the Loan Documents or
otherwise due pursuant to the terms of this Agreement. Any
requirement of reasonable notice shall be met if such notice is
mailed postage prepaid to each Obligor at each Obligor's address
as set forth herein at least ten (10) days before the time of
sale or other disposition. Agent or any Lender may be the
purchaser at any such sale, if it is public, and, in the event
Agent or any Lender is the purchaser, Agent or such Lender shall
have all the rights of a good faith, bona fide purchaser for
value from a secured party after default. The proceeds of sale
shall be applied first to all costs and expenses of sale,
including attorneys' fees, and second to the payment (in whatever
order Agent elects) of all Obligations, and any remaining
58
proceeds shall be applied in accordance with the provisions of
Article 9 of the Uniform Commercial Code. Obligors shall remain
liable to Agent and the Lenders for any deficiency. Failure by
Agent or any Lender to exercise any right, remedy or option under
this Agreement or any of the other Loan Documents or in any other
agreement between any Obligor and Agent or any Lender, or delay
by Agent or any Lender in exercising the same will not operate as
a waiver by Agent or any Lender unless it is in writing and
signed by such party and then only to the extent specifically
stated. Neither Agent nor any Lender nor any party acting as
Agent's or any Lender's attorney pursuant to this Agreement shall
be liable for any error of judgment or mistake of fact or law.
Agent's and Lenders' rights and remedies under this Agreement
will be cumulative and not exclusive of any other right or remedy
which Agent and Lenders may have. Nothing in this Agreement shall
be construed to modify or limit the unconditional right of Agent
or any Lender in its sole discretion to demand full or partial
payment of the principal of, and interest on, any demand
Obligation. The right to make demand on any such demand
Obligation shall exist whether or not Obligors are in compliance
with the covenants or conditions contained in this Agreement or
in any other agreements between Obligors and Agent or any Lender.
7.4 Collection of Receivables. Upon the occurrence and during the
continuance of an Event of Default, Agent or its designee may
notify customers or account debtors of Obligors at any time, that
Receivables have been assigned to Agent or of Agent's security
interest therein and collect them directly and charge the
collection costs and expenses to Obligors' account.
7.5 Power of Attorney. Obligors appoint Agent, or any other person
whom Agent may designate as its attorney, with power following
the occurrence and during the continuance of an Event of Default:
to endorse Obligors' names on any checks, notes, acceptances,
money orders, drafts or other forms of payment or security that
may come into Agent's possession; to sign Obligors' names on any
invoice or bill of lading relating to any Receivables, on notices
of assignment, financing statements, and other public records, on
verifications of accounts and on notices to customers; to notify
the post office authorities to change the address for delivery of
Obligors' mail to an address designated by Agent; to send
requests for verification of Receivables to customers or account
debtors; and to do all things necessary to carry out this
Agreement. Obligors ratify and approve all lawful acts of the
attorney. Neither Agent nor the attorney will be liable for any
lawful acts or omissions nor for any error of judgment or mistake
of fact or law. This power, being coupled with an interest, is
irrevocable so long as any Receivables assigned to Agent or in
which Agent has a security interest remain unpaid or until the
Obligations have been fully satisfied. Agent may file one or more
financing statements disclosing Agent's security interest without
Obligors' signatures appearing thereon.
SECTION 8. Conditions Precedent. Notwithstanding any other provision of this
Agreement or any of the other Loan Documents, and without affecting in any
manner the rights of the Agent and Lenders under the other sections of this
Agreement, the Lenders shall not be required to make any initial Loan under this
Agreement unless and until each of the following conditions has been and
continues to be satisfied:
59
8.1 Documentation. Agent shall have received, in form and substance
satisfactory to Agent and its counsel, a duly executed copy of
this Agreement, the Notes, the Guaranties, the Mortgage and the
Stock Pledge Agreement, together with such additional documents,
instruments, consents, waivers, resolutions and certificates as
Agent and its counsel shall reasonably require in connection
therewith, all in form and substance satisfactory to Agent and
its counsel.
8.2 No Default. No Event of Default or event which with the giving of
notice of the passage of time would constitute an Event of
Default shall exist.
8.3 Other Loan Documents. Each of the conditions precedent set forth
in the other Loan Documents shall have been satisfied.
8.4 No Litigation. No action, proceeding, investigation, regulation
or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to
enjoin, restrain or prohibit, or to obtain damages in respect of,
or which is related to or arises out of this Agreement or the
consummation of the transactions contemplated hereby.
8.5 Opinion of Counsel. The Agent and Lenders shall have received an
opinion of counsel to the Obligors and the Guarantors in form and
content satisfactory to the Agent and its counsel.
8.6 Compliance with Covenants. The Obligors shall have satisfied in
all respects all covenants to be performed by the Obligors prior
to the date of the first advance hereunder.
8.7 Representations and Warranties True and Correct. The
representations and warranties of the Obligors set forth in this
Agreement shall be true and correct in all material respects as
of the date of the first advance hereunder.
8.8 No Material Adverse Change. There shall have been no material
adverse change in the condition or operations, financial or
otherwise, of the Obligors or the Collateral, between October 31,
2002 and the date of the first advance hereunder.
8.9 Subordination Agreement. The Subordinated Lenders shall have
executed and delivered to the Agent subordination agreements in
form and content satisfactory to Agent in its sole discretion.
8.10 Title Insurance Policy. The Obligors shall have delivered to the
Agent a title insurance policy insuring the lien of the Mortgage
in form and content satisfactory to Agent in its sole discretion.
60
8.11 Landlord Consents. The Obligors shall have delivered to the Agent
landlord consents executed by the landlords of various business
locations leased by the Obligors in form and content satisfactory
to Agent in its sole discretion.
8.12 Reimbursement of Costs and Expenses. The Obligors shall have
reimbursed the Agent for all costs and expenses incurred by the
Agent in connection with this Agreement and the transactions
contemplated hereby.
8.13 Certificate of Obligors. The Obligors shall have furnished a
certificate to the Agent, dated as of the date of the first
advance hereunder, certifying that, assuming the items submitted
which are required to be satisfactory to Agent are satisfactory
to Agent, all conditions precedent set forth in this Section have
been satisfied in all respects.
SECTION 9. Miscellaneous.
9.1 Indemnification. In consideration of each Lender's and Agent's
execution and delivery of this Agreement and each Lender's making
of the Loans hereunder and in addition to all other obligations
of Obligors under this Agreement, each Obligor hereby agrees to
defend, protect, indemnify and hold harmless each Lender and
Agent, their successors, assigns, officers, directors, employees
and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages and expenses in
connection therewith (irrespective of whether any such
Indemnitees are a party to any action for which indemnification
hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnifiable Liabilities") incurred by
the Indemnitees or any of them as a result of, or arising out of,
or relating to (a) the execution, delivery, performance or
enforcement of this Agreement and the other Loan Documents and
any instrument, document or agreement executed pursuant hereto;
(b) any Lender's status as lender to, or creditor of, any of the
Obligors or the Agent's status as agent in connection herewith;
or (c) the operation of Obligors' business from and after the
date hereof, provided that Obligors shall not be required to
indemnify any Indemnitee for any Indemnifiable Liabilities
resulting from such Indemnitee's own gross negligence or willful
misconduct. To the extent that the foregoing undertaking by
Obligors may be unenforceable for any reason, each Obligor shall
make the maximum contribution to the payment and satisfaction of
each of the Indemnifiable Liabilities which is permissible under
applicable law.
61
9.2 Setoff. All sums at any time standing to Obligors' credit on the
books of any Lender or upon or in which any Lender has a lien or
security interest shall be security for all of the Obligations.
In addition to and not in limitation of the above, with respect
to any deposits or Property of any Obligor in the possession or
control of any Lender, now or in the future, such party shall
have the right, if an event which constitutes or which with
notice or lapse of time, or both, would constitute an Event of
Default under this Agreement or any of the other Loan Documents
has occurred and is continuing, to setoff all or any portion
thereof, at any time, against any Obligations hereunder, even
though unmatured, without prior notice or demand to any Obligor.
9.3 Sale or Participation of Interests. Subject to the terms of the
Agency Agreement, each Lender shall have the unrestricted right
at any time and from time to time, and without the consent of or
notice to Obligors, to sell or to grant participating interests
in all or a part of such Lender's Notes and its interests in the
Loans to one or more banks or other financial institutions (each,
an "Assignee"). In the event of any such grant by such Lender of
a participating interest, whether or not upon notice to Obligors,
such Lender shall remain responsible for the performance of its
obligations hereunder and Obligors shall continue to deal solely
and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Loan
Documents. In the event of any such sale by such Lender of all or
a part of such Lender's Notes and its interests in the Loans,
such Assignee shall become responsible for the performance of
such Lender's obligations hereunder to the extent of such sale
and such Lender shall be released from its obligations hereunder
to such extent. The parties hereto shall execute any amendments
to this Agreement or any of the other Loan Documents and provide
such other documentation, such as replacement Notes, requested by
the Agent to reflect the transfer of interests pursuant to this
Section. Any Lender may furnish any information concerning
Obligors in its possession from time to time to prospective
Assignees, providing that such Lender shall require any such
prospective Assignee to agree in writing to maintain the
confidentiality of such information.
9.4 No Waiver. No course of dealing between Obligors and Agent or any
Lender and no failure to exercise or delay in exercising on the
part of Agent or any Lender any right, power or privilege under
the terms of this Agreement or the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise. Neither the Agent nor any
Lender shall be deemed to have waived any of its rights upon or
under Obligations or the Collateral unless such waiver be in
writing and signed by such party. The rights and remedies
provided herein or in any other agreement are cumulative and not
exclusive or in derogation of any rights or remedies provided
therein and thereof, by law or otherwise.
9.5 Cross-Collateralization. All collateral which Agent or any Lender
may at any time acquire from Obligors or from any other source in
connection with the Obligations arising under this Agreement and
the other Loan Documents shall constitute collateral for each and
every Obligation, without apportionment or designation as to
62
particular Obligations and all Obligations, however and whenever
incurred, shall be secured by all collateral however and whenever
acquired, and Agent shall have the right, in its sole discretion,
to determine the order in which Agent and Lenders' rights in or
remedies against any collateral are to be exercised and which
type of collateral or which portions of collateral are to be
proceeded against and the order of application of proceeds of
collateral as against particular Obligations.
9.6 Cross-Default. Obligors acknowledge and agree that a default
under any one of the Loan Documents shall constitute a default
under each of the other Loan Documents.
9.7 Survival of Agreements. All agreements, representations and
warranties made herein, in any agreement and in any statements,
notices, invoices, certificates, schedules, documents or other
instruments delivered to Agent or any Lender in connection with
this Agreement or any other Loan Document shall survive the
making of the Loans and advances hereunder.
9.8 Further Documents. Obligors agree that, at any time or from time
to time upon written request of Agent, Obligors will execute and
deliver such further documents and do such other acts and things
as Agent may reasonably request in order to fully effect the
purposes of this Agreement and the other Loan Documents and in
order to reflect, to the extent deemed necessary by the Agent or
the Lenders, the addition of any new lender hereunder, the
removal of any Lender hereunder, any change in the Lender's
Commitment Percentages or the replacement of the Agent with a new
agent appointed by the Lenders in accordance with the Agency
Agreement.
9.9 Entire Agreement; Governing Law. This Agreement and the documents
referred to herein constitute the entire agreement of the parties
and may not be amended orally and they shall be construed and
interpreted in accordance with the laws of the State of
Connecticut, including its conflict of laws principles.
9.10 Consent to Jurisdiction. Each Obligor hereby acknowledges that
the underlying transactions to which this Agreement and the other
Loan Documents relate concern the making, now or in the future,
of loans and advances to the Obligors and that said obligations
of the Obligors are primarily to be performed in the State of
Connecticut. The Obligors agree that the execution of this
Agreement and the other Loan Documents and the rights and
obligations of the parties hereunder and thereunder shall be
deemed to have a Connecticut situs and each Obligor shall be
subject to the personal jurisdiction of the courts of the State
of Connecticut with respect to any action the Agent, any Lender,
or any of their successors or assigns, may commence hereunder.
Accordingly, each Obligor hereby specifically and irrevocably
consents to the jurisdiction of the courts of the State of
Connecticut with respect to all matters concerning this
Agreement, the other Loan Documents, the Notes or the enforcement
of any of the foregoing.
63
9.11 Joint and Several Liability. All obligations, covenants and
agreements of the Obligors pursuant to this Agreement or any of
the other Loan Documents shall be the joint and several
obligations, covenants and agreements of each of the Obligors.
9.12 Successors. All rights of Agent and the Lenders hereunder shall
inure to the benefit of their successors and assigns, and all
Obligations of Obligors shall bind their successors and assigns.
9.13 Expenses. Obligors will pay all expenses arising out of the
preparation, amendment, protection, collection and/or other
enforcement of this Agreement, the other Loan Documents, the
Collateral or security interest granted hereunder or thereunder
and the Notes (including, without limitation, reasonable
counsels' fees).
9.14 Payments. The acceptance of any check, draft or money order
tendered in full or partial payment of any Obligation hereunder
is conditioned upon and subject to the receipt of final payment
in cash.
9.15 Exhibits and Schedules. All exhibits and schedules referred to
herein and annexed hereto are hereby incorporated into this
Agreement and made a part hereof.
9.16 Acknowledgment of Copy, Use of Proceeds. Obligors acknowledge
receipt of copies of the Notes and Guaranties and attest,
represent and warrant to Lenders and Agent that advances made
under the Loans are to be used for general commercial purposes
and that no part of such proceeds will be used, in whole or in
part, directly or indirectly, for the purpose of purchasing or
carrying any "margin security" or "margin stock" as such terms
are defined in Regulation U of the Board of Governors of the
Federal Reserve System.
9.17 Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and
shall not be deemed to affect the meaning or construction of any
of the provisions hereof.
9.18 Notices. Any written notice required or permitted by this
Agreement may be delivered by depositing it in the U.S. mail,
postage prepaid or with a nationally recognized overnight courier
service or by facsimile addressed to the Obligors at the
addresses set forth at the beginning of this Agreement and to the
Agent or the Lenders at the addresses set forth beneath their
signatures at the end of this Agreement. If any notice is sent to
any Lender (as opposed to the Agent) pursuant to this paragraph,
a copy thereof should also be sent to the Agent and each other
Lender. Any party may change the address for its notices
hereunder by sending in accordance with this section a notice of
such change of address to all the other parties hereto, which
notice shall be effective upon receipt by the other parties.
64
9.19 Severability. If any provision of this Agreement or application
thereof to any person or circumstance shall to any extent be
invalid, the remainder of this Agreement or the application of
such provision to persons, entities or circumstances other than
those as to which it is held invalid, shall not be affected
thereby and each provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
9.20 Agency Agreement. The rights and obligations of the Lenders and
the Agent vis-a-vis each other with respect to Loans and the
Obligations are set forth in the Agency Agreement.
9.21 Termination. This Agreement shall terminate when all obligations
to make advances or issue letters of credit hereunder have
terminated and all Obligations relating in any way to the Loans
or the Loan Documents have been indefeasibly paid in full.
9.22 WAIVER OF RIGHT TO PREJUDGMENT REMEDY NOTICE AND HEARING.
OBLIGORS ACKNOWLEDGE THAT EACH LENDER AND AGENT MAY HAVE RIGHTS
AGAINST THEM, NOW OR IN THE FUTURE, IN ITS CAPACITY AS CREDITOR
OR IN ANY OTHER CAPACITY. SUCH RIGHTS MAY INCLUDE THE RIGHT TO
DEPRIVE OBLIGORS OF OR AFFECT THE USE OF OR POSSESSION OR
ENJOYMENT OF THEIR PROPERTY; AND IN THE EVENT ANY LENDER OR AGENT
DEEMS IT NECESSARY TO EXERCISE ANY OF SUCH RIGHTS PRIOR TO THE
RENDITION OF A FINAL JUDGMENT AGAINST ANY OBLIGOR, OR OTHERWISE,
SUCH OBLIGOR MAY BE ENTITLED TO NOTICE AND/OR HEARING UNDER THE
CONSTITUTION OF THE UNITED STATES AND/OR STATE OF CONNECTICUT,
CONNECTICUT STATUTES (TO DETERMINE WHETHER OR NOT SUCH LENDER OR
AGENT HAS PROBABLE CAUSE TO SUSTAIN THE VALIDITY OF SUCH PARTY'S
CLAIM), OR THE RIGHT TO NOTICE AND/OR HEARING UNDER OTHER
APPLICABLE STATE OR FEDERAL LAWS PERTAINING TO PREJUDGMENT
REMEDIES, PRIOR TO THE EXERCISE BY SUCH LENDER OR AGENT OF ANY
SUCH RIGHTS. OBLIGORS EXPRESSLY WAIVE ANY SUCH RIGHT TO
PREJUDGMENT REMEDY NOTICE OR HEARING TO WHICH OBLIGORS MAY BE
ENTITLED. THIS SHALL BE A CONTINUING WAIVER AND REMAIN IN FULL
FORCE AND EFFECT SO LONG AS OBLIGORS ARE OBLIGATED TO ANY LENDER
OR AGENT.
65
9.23 Waivers. Each Obligor hereby waives presentment, demand, notice,
protest, notice of acceptance of this Agreement, notice of loans
made, credit extended, collateral received or delivered or other
action taken in reliance hereon and all other demands and notices
of any description. With respect to this Agreement, the other
Loan Documents, the Obligations and the Collateral, each Obligor
assents to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange or release
of the Collateral, to the addition or release of any party or
person primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or
times as the Agent and the Lenders may deem advisable. Neither
the Agent nor any Lender shall have any duty as to the collection
or protection of the Collateral or any income thereon, nor as to
the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto beyond the safe
custody thereof. The Agent and the Lenders may exercise its
rights with respect to the Collateral without resorting or regard
to other collateral or sources of reimbursement for liability.
Each Obligor waives all suretyship defenses with respect to the
Notes, the Loans, the Obligations and all other matters arising
from or relating to the Loans and the Loan Documents.
9.24 WAIVER OF RIGHT TO JURY TRIAL. EACH OBLIGOR, AGENT AND EACH
LENDER HEREBY WAIVE TRIAL BY JURY AND THE RIGHT TO TRIAL BY JURY
IN ALL ACTIONS OR PROCEEDINGS BETWEEN THEM IN ANY COURT ARISING
OUT OF OR RELATING TO THIS AGREEMENT, ITS VALIDITY OR
INTERPRETATION. THIS SHALL BE A CONTINUING WAIVER AND REMAIN IN
FULL FORCE AND EFFECT SO LONG AS OBLIGORS ARE OBLIGATED TO ANY
LENDER OR AGENT.
9.25 Counterparts. This Agreement may be executed and delivered in any
number of counterparts each of which shall constitute an
original, but all of which taken together shall constitute but
one and the same agreement. Delivery of an executed signature
page to this Agreement by facsimile transmission shall be
effective as delivery of a manually signed counterpart of this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
66
In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered by the proper and duly authorized officers as of the date
and year first above written.
WITNESS:
__________________________ VERMONT PURE HOLDINGS, LTD.
Peter K. Baker
__________________________ By:____________________________
Larry P. Laubach Name: Timothy G. Fallon
Title: Chief Executive Officer
__________________________ CRYSTAL ROCK SPRING WATER COMPANY
Peter K. Baker
__________________________ By:____________________________
Larry P. Laubach Name: Timothy G. Fallon
Title: Chief Executive Officer
__________________________ VERMONT PURE SPRINGS, INC.
Peter K. Baker
__________________________ By:____________________________
Larry P. Laubach Name: Timothy G. Fallon
Title: Chief Executive Officer
__________________________ BANKNORTH, N.A.
Donna L. Corcoran
__________________________ By:____________________________
Kelly Shepard Name: Kathleen Sullivan
Title: Vice President
Address for notice:
2461 Main Street
Glastonbury, CT 06033
__________________________ MANUFACTURERS AND TRADERS TRUST
COMPANY
__________________________ By:____________________________
Name: Michael Goldrick
Title: Vice President
Address for notice:
303 South Broadway, Suite 130
Tarrytown, NY 10591
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
INTERNATIONAL", NEW YORK BRANCH,
as Lender
__________________________
Dana Hall
__________________________ By:_____________________________
Diana Delage Name: Betty H. Mills
Title: Executive Director
__________________________
__________________________ By:_____________________________
Jennifer Carbone Name: Edward J. Peyser
Title: Managing Director
Address for notice:
245 Park Ave.
New York, New York 10167
With a copy to:
1201 West Peachtree St., Suite 3450
Atlanta, Georgia 30309
Attn: Elizabeth Mills, Executive
Director
__________________________ WEBSTER BANK
Earl F. McMahon
__________________________ By:____________________________
Sharon Spada Spinelli Name: Richard A. O'Brien
Title: Senior Vice President
Address for notice:
145 Bank Street
Waterbury, Connecticut 06702
__________________________ WEBSTER BANK, as Agent
Sharon Spada Spinelli
__________________________ By:____________________________
Earl F. McMahon Name: Richard A. O'Brien
Title: Senior Vice President
Address for notice:
145 Bank Street
Waterbury, Connecticut 06702
Schedule 1.1tt
Lender Commitment Percentage
- ------ ---------------------
Banknorth, N.A. 20%
Manufacturers and Traders Trust Company 25%
Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A.,
"Rabobank International",
New York Branch 20%
Webster Bank 35%
EXHIBIT 2.1
Form of Term Note
EXHIBIT 2.2
Form of Revolving Line of Credit Note
EXHIBIT 2.3
Form of Acquisition/Capital Asset Line of Credit Note
Schedule 3.4
Locations of Collateral other than Premises
CRYSTAL ROCK SPRING WATER COMPANY CRYSTAL ROCK SPRING WATER COMPANY, INC.
70 WEST RED OAK LANE 237 EAST AURORA STREET
WHITE PLAINS, NY 10604-3602 WATERBURY, CT 06795
(914) 697-4727
VERMONT PURE SPRINGS, INC.
22 VETERAN'S LANE, SUITE 102
PLATTSBURGH, NY 12901
(518) 566-8113
VERMONT PURE HOLDINGS, INC.
36 SHUNPIKE ROAD a/k/a 87 HOLLY COURT
WILLISTON, VT 05495
(800) 639-3047
CRYSTAL ROCK SPRINGWATER COMPANY, INC. PUBLIC WAREHOUSE LOCATIONS
860 MAPLE STREET
ROCHESTER, NY 14607 VERMONT PURE SPRINGS, INC.
(716) 244-5220 RSD WAREHOUSE SERVICES, INC
601 OLD RIVER ROAD
VERMONT PURE SPRINGS, INC. WHITE RIVER JCT, VT 05001
14 JEWEL DRIVE, UNIT E (802) 291-7272
WILMINGTON, MA 01887
(800) 564-0125 VERMONT PURE SPRINGS, INC.
JCT ASSOCIATES, INC.
95 LEGGETT STREET
EAST HARTFORD, CT 06108
(860) 282-7555
CRYSTAL ROCK SPRING WATER COMPANY
1050 BUCKINGHAM ST
WATERTOWN, CT 06795
(860) 945-0661
CRYSTAL ROCK SPRING WATER COMPANY BOTTLING FACILITIES
313 LONG RIDGE ROAD
STAMFORD, CT CRYSTAL ROCK SPRING WATER COMPANY
(860) 945-0661 1050 BUCKINGHAM STREET
WATERTOWN, CT 06795
CRYSTAL ROCK SPRING WATER COMPANY
11-13 CORPORATE DRIVE CRYSTAL ROCK SPRING WATER COMPANY
HALFMOON, NY 12065 11-13 CORPORATE DRIVE
(518) 373-2972 HALFMOON, NY 12065
VERMONT PURE SPRINGS, INC. THE PREMISES
840 AERO DRIVE
BUFFALO, NY 14225
(716) 683-2365
VERMONT PURE HOLDINGS, LTD.
6486 RIDINGS ROAD
DEWITT, NY 13206
(315) 471-9057
Schedule 4.5
Section A
The following mortgages, security interests, pledges, liens, encumbrances,
or other charges listed in this Section A (the "Prior Encumbrances") are prior
in right and priority to the mortgages and security interests of the Bank:
1. Mortgage given to Janet Messier on October 8, 1991 on the premises at Chase
Road in Randolph, Vermont maturing December 1, 2006. Secured by the
property.
2. Lease with The CIT Group n/k/a Lease Plan in connection with the lease of
two trucks. The amount due through October 18, 2002 is $10,797. Secured by
a UCC-1 Financing Statement filed with the Vermont Secretary of State as
filing number 98-99831.
3. Truck Lease Agreement with Associates Leasing, Inc. n/k/a CitiCapital. The
amount outstanding on October 18, 2002 is $34,835. Secured by a UCC-1
Financing Statement filed with the Vermont Secretary of State as filing
number 99-110951.
4. Lease with Wells Fargo Financial Leasing Inc., successor to Norwest
Leasing. The amount outstanding on October 18, 2001 is approximately
$5,094. Secured by a UCC-1 Financing Statement filed with the Vermont
Secretary of State as filing number 99-115271.
5. Lease with Liqui-Box Corporation in connection with the lease of one
refurbished bottle filler. The amount due through December 31, 2006 is
$3,000. Secured by a UCC-1 Financing Statement filed with the Connecticut
Secretary of State as filing number 1833891.
6. Lease with Liqui-Box Corporation in connection with the lease of one
refurbished filler with automatic capper. The amount due through December
31, 2006 is $3,000. Secured by a UCC-1 Financing Statement filed with the
Connecticut Secretary of State as filing number 1853114.
7. Lease with Pitney Bowes Credit Corporation in connection with all the
equipment leased by Pitney Bowes Credit, Inc., Monarch Marketing Systems,
Inc., Pitney Bowes Credit Corporation and Dictaphone Corp. The amount due
through December 31, 2006 is $82,848. Secured by a UCC-1 Financing
Statement filed with the Connecticut Secretary of State as filing number
1856416.
8. Master Lease Agreement with Gelco Corporation d/b/a GE Capital Fleet
Services in connection with the lease of two (2) 2003 Freightliner M2 w/bay
Hesse Beverage Body. This lease is an operating lease, not a capital lease.
Secured by a UCC-1 Financing Statement filed with the Connecticut Secretary
of State as filing number 2174690.
9. Master Lease Agreement with Gelco Corporation d/b/a GE Capital Fleet
Services in connection with the lease of four (4) 2002 Freightliner FL70
w/Lo Boy Body. This lease is an operating lease, not a capital lease.
Secured by a UCC-1 Financing Statement filed with the Connecticut Secretary
of State as filing number 2120617.
Section B
The following mortgages, security interests, pledges, liens,
encumbrances, or other charges listed in this Section B (the "Subordinated
Encumbrances") are subordinate in right and priority to the mortgages and
security interests of the Bank:
Mortgage to the Town of Randolph through a Community Development Block
Grant in October, 1993 secured by real and personal property in
Randolph, Vermont which mortgage is subordinated to the Mortgage to
the Agent pursuant to a Subordination of Mortgage. The amount
outstanding as of October 31, 2002 was $220,719.
The security interests granted to the Subordinated Lenders in the
Subordinated Lenders' Collateral, as defined in those certain
Subordination and Pledge Agreements dated the date of this Agreement
among the Agent and the Subordinated Lenders.
Schedule 4.6
Litigation
1. Matthew F. Labounty v. Crystal Rock Spring Water Company, Vermont Pure
Springs, Inc. and Vermont Pure Holdings, Inc., Windsor County Superior
Court, State of Vermont -- Employment matter
2. Internal Revenue Service audit of old Crystal Rock for the short fiscal
year ended October 5, 2000.
3. Brian Clark v. Vermont Pure Holdings, Ltd. -- Brian Clark filed a claim
of discrimination against Vermont Pure Holdings, Ltd. with the
Connecticut Human Relations Commission.
4. VPS has recently obtained an amendment to its existing local permits
allowing for the use of an additional spring in the Town of Randolph,
expanded truck traffic from that spring site, and the construction of
an offloading facility at the bottling plant. VPS is also in the
process of filing for state Act 250 permits for the same amendments.
Certain residents of the Town of Randolph have filed an appeal to the
Vermont Environmental Court challenging the local permit amendment as
it pertained to the use of an additional spring site and expanded truck
traffic.
Schedule 4.12
Trade names for each Obligor
None
Schedule 4.14
-------------
Agreements pertaining to purchase or sale of stock
1. See attached list of outstanding Options and Warrants.
2. Common Stock Warrant issued to CoreStates Bank as of April 8, 1998 to
purchase a variable number of shares at a variable purchase price, each
as determined by the formula set forth therein.
3. Non-Incentive Stock Option Agreement between Holdings and The
Greatwater Company dated March 10, 1997 to purchase 42,187 shares of
Holding's Common Stock at $2.8125/ea. 9,500 shares were purchased upon
exercise on October 31, 2002.
4. Registration Rights Agreement between Holdings and CoreStates Bank,
dated April 8, 1998.
5. Stock Issuance and Registration Rights Agreement between Holdings and
Vermont Coffee Time, Inc. dated January 5, 1998.
Schedule 4.22
Property not owned by Obligors
Pitney Bowes Postage Machine & Scale
Pitney Bowes Copier
InPaco/Liqui-Box 1000 SL Filler
InPaco/Liqui-Box 350 HT Filler
YR MAKE VIN # OWNER / LIENHOLDER LEASE EXP
00 IHC 4900 1HTSDAANX1H335835 RYDER/CITICORP - 925802 06/01/2006
00 IHC 4900 1HTSDAAN81H335834 RYDER/CITICORP - 925801 06/09/2006
00 IHC 4900 1HTSDAAN61H335833 RYDER/CITICORP - 925800 06/01/2006
01 IHC 4900 1HTSDAAN51H335824 RYDER/CITICORP - 925799 05/25/2006
00 IHC 4900 1HTSDAAN6YH308738 RYDER/CITICORP - 394701 02/01/2006
00 IHC 4900 1HTSDAAN4YH308737 RYDER/CITICORP - 394700 02/01/2006
00 IHC 4900 1HTSDAAN1YH308727 RYDER/CITICORP - 394699 04/01/2006
00 IHC 4900 1HTSDAAN4YH308740 RYDER/CITICORP - 394094 02/01/2006
00 IHC 4900 1HTSDAAN5YH308729 RYDER/CITICORP - 394093 02/01/2006
00 IHC 4900 1HTSDAAN8YH308739 RYDER/CITICORP - 394050 02/04/2006
00 IHC 4900 1HTSDAAN1YH308730 RYDER/CITICORP - 394049 02/01/2006
00 IHC 4900 1HTSDAAN3YH308728 RYDER/CITICORP - 392705 01/28/2006
00 IHC 1HTSCAAN6YH235793 RYDER - 903443 12/01/2005
98 IHC 4700 1HTSCAAM8VH432984 RYDER - 566885 06/04/2004
99 IHC 4700 1HTSCAAN1XH671001 RYDER - 331724 01/25/2005
99 IHC 4700 1HTSCAAN1XH671000 RYDER - 331723 01/24/2005
99 IHC 4700 1HTSCAAN0XH670999 RYDER - 331722 01/08/2005
99 IHC 4700 1HTSLAAL0XH624989 RYDER - 311696 06/01/2004
99 GMC 7500 1GDM7H1C9XJ512599 LEROY HOLD - V1791 06/14/2005
99 GMC 7500 1GDM7H1C2XJ512640 LEROY HOLD - V1790 06/14/2005
99 GMC 7500 1GDM7H1CXXJ512594 LEROY HOLD - V1763 07/14/2005
99 GMC 7500 1GDM7H1C8XJ512884 LEROY HOLD - V1762 08/10/2005
99 GMC 7500 1GDM7H1C4XJ512719 LEROY HOLD - V1761 06/14/2005
99 PETERBILT 1XPGDU8X8XN510507 LEROY HOLD - TR1797 05/07/2005
99 PETERBILT 1XPGDU9XXXD487719 LEROY HOLD - TR1729 08/26/2004
99 POLAR 1PMS54338X1021007 LEROY HOLD - T1788 11/11/2004
99 POLAR 1PMS54336Z1020518 LEROY HOLD - T1730 08/26/2004
97 F'LINER FL70 1FV6HJAA4VL617511 LEASEPLAN - 040040/96543 11/25/2003
97 F'LINER FL70 1FV6HJAA6VL842674 LEASEPLAN - 040040/96536 11/25/2003
96 F'LINER FL70 1FV6HJAA1TL567048 LEASEPLAN - 040040/96514 07/25/2003
96 F'LINER FL70 1FV6HJAA9TL567055 LEASEPLAN - 040040/96505 07/25/2003
02 CAD DEVILLE 1G6KF57932U177181 GELCO 11/22/2006
03 F'LINER FL70 1FVACYCS03HL68860 GELCO 12/31/2007
03 F'LINER FL70 1FVACYCS23HL68861 GELCO 12/31/2007
03 FORD EXPED 1FMFU18L33LA69802 GELCO 05/31/2007
02 F'LINER FL70 1FVABTBV42HK96030 GELCO 04/30/2007
02 F'LINER FL70 1FVABTBV82HK96032 GELCO 04/30/2007
02 F'LINER FL70 1FVABTBV62HK96031 GELCO 04/30/2007
02 F'LINER FL70 1FVABTBVX2HK96033 GELCO 04/30/2007
01 FRHT FL70 1FVABTBV31HJ28748 GELCO 03/31/2006
01 FRHT FL70 1FVABTBV11HJ28747 GELCO 03/31/2006
01 FRHT FL70 1FVABTBV41HJ28712 GELCO 03/29/2006
01 FRHT FL70 1FVABTBV21HJ28711 GELCO 03/29/2006
01 BLAZER 1GNDT13W81K230039 GELCO 01/28/2006
02 BLAZER 1GNDT13W32K150875 GELCO 12/06/2004
99 IHC 4700 1HTSCAAN8XH624613 GELCO 09/30/2004
99 IHC 4700 1HTSCAAN1XH210914 GELCO 03/30/2004
99 IHC 4700 1HTSCAAN3XH210915 GELCO 03/30/2004
99 IHC 4900 1HTSDAAN8XH684839 GELCO 01/31/2004
99 IHC 4900 1HTSDAAN4XH684840 GELCO 01/31/2004
99 IHC 4700 1HTSCAAM6XH676247 GELCO 11/30/2003
99 IHC 4700 1HTSCAAM8XH676654 GELCO 09/30/2003
99 IHC 4700 1HTSCAAN6XH624612 GELCO 08/31/2003
98 IHC 4700 1HTSCAAN0XH606008 GELCO 07/30/2003
00 LINC TOWNCAR 1LNHM83W6YY895475 FORD/LEASE# BKN501NKY5 05/15/2003
00 FORD CONTOUR 1FAFP66L6YK101995 FORD/LEASE# 0000078916 05/01/2004
00 GMC 7500 1GBM7H1C2YJ519954 DECARLOIS - #4760 05/26/2006
00 IHC 4700 1HTSCAAN0YH233179 CITICAPITAL 05/04/2005
02 S430 WDBJF83J62X062744 GELCO 01/31/2005
02 BLAZER 4X4 S 1GNDT13W92K150248 GELCO 12/31/2006
02 MALIBU 1G1NE52J32M603202 GELCO 12/31/2004
02 EXPEDITION 4 1FMPU18L72LA68845 GELCO 01/31/2007
02 MALIBU 1G1ND52J32M586761 GELCO 03/31/2005
03 TOWN CAR 1LNHM83W33Y637374 GELCO 09/30/2005
03 TRAILBLAZER 1GNDT135032123924 GELCO 12/31/2005
01 SUBURBAN 150 1GNFK16T51J262756 GELCO 08/31/2006
Schedule 4.26
VERMONT PURE HOLDINGS, LTD.
Type of organization: corporation
State of organization: Delaware
Organizational identification number: 3215737
Federal Employer Identification number: 03-0366218
CRYSTAL ROCK SPRING WATER COMPANY
Type of organization: corporation
State of organization: Connecticut
Organizational identification number: 0011840
Federal Employer Identification number: 06-0798121
VERMONT PURE SPRINGS, INC.
Type of organization: corporation
State of organization: Delaware
Organizational identification number: 2268977
Federal Employer Identification number: 03-0330521
Schedule 4.27
Material contracts and license agreements relating to the supply of water
1. Amended and Restated Spring Water License and Supply Agreement between
Pristine Mountain Springs of Vermont , Inc. and Amsource, LLC dated
April 13, 1999. Assigned to Vermont Pure Holdings, Ltd. on September
30, 1999.
2. "Lease of Water Rights" between Sagamon Spring Water of Vermont, Inc.
and Glenn W. Merrill and Glenn D. Merrill dated November 6, 1997
assigned to Vermont Pure Springs, Inc. on January 30, 1998.
3. Contract between the Town of Bennington, Vermont and Vermont Pure
Springs, Inc. dated January 6, 2003.
Schedule 5.10
Plans of the Obligors
1. Vermont Pure Holdings Health and Welfare Plan
2. Vermont Pure Holdings Retirement and Profit Sharing Plan
3. 1998 Incentive and Non-Statutory Stock Option Plan
4. Vermont Pure Holdings, Ltd. 1999 Employee Stock Purchase Plan
5. 1993 Performance Equity Plan
Schedule 6.1
Existing Capital Leases
1. Lease with The CIT Group n/k/a Lease Plan in connection with the lease
of two trucks. The amount due through October 18, 2002 is $10,797.
Secured by a UCC-1 Financing Statement filed with the Vermont Secretary
of State as filing number 98-99831.
2. Truck Lease Agreement with Associates Leasing, Inc. n/k/a CitiCapital.
The amount outstanding on October 18, 2002 is $34,835. Secured by a
UCC-1 Financing Statement filed with the Vermont Secretary of State as
filing number 99-110951.
3. Lease with Wells Fargo Financial Leasing Inc., successor to Norwest
Leasing. The amount outstanding on October 18, 2001 is approximately
$5,094. Secured by a UCC-1 Financing Statement filed with the Vermont
Secretary of State as filing number 99-115271.
Schedule 6.2
Permitted Indebtedness
1. Mortgage to Janet Messier dated October 8, 1991 on the premises at
Chase Road in Randolph, Vermont maturing December 1, 2006. The amount
outstanding on October 31, 2002 was $30,654. Secured by the property.
2. Notes to Henry, Joan, John, Peter Baker and a Baker family
trust totaling $22,600,000, maturing October 5, 2007.
Subordinated to Lenders.
3. Loan from the Town of Randolph through a Community Development Block
Grant in October, 1993 secured by real and personal property in
Randolph, Vermont and the mortgage lien of which was subordinated to
the Mortgage to the Agent pursuant to a Subordination of Mortgage. The
amount outstanding as of October 31, 2002 was $220,719.
3. Lease with The CIT Group n/k/a Lease Plan in connection with the lease
of two trucks. The amount due through October 18, 2002 is $10,797.
Secured by a UCC-1 Financing Statement filed with the Vermont Secretary
of State as filing number 98-99831.
4. Truck Lease Agreement with Associates Leasing, Inc. n/k/a CitiCapital.
The amount outstanding on October 18, 2002 is $34,835. Secured by a
UCC-1 Financing Statement filed with the Vermont Secretary of State as
filing number 99-110951.
5. Lease with Wells Fargo Financial Leasing Inc., successor to Norwest
Leasing. The amount outstanding on October 18, 2001 is approximately
$5,094. Secured by a UCC-1 Financing Statement filed with the Vermont
Secretary of State as filing number 99-115271.
6. Lease with Liqui-Box Corporation in connection with the lease of one
refurbished bottle filler. The amount due through December 31, 2006 is
$3,000. Secured by a UCC-1 Financing Statement filed with the
Connecticut Secretary of State as filing number 1833891.
7. Lease with Liqui-Box Corporation in connection with the lease of one
refurbished filler with automatic capper. The amount due through
December 31, 2006 is $3,000. Secured by a UCC-1 Financing Statement
filed with the Connecticut Secretary of State as filing number 8076931.
8. Lease with Pitney Bowes Credit Corporation in connection with all the
equipment leased by Pitney Bowes Credit, Inc., Monarch Marketing
Systems, Inc., Pitney Bowes Credit Corporation and Dictaphone Corp. The
amount due through December 31, 2006 is $82,848. Secured by a UCC-1
Financing Statement filed with the Connecticut Secretary of State as
filing number 1856416.
Exhibit 10.13
TERM NOTE
$___________ Hartford, Connecticut
March 5, 2003
FOR VALUE RECEIVED, the undersigned, VERMONT PURE HOLDINGS, LTD., a
Delaware corporation with an office located at Catamount Industrial Park, Route
66, Randolph, Vermont 05060 ("Holdings"), CRYSTAL ROCK SPRING WATER COMPANY, a
Connecticut corporation with an office at 1050 Buckingham Street, Watertown,
Connecticut 06795 ("Crystal Rock"), and VERMONT PURE SPRINGS, INC., a Delaware
corporation with an office at Catamount Industrial Park, Route 66, Randolph,
Vermont 05060 ("VPS", and collectively with Holdings and Crystal Rock, the
"Obligors"), hereby jointly and severally promise to pay to the order of
________________, a _____________ (individually, together with its successors
and assigns, the "Lender"), at its office at _____________, __________,
____________ ______ or at such other place as the holder hereof may designate,
the principal amount of ____________ MILLION ______________ AND 00/100 DOLLARS
($____________) (the "Principal Amount") in lawful money of the United States,
together with interest on the Principal Amount, beginning on the date hereof,
before and after maturity or judgment, at a per annum rate determined as
provided in that certain Loan and Security Agreement dated as of the 5th day of
March, 2003, as the same may be amended from time to time (as so amended from
time to time the "Loan and Security Agreement"), by and among the Obligors, each
of the lenders, including the Lender, which is a signatory thereto
(collectively, the "Lenders") and Webster Bank, as agent (in such capacity,
together with its successors and assigns in such capacity, the "Agent"). All
payments shall be made in lawful money of the United States in immediately
available funds. All capitalized terms not defined herein shall have the
meanings assigned to such terms in the Loan and Security Agreement.
1. Interest Rate. The interest rate hereunder shall be as set forth in
the Loan and Security Agreement.
2. Payments of Interest. Payments of interest hereunder shall be as set
forth in the Loan and Security Agreement.
3. Payments of Principal. Payments of principal hereunder shall be as set
forth in the Loan and Security Agreement.
4. Prepayments. Prepayments of principal hereunder shall be as set forth in
the Loan and Security Agreement.
5. Costs and Expenses. The Obligors shall pay all taxes levied or assessed
on this Note or the debt evidenced hereby against the Lender, together with all
costs, expenses and attorneys' and other professional fees incurred in any
action to collect and/or enforce this Note or to enforce the Loan and Security
Agreement or any other agreement relating to this Note or the Loan and Security
Agreement or any other agreement or in any litigation or controversy arising
from or connected with the Loan and Security Agreement or any other agreement,
or this Note.
6. Increased Costs. In the event that applicable law, treaty or regulation
or directive from any government, governmental agency or regulatory authority,
or any change therein or in the interpretation or application thereof, or
compliance by the Lender with any request or directive (whether or not having
the force of law) from any central bank or government, governmental agency or
regulatory authority, shall:
a. subject the Lender to any tax of any kind whatsoever
(except taxes on the overall net income of the
Lender) with respect to the Loan and Security
Agreement, this Note or any of the loans made by it,
or change the basis of taxation of payments to the
Lender in respect thereof (except for changes in the
rate of tax on the overall net income of the Lender);
b. impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar
requirements against assets held by, deposits or
other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other
acquisition of funds by, any office of the Lender,
including (without limitation) pursuant to
Regulations of the Board of Governors of the Federal
Reserve System; or
c. in the opinion of the Lender, cause this Note, any
loan made under this Note or under the Loan and
Security Agreement to be included in any calculations
used in the computation of regulatory capital
standards; or
d. impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
an amount that the Lender deems to be material, of making, converting into,
continuing and/or maintaining the loans made pursuant to this Note and the Loan
and Security Agreement or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of such loans, then, in any
case, the Obligors shall promptly pay the Lender, upon its demand, such
additional amounts necessary to compensate the Lender for such additional costs
or such reduction in payment, as the case may be (collectively the "Additional
Costs"). The Lender shall certify the amount of such Additional Costs to the
Obligors, and such certification, absent manifest error, shall be deemed
conclusive. In determining such amount, the Lender shall use any reasonable
averaging and attribution methods.
7. Indemnity. The Obligors agree to indemnify the Lender and to hold the
Lender harmless from any loss (including any of the additional costs referred to
above and any lost profits) or expense that it may sustain or incur as a
consequence of (i) a default by any Obligor in the payment of the principal of
or interest due on this Note, or (ii) the making of a prepayment of the
Principal Amount bearing interest based upon the LIBOR Rate on a day which is
not the last day of the then current Interest Period applicable thereto,
including, but not limited to, in each case any such loss or expense arising
from the reemployment of funds obtained by it or from fees, interest or other
amounts payable to terminate the deposits from which such funds were obtained.
The Agent shall prepare a certificate as to any additional amounts payable to it
pursuant to this Section, which certificate shall be submitted by the Lender to
the Obligors and shall, absent manifest error, be deemed conclusive.
2
8. Lawful Interest. All agreements between Obligors and Lender are hereby
expressly limited so that in no event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to Lender for the use or the
forbearance of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest,
then this Note shall be governed by such new law as of its effective date. In
this regard, it is expressly agreed that it is the intent of Obligors and Lender
in the execution, delivery and acceptance of this Note to contract in strict
compliance with the laws of the State of Connecticut from time to time in
effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the Loan Documents at the time of performance of
such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
any circumstances whatsoever Lender should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between Obligors and Lender.
9. Events of Default. The Obligors agree that the occurrence of an Event of
Default under the Loan and Security Agreement shall constitute an Event of
Default under this Note. This Note is one of the Term Notes referred to in, and
is entitled to the benefits of, the Loan and Security Agreement. Reference is
hereby made to the Loan and Security Agreement for the other terms and
conditions relating to the Loan evidenced by this Note which are incorporated in
this Note by reference. Upon the occurrence and during the continuance of any
Event of Default, the Lender, at its option, may declare all amounts outstanding
hereunder, together with accrued interest thereon and all applicable late
charges, other amounts due under this Note and all other liabilities and
obligations of the Obligors to the Lender to be immediately due and payable,
whereupon the same shall become immediately due and payable; all of the
foregoing without demand, presentment, protest, notice of dishonor or other
notice of any kind, all of which are hereby expressly waived by the Obligors.
Failure to exercise such option shall not constitute a waiver of the right to
exercise the same in the event of any subsequent default. Notwithstanding the
foregoing, upon the occurrence of an Event of Default relating to the bankruptcy
or insolvency of any Obligor or any guarantor, all amounts outstanding
hereunder, together with accrued interest thereon and all applicable late
charges, other amounts due under this Note and all other liabilities and
obligations of the Obligors to the Lender shall be immediately due and payable.
Upon the occurrence and during the continuance of any Event of Default, without
in any way affecting the Agent's or Lender's other rights and remedies, or after
maturity or judgment, the interest rate applicable to the outstanding principal
balance of this Note shall be as set forth in the Loan and Security Agreement.
The Lender shall endeavor to give the Obligors prompt notice of the acceleration
of the unpaid balance owed under this Note but failure to give such notice shall
not affect any action taken by Lender and Lender shall not incur any liability
for any failure to deliver such notice.
3
10. Lien and Right of Setoff. Each Obligor hereby grants to Lender a lien,
security interest and right of setoff as security for all liabilities and
obligations to Lender or any other lender under the Loan and Security Agreement,
whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Lender or any entity under common control with Lender,
or in transit to any of them. At any time, without demand or notice, Lender may,
if an event which constitutes or which with notice or lapse of time, or both,
would constitute an Event of Default under this Note, the Loan and Security
Agreement or any of the other Loan Documents has occurred and is continuing, set
off the same or any part thereof and apply the same to any liability or
obligation of any Obligor to Lender or any other lender under the Loan and
Security Agreement even though unmatured and regardless of the adequacy of any
other collateral securing the Loans. ANY AND ALL RIGHTS TO REQUIRE LENDER TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF ANY OBLIGOR, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
11. No Waiver. Failure by the Lender to insist upon the strict performance
by Obligors of any terms and provisions herein shall not be deemed to be a
waiver of any terms and provisions herein, and the Lender shall retain the right
thereafter to insist upon strict performance by the Obligors of any and all
terms and provisions of this Note or any agreement securing the repayment of
this Note.
12. Governing Law. This Note shall be governed by the laws of the State of
Connecticut.
13. Replacement Note. Upon receipt of an affidavit of an officer of Lender
as to the loss, theft, destruction or mutilation of this Note or any other Loan
Document which is not of public record, and, in the case of any such mutilation,
upon cancellation of this Note or other Loan Document, or in the case of any
such loss, theft or destruction, upon an agreement by the holder thereof to
indemnify Obligors for losses in connection therewith, Obligors will issue, in
lieu thereof, a replacement Note or other Loan Document in the same principal
amount thereof and otherwise of like tenor.
14. Joint and Several Liability. All obligations, covenants and agreements
of the Obligors pursuant to this Note or any of the other Loan Documents shall
be the joint and several obligations, covenants and agreements of each of the
Obligors.
4
15. Agency Agreement. The provisions of this Note and all payments made
under this Note shall be subject to the terms of the Agency Agreement.
16. Prejudgment Remedy and Other Waivers. EACH OBLIGOR ACKNOWLEDGES THAT
THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES ITS RIGHT
TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR
AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH LENDER MAY DESIRE TO USE, AND FURTHER, WAIVES DILIGENCE, DEMAND,
PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF PROTEST,
AND NOTICE OF ANY RENEWALS OR EXTENSIONS OF THIS NOTE, ALL SURETYSHIP DEFENSES
AND ALL RIGHTS UNDER ANY STATUTE OF LIMITATION. EACH OBLIGOR ACKNOWLEDGES THAT
IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
17. Jury Waiver. EACH OBLIGOR AND LENDER MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR
ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT
FOR LENDER TO ACCEPT THIS NOTE AND MAKE THE LOAN. EACH OBLIGOR ACKNOWLEDGES THAT
IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
5
IN WITNESS WHEREOF, the Obligors have caused this Note to be duly
executed as of the 5th day of March, 2003.
VERMONT PURE HOLDINGS, LTD.
By________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
CRYSTAL ROCK SPRING WATER COMPANY
By____________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
VERMONT PURE SPRINGS, INC.
By____________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
6
Exhibit 10.14
THIS INSTRUMENT IS SUBJECT TO THE SUBORDINATION AND PLEDGE AGREEMENT, DATED
AS OF March 5, 2003, AMONG THE INITIAL PAYEE HEREOF, THE MAKER HEREOF,
CRYSTAL ROCK SPRING WATER COMPANY, VERMONT PURE SPRINGS, INC., AND WEBSTER
BANK, AS AGENT, WHICH, AMONG OTHER THINGS, SUBORDINATES THE MAKER'S
OBLIGATIONS TO THE PAYEE TO THE MAKER'S OBLIGATIONS TO THE HOLDERS OF SENIOR
LIABILITIES, AS DEFINED IN SUCH AGREEMENT.
AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE
US$3,488,889.00 Dated: March 5, 2003
This Note is one of five amended and restated promissory notes (the "Baker
Notes") executed and delivered as of the date hereof by Vermont Pure Holdings,
Ltd. (the "Maker"), a Delaware corporation, in favor of each of Henry E. Baker,
Joan A. Baker, John B. Baker, Peter K. Baker, Ross S. Rapaport, not individually
but as Trustee of the Peter K. Baker Life Insurance Trust, the John B. Baker
Insurance Trust, and U/T/A dated December 16, 1991 F/B/O Joan Baker et al.,
respectively (collectively, the "Stockholders"). This Amended and Restated
Subordinated Promissory Note (the "Note") amends and restates in its entirety
the original Subordinated Promissory Note dated October 5, 2000 in the principal
amount of Five Million Two Hundred Thousand Dollars ($5,200,000) (the "Original
Note"), which Original Note is hereby superceded and replaced in its entirety.
Payment Terms. The Maker hereby promises to pay to the order of Henry E.
Baker (including any subsequent holder of this Note, the "Payee"), the principal
sum of Three Million Four Hundred Eighty Eight Thousand Eight Hundred Eighty
Nine Dollars ($3,488,489.00), with interest on the unpaid principal sum from
time to time outstanding hereunder at an annual rate equal to the lesser of (i)
with respect to overdue amounts (except to the extent not paid when due because
payment is then prohibited pursuant to the terms of the Subordination Agreement,
as defined below), from and after the time due, seventeen per cent (17%),
compounded quarterly on each February 20, May 20, August 20 and November 20, and
with respect to all other amounts, twelve per cent (12%) simple interest; and
(ii) the maximum lawful rate of interest; in each case to be applied on the
basis of the actual number of days elapsed and a 365-day year.
Subject to acceleration as provided herein, payments in respect of this
Note will be made on the following schedule:
(i) Interest will be payable in arrears for the three-month periods ended
on each January 31, April 30, July 31, and October 31, in each case not more
than 20 days after the end of such three-month period (i.e., February 20, May
20, August 20, and November 20). In addition to any other applicable rights or
remedies of the Payee, any interest not paid when due will thereafter bear
interest at the applicable rate stated above.
(ii) There are no scheduled principal payments required by this Note.
(iii) The entire amount of indebtedness represented by this Note will be
due and payable not later than May 31, 2008.
Any amount owing hereunder that is not paid because prohibited pursuant to
the terms of the Subordination Agreement will be paid as soon as to do so is not
so prohibited.
Acceleration. At the Payee's option, the entire amount of indebtedness
represented by this Note will become due and payable immediately upon written
notice of acceleration given by the Payee to the Maker following any: (i)
liquidation or dissolution of the Maker, or other termination or winding-up of
its existence or business; (ii) sale of all or substantially all of the assets
or capital stock of the Maker; or (iii) acceleration of the due date of the
Senior Liabilities, as defined in the Subordination Agreement, or any other
indebtedness of the Maker for borrowed money.
In addition, the entire amount of indebtedness represented by this Note
will become due and payable, automatically and without any notice or other
action, immediately upon any: (i) appointment of a receiver for the Maker or its
assets; (ii) assignment by the Maker for the benefit of its creditors; or (iii)
institution by or against the Maker of any proceedings under bankruptcy,
insolvency, or similar laws, which in the case of any such institution against
the Maker, are not dismissed within 90 days.
For purposes of the preceding two paragraphs, any event of the types
described therein involving one or more of the Maker's subsidiaries will be
deemed to have occurred with respect to the Maker if such subsidiary or
subsidiaries represent more than 50% (by either book value or fair market value)
of the consolidated assets of the Maker and all of its consolidated
subsidiaries.
Prepayment. The Maker will have the right to prepay the unpaid principal
amount of this Note in full at any time, or in part from time to time, on 30
days' prior written notice to the Payee and the other holders of the Baker
Notes; provided, that by written notice executed by all holders of the Baker
Notes given to the Maker within 20 days following any such notice, such holders
may require the Maker to allocate the aggregate amount proposed to be repaid to
all of them among such holders in such proportions as they may specify.
Any prepayment of this Note will include all accrued and unpaid interest on
the principal amount prepaid.
If any prepayment of this Note is made before October 5, 2003, the Maker
will pay the Payee a premium equal to a percentage of the principal amount
prepaid, which percentage will be one per cent (1%) with respect to payments
made before such date.
Maker's Waiver of Presentment, Etc. The Maker hereby waives presentment,
notice, protest, and all other demands and notices.
No Waiver by Payee. The failure of the Payee to exercise any of its rights,
remedies, powers, or privileges hereunder in any instance will not constitute a
waiver thereof in respect of that or any other instance.
2
Enforcement Costs. The Maker will pay on demand all costs of collection,
including all court costs and attorneys' reasonable fees, paid or incurred by
the Payee in enforcing this Note and its rights hereunder.
Pro Rata Payments. Except to the extent provided above under the caption
"Prepayment" and except to the extent otherwise agreed in writing by all holders
of the Baker Notes, any payments by the Maker in respect of the Baker Notes will
be made pro rata in proportion to the respective amounts then owing by the Maker
in respect of each such note.
Subordination. This Note is subject to a separate Subordination and Pledge
Agreement, dated March 5, 2003, among the Payee, Ross S. Rapaport, not
individually but as Trustee of the Peter K. Baker Life Insurance Trust, The John
B. Baker Insurance Trust and u/t/a/ dated December 16, 1991 f/b/o Joan Baker et.
al., as agent for the Payee and certain other holders of indebtedness of the
Maker (in such capacity, the "Agent"), the Maker, Vermont Pure Springs, Inc.,
Crystal Rock Spring Water Company and Webster Bank, as agent, which, among other
things, (a) subordinates the Maker's obligations to the Payee to the Maker's
obligations to the holders of Senior Liabilities as defined in such agreement,
and (b) restricts the amount and payment of principal and interest hereunder and
the rights of the holder of the Note to enforce any provision hereof or to
access any collateral security for this Note. Neither this Note nor any rights
hereunder may be transferred (and any attempt to do so will be void) unless the
proposed transferee first becomes a party to the Subordination Agreement.
Security. This Note is secured pursuant to the terms of the Security
Agreement, dated as of October 5, 2000, as amended, among the Maker, Platinum
Acquisition Corp., formerly named "Vermont Pure Holdings, Ltd.," Vermont Pure
Springs, Inc., the Payee, the original holders of the other Baker Notes, and the
Agent.
Governing Law. This Note will be governed by and interpreted and construed
in accordance with the internal laws of the State of Connecticut (without
reference to principles of conflicts or choice of law).
[The remainder of this page intentionally left blank.]
3
This Note is executed and delivered on and as of the date first above
written.
VERMONT PURE HOLDINGS, LTD.
By______________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
4
Exhibit 10.15
THIS INSTRUMENT IS SUBJECT TO THE SUBORDINATION AND PLEDGE AGREEMENT, DATED
AS OF March 5, 2003, AMONG THE INITIAL PAYEE HEREOF, THE MAKER HEREOF,
CRYSTAL ROCK SPRING WATER COMPANY, VERMONT PURE SPRINGS, INC., AND WEBSTER
BANK, AS AGENT, WHICH, AMONG OTHER THINGS, SUBORDINATES THE MAKER'S
OBLIGATIONS TO THE PAYEE TO THE MAKER'S OBLIGATIONS TO THE HOLDERS OF SENIOR
LIABILITIES, AS DEFINED IN SUCH AGREEMENT.
AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE
US$3,511,111.00 Dated: March 5, 2003
This Note is one of five amended and restated promissory notes (the "Baker
Notes") executed and delivered as of the date hereof by Vermont Pure Holdings,
Ltd. (the "Maker"), a Delaware corporation, in favor of each of Henry E. Baker,
Joan A. Baker, John B. Baker, Peter K. Baker, Ross S. Rapaport, not individually
but as Trustee of the Peter K. Baker Life Insurance Trust, the John B. Baker
Insurance Trust, and U/T/A dated December 16, 1991 F/B/O Joan Baker et al.,
respectively (collectively, the "Stockholders"). This Amended and Restated
Subordinated Promissory Note (the "Note") amends and restates in its entirety
the original Subordinated Promissory Note dated October 5, 2000 in the principal
amount of Five Million Two Hundred Thousand Dollars ($5,200,000) (the "Original
Note"), which Original Note is hereby superceded and replaced in its entirety.
Payment Terms. The Maker hereby promises to pay to the order of Joan A.
Baker (including any subsequent holder of this Note, the "Payee"), the principal
sum of Three Million Five Hundred Eleven Thousand One Hundred Eleven Dollars
($3,511,111.00), with interest on the unpaid principal sum from time to time
outstanding hereunder at an annual rate equal to the lesser of (i) with respect
to overdue amounts (except to the extent not paid when due because payment is
then prohibited pursuant to the terms of the Subordination Agreement, as defined
below), from and after the time due, seventeen per cent (17%), compounded
quarterly on each February 20, May 20, August 20 and November 20, and with
respect to all other amounts, twelve per cent (12%) simple interest; and (ii)
the maximum lawful rate of interest; in each case to be applied on the basis of
the actual number of days elapsed and a 365-day year.
Subject to acceleration as provided herein, payments in respect of this
Note will be made on the following schedule:
(i) Interest will be payable in arrears for the three-month periods ended
on each January 31, April 30, July 31, and October 31, in each case not more
than 20 days after the end of such three-month period (i.e., February 20, May
20, August 20, and November 20). In addition to any other applicable rights or
remedies of the Payee, any interest not paid when due will thereafter bear
interest at the applicable rate stated above.
(ii) There are no scheduled principal payments required by this Note.
(iii) The entire amount of indebtedness represented by this Note will be
due and payable not later than May 31, 2008.
Any amount owing hereunder that is not paid because prohibited pursuant to
the terms of the Subordination Agreement will be paid as soon as to do so is not
so prohibited.
Acceleration. At the Payee's option, the entire amount of indebtedness
represented by this Note will become due and payable immediately upon written
notice of acceleration given by the Payee to the Maker following any: (i)
liquidation or dissolution of the Maker, or other termination or winding-up of
its existence or business; (ii) sale of all or substantially all of the assets
or capital stock of the Maker; or (iii) acceleration of the due date of the
Senior Liabilities, as defined in the Subordination Agreement, or any other
indebtedness of the Maker for borrowed money.
In addition, the entire amount of indebtedness represented by this Note
will become due and payable, automatically and without any notice or other
action, immediately upon any: (i) appointment of a receiver for the Maker or its
assets; (ii) assignment by the Maker for the benefit of its creditors; or (iii)
institution by or against the Maker of any proceedings under bankruptcy,
insolvency, or similar laws, which in the case of any such institution against
the Maker, are not dismissed within 90 days.
For purposes of the preceding two paragraphs, any event of the types
described therein involving one or more of the Maker's subsidiaries will be
deemed to have occurred with respect to the Maker if such subsidiary or
subsidiaries represent more than 50% (by either book value or fair market value)
of the consolidated assets of the Maker and all of its consolidated
subsidiaries.
Prepayment. The Maker will have the right to prepay the unpaid principal
amount of this Note in full at any time, or in part from time to time, on 30
days' prior written notice to the Payee and the other holders of the Baker
Notes; provided, that by written notice executed by all holders of the Baker
Notes given to the Maker within 20 days following any such notice, such holders
may require the Maker to allocate the aggregate amount proposed to be repaid to
all of them among such holders in such proportions as they may specify.
Any prepayment of this Note will include all accrued and unpaid interest on
the principal amount prepaid.
If any prepayment of this Note is made before October 5, 2003, the Maker
will pay the Payee a premium equal to a percentage of the principal amount
prepaid, which percentage will be one per cent (1%) with respect to payments
made before such date.
Maker's Waiver of Presentment, Etc. The Maker hereby waives presentment,
notice, protest, and all other demands and notices.
No Waiver by Payee. The failure of the Payee to exercise any of its rights,
remedies, powers, or privileges hereunder in any instance will not constitute a
waiver thereof in respect of that or any other instance.
2
Enforcement Costs. The Maker will pay on demand all costs of collection,
including all court costs and attorneys' reasonable fees, paid or incurred by
the Payee in enforcing this Note and its rights hereunder.
Pro Rata Payments. Except to the extent provided above under the caption
"Prepayment" and except to the extent otherwise agreed in writing by all holders
of the Baker Notes, any payments by the Maker in respect of the Baker Notes will
be made pro rata in proportion to the respective amounts then owing by the Maker
in respect of each such note.
Subordination. This Note is subject to a separate Subordination and Pledge
Agreement, dated March 5, 2003, among the Payee, Ross S. Rapaport, not
individually but as Trustee of the Peter K. Baker Life Insurance Trust, The John
B. Baker Insurance Trust and u/t/a/ dated December 16, 1991 f/b/o Joan Baker et.
al., as agent for the Payee and certain other holders of indebtedness of the
Maker (in such capacity, the "Agent"), the Maker, Vermont Pure Springs, Inc.,
Crystal Rock Spring Water Company and Webster Bank, as agent, which, among other
things, (a) subordinates the Maker's obligations to the Payee to the Maker's
obligations to the holders of Senior Liabilities as defined in such agreement,
and (b) restricts the amount and payment of principal and interest hereunder and
the rights of the holder of the Note to enforce any provision hereof or to
access any collateral security for this Note. Neither this Note nor any rights
hereunder may be transferred (and any attempt to do so will be void) unless the
proposed transferee first becomes a party to the Subordination Agreement.
Security. This Note is secured pursuant to the terms of the Security
Agreement, dated as of October 5, 2000, as amended, among the Maker, Platinum
Acquisition Corp., formerly named "Vermont Pure Holdings, Ltd.," Vermont Pure
Springs, Inc., the Payee, the original holders of the other Baker Notes, and the
Agent.
Governing Law. This Note will be governed by and interpreted and construed
in accordance with the internal laws of the State of Connecticut (without
reference to principles of conflicts or choice of law).
[The remainder of this page intentionally left blank.]
3
This Note is executed and delivered on and as of the date first above
written.
VERMONT PURE HOLDINGS, LTD.
By______________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
4
Exhibit 10.16
THIS INSTRUMENT IS SUBJECT TO THE SUBORDINATION AND PLEDGE AGREEMENT, DATED
AS OF March 5, 2003, AMONG THE INITIAL PAYEE HEREOF, THE MAKER HEREOF,
CRYSTAL ROCK SPRING WATER COMPANY, VERMONT PURE SPRINGS, INC., AND WEBSTER
BANK, AS AGENT, WHICH, AMONG OTHER THINGS, SUBORDINATES THE MAKER'S
OBLIGATIONS TO THE PAYEE TO THE MAKER'S OBLIGATIONS TO THE HOLDERS OF SENIOR
LIABILITIES, AS DEFINED IN SUCH AGREEMENT.
AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE
US$5,200,000.00 Dated: March 5, 2003
This Note is one of five amended and restated promissory notes (the "Baker
Notes") executed and delivered as of the date hereof by Vermont Pure Holdings,
Ltd. (the "Maker"), a Delaware corporation, in favor of each of Henry E. Baker,
Joan A. Baker, John B. Baker, Peter K. Baker, Ross S. Rapaport, not individually
but as Trustee of the Peter K. Baker Life Insurance Trust, the John B. Baker
Insurance Trust, and U/T/A dated December 16, 1991 F/B/O Joan Baker et al.,
respectively (collectively, the "Stockholders"). This Amended and Restated
Subordinated Promissory Note (the "Note") amends and restates in its entirety
the original Subordinated Promissory Note dated October 5, 2000 in the principal
amount of Five Million Two Hundred Thousand Dollars ($5,200,000) (the "Original
Note"), which Original Note is hereby superceded and replaced in its entirety.
Payment Terms. The Maker hereby promises to pay to the order of John B.
Baker (including any subsequent holder of this Note, the "Payee"), the principal
sum of Five Million Two Hundred Thousand Dollars ($5,200,000.00), with interest
on the unpaid principal sum from time to time outstanding hereunder at an annual
rate equal to the lesser of (i) with respect to overdue amounts (except to the
extent not paid when due because payment is then prohibited pursuant to the
terms of the Subordination Agreement, as defined below), from and after the time
due, seventeen per cent (17%), compounded quarterly on each February 20, May 20,
August 20 and November 20, and with respect to all other amounts, twelve per
cent (12%) simple interest; and (ii) the maximum lawful rate of interest; in
each case to be applied on the basis of the actual number of days elapsed and a
365-day year.
Subject to acceleration as provided herein, payments in respect of this
Note will be made on the following schedule:
(i) Interest will be payable in arrears for the three-month periods ended
on each January 31, April 30, July 31, and October 31, in each case not more
than 20 days after the end of such three-month period (i.e., February 20, May
20, August 20, and November 20). In addition to any other applicable rights or
remedies of the Payee, any interest not paid when due will thereafter bear
interest at the applicable rate stated above.
(ii) There are no scheduled principal payments required by this Note.
(iii) The entire amount of indebtedness represented by this Note will be
due and payable not later than May 31, 2008.
Any amount owing hereunder that is not paid because prohibited pursuant to
the terms of the Subordination Agreement will be paid as soon as to do so is not
so prohibited.
Acceleration. At the Payee's option, the entire amount of indebtedness
represented by this Note will become due and payable immediately upon written
notice of acceleration given by the Payee to the Maker following any: (i)
liquidation or dissolution of the Maker, or other termination or winding-up of
its existence or business; (ii) sale of all or substantially all of the assets
or capital stock of the Maker; or (iii) acceleration of the due date of the
Senior Liabilities, as defined in the Subordination Agreement, or any other
indebtedness of the Maker for borrowed money.
In addition, the entire amount of indebtedness represented by this Note
will become due and payable, automatically and without any notice or other
action, immediately upon any: (i) appointment of a receiver for the Maker or its
assets; (ii) assignment by the Maker for the benefit of its creditors; or (iii)
institution by or against the Maker of any proceedings under bankruptcy,
insolvency, or similar laws, which in the case of any such institution against
the Maker, are not dismissed within 90 days.
For purposes of the preceding two paragraphs, any event of the types
described therein involving one or more of the Maker's subsidiaries will be
deemed to have occurred with respect to the Maker if such subsidiary or
subsidiaries represent more than 50% (by either book value or fair market value)
of the consolidated assets of the Maker and all of its consolidated
subsidiaries.
Prepayment. The Maker will have the right to prepay the unpaid principal
amount of this Note in full at any time, or in part from time to time, on 30
days' prior written notice to the Payee and the other holders of the Baker
Notes; provided, that by written notice executed by all holders of the Baker
Notes given to the Maker within 20 days following any such notice, such holders
may require the Maker to allocate the aggregate amount proposed to be repaid to
all of them among such holders in such proportions as they may specify.
Any prepayment of this Note will include all accrued and unpaid interest on
the principal amount prepaid.
If any prepayment of this Note is made before October 5, 2003, the Maker
will pay the Payee a premium equal to a percentage of the principal amount
prepaid, which percentage will be one per cent (1%) with respect to payments
made before such date.
Maker's Waiver of Presentment, Etc. The Maker hereby waives presentment,
notice, protest, and all other demands and notices.
No Waiver by Payee. The failure of the Payee to exercise any of its rights,
remedies, powers, or privileges hereunder in any instance will not constitute a
waiver thereof in respect of that or any other instance.
2
Enforcement Costs. The Maker will pay on demand all costs of collection,
including all court costs and attorneys' reasonable fees, paid or incurred by
the Payee in enforcing this Note and its rights hereunder.
Pro Rata Payments. Except to the extent provided above under the caption
"Prepayment" and except to the extent otherwise agreed in writing by all holders
of the Baker Notes, any payments by the Maker in respect of the Baker Notes will
be made pro rata in proportion to the respective amounts then owing by the Maker
in respect of each such note.
Subordination. This Note is subject to a separate Subordination and Pledge
Agreement, dated March 5, 2003, among the Payee, Ross S. Rapaport, not
individually but as Trustee of the Peter K. Baker Life Insurance Trust, The John
B. Baker Insurance Trust and u/t/a/ dated December 16, 1991 f/b/o Joan Baker et.
al., as agent for the Payee and certain other holders of indebtedness of the
Maker (in such capacity, the "Agent"), the Maker, Vermont Pure Springs, Inc.,
Crystal Rock Spring Water Company and Webster Bank, as agent, which, among other
things, (a) subordinates the Maker's obligations to the Payee to the Maker's
obligations to the holders of Senior Liabilities as defined in such agreement,
and (b) restricts the amount and payment of principal and interest hereunder and
the rights of the holder of the Note to enforce any provision hereof or to
access any collateral security for this Note. Neither this Note nor any rights
hereunder may be transferred (and any attempt to do so will be void) unless the
proposed transferee first becomes a party to the Subordination Agreement.
Security. This Note is secured pursuant to the terms of the Security
Agreement, dated as of October 5, 2000, as amended, among the Maker, Platinum
Acquisition Corp., formerly named "Vermont Pure Holdings, Ltd.," Vermont Pure
Springs, Inc., the Payee, the original holders of the other Baker Notes, and the
Agent.
Governing Law. This Note will be governed by and interpreted and construed
in accordance with the internal laws of the State of Connecticut (without
reference to principles of conflicts or choice of law).
[The remainder of this page intentionally left blank.]
3
This Note is executed and delivered on and as of the date first above
written.
VERMONT PURE HOLDINGS, LTD.
By______________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
4
Exhbit 10.17
THIS INSTRUMENT IS SUBJECT TO THE SUBORDINATION AND PLEDGE AGREEMENT, DATED
AS OF March 5, 2003, AMONG THE INITIAL PAYEE HEREOF, THE MAKER HEREOF,
CRYSTAL ROCK SPRING WATER COMPANY, VERMONT PURE SPRINGS, INC., AND WEBSTER
BANK, AS AGENT, WHICH, AMONG OTHER THINGS, SUBORDINATES THE MAKER'S
OBLIGATIONS TO THE PAYEE TO THE MAKER'S OBLIGATIONS TO THE HOLDERS OF SENIOR
LIABILITIES, AS DEFINED IN SUCH AGREEMENT.
AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE
US$5,200,000.00 Dated: March 5, 2003
This Note is one of five amended and restated promissory notes (the "Baker
Notes") executed and delivered as of the date hereof by Vermont Pure Holdings,
Ltd. (the "Maker"), a Delaware corporation, in favor of each of Henry E. Baker,
Joan A. Baker, John B. Baker, Peter K. Baker, Ross S. Rapaport, not individually
but as Trustee of the Peter K. Baker Life Insurance Trust, the John B. Baker
Insurance Trust, and U/T/A dated December 16, 1991 F/B/O Joan Baker et al.,
respectively (collectively, the "Stockholders"). This Amended and Restated
Subordinated Promissory Note (the "Note") amends and restates in its entirety
the original Subordinated Promissory Note dated October 5, 2000 in the principal
amount of Five Million Two Hundred Thousand Dollars ($5,200,000) (the "Original
Note"), which Original Note is hereby superceded and replaced in its entirety.
Payment Terms. The Maker hereby promises to pay to the order of Peter K.
Baker (including any subsequent holder of this Note, the "Payee"), the principal
sum of Five Million Two Hundred Thousand Dollars ($5,200,000.00), with interest
on the unpaid principal sum from time to time outstanding hereunder at an annual
rate equal to the lesser of (i) with respect to overdue amounts (except to the
extent not paid when due because payment is then prohibited pursuant to the
terms of the Subordination Agreement, as defined below), from and after the time
due, seventeen per cent (17%), compounded quarterly on each February 20, May 20,
August 20 and November 20, and with respect to all other amounts, twelve per
cent (12%) simple interest; and (ii) the maximum lawful rate of interest; in
each case to be applied on the basis of the actual number of days elapsed and a
365-day year.
Subject to acceleration as provided herein, payments in respect of this
Note will be made on the following schedule:
(i) Interest will be payable in arrears for the three-month periods ended
on each January 31, April 30, July 31, and October 31, in each case not more
than 20 days after the end of such three-month period (i.e., February 20, May
20, August 20, and November 20). In addition to any other applicable rights or
remedies of the Payee, any interest not paid when due will thereafter bear
interest at the applicable rate stated above.
(ii) There are no scheduled principal payments required by this Note.
(iii) The entire amount of indebtedness represented by this Note will be
due and payable not later than May 31, 2008.
Any amount owing hereunder that is not paid because prohibited pursuant to
the terms of the Subordination Agreement will be paid as soon as to do so is not
so prohibited.
Acceleration. At the Payee's option, the entire amount of indebtedness
represented by this Note will become due and payable immediately upon written
notice of acceleration given by the Payee to the Maker following any: (i)
liquidation or dissolution of the Maker, or other termination or winding-up of
its existence or business; (ii) sale of all or substantially all of the assets
or capital stock of the Maker; or (iii) acceleration of the due date of the
Senior Liabilities, as defined in the Subordination Agreement, or any other
indebtedness of the Maker for borrowed money.
In addition, the entire amount of indebtedness represented by this Note
will become due and payable, automatically and without any notice or other
action, immediately upon any: (i) appointment of a receiver for the Maker or its
assets; (ii) assignment by the Maker for the benefit of its creditors; or (iii)
institution by or against the Maker of any proceedings under bankruptcy,
insolvency, or similar laws, which in the case of any such institution against
the Maker, are not dismissed within 90 days.
For purposes of the preceding two paragraphs, any event of the types
described therein involving one or more of the Maker's subsidiaries will be
deemed to have occurred with respect to the Maker if such subsidiary or
subsidiaries represent more than 50% (by either book value or fair market value)
of the consolidated assets of the Maker and all of its consolidated
subsidiaries.
Prepayment. The Maker will have the right to prepay the unpaid principal
amount of this Note in full at any time, or in part from time to time, on 30
days' prior written notice to the Payee and the other holders of the Baker
Notes; provided, that by written notice executed by all holders of the Baker
Notes given to the Maker within 20 days following any such notice, such holders
may require the Maker to allocate the aggregate amount proposed to be repaid to
all of them among such holders in such proportions as they may specify.
Any prepayment of this Note will include all accrued and unpaid interest on
the principal amount prepaid.
If any prepayment of this Note is made before October 5, 2003, the Maker
will pay the Payee a premium equal to a percentage of the principal amount
prepaid, which percentage will be one per cent (1%) with respect to payments
made before such date.
Maker's Waiver of Presentment, Etc. The Maker hereby waives presentment,
notice, protest, and all other demands and notices.
No Waiver by Payee. The failure of the Payee to exercise any of its rights,
remedies, powers, or privileges hereunder in any instance will not constitute a
waiver thereof in respect of that or any other instance.
2
Enforcement Costs. The Maker will pay on demand all costs of collection,
including all court costs and attorneys' reasonable fees, paid or incurred by
the Payee in enforcing this Note and its rights hereunder.
Pro Rata Payments. Except to the extent provided above under the caption
"Prepayment" and except to the extent otherwise agreed in writing by all holders
of the Baker Notes, any payments by the Maker in respect of the Baker Notes will
be made pro rata in proportion to the respective amounts then owing by the Maker
in respect of each such note.
Subordination. This Note is subject to a separate Subordination and Pledge
Agreement, dated March 5, 2003, among the Payee, Ross S. Rapaport, not
individually but as Trustee of the Peter K. Baker Life Insurance Trust, The John
B. Baker Insurance Trust and u/t/a/ dated December 16, 1991 f/b/o Joan Baker et.
al., as agent for the Payee and certain other holders of indebtedness of the
Maker (in such capacity, the "Agent"), the Maker, Vermont Pure Springs, Inc.,
Crystal Rock Spring Water Company and Webster Bank, as agent, which, among other
things, (a) subordinates the Maker's obligations to the Payee to the Maker's
obligations to the holders of Senior Liabilities as defined in such agreement,
and (b) restricts the amount and payment of principal and interest hereunder and
the rights of the holder of the Note to enforce any provision hereof or to
access any collateral security for this Note. Neither this Note nor any rights
hereunder may be transferred (and any attempt to do so will be void) unless the
proposed transferee first becomes a party to the Subordination Agreement.
Security. This Note is secured pursuant to the terms of the Security
Agreement, dated as of October 5, 2000, as amended, among the Maker, Platinum
Acquisition Corp., formerly named "Vermont Pure Holdings, Ltd.," Vermont Pure
Springs, Inc., the Payee, the original holders of the other Baker Notes, and the
Agent.
Governing Law. This Note will be governed by and interpreted and construed
in accordance with the internal laws of the State of Connecticut (without
reference to principles of conflicts or choice of law).
[The remainder of this page intentionally left blank.]
3
This Note is executed and delivered on and as of the date first above
written.
VERMONT PURE HOLDINGS, LTD.
By______________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
4
Exhibit 10.18
THIS INSTRUMENT IS SUBJECT TO THE SUBORDINATION AND PLEDGE AGREEMENT, DATED
AS OF March 5, 2003, AMONG THE INITIAL PAYEE HEREOF, THE MAKER HEREOF,
CRYSTAL ROCK SPRING WATER COMPANY, VERMONT PURE SPRINGS, INC., AND WEBSTER
BANK, AS AGENT, WHICH, AMONG OTHER THINGS, SUBORDINATES THE MAKER'S
OBLIGATIONS TO THE PAYEE TO THE MAKER'S OBLIGATIONS TO THE HOLDERS OF SENIOR
LIABILITIES, AS DEFINED IN SUCH AGREEMENT.
AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE
US$5,200,000.00 Dated: March 5, 2003
This Note is one of five amended and restated promissory notes (the "Baker
Notes") executed and delivered as of the date hereof by Vermont Pure Holdings,
Ltd. (the "Maker"), a Delaware corporation, in favor of each of Henry E. Baker,
Joan A. Baker, John B. Baker, Peter K. Baker, Ross S. Rapaport, not individually
but as Trustee of the Peter K. Baker Life Insurance Trust, the John B. Baker
Insurance Trust, and U/T/A dated December 16, 1991 F/B/O Joan Baker et al.,
respectively (collectively, the "Stockholders"). This Amended and Restated
Subordinated Promissory Note (the "Note") amends and restates in its entirety
the original Subordinated Promissory Note dated October 5, 2000 in the principal
amount of Five Million Two Hundred Thousand Dollars ($5,200,000) (the "Original
Note"), which Original Note is hereby superceded and replaced in its entirety.
Payment Terms. The Maker hereby promises to pay to the order of Ross S.
Rapaport, not individually but as Trustee of the Peter K. Baker Life Insurance
Trust, the John B. Baker Insurance Trust, and U/T/A dated December 16, 1991
F/B/O Joan Baker et al. (including any subsequent holder of this Note, the
"Payee"), the principal sum of Five Million Two Hundred Thousand Dollars
($5,200,000.00), with interest on the unpaid principal sum from time to time
outstanding hereunder at an annual rate equal to the lesser of (i) with respect
to overdue amounts (except to the extent not paid when due because payment is
then prohibited pursuant to the terms of the Subordination Agreement, as defined
below), from and after the time due, seventeen per cent (17%), compounded
quarterly on each February 20, May 20, August 20 and November 20, and with
respect to all other amounts, twelve per cent (12%) simple interest; and (ii)
the maximum lawful rate of interest; in each case to be applied on the basis of
the actual number of days elapsed and a 365-day year.
Subject to acceleration as provided herein, payments in respect of this
Note will be made on the following schedule:
(i) Interest will be payable in arrears for the three-month periods ended
on each January 31, April 30, July 31, and October 31, in each case not more
than 20 days after the end of such three-month period (i.e., February 20, May
20, August 20, and November 20). In addition to any other applicable rights or
remedies of the Payee, any interest not paid when due will thereafter bear
interest at the applicable rate stated above.
(ii) There are no scheduled principal payments required by this Note.
(iii) The entire amount of indebtedness represented by this Note will be
due and payable not later than May 31, 2008.
Any amount owing hereunder that is not paid because prohibited pursuant to
the terms of the Subordination Agreement will be paid as soon as to do so is not
so prohibited.
Acceleration. At the Payee's option, the entire amount of indebtedness
represented by this Note will become due and payable immediately upon written
notice of acceleration given by the Payee to the Maker following any: (i)
liquidation or dissolution of the Maker, or other termination or winding-up of
its existence or business; (ii) sale of all or substantially all of the assets
or capital stock of the Maker; or (iii) acceleration of the due date of the
Senior Liabilities, as defined in the Subordination Agreement, or any other
indebtedness of the Maker for borrowed money.
In addition, the entire amount of indebtedness represented by this Note
will become due and payable, automatically and without any notice or other
action, immediately upon any: (i) appointment of a receiver for the Maker or its
assets; (ii) assignment by the Maker for the benefit of its creditors; or (iii)
institution by or against the Maker of any proceedings under bankruptcy,
insolvency, or similar laws, which in the case of any such institution against
the Maker, are not dismissed within 90 days.
For purposes of the preceding two paragraphs, any event of the types
described therein involving one or more of the Maker's subsidiaries will be
deemed to have occurred with respect to the Maker if such subsidiary or
subsidiaries represent more than 50% (by either book value or fair market value)
of the consolidated assets of the Maker and all of its consolidated
subsidiaries.
Prepayment. The Maker will have the right to prepay the unpaid principal
amount of this Note in full at any time, or in part from time to time, on 30
days' prior written notice to the Payee and the other holders of the Baker
Notes; provided, that by written notice executed by all holders of the Baker
Notes given to the Maker within 20 days following any such notice, such holders
may require the Maker to allocate the aggregate amount proposed to be repaid to
all of them among such holders in such proportions as they may specify.
Any prepayment of this Note will include all accrued and unpaid interest on
the principal amount prepaid.
If any prepayment of this Note is made before October 5, 2003, the Maker
will pay the Payee a premium equal to a percentage of the principal amount
prepaid, which percentage will be one per cent (1%) with respect to payments
made before such date.
Maker's Waiver of Presentment, Etc. The Maker hereby waives presentment,
notice, protest, and all other demands and notices.
2
No Waiver by Payee. The failure of the Payee to exercise any of its rights,
remedies, powers, or privileges hereunder in any instance will not constitute a
waiver thereof in respect of that or any other instance.
Enforcement Costs. The Maker will pay on demand all costs of collection,
including all court costs and attorneys' reasonable fees, paid or incurred by
the Payee in enforcing this Note and its rights hereunder.
Pro Rata Payments. Except to the extent provided above under the caption
"Prepayment" and except to the extent otherwise agreed in writing by all holders
of the Baker Notes, any payments by the Maker in respect of the Baker Notes will
be made pro rata in proportion to the respective amounts then owing by the Maker
in respect of each such note.
Subordination. This Note is subject to a separate Subordination and Pledge
Agreement, dated March 5, 2003, among the Payee, Ross S. Rapaport, not
individually but as Trustee of the Peter K. Baker Life Insurance Trust, The John
B. Baker Insurance Trust and u/t/a/ dated December 16, 1991 f/b/o Joan Baker et.
al., as agent for the Payee and certain other holders of indebtedness of the
Maker (in such capacity, the "Agent"), the Maker, Vermont Pure Springs, Inc.,
Crystal Rock Spring Water Company and Webster Bank, as agent, which, among other
things, (a) subordinates the Maker's obligations to the Payee to the Maker's
obligations to the holders of Senior Liabilities as defined in such agreement,
and (b) restricts the amount and payment of principal and interest hereunder and
the rights of the holder of the Note to enforce any provision hereof or to
access any collateral security for this Note. Neither this Note nor any rights
hereunder may be transferred (and any attempt to do so will be void) unless the
proposed transferee first becomes a party to the Subordination Agreement.
Security. This Note is secured pursuant to the terms of the Security
Agreement, dated as of October 5, 2000, as amended, among the Maker, Platinum
Acquisition Corp., formerly named "Vermont Pure Holdings, Ltd.," Vermont Pure
Springs, Inc., the Payee, the original holders of the other Baker Notes, and the
Agent.
Governing Law. This Note will be governed by and interpreted and construed
in accordance with the internal laws of the State of Connecticut (without
reference to principles of conflicts or choice of law).
[The remainder of this page intentionally left blank.]
3
This Note is executed and delivered on and as of the date first above
written.
VERMONT PURE HOLDINGS, LTD.
By______________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
4
Exhibit 10.19
SUBORDINATION AND PLEDGE AGREEMENT
March 5, 2003
WHEREAS, VERMONT PURE HOLDINGS, LTD., a Delaware corporation with a principal
executive office at Catamount Industrial Park, Route 66, Randolph, Vermont 05060
("Holdings"), CRYSTAL ROCK SPRING WATER COMPANY, a Connecticut corporation with
an office at 1050 Buckingham Street, Watertown, Connecticut 06795 ("Crystal
Rock"), and VERMONT PURE SPRINGS, INC., a Delaware corporation with an office at
Catamount Industrial Park, Route 66, Randolph, Vermont 05060 ("VPS", and
collectively with Holdings and Crystal Rock, the "Obligors ") are now indebted
to HENRY E. BAKER (the "Subordinate Lender") and may from time to time hereafter
become indebted to the Subordinate Lender in further amounts; and
WHEREAS, Ross S. Rapaport, not individually but as Trustee of the Peter K. Baker
Life Insurance Trust, The John B. Baker Insurance Trust and u/t/a dated December
16, 1991 f/b/o Joan Baker et. al. is acting as agent (the "Subordinate Lender's
Agent") for Subordinate Lender pursuant to certain of the Subordinated Loan
Documents; and
WHEREAS, the Obligors have requested, and may from time to time hereafter
request, the lenders under that certain Loan and Security Agreement dated as of
the 5th day of March, 2003, as the same may be amended from time to time, by and
among the Obligors, each of the lenders which is a signatory thereto
(individually, together with its successors and assigns, a "Lender" and
collectively, the "Lenders") and Webster Bank, as agent (in such capacity,
together with its successors and assigns in such capacity, the "Agent" ) to make
or agree to make loans, extensions of credit or other financial accommodations
to the Obligors (the "Loans"); and
WHEREAS, the Lenders, as a condition to the making or continuation of the Loans,
has required the Subordinate Lender to execute and deliver this Subordination
and Pledge Agreement (together with all schedules and any exhibits attached
hereto and amendments or modifications hereto in effect from time to time, the
"Agreement").
NOW, THEREFORE, in order to induce the Lenders to make, or continue to make the
Loans and in consideration thereof, the Subordinate Lender agrees as follows:
A. Definitions. As used herein, the following terms shall have the
following meanings:
1. Affiliate. The term "Affiliate" means any of each of the Lenders direct
and indirect affiliates and subsidiaries.
2. Bank Collateral. The term "Bank Collateral" means the personal property
of the Obligors described in Schedule A and any other real or personal property
of any of the Obligors in which the Agent, any Lender or an Affiliate may
hereafter be granted a security interest, mortgage interest or other similar
interest.
3. Collection Action. The term "Collection Action" means to (i) exercise or
enforce any rights or remedies or assert any claims against the Bank Collateral
or Subordinated Lenders' Collateral; (ii) make any claim or commence or initiate
any action, lawsuit, case or proceeding against any of the Obligors or join
together or with any creditor other than, with its consent, the Agent in any
action, lawsuit, case or proceeding against the Obligors (including, but not
being limited to, proceedings under the Bankruptcy Code); (iii) contact any
account of any of the Obligors or attach or take possession of any Bank
Collateral or Subordinated Lenders' Collateral or exercise any right of
foreclosure or any right or remedy with respect to any of the Obligors or the
Bank Collateral or Subordinated Lenders' Collateral; or (iv) take any other
action prejudicial to or inconsistent with the Lenders' and Agent's rights and
first priority secured position with respect to the Obligors or the Bank
Collateral, including, without limitation, any action that will impede,
interfere with, restrict, or restrain the exercise by the Agent or any of the
Lenders of their rights and remedies under the Loan Documents or contest in any
manner the perfection, priority or validity of any lien held by the Agent in any
of the Bank Collateral.
4. Event of Default. The term "Event of Default" shall mean an Event of
Default under the Loan Agreement beyond any applicable grace and cure period.
5. Financial Covenant Default. The term "Financial Covenant Default" shall
mean an Event of Default which results solely from the violation of any now
existing or hereafter arising financial covenant contained in the Loan
Agreement, including, by way of illustration, those specific financial covenants
set forth in Sections 6.16, 6.17, 6.18, 6.19, and 6.20 of the Loan Agreement and
any supplement, addition, modification or amendment to those specific financial
covenants.
6. Liabilities. The term "Liabilities" means any and all obligations and
indebtedness of every kind and description, now or hereafter existing, whether
such debts or obligations are primary or secondary, direct or indirect, absolute
or contingent, sole, joint or several, secured or unsecured, due or to become
due, contractual or tortious, arising by operation of law, by overdraft, or
otherwise, including, without limitation, principal, interest, fees, late fees,
expenses, attorneys' fees and costs, and/or allocated fees and costs of the
Agent's in-house legal counsel, that have been or may hereafter be contracted or
incurred.
7. Loan Agreement. The term "Loan Agreement" means that certain Loan and
Security Agreement among the Obligors, the Lenders and Agent dated the date
hereof, and any subsequent supplement, modification, renewal, extension or
amendment thereto.
8. Loan Documents. The term "Loan Documents" means the Loan Agreement and
all other credit accommodations, notes, loan agreements, and any other
agreements and documents, now or hereafter existing, creating, evidencing,
guarantying, securing or relating to any or all of the Senior Liabilities,
together with all amendments, modifications, renewals, or extensions thereof.
2
9. Non-Covenant Default. The term "Non-Covenant Default" means an Event of
Default other than a Financial Covenant Default.
10. Obligor. The term "Obligor" means the Holdings, Crystal Rock, VPS and
each and every other maker, endorser, guarantor, or surety of or for the Senior
Liabilities.
11. Senior Liabilities. The term "Senior Liabilities" means all Liabilities
of the Obligors to any of the Lenders, the Agent and/or to any of the Affiliates
including, without limitation, any and all interest accruing on Senior
Liabilities after the commencement of any proceedings referred to in paragraph
B.5. hereof, notwithstanding any provision or rule of law which might restrict
the rights of the Lenders or Agent, as against the Obligors and/or anyone else,
to collect such interest. For purposes of this Agreement, Senior Liabilities
shall include all Liabilities of the Obligors to the Lenders and the Agent,
notwithstanding any right or power of any of the Obligors and/or anyone else to
assert any claim or defense as to the invalidity or unenforceability of any such
Senior Liabilities.
12. Subordinated Lenders' Collateral. The term "Subordinated Lenders'
Collateral" means the personal property of the Obligors more fully described in
Schedule B attached hereto.
13. Subordinated Lending Group. The term "Subordinated Lending Group" means
Henry E. Baker, Joan A. Baker, John B. Baker, Peter K. Baker, and Ross S.
Rappaport, not individually, but as Trustee of the Peter K. Baker Life Insurance
Trust, the John B. Baker Insurance Trust and u/t/a dated December 16, 1991 f/b/o
Joan Baker et. al., each as holder of an Amended and Restated Subordinated
Promissory Note of Holdings dated the date hereof, as such Subordinated
Promissory Notes may be amended, restated or replaced from time to time, and any
successor holders of such Subordinated Promissory Notes.
14. Subordinated Liabilities. The term "Subordinated Liabilities" means all
Liabilities of the Obligors to the Subordinate Lender, including, without
limitation, all payments of principal and interest pursuant to that Amended and
Restated Subordinated Promissory Note dated the date hereof from Holdings
payable to the order of the Subordinated Lender in the original principal amount
of $3,488,889.00 (the "Subordinated Note") and that Guaranty dated October 5,
2000 as amended by amendment dated the date hereof from Platinum and VPS to
Subordinate Lender guarantying payments due under the Subordinated Note (the
"Subordinate Guaranty") but specifically excluding therefrom compensation from
the Obligors to the Subordinate Lender presently contemplated pursuant to the
existing employment agreement between any of the Obligors and the Subordinate
Lender, as the compensation clauses thereof may be amended from time to time
with the consent of the Agent, the normal reimbursement of expenses in the
ordinary course of business and indemnification of claims arising solely from
the Subordinate Lender's actions as an officer or director of any of the
Obligors.
15. Subordinated Loan Documents. The term "Subordinated Loan Documents"
means all credit accommodations, notes, loan agreements and any other agreements
and documents, now or hereafter existing, creating, evidencing, guarantying,
securing or relating to any or all of the Subordinated Liabilities, together
with all amendments, modifications, renewals or extensions thereof.
3
B. Subordination and Pledge.
1. Subordination to Senior Liabilities.
(a) Except as hereinafter expressly set forth in this Agreement or as the
Agent and Lenders may hereafter otherwise expressly consent in writing, the
payment of all Subordinated Liabilities shall be postponed and subordinated to
the indefeasible payment in full of all Senior Liabilities, and no payments or
other distributions whatsoever, including, without limitation, payments of
interest in respect of any Subordinated Liabilities shall be made, nor shall any
property or assets of the Borrower or other Obligor be applied to the purchase
or other acquisition or retirement of any Subordinated Liabilities, nor given as
collateral security to secure repayment of same.
(b) Notwithstanding the provisions in paragraph B.1(a) above, and subject
to the other terms of this Agreement, the Subordinate Lender may be granted a
security interest in the Subordinated Lenders' Collateral to secure the payments
of principal and interest and other amounts due pursuant to the Subordinated
Note.
(c) Notwithstanding the provisions of paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, the Obligors may make regularly scheduled
quarterly payments of interest under the Subordinated Note, at a rate not in
excess of twelve per cent (12%) per annum, and past due regularly scheduled
quarterly payments of interest under the Subordinated Note which were not paid
when scheduled to be paid because of the terms of this Agreement, including
interest at a rate not in excess of twelve per cent (12%) per annum on such past
due amounts, but only to the extent that the making of such payments would not
result in a Financial Covenant Default.
(d) Notwithstanding the provisions in paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, and provided that all the conditions in
the Loan and Security Agreement with respect to a request under the
Acquisition/Capital Asset Line of Credit (as defined in the Loan and Security
Agreement) for an advance to pay Subordinated Debt (as defined in the Loan and
Security Agreement) owed to the Subordinated Lending Group have been satisfied,
the Obligors may make principal payments on the Subordinated Debt (as defined in
the Loan and Security Agreement) to members of the Subordinated Lending Group
which in the aggregate do not exceed $5,000,000.
4
2. Pledge of Subordinated Loan Documents. In order to secure the due and
punctual payment and performance of the Senior Liabilities, the Subordinate
Lender hereby pledges, transfers, assigns, and grants to the Agent a continuing
security interest in and lien upon the Subordinated Loan Documents. The
Subordinate Lender has endorsed and delivered to the Agent physical possession
of any of the Subordinated Loan Documents which are instruments, including the
Subordinated Note and has executed Uniform Commercial Code financing statements
and such other documents and/or instruments as may be necessary or convenient to
perfect the security interests granted herein. Agent shall hold the Subordinated
Note and any other Subordinated Loan Documents which are instruments delivered
to the Agent as security for the due and punctual payment and performance of the
Senior Liabilities and notwithstanding the possession of the Subordinated Note
or such other Subordinated Loan Documents by the Agent, the Subordinate Lender
shall be entitled to receive payments thereunder to the extent expressly
permitted by the terms of this Agreement. Upon payment in full of the Senior
Liabilities, the Agent will deliver to the Subordinate Lender in care of Peter
K. Baker the Subordinated Note and any other Subordinated Loan Documents in its
possession.
3. Subordination of Security Interest of Subordinated Liabilities. Any
security interest now or hereafter held by the Subordinate Lender and granted by
any of the Obligors to secure any of the Subordinated Liabilities, including the
security interest described in paragraph B.1(b), is hereby immediately made
subordinate, junior and postponed in priority and effect to the priority and
effect of the security interest purported to be created by any of the Loan
Documents, as if (and whether or not) the Agent's or any Lender's security
interest had been perfected by possession, by timely filing of financing
statements, or by any other means prior to the time the security interest with
respect to the Subordinated Liabilities is perfected, and prior to the filing of
any financing statements in connection with the Subordinated Liabilities. The
Subordinate Lender agrees to execute and deliver to the Agent all instruments,
including, without limitation, Forms UCC-3, subordinations of lien, and
subordinations of mortgage which, in the reasonable opinion of the Agent, are
necessary or convenient to effectuate the purposes of this paragraph and this
Agreement.
4. Further Assurances of Pledge of Subordinated Liabilities. The
Subordinate Lender will (i) promptly notify the Agent of the creation of any
Subordinated Liabilities and of the issuance of any promissory note or other
instrument to evidence any Subordinated Liabilities; (ii) cause any Subordinated
Liabilities which are not already evidenced by a promissory note or other
instrument of the Obligors to be so evidenced; (iii) as collateral security for
the Senior Liabilities, endorse, deliver and pledge to the Agent any and all
promissory notes and/or other instruments evidencing Subordinated Liabilities,
and otherwise assign and/or pledge to the Agent any or all Subordinated
Liabilities and the Subordinated Loan Documents, all in a manner satisfactory to
the Agent in its sole discretion, and (iv) promptly give the Agent written
notice of any default by any Obligor under the Subordinated Note or any
agreement securing Obligors' obligations under any of the other Subordinated
Loan Documents.
5
Further Assurances of Agent. Agent will endeavor to deliver to the
Subordinate Lender in care of Peter K. Baker prompt notice of any Event of
Default or Financial Covenant Default under the Loan Agreement or any of the
other Loan Documents of which the Agent becomes aware but the failure of the
Agent to promptly deliver any such notice will not affect any of the rights or
obligations of the parties under this Agreement.
5. Rights of Agent to Collect Subordinated Liabilities. In the event of,
and commencing with the date thereof, any dissolution, winding up, liquidation,
reorganization or other similar proceedings relating to any Obligor or to any of
their creditors, or to any of their property (whether voluntary or involuntary,
partial or complete, and whether in bankruptcy, insolvency or receivership, or
upon an assignment for the benefit of creditors, or any other marshalling of the
assets and liabilities of any Obligor, or any sale of all or substantially all
of the assets of any Obligor, or otherwise), the Senior Liabilities shall first
be paid in full before the Subordinate Lender shall be entitled to receive
and/or to retain any payment or distribution in respect of the Subordinated
Liabilities; provided that the Subordinate Lender shall be entitled to receive
and retain any securities issued in connection with reorganization proceedings
which are junior in right of repayment to the Senior Liabilities to the extent
set forth herein, are treated as Subordinated Liabilities hereunder and are
subject to all the provisions of this Agreement, and, in order to implement the
foregoing (i) all payments and distributions of any kind or character in respect
of the Subordinated Liabilities to which any of the Subordinate Lender would be
entitled but for the provisions of this Agreement (other than such junior
securities) will be made directly to the Agent; (ii) the Subordinate Lender
shall promptly file a claim or claims, in the form required in such proceedings,
for the full outstanding amount of the Subordinated Liabilities, and shall cause
said claim or claims to be approved and all payments and other distributions in
respect thereof (other than such junior securities) to be made directly to the
Agent; (iii) the Subordinate Lender hereby irrevocably agrees that the Agent
may, in its sole discretion, in the name of the Subordinate Lender or otherwise,
demand, sue for, collect, receive, and receipt for any and all such payments or
distributions, and file, prove, and vote or consent in any such proceedings with
respect to, any and all claims of the Subordinate Lender relating to the
Subordinated Liabilities; and (iv) the Subordinate Lender hereby ratifies all of
the foregoing acts or omissions on the Agent's part or behalf and waives any
claim, counterclaim or defense of the Subordinate Lender which may be alleged to
arise from such acts or omissions.
6. Protection of Agent's Rights in Subordinated Liabilities. In the event
that the Subordinate Lender receives any payment or other distribution of any
kind or character from any Obligor or any other source whatsoever in respect of
any of the Subordinated Liabilities, other than as expressly permitted by the
terms of this Agreement, such payment or other distribution shall be received in
trust for the Lenders and the Agent and promptly turned over by the Subordinate
Lender to the Agent. The Subordinate Lender will mark its books and records, and
cause the Obligors to mark their books and records, so as to clearly indicate
that the Subordinated Liabilities are subordinated in accordance with the terms
of this Agreement, and will cause to be clearly inserted in any promissory note
or other instrument which at any time evidences any of the Subordinated
Liabilities a statement to the effect that the payment thereof is subordinated
in accordance with the terms of this Agreement. The Subordinate Lender will
execute such further documents and instruments and take such further action as
the Agent may from time to time reasonably request to carry out the intent of
this Agreement. The Subordinate Lender hereby irrevocably appoints the Agent its
attorney in fact, said appointment being coupled with an interest, to execute
such further documents and instruments and take such further action on behalf of
the Subordinate Lender as the Agent may from time to time deem reasonable to
carry out the intent of this Agreement, including, without limitation, the
actions set forth in paragraph B.4. hereof.
6
7. Treatment of Payment of Subordinated Liabilities. All payments and
distributions received by the Agent or any Lender in respect of the Subordinated
Liabilities, to the extent received in or converted into cash, may be applied by
the Agent and Lenders first to the payment of any and all expenses (including
attorneys' fees and disbursements and the allocated fees, expenses and cost of
in-house counsel) paid or incurred by the Agent in enforcing this Agreement or
in endeavoring to collect or realize upon any of the Subordinated Liabilities,
and any balance thereof shall, solely as between the Subordinate Lender and the
Lenders and Agent, be applied by the Agent, in such order of application as the
Agent may from time to time select, toward the payment of any of the Senior
Liabilities remaining unpaid. As between the Obligors and any of their
creditors, no such payments or distributions of any kind or character shall be
deemed to be payments or distributions in respect of the Senior Liabilities;
and, notwithstanding any such payments or distributions received by the Agent or
any Lender in respect of the Subordinated Liabilities and so applied by the
Agent and Lenders toward the payment of the Senior Liabilities, the Subordinate
Lender shall be subrogated to the then existing rights of the Agent and Lenders,
if any, in respect of the Senior Liabilities, only at such time as the Lenders
and Agent shall have received indefeasible payment of the full amount of the
Senior Liabilities.
8. Waivers. The Subordinate Lender hereby waives (i) any and all notice of
the receipt and acceptance by the Agent or any Lender of this Agreement; (ii)
except as set forth in paragraph B.4, notice of the existence, incurrence, or
non-payment of all or any of the Senior Liabilities; (iii) all diligence in
collection or protection of or realization upon any of the Senior Liabilities or
any security therefor; and (iv) any obligation with respect to the marshalling
of assets by the Agent or any Lender.
9. Prohibition on Changes in Subordinated Liabilities.
(a) Except as herein set forth in paragraph B.9(b), the Subordinate Lender
will not without the prior written consent of the Agent (i) cancel, waive,
forgive, amend, modify, transfer or assign, or attempt to enforce or collect, or
subordinate to any Liabilities other than the Senior Liabilities, any
Subordinated Liabilities or any rights in respect thereof; (ii) convert any
Subordinated Liabilities into stock or other securities in any of the Obligors;
(iii) take any Collection Action; (iv) commence, or join with any other creditor
in commencing, any bankruptcy, reorganization or insolvency proceedings with
respect to any of the Obligors, or (v) take any other action prejudicial to or
inconsistent with the Agent's and Lenders' rights and first priority secured
position with respect to the Obligors, the Bank Collateral and collateral for
the Senior Liabilities.
7
(b) Notwithstanding the provisions of paragraph B.9(a), if any default has
occurred under any of the Subordinated Loan Documents and such default has
continued in existence for a period of one hundred eighty (180) consecutive days
after the Subordinated Lenders have provided written notice of the existence of
such default to the Agent (the "Standstill Period"), the Subordinated Lender may
proceed to take legal action against the Obligors for the sole purpose of
obtaining a judgment against the Obligors; provided, however, at no time either
before or after the expiration of the Standstill Period, may any Subordinated
Lender take any action or Collection Action to enforce a security interest in,
liquidate or otherwise receive payment from any collateral for the Senior
Liabilities, including the Bank Collateral or Subordinated Lenders' Collateral,
unless and until the Lenders and Agent have been indefeasibly paid in full for
all Senior Liabilities.
10. Continuing Agreement. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect notwithstanding,
without limitation, the death, incompetency or dissolution of the Subordinate
Lender or that at any time or from time to time all Senior Liabilities may have
been paid in full if any of the Loan Documents have not been terminated.
11. Permitted Changes in Senior Liabilities. The Agent or any Lender may,
from time to time, whether before or after any discontinuance of this Agreement,
at its sole discretion and without notice to the Subordinate Lender, take any or
all of the following actions: (i) retain or obtain a security interest in any
property to secure any of the Senior Liabilities; (ii) retain or obtain the
primary or secondary obligation of any other Obligor or Obligors with respect to
any of the Senior Liabilities; (iii) extend, renew (whether or not longer than
the original period), alter or exchange any of the Senior Liabilities; (iv)
release or compromise any obligation of any nature of any Obligor with respect
to any of the Senior Liabilities; and, (v) release its security interest or lien
in, allows its security interest or lien to be unperfected, surrender, release
or permit any substitution or exchange for, all or any part of any property
securing any of the Senior Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any Obligor with respect to
any such property.
12. Disposition of Assets. The Subordinate Lender agree that any
disposition by the Agent or any Lender of any collateral for the Senior
Liabilities, whether by collection, sale, or other manner of liquidation, after
an Event of Default under the Loan Documents, if conducted in a commercially
reasonable manner, may not be challenged or contested by the Subordinate Lender
on the grounds of commercial unreasonableness. The Subordinate Lender agrees
that the Agent and Lenders may use such means of collection and exercise such
diligence with respect thereto as the Agent or such Lender, in its sole
discretion, deems appropriate under the circumstances and may enter into such
compromise with and give such releases and acquittances to account debtors or
other obligors of the Obligors' receivables as it determines in its sole
discretion, without obtaining the agreement or concurrence of or giving notice
to the Subordinate Lender and the Subordinate Lender hereby waive all right to
require that its agreement or consent be obtained or that it be given notice.
The Subordinate Lender further agrees that it will release its security interest
on any collateral (including the Subordinated Lenders' Collateral) for the
Senior Liabilities upon the sale or other disposition thereof at the request of
the Agent, whether or not any proceeds therefrom will pay any of the
Subordinated Liabilities.
8
C. Representations and Warranties. The Subordinate Lender hereby represents
and warrants that (i) the Subordinate Lender has the necessary power and
capacity to make and perform this Agreement and such making and performance have
been duly authorized by all necessary actions on the part of the Subordinate
Lender; (ii) the making and performance by the Subordinate Lender of this
Agreement does not and will not violate any provision of law or regulation or
result in the breach of, or constitute a default or require any consent under,
any indenture or other agreement or instrument to which it is a party or by
which any of its properties may be bound; and (iii) this Agreement is the legal,
valid and binding obligation of the Subordinate Lender, enforceable against the
Subordinate Lender in accordance with its terms.
D. Remedies. Upon the occurrence of any Event of Default, or upon the
breach of any representation, covenant or agreement in this Agreement by any
Obligor or the Subordinate Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent may
immediately, without further notice, resort to all of its rights and remedies
herein, in any document (including the Loan Agreement and any of the Loan
Documents) by and between the Agent or any Lender and any Obligor, or in any in
any instrument evidencing any obligation under any such document, at law or in
equity. The Agent agrees that it shall proceed, to the extent commercially
reasonable, against all the assets of the Obligors before liquidating the
Subordinated Note. The Agent shall endeavor to give the Obligors prompt notice
of the acceleration of the Senior Liabilities but failure to give such notice
shall not affect any action taken by Agent and Agent shall not incur any
liability for any failure to deliver such notice.
E. Miscellaneous.
1. Remedies Cumulative; No Waiver. The rights, powers and remedies of the
Agent and Lenders provided in this Agreement and any of the Loan Documents are
cumulative and not exclusive of any right, power or remedy provided by law or
equity. No failure or delay on the part of the Agent or any Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy.
2. Notices. Notices and communications under this Agreement shall be in
writing and shall be given by (i) hand-delivery, (ii) first class mail (postage
prepaid), or (iii) reliable overnight commercial courier (charges prepaid) to
the addresses listed in this Agreement. Notice by overnight courier shall be
deemed to have been given and received on the date scheduled for delivery.
Notice by mail shall be deemed to have been given and received three (3)
calendar days after the date first deposited in the United States Mail. Notice
by hand-delivery shall be deemed to have been given and received upon delivery.
A party may change its address by giving written notice to the other party as
specified herein.
9
3. Costs and Expenses. Whether or not the transactions contemplated by this
Agreement or the Loan Documents are fully consummated, the Obligors shall
promptly pay (or reimburse, as the Agent may elect) all costs and expenses which
the Agent has incurred or may hereafter incur in connection with the
negotiation, preparation, reproduction, interpretation, perfection, protection
of collateral, administration and enforcement of this Agreement and the other
Loan Documents, the collection of all amounts due under this Agreement and the
other Loan Documents, and all amendments, modifications, consents or waivers, if
any, to the Loan Documents. The Obligors' reimbursement obligations under this
Paragraph shall survive any termination of this Agreement or any other Loan
Document and are deemed part of the Senior Liabilities.
4. Governing Law. This Agreement shall be construed in accordance with and
governed by the substantive laws of the State of Connecticut without reference
to conflict of laws principles.
5. Integration; Amendment. This Agreement and the other Loan Documents
constitute the sole agreement of the parties with respect to the subject matter
hereof and thereof and supersede all oral negotiations and prior writings with
respect to the subject matter hereof and thereof. No amendment of this
Agreement, and no waiver of any one or more of the provisions hereof shall be
effective unless set forth in writing and signed by the parties hereto.
6. Successors and Assigns. This Agreement (i) shall be binding upon the
Subordinate Lender, the Obligors executing this Agreement and the Agent and,
where applicable, their respective heirs, executors, administrators, successors
and assigns, and (ii) shall inure to the benefit of the Subordinate Lender, the
Obligors, the Agent and the Lenders and, where applicable, their respective
heirs, executors, administrators, successors and permitted assigns; provided,
however, that the Subordinate Lender and the Obligors may not assign their
rights or obligations hereunder or any interest herein without the prior written
consent of the Agent, and any such assignment or attempted assignment by the
Subordinate Lender and/or any of the Obligors shall be void and of no effect
with respect to the Agent and the Lenders. The Lenders may from time to time
sell or assign, in whole or in part, or grant participations in the Loans and/or
the Agreement and/or the obligations evidenced thereby. The Subordinate Lender
authorizes the Agent and Lenders to provide information concerning the
Subordinate Lender and the Obligors to any prospective purchaser, assignee or
participant.
7. Severability and Consistency. The illegality, unenforceability or
inconsistency of any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Agreement or
any instrument or agreement required hereunder. The Loan Documents and this
Agreement are intended to be consistent. However, in the event of any
inconsistencies between and/or among this Agreement and any of the Loan
Documents, such inconsistency shall not affect the validity or enforceability of
this Agreement or any of the Loan Documents. In the event of any inconsistency
or ambiguity in this Agreement or any of the Loan Documents, this Agreement and
the Loan Documents shall not be construed against any one party but shall be
interpreted consistent with the Agent's policies and procedures.
10
8. Consent to Jurisdiction and Service of Process. The Subordinate Lender
irrevocably appoints Ross Rapaport, c/o Pepe & Hazard, 30 Jeliff Lane,
Southport, CT 06490-1436 as its attorney upon whom may be served any notice,
process or pleading in any action or proceeding against it arising out of or in
connection with this Agreement. If service of process cannot be delivered to the
Subordinate Lender as specified by statute, the Subordinate Lender agrees that,
with court approval, it may be served by regular or certified mail at the
address set forth herein. The Subordinate Lender hereby consents and agrees that
(i) any action or proceeding against it may be commenced and maintained in any
court within the State of Connecticut or in the United States District Court for
the District of Connecticut by service of process on Ross Rapaport and (ii) the
courts of the State of Connecticut and the United States District Court for the
District of Connecticut shall have jurisdiction with respect to the subject
matter hereof and the person of the Subordinate Lender and the Subordinated
Liabilities. The Subordinate Lender agrees that any action brought by the
Subordinate Lender on account of this Agreement shall be commenced and
maintained only in a court in the federal judicial district or county in which
the Agent has its principal place of business in Connecticut.
9. Prejudgment Remedies. The Subordinate Lender hereby acknowledges that
the transactions contemplated herein constitute commercial transactions.
Pursuant to Section 52-278f of the Connecticut General Statutes, the Subordinate
Lender hereby waives and relinquishes all rights to notice and hearing as
provided in Sections 52-278a through 52-278g of said Connecticut General
Statutes prior to the securing of any prejudgment remedy against the Subordinate
Lender in connection with the Liabilities or any of the instruments or documents
executed in connection herewith.
10. Provisions Solely for the Benefit of the Lenders and Agent. The
provisions of this Agreement are solely to define the relative rights and
obligations of the Lenders and Agent and the Subordinate Lender, and no other
person or entity, including, without limitation, any of the Obligors, shall have
any rights hereunder or as a result of the provisions hereof.
11. Agent for Subordinate Lender. The Subordinate Lender's Agent hereby
agrees to be bound by the terms and provisions of this Agreement and agrees not
to make any payment or distribution or to otherwise take any action which is
contrary to the provisions of this Agreement.
12. Judicial Proceedings; Waivers. THE SUBORDINATE LENDER AND THE AGENT
ACKNOWLEDGE AND AGREE THAT (i) ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT OR INSTITUTED BY THE AGENT, THE SUBORDINATE LENDER OR ANY
SUCCESSOR OR ASSIGN OF THE AGENT OR THE SUBORDINATE LENDER, ON OR WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH
RESPECT HERETO, OR THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY AND
EACH PARTY WAIVES THE RIGHT TO TRIAL BY JURY; (ii) EACH WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; AND (iii) THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND THE LENDERS WOULD NOT EXTEND CREDIT IF THE WAIVERS
SET FORTH IN THIS SECTION WERE NOT A PART OF THIS AGREEMENT.
11
13. Counterparts. This Agreement may be executed and delivered in any
number of counterparts each of which shall constitute an original, but all of
which taken together shall constitute but one and the same agreement. Delivery
of an executed signature page to this Agreement by facsimile transmission shall
be effective as delivery of a manually signed counterpart of this Agreement.
IN WITNESS WHEREOF, the Subordinate Lender has executed and delivered to the
Agent this Agreement, as of the day and year first above written.
WITNESSED BY:
- ---------------------------- ------------------------------
Henry E. Baker
Address: 1050 Buckingham Street
Watertown, CT 06795
- ---------------------------- -------------------------------
Ross S. Rapaport, not individually bu
as Trustee of the Peter K. Baker Life
Insurance Trust, The John B. Baker
Insurance Trust and u/t/a dated
December 16, 1991 f/b/o Joan Baker
et. al., as agent for the Subordinate
Lender
Address: 1050 Buckingham Street
Watertown, CT 06795
WEBSTER BANK, as Agent
- ---------------------------- By:______________________
Richard A. O'Brien
Its Senior Vice President
- ---------------------------- Address: 145 Bank Street
Waterbury, CT 06702
STATE OF ______________)
12
) ss: _________ __________, 2003
COUNTY OF ____________)
Personally appeared Henry E. Baker, signer and sealer of the foregoing
instrument and acknowledged the same to be his free act and deed, before me.
-----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
STATE OF _____________)
) ss: _________ _________, 2003
COUNTY OF ____________)
Personally appeared Ross S. Rapaport, not individually but as Trustee of the
Peter K. Baker Life Insurance Trust, the John B. Baker Insurance Trust and U/T/A
dated December 16, 1991 F/B/O Joan Baker et. al, as agent for the Subordinate
Lender, signer and sealer of the foregoing instrument and acknowledged the same
to be his free act and deed as Trustee and agent, before me.
-----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
STATE OF CONNECTICUT )
) ss: Hartford March ___, 2003
COUNTY OF HARTFORD )
Personally appeared Richard A. O'Brien, Senior Vice President of Webster Bank,
as Agent, signer and sealer of the foregoing instrument and acknowledged the
same to be his free act and deed as such officer and the free act and deed of
Webster Bank, as Agent, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
13
The Obligors signing below hereby acknowledge receipt of a copy of the foregoing
Agreement, waive notice of acceptance thereof by the Agent and Lenders, and
agree to be bound by the terms and provisions thereof. The Obligors signing
below further agree to make no payments or distributions, or grant any security
interest, contrary to the terms and provisions of this Agreement and to do every
other act and thing necessary or appropriate to carry out such terms and
provisions. Upon the occurrence of any Event of Default, or upon the breach of
any representation, covenant or agreement in this Agreement by any of the
Obligors or the Subordinated Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent and Lenders
may immediately, without further notice, resort to all of its rights and
remedies herein, in any document (including the Loan Agreement and any of the
Loan Documents) by and between the Agent or any Lender and any Obligor, or in
any in any instrument evidencing any obligation under any such document, at law
or in equity.
Dated: As of the ___ day of March, 2003
VERMONT PURE HOLDINGS, LTD.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
CRYSTAL ROCK SPRING WATER COMPANY
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: 1050 Buckingham Street
Watertown, CT 06795
VERMONT PURE SPRINGS, INC.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
14
SCHEDULE A
Bank Collateral
"Collateral" means Receivables, Inventory, Equipment, Patents, Trademarks,
Investment Property, Additional Collateral, and the Premises, but excluding
personal property subject to a purchase money lien permitted by Section 6.1 of
the Loan Agreement to the extent the terms of such purchase money lien prohibit
further liens or encumbrances.
"Additional Collateral" means (i) all General Intangibles, including Payment
Intangibles and Software and all Supporting Obligations related thereto, (as
such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time) of every kind and description of the Obligors,
including without limitation federal, state and local tax refund claims of all
kinds, whether now existing or hereafter arising; (ii) all of Obligors' Deposit
Accounts, Letter of Credit Rights and all Supporting Obligations related thereto
(as such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time), whether now owned or hereafter created, wherever
located, together with the rights to withdraw from said Deposit Accounts and
make deposits to the same and the right to draw under Letters of Credit; (iii)
all monies, securities, instruments, cash and other property of Obligors and the
proceeds thereof, now or hereafter held or received by, or in transit to, any
Lender from or for Obligors, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of Obligors' deposits (general or
special, balances, sums, proceeds and credits of Obligors with any Lender at any
time existing); (iv) all interests in real property held or owned by Obligors,
including all leasehold interests; (v) all rights under contracts and license
agreements for water; (vi) all books, records, customer lists, ledger cards,
computer programs, computer tapes, disks, printouts and records, and other
property and general intangibles at any time evidencing or relating to any of
the foregoing, whether now in existence or hereafter created; (vii) all other
personal property and fixtures of the Obligors, whether now existing or
hereafter arising or created; and all proceeds of the foregoing and all proceeds
of any insurance on the foregoing.
"Equipment" means all Equipment, Farm Products and Fixtures (as such terms are
defined in the Uniform Commercial Code as in effect in Connecticut on the date
of this Agreement), including all machinery, equipment, furniture, fixtures,
tools, parts, supplies and motor vehicles, now owned and hereafter acquired, by
Obligors of whatsoever name, nature, kind or description, wherever located, and
all additions and accessions thereto and replacements or substitutions therefor,
and all proceeds thereof and all proceeds of any insurance thereon.
"Inventory" means all Inventory and Goods and all Supporting Obligations related
thereto (as such terms are defined in the Uniform Commercial Code as in effect
in Connecticut from time to time) of whatsoever name, nature, kind or
description now owned and hereafter acquired by Obligors, wherever located,
including without limitation all contract rights with respect thereto and
documents representing the same, all goods held for sale or lease or to be
furnished under contracts of service, finished goods, raw materials, materials
used or consumed by Obligors, parts, supplies, and all wrapping, packaging,
advertising and shipping materials and any documents relating thereto, and all
labels and other devices, names and marks affixed or to be affixed thereto for
purposes of selling or of identifying the same or the seller or manufacturer
thereof, and all right, title and interest of Obligors therein and thereto, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Investment Property" means all investment property (as such term is defined in
the Uniform Commercial Code as adopted in Connecticut from time to time) of
whatever type or nature now owned or hereafter acquired by the Obligors,
including without limitation, all certificated securities, all uncertificated
securities, all security entitlements, all security accounts, all commodity
contracts, all commodity accounts and all financial assets of every type and
nature and all rights thereto or therein, and all financial accounts of every
type and nature and all rights thereto or therein, and all Supporting
Obligations (as such term is defined in the Uniform Commercial Code as adopted
in Connecticut from time to time) related thereto and all proceeds and products
thereof, including without limitation, all insurance proceeds and fidelity bond
proceeds related thereto.
"Patents" means all of Obligors' right, title and interest, present and future,
in and to (a) all letters patent of the United States or any other country, all
right, title and interest therein and thereto, and all registrations and
recordings thereof, including without limitation applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States or any state thereof or any other country
or any political subdivision thereof, all whether now owned or hereafter
acquired by Obligors; and (b) all reissues, continuations, continuations-in-part
or extensions thereof and all licenses thereof; and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing.
"Premises" means the following real property owned by Obligors:
Route 66 Factory, Randolph, VT
Chase Road, Randolph, VT
North Randolph Road, Randolph, VT
Alice E. LaFrance, Route 66, Randolph, VT (approximately 5 acres) Gary
LaFrance, Route 66, Randolph, VT (approximately 20 acres)
"Receivables" means (i) all of Obligors' now owned and hereafter acquired,
present and future, Accounts, Chattel Paper, Documents, Instruments and
Supporting Obligations related thereto, (as such terms are defined in the
Uniform Commercial Code as in effect in Connecticut from time to time) and
contract rights, including without limitation all obligations to Obligors for
the payment of money, whether arising out of Obligors' sale of goods or
rendition of services or otherwise (all hereinafter called "Accounts") and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
(ii) all of Obligors' rights, remedies, security and liens, in, to and in
respect of the Accounts, present and future, including without limitation,
rights of stoppage in transit, replevin, repossession and reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, guaranties or
other contracts of suretyship with respect to the Accounts, deposits or other
security for the obligation of any debtor or obligor in any way obligated on or
in connection with any Accounts, and credit and other insurance, and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
and (iii) all of Obligors' right, title and interest, present and future, in, to
and in respect of all goods relating to, or which by sale have resulted in,
Accounts, including without limitation all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing any Accounts, and all returned, reclaimed or repossessed goods, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Trademarks" means all of Obligors' right, title and interest, present and
future, in and to (i) all trademarks, trade names, trade styles, service marks,
prints and labels on which said trademarks, trade names, trade styles and
service marks have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all right, title and
interest therein and thereto, and all registrations and recordings thereof,
including without limitation applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof, or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Obligors;
(ii) all reissues, extensions or renewals thereof and all licenses thereof; and
(iii) the goodwill of the business symbolized by each of the Trademarks, and all
customer lists and other records of Obligors relating to the distribution of
products bearing the Trademarks; and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing.
SCHEDULE B
Subordinated Lender Collateral
The following property, whether now existing or subsequently acquired, and
all additions, substitutions, accessions, replacements, proceeds, and products
thereof or thereto: all tangible and intangible assets and properties of each of
Vermont Pure Holdings, Ltd., a Delaware corporation formerly named "VP Merger
Parent, Inc.", Vermont Pure Springs, Inc., a Delaware corporation, Platinum
Acquisition Corp., f/k/a Vermont Pure Holdings (each a "Company"), including
without limitation all furniture, fixtures, equipment, raw materials, inventory,
other goods, accounts, contract rights, rights to the payment of money,
insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and other investment
property, deposit accounts, rights to proceeds of letters of credit and all
general intangibles including, without limitation, all tax refund claims,
license fees, patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, rights to sue and recover for
past infringement of patents, trademarks and copyrights, computer programs,
computer software, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature pursuant
to which any Company possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess, use or have
authority to possess or use property (whether tangible or intangible) of such
Company, and all recorded data of any kind or nature, regardless of the medium
of recording including, without limitation, all software, writings, plans,
specifications and schematics (each of which terms has the meaning ascribed to
in the Uniform Commercial Code, as in effect in the State of Connecticut)
(collectively, the "Collateral"); provided that notwithstanding the foregoing,
such grant of security interest shall not extend to, and the term "Collateral"
shall not include any cash and cash equivalents at any time owned by any
Company.
Exhibit 10.20
SUBORDINATION AND PLEDGE AGREEMENT
March 5, 2003
WHEREAS, VERMONT PURE HOLDINGS, LTD., a Delaware corporation with a principal
executive office at Catamount Industrial Park, Route 66, Randolph, Vermont 05060
("Holdings"), CRYSTAL ROCK SPRING WATER COMPANY, a Connecticut corporation with
an office at 1050 Buckingham Street, Watertown, Connecticut 06795 ("Crystal
Rock"), and VERMONT PURE SPRINGS, INC., a Delaware corporation with an office at
Catamount Industrial Park, Route 66, Randolph, Vermont 05060 ("VPS", and
collectively with Holdings and Crystal Rock, the "Obligors ") are now indebted
to JOAN A. BAKER (the "Subordinate Lender") and may from time to time hereafter
become indebted to the Subordinate Lender in further amounts; and
WHEREAS, Ross S. Rapaport, not individually but as Trustee of the Peter K. Baker
Life Insurance Trust, The John B. Baker Insurance Trust and u/t/a dated December
16, 1991 f/b/o Joan Baker et. al. is acting as agent (the "Subordinate Lender's
Agent") for Subordinate Lender pursuant to certain of the Subordinated Loan
Documents; and
WHEREAS, the Obligors have requested, and may from time to time hereafter
request, the lenders under that certain Loan and Security Agreement dated as of
the 5th day of March, 2003, as the same may be amended from time to time, by and
among the Obligors, each of the lenders which is a signatory thereto
(individually, together with its successors and assigns, a "Lender" and
collectively, the "Lenders") and Webster Bank, as agent (in such capacity,
together with its successors and assigns in such capacity, the "Agent" ) to make
or agree to make loans, extensions of credit or other financial accommodations
to the Obligors (the "Loans"); and
WHEREAS, the Lenders, as a condition to the making or continuation of the Loans,
has required the Subordinate Lender to execute and deliver this Subordination
and Pledge Agreement (together with all schedules and any exhibits attached
hereto and amendments or modifications hereto in effect from time to time, the
"Agreement").
NOW, THEREFORE, in order to induce the Lenders to make, or continue to make the
Loans and in consideration thereof, the Subordinate Lender agrees as follows:
A. Definitions. As used herein, the following terms shall have the
following meanings:
1. Affiliate. The term "Affiliate" means any of each of the Lenders direct
and indirect affiliates and subsidiaries.
2. Bank Collateral. The term "Bank Collateral" means the personal property
of the Obligors described in Schedule A and any other real or personal property
of any of the Obligors in which the Agent, any Lender or an Affiliate may
hereafter be granted a security interest, mortgage interest or other similar
interest.
3. Collection Action. The term "Collection Action" means to (i) exercise or
enforce any rights or remedies or assert any claims against the Bank Collateral
or Subordinated Lenders' Collateral; (ii) make any claim or commence or initiate
any action, lawsuit, case or proceeding against any of the Obligors or join
together or with any creditor other than, with its consent, the Agent in any
action, lawsuit, case or proceeding against the Obligors (including, but not
being limited to, proceedings under the Bankruptcy Code); (iii) contact any
account of any of the Obligors or attach or take possession of any Bank
Collateral or Subordinated Lenders' Collateral or exercise any right of
foreclosure or any right or remedy with respect to any of the Obligors or the
Bank Collateral or Subordinated Lenders' Collateral; or (iv) take any other
action prejudicial to or inconsistent with the Lenders' and Agent's rights and
first priority secured position with respect to the Obligors or the Bank
Collateral, including, without limitation, any action that will impede,
interfere with, restrict, or restrain the exercise by the Agent or any of the
Lenders of their rights and remedies under the Loan Documents or contest in any
manner the perfection, priority or validity of any lien held by the Agent in any
of the Bank Collateral.
4. Event of Default. The term "Event of Default" shall mean an Event of
Default under the Loan Agreement beyond any applicable grace and cure period.
5. Financial Covenant Default. The term "Financial Covenant Default" shall
mean an Event of Default which results solely from the violation of any now
existing or hereafter arising financial covenant contained in the Loan
Agreement, including, by way of illustration, those specific financial covenants
set forth in Sections 6.16, 6.17, 6.18, 6.19, and 6.20 of the Loan Agreement and
any supplement, addition, modification or amendment to those specific financial
covenants.
6. Liabilities. The term "Liabilities" means any and all obligations and
indebtedness of every kind and description, now or hereafter existing, whether
such debts or obligations are primary or secondary, direct or indirect, absolute
or contingent, sole, joint or several, secured or unsecured, due or to become
due, contractual or tortious, arising by operation of law, by overdraft, or
otherwise, including, without limitation, principal, interest, fees, late fees,
expenses, attorneys' fees and costs, and/or allocated fees and costs of the
Agent's in-house legal counsel, that have been or may hereafter be contracted or
incurred.
7. Loan Agreement. The term "Loan Agreement" means that certain Loan and
Security Agreement among the Obligors, the Lenders and Agent dated the date
hereof, and any subsequent supplement, modification, renewal, extension or
amendment thereto.
8. Loan Documents. The term "Loan Documents" means the Loan Agreement and
all other credit accommodations, notes, loan agreements, and any other
agreements and documents, now or hereafter existing, creating, evidencing,
guarantying, securing or relating to any or all of the Senior Liabilities,
together with all amendments, modifications, renewals, or extensions thereof.
2
9. Non-Covenant Default. The term "Non-Covenant Default" means an Event of
Default other than a Financial Covenant Default.
10. Obligor. The term "Obligor" means the Holdings, Crystal Rock, VPS and
each and every other maker, endorser, guarantor, or surety of or for the Senior
Liabilities.
11. Senior Liabilities. The term "Senior Liabilities" means all Liabilities
of the Obligors to any of the Lenders, the Agent and/or to any of the Affiliates
including, without limitation, any and all interest accruing on Senior
Liabilities after the commencement of any proceedings referred to in paragraph
B.5. hereof, notwithstanding any provision or rule of law which
might restrict the rights of the Lenders or Agent, as against the Obligors
and/or anyone else, to collect such interest. For purposes of this Agreement,
Senior Liabilities shall include all Liabilities of the Obligors to the Lenders
and the Agent, notwithstanding any right or power of any of the Obligors and/or
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such Senior Liabilities.
12. Subordinated Lenders' Collateral. The term "Subordinated Lenders'
Collateral" means the personal property of the Obligors more fully described in
Schedule B attached hereto.
13. Subordinated Lending Group. The term "Subordinated Lending Group" means
Henry E. Baker, Joan A. Baker, John B. Baker, Peter K. Baker, and Ross S.
Rappaport, not individually, but as Trustee of the Peter K. Baker Life Insurance
Trust, the John B. Baker Insurance Trust and u/t/a dated December 16, 1991 f/b/o
Joan Baker et. al., each as holder of an Amended and Restated Subordinated
Promissory Note of Holdings dated the date hereof, as such Subordinated
Promissory Notes may be amended, restated or replaced from time to time, and any
successor holders of such Subordinated Promissory Notes.
14. Subordinated Liabilities. The term "Subordinated Liabilities" means all
Liabilities of the Obligors to the Subordinate Lender, including, without
limitation, all payments of principal and interest pursuant to that Amended and
Restated Subordinated Promissory Note dated the date hereof from Holdings
payable to the order of the Subordinated Lender in the original principal amount
of $3,511,111.00 (the "Subordinated Note") and that Guaranty dated October 5,
2000 as amended by amendment dated the date hereof from Platinum and VPS to
Subordinate Lender guarantying payments due under the Subordinated Note (the
"Subordinate Guaranty") but specifically excluding therefrom compensation from
the Obligors to the Subordinate Lender presently contemplated pursuant to the
existing employment agreement between any of the Obligors and the Subordinate
Lender, as the compensation clauses thereof may be amended from time to time
with the consent of the Agent, the normal reimbursement of expenses in the
ordinary course of business and indemnification of claims arising solely from
the Subordinate Lender's actions as an officer or director of any of the
Obligors.
15. Subordinated Loan Documents. The term "Subordinated Loan Documents"
means all credit accommodations, notes, loan agreements and any other agreements
and documents, now or hereafter existing, creating, evidencing, guarantying,
securing or relating to any or all of the Subordinated Liabilities, together
with all amendments, modifications, renewals or extensions thereof.
3
B. Subordination and Pledge.
1. Subordination to Senior Liabilities.
(a) Except as hereinafter expressly set forth in this Agreement or as the
Agent and Lenders may hereafter otherwise expressly consent in writing, the
payment of all Subordinated Liabilities shall be postponed and subordinated to
the indefeasible payment in full of all Senior Liabilities, and no payments or
other distributions whatsoever, including, without limitation, payments of
interest in respect of any Subordinated Liabilities shall be made, nor shall any
property or assets of the Borrower or other Obligor be applied to the purchase
or other acquisition or retirement of any Subordinated Liabilities, nor given as
collateral security to secure repayment of same.
(b) Notwithstanding the provisions in paragraph B.1(a) above, and subject
to the other terms of this Agreement, the Subordinate Lender may be granted a
security interest in the Subordinated Lenders' Collateral to secure the payments
of principal and interest and other amounts due pursuant to the Subordinated
Note.
(c) Notwithstanding the provisions of paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, the Obligors may make regularly scheduled
quarterly payments of interest under the Subordinated Note, at a rate not in
excess of twelve per cent (12%) per annum, and past due regularly scheduled
quarterly payments of interest under the Subordinated Note which were not paid
when scheduled to be paid because of the terms of this Agreement, including
interest at a rate not in excess of twelve per cent (12%) per annum on such past
due amounts, but only to the extent that the making of such payments would not
result in a Financial Covenant Default.
(d) Notwithstanding the provisions in paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, and provided that all the conditions in
the Loan and Security Agreement with respect to a request under the
Acquisition/Capital Asset Line of Credit (as defined in the Loan and Security
Agreement) for an advance to pay Subordinated Debt (as defined in the Loan and
Security Agreement) owed to the Subordinated Lending Group have been satisfied,
the Obligors may make principal payments on the Subordinated Debt (as defined in
the Loan and Security Agreement) to members of the Subordinated Lending Group
which in the aggregate do not exceed $5,000,000.
4
2. Pledge of Subordinated Loan Documents. In order to secure the due and
punctual payment and performance of the Senior Liabilities, the Subordinate
Lender hereby pledges, transfers, assigns, and grants to the Agent a continuing
security interest in and lien upon the Subordinated Loan Documents. The
Subordinate Lender has endorsed and delivered to the Agent physical possession
of any of the Subordinated Loan Documents which are instruments, including the
Subordinated Note and has executed Uniform Commercial Code financing statements
and such other documents and/or instruments as may be necessary or convenient to
perfect the security interests granted herein. Agent shall hold the Subordinated
Note and any other Subordinated Loan Documents which are instruments delivered
to the Agent as security for the due and punctual payment and performance of the
Senior Liabilities and notwithstanding the possession of the Subordinated Note
or such other Subordinated Loan Documents by the Agent, the Subordinate Lender
shall be entitled to receive payments thereunder to the extent expressly
permitted by the terms of this Agreement. Upon payment in full of the Senior
Liabilities, the Agent will deliver to the Subordinate Lender in care of Peter
K. Baker the Subordinated Note and any other Subordinated Loan Documents in its
possession.
3. Subordination of Security Interest of Subordinated Liabilities. Any
security interest now or hereafter held by the Subordinate Lender and granted by
any of the Obligors to secure any of the Subordinated Liabilities, including the
security interest described in paragraph B.1(b), is hereby immediately made
- ----------------- subordinate, junior and postponed in priority and effect to
the priority and effect of the security interest purported to be created by any
of the Loan Documents, as if (and whether or not) the Agent's or any Lender's
security interest had been perfected by possession, by timely filing of
financing statements, or by any other means prior to the time the security
interest with respect to the Subordinated Liabilities is perfected, and prior to
the filing of any financing statements in connection with the Subordinated
Liabilities. The Subordinate Lender agrees to execute and deliver to the Agent
all instruments, including, without limitation, Forms UCC-3, subordinations of
lien, and subordinations of mortgage which, in the reasonable opinion of the
Agent, are necessary or convenient to effectuate the purposes of this paragraph
and this Agreement.
4. Further Assurances of Pledge of Subordinated Liabilities. The
Subordinate Lender will (i) promptly notify the Agent of the creation of any
Subordinated Liabilities and of the issuance of any promissory note or other
instrument to evidence any Subordinated Liabilities; (ii) cause any Subordinated
Liabilities which are not already evidenced by a promissory note or other
instrument of the Obligors to be so evidenced; (iii) as collateral security for
the Senior Liabilities, endorse, deliver and pledge to the Agent any and all
promissory notes and/or other instruments evidencing Subordinated Liabilities,
and otherwise assign and/or pledge to the Agent any or all Subordinated
Liabilities and the Subordinated Loan Documents, all in a manner satisfactory to
the Agent in its sole discretion, and (iv) promptly give the Agent written
notice of any default by any Obligor under the Subordinated Note or any
agreement securing Obligors' obligations under any of the other Subordinated
Loan Documents.
5
Further Assurances of Agent. Agent will endeavor to deliver to the Subordinate
Lender in care of Peter K. Baker prompt notice of any Event of Default or
Financial Covenant Default under the Loan Agreement or any of the other Loan
Documents of which the Agent becomes aware but the failure of the Agent to
promptly deliver any such notice will not affect any of the rights or
obligations of the parties under this Agreement.
5. Rights of Agent to Collect Subordinated Liabilities. In the event of,
and commencing with the date thereof, any dissolution, winding up, liquidation,
reorganization or other similar proceedings relating to any Obligor or to any of
their creditors, or to any of their property (whether voluntary or involuntary,
partial or complete, and whether in bankruptcy, insolvency or receivership, or
upon an assignment for the benefit of creditors, or any other marshalling of the
assets and liabilities of any Obligor, or any sale of all or substantially all
of the assets of any Obligor, or otherwise), the Senior Liabilities shall first
be paid in full before the Subordinate Lender shall be entitled to receive
and/or to retain any payment or distribution in respect of the Subordinated
Liabilities; provided that the Subordinate Lender shall be entitled to receive
and retain any securities issued in connection with reorganization proceedings
which are junior in right of repayment to the Senior Liabilities to the extent
set forth herein, are treated as Subordinated Liabilities hereunder and are
subject to all the provisions of this Agreement, and, in order to implement the
foregoing (i) all payments and distributions of any kind or character in respect
of the Subordinated Liabilities to which any of the Subordinate Lender would be
entitled but for the provisions of this Agreement (other than such junior
securities) will be made directly to the Agent; (ii) the Subordinate Lender
shall promptly file a claim or claims, in the form required in such proceedings,
for the full outstanding amount of the Subordinated Liabilities, and shall cause
said claim or claims to be approved and all payments and other distributions in
respect thereof (other than such junior securities) to be made directly to the
Agent; (iii) the Subordinate Lender hereby irrevocably agrees that the Agent
may, in its sole discretion, in the name of the Subordinate Lender or otherwise,
demand, sue for, collect, receive, and receipt for any and all such payments or
distributions, and file, prove, and vote or consent in any such proceedings with
respect to, any and all claims of the Subordinate Lender relating to the
Subordinated Liabilities; and (iv) the Subordinate Lender hereby ratifies all of
the foregoing acts or omissions on the Agent's part or behalf and waives any
claim, counterclaim or defense of the Subordinate Lender which may be alleged to
arise from such acts or omissions.
6. Protection of Agent's Rights in Subordinated Liabilities. In the event
that the Subordinate Lender receives any payment or other distribution of any
kind or character from any Obligor or any other source whatsoever in respect of
any of the Subordinated Liabilities, other than as expressly permitted by the
terms of this Agreement, such payment or other distribution shall be received in
trust for the Lenders and the Agent and promptly turned over by the Subordinate
Lender to the Agent. The Subordinate Lender will mark its books and records, and
cause the Obligors to mark their books and records, so as to clearly indicate
that the Subordinated Liabilities are subordinated in accordance with the terms
of this Agreement, and will cause to be clearly inserted in any promissory note
or other instrument which at any time evidences any of the Subordinated
Liabilities a statement to the effect that the payment thereof is subordinated
in accordance with the terms of this Agreement. The Subordinate Lender will
execute such further documents and instruments and take such further action as
the Agent may from time to time reasonably request to carry out the intent of
this Agreement. The Subordinate Lender hereby irrevocably appoints the Agent its
attorney in fact, said appointment being coupled with an interest, to execute
such further documents and instruments and take such further action on behalf of
the Subordinate Lender as the Agent may from time to time deem reasonable to
carry out the intent of this Agreement, including, without limitation, the
actions set forth in paragraph B.4. hereof.
6
7. Treatment of Payment of Subordinated Liabilities. All payments and
distributions received by the Agent or any Lender in respect of the Subordinated
Liabilities, to the extent received in or converted into cash, may be applied by
the Agent and Lenders first to the payment of any and all expenses (including
attorneys' fees and disbursements and the allocated fees, expenses and cost of
in-house counsel) paid or incurred by the Agent in enforcing this Agreement or
in endeavoring to collect or realize upon any of the Subordinated Liabilities,
and any balance thereof shall, solely as between the Subordinate Lender and the
Lenders and Agent, be applied by the Agent, in such order of application as the
Agent may from time to time select, toward the payment of any of the Senior
Liabilities remaining unpaid. As between the Obligors and any of their
creditors, no such payments or distributions of any kind or character shall be
deemed to be payments or distributions in respect of the Senior Liabilities;
and, notwithstanding any such payments or distributions received by the Agent or
any Lender in respect of the Subordinated Liabilities and so applied by the
Agent and Lenders toward the payment of the Senior Liabilities, the Subordinate
Lender shall be subrogated to the then existing rights of the Agent and Lenders,
if any, in respect of the Senior Liabilities, only at such time as the Lenders
and Agent shall have received indefeasible payment of the full amount of the
Senior Liabilities.
8. Waivers. The Subordinate Lender hereby waives (i) any and all notice of
the receipt and acceptance by the Agent or any Lender of this Agreement; (ii)
except as set forth in paragraph B.4, notice of the existence, incurrence, or
non-payment of all or any of the Senior Liabilities; (iii) all diligence in
collection or protection of or realization upon any of the Senior Liabilities or
any security therefor; and (iv) any obligation with respect to the marshalling
of assets by the Agent or any Lender.
9. Prohibition on Changes in Subordinated Liabilities.
(a) Except as herein set forth in paragraph B.9(b), the Subordinate Lender
will not without the prior written consent of the Agent (i) cancel, waive,
forgive, amend, modify, transfer or assign, or attempt to enforce or collect, or
subordinate to any Liabilities other than the Senior Liabilities, any
Subordinated Liabilities or any rights in respect thereof; (ii) convert any
Subordinated Liabilities into stock or other securities in any of the Obligors;
(iii) take any Collection Action; (iv) commence, or join with any other creditor
in commencing, any bankruptcy, reorganization or insolvency proceedings with
respect to any of the Obligors, or (v) take any other action prejudicial to or
inconsistent with the Agent's and Lenders' rights and first priority secured
position with respect to the Obligors, the Bank Collateral and collateral for
the Senior Liabilities.
7
(b) Notwithstanding the provisions of paragraph B.9(a), if any default has
occurred under any of the Subordinated Loan Documents and such default has
continued in existence for a period of one hundred eighty (180) consecutive days
after the Subordinated Lenders have provided written notice of the existence of
such default to the Agent (the "Standstill Period"), the Subordinated Lender may
proceed to take legal action against the Obligors for the sole purpose of
obtaining a judgment against the Obligors; provided, however, at no time either
before or after the expiration of the Standstill Period, may any Subordinated
Lender take any action or Collection Action to enforce a security interest in,
liquidate or otherwise receive payment from any collateral for the Senior
Liabilities, including the Bank Collateral or Subordinated Lenders' Collateral,
unless and until the Lenders and Agent have been indefeasibly paid in full for
all Senior Liabilities.
10. Continuing Agreement. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect notwithstanding,
without limitation, the death, incompetency or dissolution of the Subordinate
Lender or that at any time or from time to time all Senior Liabilities may have
been paid in full if any of the Loan Documents have not been terminated.
11. Permitted Changes in Senior Liabilities. The Agent or any Lender may,
from time to time, whether before or after any discontinuance of this Agreement,
at its sole discretion and without notice to the Subordinate Lender, take any or
all of the following actions: (i) retain or obtain a security interest in any
property to secure any of the Senior Liabilities; (ii) retain or obtain the
primary or secondary obligation of any other Obligor or Obligors with respect to
any of the Senior Liabilities; (iii) extend, renew (whether or not longer than
the original period), alter or exchange any of the Senior Liabilities; (iv)
release or compromise any obligation of any nature of any Obligor with respect
to any of the Senior Liabilities; and, (v) release its security interest or lien
in, allows its security interest or lien to be unperfected, surrender, release
or permit any substitution or exchange for, all or any part of any property
securing any of the Senior Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any Obligor with respect to
any such property.
12. Disposition of Assets. The Subordinate Lender agree that any
disposition by the Agent or any Lender of any collateral for the Senior
Liabilities, whether by collection, sale, or other manner of liquidation, after
an Event of Default under the Loan Documents, if conducted in a commercially
reasonable manner, may not be challenged or contested by the Subordinate Lender
on the grounds of commercial unreasonableness. The Subordinate Lender agrees
that the Agent and Lenders may use such means of collection and exercise such
diligence with respect thereto as the Agent or such Lender, in its sole
discretion, deems appropriate under the circumstances and may enter into such
compromise with and give such releases and acquittances to account debtors or
other obligors of the Obligors' receivables as it determines in its sole
discretion, without obtaining the agreement or concurrence of or giving notice
to the Subordinate Lender and the Subordinate Lender hereby waive all right to
require that its agreement or consent be obtained or that it be given notice.
The Subordinate Lender further agrees that it will release its security interest
on any collateral (including the Subordinated Lenders' Collateral) for the
Senior Liabilities upon the sale or other disposition thereof at the request of
the Agent, whether or not any proceeds therefrom will pay any of the
Subordinated Liabilities.
8
C. Representations and Warranties. The Subordinate Lender hereby represents
and warrants that (i) the Subordinate Lender has the necessary power and
capacity to make and perform this Agreement and such making and performance have
been duly authorized by all necessary actions on the part of the Subordinate
Lender; (ii) the making and performance by the Subordinate Lender of this
Agreement does not and will not violate any provision of law or regulation or
result in the breach of, or constitute a default or require any consent under,
any indenture or other agreement or instrument to which it is a party or by
which any of its properties may be bound; and (iii) this Agreement is the legal,
valid and binding obligation of the Subordinate Lender, enforceable against the
Subordinate Lender in accordance with its terms.
D. Remedies. Upon the occurrence of any Event of Default, or upon the
breach of any representation, covenant or agreement in this Agreement by any
Obligor or the Subordinate Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent may
immediately, without further notice, resort to all of its rights and remedies
herein, in any document (including the Loan Agreement and any of the Loan
Documents) by and between the Agent or any Lender and any Obligor, or in any in
any instrument evidencing any obligation under any such document, at law or in
equity. The Agent agrees that it shall proceed, to the extent commercially
reasonable, against all the assets of the Obligors before liquidating the
Subordinated Note. The Agent shall endeavor to give the Obligors prompt notice
of the acceleration of the Senior Liabilities but failure to give such notice
shall not affect any action taken by Agent and Agent shall not incur any
liability for any failure to deliver such notice.
E. Miscellaneous.
1. Remedies Cumulative; No Waiver. The rights, powers and remedies of the
Agent and Lenders provided in this Agreement and any of the Loan Documents are
cumulative and not exclusive of any right, power or remedy provided by law or
equity. No failure or delay on the part of the Agent or any Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy.
2. Notices. Notices and communications under this Agreement shall be in
writing and shall be given by (i) hand-delivery, (ii) first class mail (postage
prepaid), or (iii) reliable overnight commercial courier (charges prepaid) to
the addresses listed in this Agreement. Notice by overnight courier shall be
deemed to have been given and received on the date scheduled for delivery.
Notice by mail shall be deemed to have been given and received three (3)
calendar days after the date first deposited in the United States Mail. Notice
by hand-delivery shall be deemed to have been given and received upon delivery.
A party may change its address by giving written notice to the other party as
specified herein.
9
3. Costs and Expenses. Whether or not the transactions contemplated by this
Agreement or the Loan Documents are fully consummated, the Obligors shall
promptly pay (or reimburse, as the Agent may elect) all costs and expenses which
the Agent has incurred or may hereafter incur in connection with the
negotiation, preparation, reproduction, interpretation, perfection, protection
of collateral, administration and enforcement of this Agreement and the other
Loan Documents, the collection of all amounts due under this Agreement and the
other Loan Documents, and all amendments, modifications, consents or waivers, if
any, to the Loan Documents. The Obligors' reimbursement obligations under this
Paragraph shall survive any termination of this Agreement or any other Loan
Document and are deemed part of the Senior Liabilities.
4. Governing Law. This Agreement shall be construed in accordance with and
governed by the substantive laws of the State of Connecticut without reference
to conflict of laws principles.
5. Integration; Amendment. This Agreement and the other Loan Documents
constitute the sole agreement of the parties with respect to the subject matter
hereof and thereof and supersede all oral negotiations and prior writings with
respect to the subject matter hereof and thereof. No amendment of this
Agreement, and no waiver of any one or more of the provisions hereof shall be
effective unless set forth in writing and signed by the parties hereto.
6. Successors and Assigns. This Agreement (i) shall be binding upon the
Subordinate Lender, the Obligors executing this Agreement and the Agent and,
where applicable, their respective heirs, executors, administrators, successors
and assigns, and (ii) shall inure to the benefit of the Subordinate Lender, the
Obligors, the Agent and the Lenders and, where applicable, their respective
heirs, executors, administrators, successors and permitted assigns; provided,
however, that the Subordinate Lender and the Obligors may not assign their
rights or obligations hereunder or any interest herein without the prior written
consent of the Agent, and any such assignment or attempted assignment by the
Subordinate Lender and/or any of the Obligors shall be void and of no effect
with respect to the Agent and the Lenders. The Lenders may from time to time
sell or assign, in whole or in part, or grant participations in the Loans and/or
the Agreement and/or the obligations evidenced thereby. The Subordinate Lender
authorizes the Agent and Lenders to provide information concerning the
Subordinate Lender and the Obligors to any prospective purchaser, assignee or
participant.
7. Severability and Consistency. The illegality, unenforceability or
inconsistency of any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Agreement or
any instrument or agreement required hereunder. The Loan Documents and this
Agreement are intended to be consistent. However, in the event of any
inconsistencies between and/or among this Agreement and any of the Loan
Documents, such inconsistency shall not affect the validity or enforceability of
this Agreement or any of the Loan Documents. In the event of any inconsistency
or ambiguity in this Agreement or any of the Loan Documents, this Agreement and
the Loan Documents shall not be construed against any one party but shall be
interpreted consistent with the Agent's policies and procedures.
10
8. Consent to Jurisdiction and Service of Process. The Subordinate Lender
irrevocably appoints Ross Rapaport, c/o Pepe & Hazard, 30 Jeliff Lane,
Southport, CT 06490-1436 as its attorney upon whom may be served any notice,
process or pleading in any action or proceeding against it arising out of or in
connection with this Agreement. If service of process cannot be delivered to the
Subordinate Lender as specified by statute, the Subordinate Lender agrees that,
with court approval, it may be served by regular or certified mail at the
address set forth herein. The Subordinate Lender hereby consents and agrees that
(i) any action or proceeding against it may be commenced and maintained in any
court within the State of Connecticut or in the United States District Court for
the District of Connecticut by service of process on Ross Rapaport and (ii) the
courts of the State of Connecticut and the United States District Court for the
District of Connecticut shall have jurisdiction with respect to the subject
matter hereof and the person of the Subordinate Lender and the Subordinated
Liabilities. The Subordinate Lender agrees that any action brought by the
Subordinate Lender on account of this Agreement shall be commenced and
maintained only in a court in the federal judicial district or county in which
the Agent has its principal place of business in Connecticut.
9. Prejudgment Remedies. The Subordinate Lender hereby acknowledges that
the transactions contemplated herein constitute commercial transactions.
Pursuant to Section 52-278f of the Connecticut General Statutes, the Subordinate
Lender hereby waives and relinquishes all rights to notice and hearing as
provided in Sections 52-278a through 52-278g of said Connecticut General
Statutes prior to the securing of any prejudgment remedy against the Subordinate
Lender in connection with the Liabilities or any of the instruments or documents
executed in connection herewith.
10. Provisions Solely for the Benefit of the Lenders and Agent. The
provisions of this Agreement are solely to define the relative rights and
obligations of the Lenders and Agent and the Subordinate Lender, and no other
person or entity, including, without limitation, any of the Obligors, shall have
any rights hereunder or as a result of the provisions hereof.
11. Agent for Subordinate Lender. The Subordinate Lender's Agent hereby
agrees to be bound by the terms and provisions of this Agreement and agrees not
to make any payment or distribution or to otherwise take any action which is
contrary to the provisions of this Agreement.
12. Judicial Proceedings; Waivers. THE SUBORDINATE LENDER AND THE AGENT
ACKNOWLEDGE AND AGREE THAT (i) ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT OR INSTITUTED BY THE AGENT, THE SUBORDINATE LENDER OR ANY
SUCCESSOR OR ASSIGN OF THE AGENT OR THE SUBORDINATE LENDER, ON OR WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH
RESPECT HERETO, OR THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY AND
EACH PARTY WAIVES THE RIGHT TO TRIAL BY JURY; (ii) EACH WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; AND (iii) THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND THE LENDERS WOULD NOT EXTEND CREDIT IF THE WAIVERS
SET FORTH IN THIS SECTION WERE NOT A PART OF THIS AGREEMENT.
11
13. Counterparts. This Agreement may be executed and delivered in any
number of counterparts each of which shall constitute an original, but all of
which taken together shall constitute but one and the same agreement. Delivery
of an executed signature page to this Agreement by facsimile transmission shall
be effective as delivery of a manually signed counterpart of this Agreement.
IN WITNESS WHEREOF, the Subordinate Lender has executed and delivered to
the Agent this Agreement, as of the day and year first above written.
WITNESSED BY:
- ------------------------ -------------------------------
Joan A. Baker
Address: 1050 Buckingham Street
Watertown, CT 06795
- ------------------------
- ------------------------ -------------------------------
Ross S. Rapaport, not individually
but as Trustee of the Peter K.
Baker Life Insurance Trust, The
- ------------------------ John B. Baker Insurance Trust and
u/t/a dated December 16, 1991 f/b/o
Joan Baker et. al., as agent for
the Subordinate Lender
Address: 1050 Buckingham Street
Watertown, CT 06795
WEBSTER BANK, as Agent
__________________________ By:______________________
Richard A. O'Brien
Its Senior Vice President
__________________________ Address: 145 Bank Street
Waterbury, CT 06702
12
STATE OF _____________)
) ss: _________ ___________, 2003
COUNTY OF ____________)
Personally appeared Joan A. Baker, signer and sealer of the foregoing instrument
and acknowledged the same to be his free act and deed, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
------------
STATE OF _____________)
) ss: ________ ___________, 2003
COUNTY OF ____________)
Personally appeared Ross S. Rapaport, not individually but as Trustee of the
Peter K. Baker Life Insurance Trust, the John B. Baker Insurance Trust and U/T/A
dated December 16, 1991 F/B/O Joan Baker et. al, as agent for the Subordinate
Lender, signer and sealer of the foregoing instrument and acknowledged the same
to be his free act and deed as Trustee and agent, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
STATE OF CONNECTICUT )
) ss: Hartford March __, 2003
COUNTY OF HARTFORD )
Personally appeared Richard A. O'Brien, Senior Vice President of Webster Bank,
as Agent, signer and sealer of the foregoing instrument and acknowledged the
same to be his free act and deed as such officer and the free act and deed of
Webster Bank, as Agent, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
13
The Obligors signing below hereby acknowledge receipt of a copy of the foregoing
Agreement, waive notice of acceptance thereof by the Agent and Lenders, and
agree to be bound by the terms and provisions thereof. The Obligors signing
below further agree to make no payments or distributions, or grant any security
interest, contrary to the terms and provisions of this Agreement and to do every
other act and thing necessary or appropriate to carry out such terms and
provisions. Upon the occurrence of any Event of Default, or upon the breach of
any representation, covenant or agreement in this Agreement by any of the
Obligors or the Subordinated Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent and Lenders
may immediately, without further notice, resort to all of its rights and
remedies herein, in any document (including the Loan Agreement and any of the
Loan Documents) by and between the Agent or any Lender and any Obligor, or in
any in any instrument evidencing any obligation under any such document, at law
or in equity.
Dated: As of the ___ day of March, 2003
VERMONT PURE HOLDINGS, LTD.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
CRYSTAL ROCK SPRING WATER COMPANY
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: 1050 Buckingham Street
Watertown, CT 06795
VERMONT PURE SPRINGS, INC.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
14
SCHEDULE A
Bank Collateral
"Collateral" means Receivables, Inventory, Equipment, Patents, Trademarks,
Investment Property, Additional Collateral, and the Premises, but excluding
personal property subject to a purchase money lien permitted by Section 6.1 of
the Loan Agreement to the extent the terms of such purchase money lien prohibit
further liens or encumbrances.
"Additional Collateral" means (i) all General Intangibles, including Payment
Intangibles and Software and all Supporting Obligations related thereto, (as
such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time) of every kind and description of the Obligors,
including without limitation federal, state and local tax refund claims of all
kinds, whether now existing or hereafter arising; (ii) all of Obligors' Deposit
Accounts, Letter of Credit Rights and all Supporting Obligations related thereto
(as such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time), whether now owned or hereafter created, wherever
located, together with the rights to withdraw from said Deposit Accounts and
make deposits to the same and the right to draw under Letters of Credit; (iii)
all monies, securities, instruments, cash and other property of Obligors and the
proceeds thereof, now or hereafter held or received by, or in transit to, any
Lender from or for Obligors, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of Obligors' deposits (general or
special, balances, sums, proceeds and credits of Obligors with any Lender at any
time existing); (iv) all interests in real property held or owned by Obligors,
including all leasehold interests; (v) all rights under contracts and license
agreements for water; (vi) all books, records, customer lists, ledger cards,
computer programs, computer tapes, disks, printouts and records, and other
property and general intangibles at any time evidencing or relating to any of
the foregoing, whether now in existence or hereafter created; (vii) all other
personal property and fixtures of the Obligors, whether now existing or
hereafter arising or created; and all proceeds of the foregoing and all proceeds
of any insurance on the foregoing.
"Equipment" means all Equipment, Farm Products and Fixtures (as such terms are
defined in the Uniform Commercial Code as in effect in Connecticut on the date
of this Agreement), including all machinery, equipment, furniture, fixtures,
tools, parts, supplies and motor vehicles, now owned and hereafter acquired, by
Obligors of whatsoever name, nature, kind or description, wherever located, and
all additions and accessions thereto and replacements or substitutions therefor,
and all proceeds thereof and all proceeds of any insurance thereon.
"Inventory" means all Inventory and Goods and all Supporting Obligations related
thereto (as such terms are defined in the Uniform Commercial Code as in effect
in Connecticut from time to time) of whatsoever name, nature, kind or
description now owned and hereafter acquired by Obligors, wherever located,
including without limitation all contract rights with respect thereto and
documents representing the same, all goods held for sale or lease or to be
furnished under contracts of service, finished goods, raw materials, materials
used or consumed by Obligors, parts, supplies, and all wrapping, packaging,
advertising and shipping materials and any documents relating thereto, and all
labels and other devices, names and marks affixed or to be affixed thereto for
purposes of selling or of identifying the same or the seller or manufacturer
thereof, and all right, title and interest of Obligors therein and thereto, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Investment Property" means all investment property (as such term is defined in
the Uniform Commercial Code as adopted in Connecticut from time to time) of
whatever type or nature now owned or hereafter acquired by the Obligors,
including without limitation, all certificated securities, all uncertificated
securities, all security entitlements, all security accounts, all commodity
contracts, all commodity accounts and all financial assets of every type and
nature and all rights thereto or therein, and all financial accounts of every
type and nature and all rights thereto or therein, and all Supporting
Obligations (as such term is defined in the Uniform Commercial Code as adopted
in Connecticut from time to time) related thereto and all proceeds and products
thereof, including without limitation, all insurance proceeds and fidelity bond
proceeds related thereto.
"Patents" means all of Obligors' right, title and interest, present and future,
in and to (a) all letters patent of the United States or any other country, all
right, title and interest therein and thereto, and all registrations and
recordings thereof, including without limitation applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States or any state thereof or any other country
or any political subdivision thereof, all whether now owned or hereafter
acquired by Obligors; and (b) all reissues, continuations, continuations-in-part
or extensions thereof and all licenses thereof; and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing.
"Premises" means the following real property owned by Obligors:
Route 66 Factory, Randolph, VT
Chase Road, Randolph, VT
North Randolph Road, Randolph, VT
Alice E. LaFrance, Route 66, Randolph, VT (approximately 5 acres) Gary
LaFrance, Route 66, Randolph, VT (approximately 20 acres)
"Receivables" means (i) all of Obligors' now owned and hereafter acquired,
present and future, Accounts, Chattel Paper, Documents, Instruments and
Supporting Obligations related thereto, (as such terms are defined in the
Uniform Commercial Code as in effect in Connecticut from time to time) and
contract rights, including without limitation all obligations to Obligors for
the payment of money, whether arising out of Obligors' sale of goods or
rendition of services or otherwise (all hereinafter called "Accounts") and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
(ii) all of Obligors' rights, remedies, security and liens, in, to and in
respect of the Accounts, present and future, including without limitation,
rights of stoppage in transit, replevin, repossession and reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, guaranties or
other contracts of suretyship with respect to the Accounts, deposits or other
security for the obligation of any debtor or obligor in any way obligated on or
in connection with any Accounts, and credit and other insurance, and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
and (iii) all of Obligors' right, title and interest, present and future, in, to
and in respect of all goods relating to, or which by sale have resulted in,
Accounts, including without limitation all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing any Accounts, and all returned, reclaimed or repossessed goods, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Trademarks" means all of Obligors' right, title and interest, present and
future, in and to (i) all trademarks, trade names, trade styles, service marks,
prints and labels on which said trademarks, trade names, trade styles and
service marks have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all right, title and
interest therein and thereto, and all registrations and recordings thereof,
including without limitation applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof, or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Obligors;
(ii) all reissues, extensions or renewals thereof and all licenses thereof; and
(iii) the goodwill of the business symbolized by each of the Trademarks, and all
customer lists and other records of Obligors relating to the distribution of
products bearing the Trademarks; and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing.
SCHEDULE B
Subordinated Lender Collateral
The following property, whether now existing or subsequently acquired, and
all additions, substitutions, accessions, replacements, proceeds, and products
thereof or thereto: all tangible and intangible assets and properties of each of
Vermont Pure Holdings, Ltd., a Delaware corporation formerly named "VP Merger
Parent, Inc.", Vermont Pure Springs, Inc., a Delaware corporation, Platinum
Acquisition Corp., f/k/a Vermont Pure Holdings (each a "Company"), including
without limitation all furniture, fixtures, equipment, raw materials, inventory,
other goods, accounts, contract rights, rights to the payment of money,
insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and other investment
property, deposit accounts, rights to proceeds of letters of credit and all
general intangibles including, without limitation, all tax refund claims,
license fees, patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, rights to sue and recover for
past infringement of patents, trademarks and copyrights, computer programs,
computer software, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature pursuant
to which any Company possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess, use or have
authority to possess or use property (whether tangible or intangible) of such
Company, and all recorded data of any kind or nature, regardless of the medium
of recording including, without limitation, all software, writings, plans,
specifications and schematics (each of which terms has the meaning ascribed to
in the Uniform Commercial Code, as in effect in the State of Connecticut)
(collectively, the "Collateral"); provided that notwithstanding the foregoing,
such grant of security interest shall not extend to, and the term "Collateral"
shall not include any cash and cash equivalents at any time owned by any
Company.
Exhibit 10.21
SUBORDINATION AND PLEDGE AGREEMENT
March 5, 2003
WHEREAS, VERMONT PURE HOLDINGS, LTD., a Delaware corporation with a principal
executive office at Catamount Industrial Park, Route 66, Randolph, Vermont 05060
("Holdings"), CRYSTAL ROCK SPRING WATER COMPANY, a Connecticut corporation with
an office at 1050 Buckingham Street, Watertown, Connecticut 06795 ("Crystal
Rock"), and VERMONT PURE SPRINGS, INC., a Delaware corporation with an office at
Catamount Industrial Park, Route 66, Randolph, Vermont 05060 ("VPS", and
collectively with Holdings and Crystal Rock, the "Obligors ") are now indebted
to JOHN B. BAKER (the "Subordinate Lender") and may from time to time hereafter
become indebted to the Subordinate Lender in further amounts; and
WHEREAS, Ross S. Rapaport, not individually but as Trustee of the Peter K. Baker
Life Insurance Trust, The John B. Baker Insurance Trust and u/t/a dated December
16, 1991 f/b/o Joan Baker et. al. is acting as agent (the "Subordinate Lender's
Agent") for Subordinate Lender pursuant to certain of the Subordinated Loan
Documents; and
WHEREAS, the Obligors have requested, and may from time to time hereafter
request, the lenders under that certain Loan and Security Agreement dated as of
the 5th day of March, 2003, as the same may be amended from time to time, by and
among the Obligors, each of the lenders which is a signatory thereto
(individually, together with its successors and assigns, a "Lender" and
collectively, the "Lenders") and Webster Bank, as agent (in such capacity,
together with its successors and assigns in such capacity, the "Agent" ) to make
or agree to make loans, extensions of credit or other financial accommodations
to the Obligors (the "Loans"); and
WHEREAS, the Lenders, as a condition to the making or continuation of the Loans,
has required the Subordinate Lender to execute and deliver this Subordination
and Pledge Agreement (together with all schedules and any exhibits attached
hereto and amendments or modifications hereto in effect from time to time, the
"Agreement").
NOW, THEREFORE, in order to induce the Lenders to make, or continue to make the
Loans and in consideration thereof, the Subordinate Lender agrees as follows:
A. Definitions. As used herein, the following terms shall have the
following meanings:
1. Affiliate. The term "Affiliate" means any of each of the Lenders direct
and indirect affiliates and subsidiaries.
2. Bank Collateral. The term "Bank Collateral" means the personal property
of the Obligors described in Schedule A and any other real or personal property
of any of the Obligors in which the Agent, any Lender or an Affiliate may
hereafter be granted a security interest, mortgage interest or other similar
interest.
3. Collection Action. The term "Collection Action" means to (i) exercise or
enforce any rights or remedies or assert any claims against the Bank Collateral
or Subordinated Lenders' Collateral; (ii) make any claim or commence or initiate
any action, lawsuit, case or proceeding against any of the Obligors or join
together or with any creditor other than, with its consent, the Agent in any
action, lawsuit, case or proceeding against the Obligors (including, but not
being limited to, proceedings under the Bankruptcy Code); (iii) contact any
account of any of the Obligors or attach or take possession of any Bank
Collateral or Subordinated Lenders' Collateral or exercise any right of
foreclosure or any right or remedy with respect to any of the Obligors or the
Bank Collateral or Subordinated Lenders' Collateral; or (iv) take any other
action prejudicial to or inconsistent with the Lenders' and Agent's rights and
first priority secured position with respect to the Obligors or the Bank
Collateral, including, without limitation, any action that will impede,
interfere with, restrict, or restrain the exercise by the Agent or any of the
Lenders of their rights and remedies under the Loan Documents or contest in any
manner the perfection, priority or validity of any lien held by the Agent in any
of the Bank Collateral.
4. Event of Default. The term "Event of Default" shall mean an Event of
Default under the Loan Agreement beyond any applicable grace and cure period.
5. Financial Covenant Default. The term "Financial Covenant Default" shall
mean an Event of Default which results solely from the violation of any now
existing or hereafter arising financial covenant contained in the Loan
Agreement, including, by way of illustration, those specific financial covenants
set forth in Sections 6.16, 6.17, 6.18, 6.19, and 6.20 of the Loan Agreement and
any supplement, addition, modification or amendment to those specific financial
covenants.
6. Liabilities. The term "Liabilities" means any and all obligations and
indebtedness of every kind and description, now or hereafter existing, whether
such debts or obligations are primary or secondary, direct or indirect, absolute
or contingent, sole, joint or several, secured or unsecured, due or to become
due, contractual or tortious, arising by operation of law, by overdraft, or
otherwise, including, without limitation, principal, interest, fees, late fees,
expenses, attorneys' fees and costs, and/or allocated fees and costs of the
Agent's in-house legal counsel, that have been or may hereafter be contracted or
incurred.
7. Loan Agreement. The term "Loan Agreement" means that certain Loan and
Security Agreement among the Obligors, the Lenders and Agent dated the date
hereof, and any subsequent supplement, modification, renewal, extension or
amendment thereto.
8. Loan Documents. The term "Loan Documents" means the Loan Agreement and
all other credit accommodations, notes, loan agreements, and any other
agreements and documents, now or hereafter existing, creating, evidencing,
guarantying, securing or relating to any or all of the Senior Liabilities,
together with all amendments, modifications, renewals, or extensions thereof.
9. Non-Covenant Default. The term "Non-Covenant Default" means an Event of
Default other than a Financial Covenant Default.
2
10. Obligor. The term "Obligor" means the Holdings, Crystal Rock, VPS and
each and every other maker, endorser, guarantor, or surety of or for the Senior
Liabilities.
11. Senior Liabilities. The term "Senior Liabilities" means all Liabilities
of the Obligors to any of the Lenders, the Agent and/or to any of the Affiliates
including, without limitation, any and all interest accruing on Senior
Liabilities after the commencement of any proceedings referred to in paragraph
B.5. hereof, notwithstanding any provision or rule of law which might restrict
the rights of the Lenders or Agent, as against the Obligors and/or anyone else,
to collect such interest. For purposes of this Agreement, Senior Liabilities
shall include all Liabilities of the Obligors to the Lenders and the Agent,
notwithstanding any right or power of any of the Obligors and/or anyone else to
assert any claim or defense as to the invalidity or unenforceability of any such
Senior Liabilities.
12. Subordinated Lenders' Collateral. The term "Subordinated Lenders'
Collateral" means the personal property of the Obligors more fully described in
Schedule B attached hereto.
13. Subordinated Lending Group. The term "Subordinated Lending Group" means
Henry E. Baker, Joan A. Baker, John B. Baker, Peter K. Baker, and Ross S.
Rappaport, not individually, but as Trustee of the Peter K. Baker Life Insurance
Trust, the John B. Baker Insurance Trust and u/t/a dated December 16, 1991 f/b/o
Joan Baker et. al., each as holder of an Amended and Restated Subordinated
Promissory Note of Holdings dated the date hereof, as such Subordinated
Promissory Notes may be amended, restated or replaced from time to time, and any
successor holders of such Subordinated Promissory Notes.
14. Subordinated Liabilities. The term "Subordinated Liabilities" means all
Liabilities of the Obligors to the Subordinate Lender, including, without
limitation, all payments of principal and interest pursuant to that Amended and
Restated Subordinated Promissory Note dated the date hereof from Holdings
payable to the order of the Subordinated Lender in the original principal amount
of $5,200,000.00 (the "Subordinated Note") and that Guaranty dated October 5,
2000 as amended by amendment dated the date hereof from Platinum and VPS to
Subordinate Lender guarantying payments due under the Subordinated Note (the
"Subordinate Guaranty") but specifically excluding therefrom compensation from
the Obligors to the Subordinate Lender presently contemplated pursuant to the
existing employment agreement between any of the Obligors and the Subordinate
Lender, as the compensation clauses thereof may be amended from time to time
with the consent of the Agent, the normal reimbursement of expenses in the
ordinary course of business and indemnification of claims arising solely from
the Subordinate Lender's actions as an officer or director of any of the
Obligors.
15. Subordinated Loan Documents. The term "Subordinated Loan Documents"
means all credit accommodations, notes, loan agreements and any other agreements
and documents, now or hereafter existing, creating, evidencing, guarantying,
securing or relating to any or all of the Subordinated Liabilities, together
with all amendments, modifications, renewals or extensions thereof.
3
B. Subordination and Pledge.
1. Subordination to Senior Liabilities.
(a) Except as hereinafter expressly set forth in this Agreement or as the
Agent and Lenders may hereafter otherwise expressly consent in writing, the
payment of all Subordinated Liabilities shall be postponed and subordinated to
the indefeasible payment in full of all Senior Liabilities, and no payments or
other distributions whatsoever, including, without limitation, payments of
interest in respect of any Subordinated Liabilities shall be made, nor shall any
property or assets of the Borrower or other Obligor be applied to the purchase
or other acquisition or retirement of any Subordinated Liabilities, nor given as
collateral security to secure repayment of same.
(b) Notwithstanding the provisions in paragraph B.1(a) above, and subject
to the other terms of this Agreement, the Subordinate Lender may be granted a
security interest in the Subordinated Lenders' Collateral to secure the payments
of principal and interest and other amounts due pursuant to the Subordinated
Note.
(c) Notwithstanding the provisions of paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, the Obligors may make regularly scheduled
quarterly payments of interest under the Subordinated Note, at a rate not in
excess of twelve per cent (12%) per annum, and past due regularly scheduled
quarterly payments of interest under the Subordinated Note which were not paid
when scheduled to be paid because of the terms of this Agreement, including
interest at a rate not in excess of twelve per cent (12%) per annum on such past
due amounts, but only to the extent that the making of such payments would not
result in a Financial Covenant Default.
(d) Notwithstanding the provisions in paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, and provided that all the conditions in
the Loan and Security Agreement with respect to a request under the
Acquisition/Capital Asset Line of Credit (as defined in the Loan and Security
Agreement) for an advance to pay Subordinated Debt (as defined in the Loan and
Security Agreement) owed to the Subordinated Lending Group have been satisfied,
the Obligors may make principal payments on the Subordinated Debt (as defined in
the Loan and Security Agreement) to members of the Subordinated Lending Group
which in the aggregate do not exceed $5,000,000.
4
2. Pledge of Subordinated Loan Documents. In order to secure the due and
punctual payment and performance of the Senior Liabilities, the Subordinate
Lender hereby pledges, transfers, assigns, and grants to the Agent a continuing
security interest in and lien upon the Subordinated Loan Documents. The
Subordinate Lender has endorsed and delivered to the Agent physical possession
of any of the Subordinated Loan Documents which are instruments, including the
Subordinated Note and has executed Uniform Commercial Code financing statements
and such other documents and/or instruments as may be necessary or convenient to
perfect the security interests granted herein. Agent shall hold the Subordinated
Note and any other Subordinated Loan Documents which are instruments delivered
to the Agent as security for the due and punctual payment and performance of the
Senior Liabilities and notwithstanding the possession of the Subordinated Note
or such other Subordinated Loan Documents by the Agent, the Subordinate Lender
shall be entitled to receive payments thereunder to the extent expressly
permitted by the terms of this Agreement. Upon payment in full of the Senior
Liabilities, the Agent will deliver to the Subordinate Lender in care of Peter
K. Baker the Subordinated Note and any other Subordinated Loan Documents in its
possession.
3. Subordination of Security Interest of Subordinated Liabilities. Any
security interest now or hereafter held by the Subordinate Lender and granted by
any of the Obligors to secure any of the Subordinated Liabilities, including the
security interest described in paragraph B.1(b), is hereby immediately made
- ----------------- subordinate, junior and postponed in priority and effect to
the priority and effect of the security interest purported to be created by any
of the Loan Documents, as if (and whether or not) the Agent's or any Lender's
security interest had been perfected by possession, by timely filing of
financing statements, or by any other means prior to the time the security
interest with respect to the Subordinated Liabilities is perfected, and prior to
the filing of any financing statements in connection with the Subordinated
Liabilities. The Subordinate Lender agrees to execute and deliver to the Agent
all instruments, including, without limitation, Forms UCC-3, subordinations of
lien, and subordinations of mortgage which, in the reasonable opinion of the
Agent, are necessary or convenient to effectuate the purposes of this paragraph
and this Agreement.
4. Further Assurances of Pledge of Subordinated Liabilities. The
Subordinate Lender will (i) promptly notify the Agent of the creation of any
Subordinated Liabilities and of the issuance of any promissory note or other
instrument to evidence any Subordinated Liabilities; (ii) cause any Subordinated
Liabilities which are not already evidenced by a promissory note or other
instrument of the Obligors to be so evidenced; (iii) as collateral security for
the Senior Liabilities, endorse, deliver and pledge to the Agent any and all
promissory notes and/or other instruments evidencing Subordinated Liabilities,
and otherwise assign and/or pledge to the Agent any or all Subordinated
Liabilities and the Subordinated Loan Documents, all in a manner satisfactory to
the Agent in its sole discretion, and (iv) promptly give the Agent written
notice of any default by any Obligor under the Subordinated Note or any
agreement securing Obligors' obligations under any of the other Subordinated
Loan Documents.
5
Further Assurances of Agent. Agent will endeavor to deliver to the Subordinate
Lender in care of Peter K. Baker prompt notice of any Event of Default or
Financial Covenant Default under the Loan Agreement or any of the other Loan
Documents of which the Agent becomes aware but the failure of the Agent to
promptly deliver any such notice will not affect any of the rights or
obligations of the parties under this Agreement.
5. Rights of Agent to Collect Subordinated Liabilities. In the event of,
and commencing with the date thereof, any dissolution, winding up, liquidation,
reorganization or other similar proceedings relating to any Obligor or to any of
their creditors, or to any of their property (whether voluntary or involuntary,
partial or complete, and whether in bankruptcy, insolvency or receivership, or
upon an assignment for the benefit of creditors, or any other marshalling of the
assets and liabilities of any Obligor, or any sale of all or substantially all
of the assets of any Obligor, or otherwise), the Senior Liabilities shall first
be paid in full before the Subordinate Lender shall be entitled to receive
and/or to retain any payment or distribution in respect of the Subordinated
Liabilities; provided that the Subordinate Lender shall be entitled to receive
and retain any securities issued in connection with reorganization proceedings
which are junior in right of repayment to the Senior Liabilities to the extent
set forth herein, are treated as Subordinated Liabilities hereunder and are
subject to all the provisions of this Agreement, and, in order to implement the
foregoing (i) all payments and distributions of any kind or character in respect
of the Subordinated Liabilities to which any of the Subordinate Lender would be
entitled but for the provisions of this Agreement (other than such junior
securities) will be made directly to the Agent; (ii) the Subordinate Lender
shall promptly file a claim or claims, in the form required in such proceedings,
for the full outstanding amount of the Subordinated Liabilities, and shall cause
said claim or claims to be approved and all payments and other distributions in
respect thereof (other than such junior securities) to be made directly to the
Agent; (iii) the Subordinate Lender hereby irrevocably agrees that the Agent
may, in its sole discretion, in the name of the Subordinate Lender or otherwise,
demand, sue for, collect, receive, and receipt for any and all such payments or
distributions, and file, prove, and vote or consent in any such proceedings with
respect to, any and all claims of the Subordinate Lender relating to the
Subordinated Liabilities; and (iv) the Subordinate Lender hereby ratifies all of
the foregoing acts or omissions on the Agent's part or behalf and waives any
claim, counterclaim or defense of the Subordinate Lender which may be alleged to
arise from such acts or omissions.
6. Protection of Agent's Rights in Subordinated Liabilities. In the event
that the Subordinate Lender receives any payment or other distribution of any
kind or character from any Obligor or any other source whatsoever in respect of
any of the Subordinated Liabilities, other than as expressly permitted by the
terms of this Agreement, such payment or other distribution shall be received in
trust for the Lenders and the Agent and promptly turned over by the Subordinate
Lender to the Agent. The Subordinate Lender will mark its books and records, and
cause the Obligors to mark their books and records, so as to clearly indicate
that the Subordinated Liabilities are subordinated in accordance with the terms
of this Agreement, and will cause to be clearly inserted in any promissory note
or other instrument which at any time evidences any of the Subordinated
Liabilities a statement to the effect that the payment thereof is subordinated
in accordance with the terms of this Agreement. The Subordinate Lender will
execute such further documents and instruments and take such further action as
the Agent may from time to time reasonably request to carry out the intent of
this Agreement. The Subordinate Lender hereby irrevocably appoints the Agent its
attorney in fact, said appointment being coupled with an interest, to execute
such further documents and instruments and take such further action on behalf of
the Subordinate Lender as the Agent may from time to time deem reasonable to
carry out the intent of this Agreement, including, without limitation, the
actions set forth in paragraph B.4. hereof.
6
7. Treatment of Payment of Subordinated Liabilities. All payments and
distributions received by the Agent or any Lender in respect of the Subordinated
Liabilities, to the extent received in or converted into cash, may be applied by
the Agent and Lenders first to the payment of any and all expenses (including
attorneys' fees and disbursements and the allocated fees, expenses and cost of
in-house counsel) paid or incurred by the Agent in enforcing this Agreement or
in endeavoring to collect or realize upon any of the Subordinated Liabilities,
and any balance thereof shall, solely as between the Subordinate Lender and the
Lenders and Agent, be applied by the Agent, in such order of application as the
Agent may from time to time select, toward the payment of any of the Senior
Liabilities remaining unpaid. As between the Obligors and any of their
creditors, no such payments or distributions of any kind or character shall be
deemed to be payments or distributions in respect of the Senior Liabilities;
and, notwithstanding any such payments or distributions received by the Agent or
any Lender in respect of the Subordinated Liabilities and so applied by the
Agent and Lenders toward the payment of the Senior Liabilities, the Subordinate
Lender shall be subrogated to the then existing rights of the Agent and Lenders,
if any, in respect of the Senior Liabilities, only at such time as the Lenders
and Agent shall have received indefeasible payment of the full amount of the
Senior Liabilities.
8. Waivers. The Subordinate Lender hereby waives (i) any and all notice of
the receipt and acceptance by the Agent or any Lender of this Agreement; (ii)
except as set forth in paragraph B.4, notice of the existence, incurrence, or
non-payment of all or any of the Senior Liabilities; (iii) all diligence in
collection or protection of or realization upon any of the Senior Liabilities or
any security therefor; and (iv) any obligation with respect to the marshalling
of assets by the Agent or any Lender.
9. Prohibition on Changes in Subordinated Liabilities.
(a) Except as herein set forth in paragraph B.9(b), the Subordinate Lender
will not without the prior written consent of the Agent (i) cancel, waive,
forgive, amend, modify, transfer or assign, or attempt to enforce or collect, or
subordinate to any Liabilities other than the Senior Liabilities, any
Subordinated Liabilities or any rights in respect thereof; (ii) convert any
Subordinated Liabilities into stock or other securities in any of the Obligors;
(iii) take any Collection Action; (iv) commence, or join with any other creditor
in commencing, any bankruptcy, reorganization or insolvency proceedings with
respect to any of the Obligors, or (v) take any other action prejudicial to or
inconsistent with the Agent's and Lenders' rights and first priority secured
position with respect to the Obligors, the Bank Collateral and collateral for
the Senior Liabilities.
(b) Notwithstanding the provisions of paragraph B.9(a), if any default has
occurred under any of the Subordinated Loan Documents and such default has
continued in existence for a period of one hundred eighty (180) consecutive days
after the Subordinated Lenders have provided written notice of the existence of
such default to the Agent (the "Standstill Period"), the Subordinated Lender may
proceed to take legal action against the Obligors for the sole purpose of
obtaining a judgment against the Obligors; provided, however, at no time either
before or after the expiration of the Standstill Period, may any Subordinated
Lender take any action or Collection Action to enforce a security interest in,
liquidate or otherwise receive payment from any collateral for the Senior
Liabilities, including the Bank Collateral or Subordinated Lenders' Collateral,
unless and until the Lenders and Agent have been indefeasibly paid in full for
all Senior Liabilities.
7
10. Continuing Agreement. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect notwithstanding,
without limitation, the death, incompetency or dissolution of the Subordinate
Lender or that at any time or from time to time all Senior Liabilities may have
been paid in full if any of the Loan Documents have not been terminated.
11. Permitted Changes in Senior Liabilities. The Agent or any Lender may,
from time to time, whether before or after any discontinuance of this Agreement,
at its sole discretion and without notice to the Subordinate Lender, take any or
all of the following actions: (i) retain or obtain a security interest in any
property to secure any of the Senior Liabilities; (ii) retain or obtain the
primary or secondary obligation of any other Obligor or Obligors with respect to
any of the Senior Liabilities; (iii) extend, renew (whether or not longer than
the original period), alter or exchange any of the Senior Liabilities; (iv)
release or compromise any obligation of any nature of any Obligor with respect
to any of the Senior Liabilities; and, (v) release its security interest or lien
in, allows its security interest or lien to be unperfected, surrender, release
or permit any substitution or exchange for, all or any part of any property
securing any of the Senior Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any Obligor with respect to
any such property.
12. Disposition of Assets. The Subordinate Lender agree that any
disposition by the Agent or any Lender of any collateral for the Senior
Liabilities, whether by collection, sale, or other manner of liquidation, after
an Event of Default under the Loan Documents, if conducted in a commercially
reasonable manner, may not be challenged or contested by the Subordinate Lender
on the grounds of commercial unreasonableness. The Subordinate Lender agrees
that the Agent and Lenders may use such means of collection and exercise such
diligence with respect thereto as the Agent or such Lender, in its sole
discretion, deems appropriate under the circumstances and may enter into such
compromise with and give such releases and acquittances to account debtors or
other obligors of the Obligors' receivables as it determines in its sole
discretion, without obtaining the agreement or concurrence of or giving notice
to the Subordinate Lender and the Subordinate Lender hereby waive all right to
require that its agreement or consent be obtained or that it be given notice.
The Subordinate Lender further agrees that it will release its security interest
on any collateral (including the Subordinated Lenders' Collateral) for the
Senior Liabilities upon the sale or other disposition thereof at the request of
the Agent, whether or not any proceeds therefrom will pay any of the
Subordinated Liabilities.
8
C. Representations and Warranties. The Subordinate Lender hereby represents
and warrants that (i) the Subordinate Lender has the necessary power and
capacity to make and perform this Agreement and such making and performance have
been duly authorized by all necessary actions on the part of the Subordinate
Lender; (ii) the making and performance by the Subordinate Lender of this
Agreement does not and will not violate any provision of law or regulation or
result in the breach of, or constitute a default or require any consent under,
any indenture or other agreement or instrument to which it is a party or by
which any of its properties may be bound; and (iii) this Agreement is the legal,
valid and binding obligation of the Subordinate Lender, enforceable against the
Subordinate Lender in accordance with its terms.
D. Remedies. Upon the occurrence of any Event of Default, or upon the
breach of any representation, covenant or agreement in this Agreement by any
Obligor or the Subordinate Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent may
immediately, without further notice, resort to all of its rights and remedies
herein, in any document (including the Loan Agreement and any of the Loan
Documents) by and between the Agent or any Lender and any Obligor, or in any in
any instrument evidencing any obligation under any such document, at law or in
equity. The Agent agrees that it shall proceed, to the extent commercially
reasonable, against all the assets of the Obligors before liquidating the
Subordinated Note. The Agent shall endeavor to give the Obligors prompt notice
of the acceleration of the Senior Liabilities but failure to give such notice
shall not affect any action taken by Agent and Agent shall not incur any
liability for any failure to deliver such notice.
E. Miscellaneous.
1. Remedies Cumulative; No Waiver. The rights, powers and remedies of the
Agent and Lenders provided in this Agreement and any of the Loan Documents are
cumulative and not exclusive of any right, power or remedy provided by law or
equity. No failure or delay on the part of the Agent or any Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy.
2. Notices. Notices and communications under this Agreement shall be in
writing and shall be given by (i) hand-delivery, (ii) first class mail (postage
prepaid), or (iii) reliable overnight commercial courier (charges prepaid) to
the addresses listed in this Agreement. Notice by overnight courier shall be
deemed to have been given and received on the date scheduled for delivery.
Notice by mail shall be deemed to have been given and received three (3)
calendar days after the date first deposited in the United States Mail. Notice
by hand-delivery shall be deemed to have been given and received upon delivery.
A party may change its address by giving written notice to the other party as
specified herein.
3. Costs and Expenses. Whether or not the transactions contemplated by this
Agreement or the Loan Documents are fully consummated, the Obligors shall
promptly pay (or reimburse, as the Agent may elect) all costs and expenses which
the Agent has incurred or may hereafter incur in connection with the
negotiation, preparation, reproduction, interpretation, perfection, protection
of collateral, administration and enforcement of this Agreement and the other
Loan Documents, the collection of all amounts due under this Agreement and the
other Loan Documents, and all amendments, modifications, consents or waivers, if
any, to the Loan Documents. The Obligors' reimbursement obligations under this
Paragraph shall survive any termination of this Agreement or any other Loan
Document and are deemed part of the Senior Liabilities.
9
4. Governing Law. This Agreement shall be construed in accordance with and
governed by the substantive laws of the State of Connecticut without reference
to conflict of laws principles.
5. Integration; Amendment. This Agreement and the other Loan Documents
constitute the sole agreement of the parties with respect to the subject matter
hereof and thereof and supersede all oral negotiations and prior writings with
respect to the subject matter hereof and thereof. No amendment of this
Agreement, and no waiver of any one or more of the provisions hereof shall be
effective unless set forth in writing and signed by the parties hereto.
6. Successors and Assigns. This Agreement (i) shall be binding upon the
Subordinate Lender, the Obligors executing this Agreement and the Agent and,
where applicable, their respective heirs, executors, administrators, successors
and assigns, and (ii) shall inure to the benefit of the Subordinate Lender, the
Obligors, the Agent and the Lenders and, where applicable, their respective
heirs, executors, administrators, successors and permitted assigns; provided,
however, that the Subordinate Lender and the Obligors may not assign their
rights or obligations hereunder or any interest herein without the prior written
consent of the Agent, and any such assignment or attempted assignment by the
Subordinate Lender and/or any of the Obligors shall be void and of no effect
with respect to the Agent and the Lenders. The Lenders may from time to time
sell or assign, in whole or in part, or grant participations in the Loans and/or
the Agreement and/or the obligations evidenced thereby. The Subordinate Lender
authorizes the Agent and Lenders to provide information concerning the
Subordinate Lender and the Obligors to any prospective purchaser, assignee or
participant.
7. Severability and Consistency. The illegality, unenforceability or
inconsistency of any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Agreement or
any instrument or agreement required hereunder. The Loan Documents and this
Agreement are intended to be consistent. However, in the event of any
inconsistencies between and/or among this Agreement and any of the Loan
Documents, such inconsistency shall not affect the validity or enforceability of
this Agreement or any of the Loan Documents. In the event of any inconsistency
or ambiguity in this Agreement or any of the Loan Documents, this Agreement and
the Loan Documents shall not be construed against any one party but shall be
interpreted consistent with the Agent's policies and procedures.
8. Consent to Jurisdiction and Service of Process. The Subordinate Lender
irrevocably appoints Ross Rapaport, c/o Pepe & Hazard, 30 Jeliff Lane,
Southport, CT 06490-1436 as its attorney upon whom may be served any notice,
process or pleading in any action or proceeding against it arising out of or in
connection with this Agreement. If service of process cannot be delivered to the
Subordinate Lender as specified by statute, the Subordinate Lender agrees that,
with court approval, it may be served by regular or certified mail at the
address set forth herein. The Subordinate Lender hereby consents and agrees that
(i) any action or proceeding against it may be commenced and maintained in any
court within the State of Connecticut or in the United States District Court for
the District of Connecticut by service of process on Ross Rapaport and (ii) the
courts of the State of Connecticut and the United States District Court for the
District of Connecticut shall have jurisdiction with respect to the subject
matter hereof and the person of the Subordinate Lender and the Subordinated
Liabilities. The Subordinate Lender agrees that any action brought by the
Subordinate Lender on account of this Agreement shall be commenced and
maintained only in a court in the federal judicial district or county in which
the Agent has its principal place of business in Connecticut.
10
9. Prejudgment Remedies. The Subordinate Lender hereby acknowledges that
the transactions contemplated herein constitute commercial transactions.
Pursuant to Section 52-278f of the Connecticut General Statutes, the Subordinate
Lender hereby waives and relinquishes all rights to notice and hearing as
provided in Sections 52-278a through 52-278g of said Connecticut General
Statutes prior to the securing of any prejudgment remedy against the Subordinate
Lender in connection with the Liabilities or any of the instruments or documents
executed in connection herewith.
10. Provisions Solely for the Benefit of the Lenders and Agent. The
provisions of this Agreement are solely to define the relative rights and
obligations of the Lenders and Agent and the Subordinate Lender, and no other
person or entity, including, without limitation, any of the Obligors, shall have
any rights hereunder or as a result of the provisions hereof.
11. Agent for Subordinate Lender. The Subordinate Lender's Agent hereby
agrees to be bound by the terms and provisions of this Agreement and agrees not
to make any payment or distribution or to otherwise take any action which is
contrary to the provisions of this Agreement.
12. Judicial Proceedings; Waivers. THE SUBORDINATE LENDER AND THE AGENT
ACKNOWLEDGE AND AGREE THAT (i) ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT OR INSTITUTED BY THE AGENT, THE SUBORDINATE LENDER OR ANY
SUCCESSOR OR ASSIGN OF THE AGENT OR THE SUBORDINATE LENDER, ON OR WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH
RESPECT HERETO, OR THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY AND
EACH PARTY WAIVES THE RIGHT TO TRIAL BY JURY; (ii) EACH WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; AND (iii) THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND THE LENDERS WOULD NOT EXTEND CREDIT IF THE WAIVERS
SET FORTH IN THIS SECTION WERE NOT A PART OF THIS AGREEMENT.
13. Counterparts. This Agreement may be executed and delivered in any
number of counterparts each of which shall constitute an original, but all of
which taken together shall constitute but one and the same agreement. Delivery
of an executed signature page to this Agreement by facsimile transmission shall
be effective as delivery of a manually signed counterpart of this Agreement.
11
IN WITNESS WHEREOF, the Subordinate Lender has executed and delivered to
the Agent this Agreement, as of the day and year first above written.
WITNESSED BY:
- ------------------------- -------------------------------
John B. Baker
Address: 1050 Buckingham Street
Watertown, CT 06795
- -------------------------
- ------------------------- -------------------------------------
Ross S. Rapaport, not individually but
as Trustee of the Peter K. Baker Life
Insurance Trust, The John B. Baker
Insurance Trust and u/t/a dated
December 16, 1991 f/b/o Joan Baker
et. al., as agent for the Subordinate
Lender
Address: 1050 Buckingham Street
Watertown, CT 06795
WEBSTER BANK, as Agent
- -------------------------- By:______________________
Richard A. O'Brien
Its Senior Vice President
- -------------------------- Address: 145 Bank Street
Waterbury, CT 06702
12
STATE OF _____________)
) ss: __________ __________, 2003
COUNTY OF ____________)
Personally appeared John B. Baker, signer and sealer of the foregoing instrument
and acknowledged the same to be his free act and deed, before me.
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
STATE OF _____________)
) ss: __________ _________, 2003
COUNTY OF ____________)
Personally appeared Ross S. Rapaport, not individually but as Trustee of the
Peter K. Baker Life Insurance Trust, the John B. Baker Insurance Trust and U/T/A
dated December 16, 1991 F/B/O Joan Baker et. al, as agent for the Subordinate
Lender, signer and sealer of the foregoing instrument and acknowledged the same
to be his free act and deed as Trustee and agent, before me.
---------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
------------
STATE OF CONNECTICUT_______)
) ss: Hartford March __, 2003
COUNTY OF HARTFORD_________)
Personally appeared Richard A. O'Brien, Senior Vice President of Webster Bank,
as Agent, signer and sealer of the foregoing instrument and acknowledged the
same to be his free act and deed as such officer and the free act and deed of
Webster Bank, as Agent, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
------------
13
The Obligors signing below hereby acknowledge receipt of a copy of the foregoing
Agreement, waive notice of acceptance thereof by the Agent and Lenders, and
agree to be bound by the terms and provisions thereof. The Obligors signing
below further agree to make no payments or distributions, or grant any security
interest, contrary to the terms and provisions of this Agreement and to do every
other act and thing necessary or appropriate to carry out such terms and
provisions. Upon the occurrence of any Event of Default, or upon the breach of
any representation, covenant or agreement in this Agreement by any of the
Obligors or the Subordinated Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent and Lenders
may immediately, without further notice, resort to all of its rights and
remedies herein, in any document (including the Loan Agreement and any of the
Loan Documents) by and between the Agent or any Lender and any Obligor, or in
any in any instrument evidencing any obligation under any such document, at law
or in equity.
Dated: As of the ___ day of March, 2003
VERMONT PURE HOLDINGS, LTD.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
CRYSTAL ROCK SPRING WATER COMPANY
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: 1050 Buckingham Street
Watertown, CT 06795
VERMONT PURE SPRINGS, INC.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
14
SCHEDULE A
Bank Collateral
"Collateral" means Receivables, Inventory, Equipment, Patents, Trademarks,
Investment Property, Additional Collateral, and the Premises, but excluding
personal property subject to a purchase money lien permitted by Section 6.1 of
the Loan Agreement to the extent the terms of such purchase money lien prohibit
further liens or encumbrances.
"Additional Collateral" means (i) all General Intangibles, including Payment
Intangibles and Software and all Supporting Obligations related thereto, (as
such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time) of every kind and description of the Obligors,
including without limitation federal, state and local tax refund claims of all
kinds, whether now existing or hereafter arising; (ii) all of Obligors' Deposit
Accounts, Letter of Credit Rights and all Supporting Obligations related thereto
(as such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time), whether now owned or hereafter created, wherever
located, together with the rights to withdraw from said Deposit Accounts and
make deposits to the same and the right to draw under Letters of Credit; (iii)
all monies, securities, instruments, cash and other property of Obligors and the
proceeds thereof, now or hereafter held or received by, or in transit to, any
Lender from or for Obligors, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of Obligors' deposits (general or
special, balances, sums, proceeds and credits of Obligors with any Lender at any
time existing); (iv) all interests in real property held or owned by Obligors,
including all leasehold interests; (v) all rights under contracts and license
agreements for water; (vi) all books, records, customer lists, ledger cards,
computer programs, computer tapes, disks, printouts and records, and other
property and general intangibles at any time evidencing or relating to any of
the foregoing, whether now in existence or hereafter created; (vii) all other
personal property and fixtures of the Obligors, whether now existing or
hereafter arising or created; and all proceeds of the foregoing and all proceeds
of any insurance on the foregoing.
"Equipment" means all Equipment, Farm Products and Fixtures (as such terms are
defined in the Uniform Commercial Code as in effect in Connecticut on the date
of this Agreement), including all machinery, equipment, furniture, fixtures,
tools, parts, supplies and motor vehicles, now owned and hereafter acquired, by
Obligors of whatsoever name, nature, kind or description, wherever located, and
all additions and accessions thereto and replacements or substitutions therefor,
and all proceeds thereof and aFll proceeds of any insurance thereon.
"Inventory" means all Inventory and Goods and all Supporting Obligations related
thereto (as such terms are defined in the Uniform Commercial Code as in effect
in Connecticut from time to time) of whatsoever name, nature, kind or
description now owned and hereafter acquired by Obligors, wherever located,
including without limitation all contract rights with respect thereto and
documents representing the same, all goods held for sale or lease or to be
furnished under contracts of service, finished goods, raw materials, materials
used or consumed by Obligors, parts, supplies, and all wrapping, packaging,
advertising and shipping materials and any documents relating thereto, and all
labels and other devices, names and marks affixed or to be affixed thereto for
purposes of selling or of identifying the same or the seller or manufacturer
thereof, and all right, title and interest of Obligors therein and thereto, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Investment Property" means all investment property (as such term is defined in
the Uniform Commercial Code as adopted in Connecticut from time to time) of
whatever type or nature now owned or hereafter acquired by the Obligors,
including without limitation, all certificated securities, all uncertificated
securities, all security entitlements, all security accounts, all commodity
contracts, all commodity accounts and all financial assets of every type and
nature and all rights thereto or therein, and all financial accounts of every
type and nature and all rights thereto or therein, and all Supporting
Obligations (as such term is defined in the Uniform Commercial Code as adopted
in Connecticut from time to time) related thereto and all proceeds and products
thereof, including without limitation, all insurance proceeds and fidelity bond
proceeds related thereto.
"Patents" means all of Obligors' right, title and interest, present and future,
in and to (a) all letters patent of the United States or any other country, all
right, title and interest therein and thereto, and all registrations and
recordings thereof, including without limitation applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States or any state thereof or any other country
or any political subdivision thereof, all whether now owned or hereafter
acquired by Obligors; and (b) all reissues, continuations, continuations-in-part
or extensions thereof and all licenses thereof; and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing.
"Premises" means the following real property owned by Obligors:
Route 66 Factory, Randolph, VT
Chase Road, Randolph, VT
North Randolph Road, Randolph, VT
Alice E. LaFrance, Route 66, Randolph, VT (approximately 5 acres) Gary
LaFrance, Route 66, Randolph, VT (approximately 20 acres)
"Receivables" means (i) all of Obligors' now owned and hereafter acquired,
present and future, Accounts, Chattel Paper, Documents, Instruments and
Supporting Obligations related thereto, (as such terms are defined in the
Uniform Commercial Code as in effect in Connecticut from time to time) and
contract rights, including without limitation all obligations to Obligors for
the payment of money, whether arising out of Obligors' sale of goods or
rendition of services or otherwise (all hereinafter called "Accounts") and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
(ii) all of Obligors' rights, remedies, security and liens, in, to and in
respect of the Accounts, present and future, including without limitation,
rights of stoppage in transit, replevin, repossession and reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, guaranties or
other contracts of suretyship with respect to the Accounts, deposits or other
security for the obligation of any debtor or obligor in any way obligated on or
in connection with any Accounts, and credit and other insurance, and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
and (iii) all of Obligors' right, title and interest, present and future, in, to
and in respect of all goods relating to, or which by sale have resulted in,
Accounts, including without limitation all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing any Accounts, and all returned, reclaimed or repossessed goods, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Trademarks" means all of Obligors' right, title and interest, present and
future, in and to (i) all trademarks, trade names, trade styles, service marks,
prints and labels on which said trademarks, trade names, trade styles and
service marks have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all right, title and
interest therein and thereto, and all registrations and recordings thereof,
including without limitation applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof, or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Obligors;
(ii) all reissues, extensions or renewals thereof and all licenses thereof; and
(iii) the goodwill of the business symbolized by each of the Trademarks, and all
customer lists and other records of Obligors relating to the distribution of
products bearing the Trademarks; and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing.
SCHEDULE B
Subordinated Lender Collateral
The following property, whether now existing or subsequently acquired, and
all additions, substitutions, accessions, replacements, proceeds, and products
thereof or thereto: all tangible and intangible assets and properties of each of
Vermont Pure Holdings, Ltd., a Delaware corporation formerly named "VP Merger
Parent, Inc.", Vermont Pure Springs, Inc., a Delaware corporation, Platinum
Acquisition Corp., f/k/a Vermont Pure Holdings (each a "Company"), including
without limitation all furniture, fixtures, equipment, raw materials, inventory,
other goods, accounts, contract rights, rights to the payment of money,
insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and other investment
property, deposit accounts, rights to proceeds of letters of credit and all
general intangibles including, without limitation, all tax refund claims,
license fees, patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, rights to sue and recover for
past infringement of patents, trademarks and copyrights, computer programs,
computer software, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature pursuant
to which any Company possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess, use or have
authority to possess or use property (whether tangible or intangible) of such
Company, and all recorded data of any kind or nature, regardless of the medium
of recording including, without limitation, all software, writings, plans,
specifications and schematics (each of which terms has the meaning ascribed to
in the Uniform Commercial Code, as in effect in the State of Connecticut)
(collectively, the "Collateral"); provided that notwithstanding the foregoing,
such grant of security interest shall not extend to, and the term "Collateral"
shall not include any cash and cash equivalents at any time owned by any
Company.
Exhibit 10.22
SUBORDINATION AND PLEDGE AGREEMENT
March 5, 2003
WHEREAS, VERMONT PURE HOLDINGS, LTD., a Delaware corporation with a principal
executive office at Catamount Industrial Park, Route 66, Randolph, Vermont 05060
("Holdings"), CRYSTAL ROCK SPRING WATER COMPANY, a Connecticut corporation with
an office at 1050 Buckingham Street, Watertown, Connecticut 06795 ("Crystal
Rock"), and VERMONT PURE SPRINGS, INC., a Delaware corporation with an office at
Catamount Industrial Park, Route 66, Randolph, Vermont 05060 ("VPS", and
collectively with Holdings and Crystal Rock, the "Obligors ") are now indebted
to PETER K. BAKER (the "Subordinate Lender") and may from time to time hereafter
become indebted to the Subordinate Lender in further amounts; and
WHEREAS, Ross S. Rapaport, not individually but as Trustee of the Peter K. Baker
Life Insurance Trust, The John B. Baker Insurance Trust and u/t/a dated December
16, 1991 f/b/o Joan Baker et. al. is acting as agent (the "Subordinate Lender's
Agent") for Subordinate Lender pursuant to certain of the Subordinated Loan
Documents; and
WHEREAS, the Obligors have requested, and may from time to time hereafter
request, the lenders under that certain Loan and Security Agreement dated as of
the 5th day of March, 2003, as the same may be amended from time to time, by and
among the Obligors, each of the lenders which is a signatory thereto
(individually, together with its successors and assigns, a "Lender" and
collectively, the "Lenders") and Webster Bank, as agent (in such capacity,
together with its successors and assigns in such capacity, the "Agent" ) to make
or agree to make loans, extensions of credit or other financial accommodations
to the Obligors (the "Loans"); and
WHEREAS, the Lenders, as a condition to the making or continuation of the Loans,
has required the Subordinate Lender to execute and deliver this Subordination
and Pledge Agreement (together with all schedules and any exhibits attached
hereto and amendments or modifications hereto in effect from time to time, the
"Agreement").
NOW, THEREFORE, in order to induce the Lenders to make, or continue to make the
Loans and in consideration thereof, the Subordinate Lender agrees as follows:
A. Definitions. As used herein, the following terms shall have the
following meanings:
1. Affiliate. The term "Affiliate" means any of each of the Lenders direct
and indirect affiliates and subsidiaries.
2. Bank Collateral. The term "Bank Collateral" means the personal property
of the Obligors described in Schedule A and any other real or personal property
of any of the Obligors in which the Agent, any Lender or an Affiliate may
hereafter be granted a security interest, mortgage interest or other similar
interest.
3. Collection Action. The term "Collection Action" means to (i) exercise or
enforce any rights or remedies or assert any claims against the Bank Collateral
or Subordinated Lenders' Collateral; (ii) make any claim or commence or initiate
any action, lawsuit, case or proceeding against any of the Obligors or join
together or with any creditor other than, with its consent, the Agent in any
action, lawsuit, case or proceeding against the Obligors (including, but not
being limited to, proceedings under the Bankruptcy Code); (iii) contact any
account of any of the Obligors or attach or take possession of any Bank
Collateral or Subordinated Lenders' Collateral or exercise any right of
foreclosure or any right or remedy with respect to any of the Obligors or the
Bank Collateral or Subordinated Lenders' Collateral; or (iv) take any other
action prejudicial to or inconsistent with the Lenders' and Agent's rights and
first priority secured position with respect to the Obligors or the Bank
Collateral, including, without limitation, any action that will impede,
interfere with, restrict, or restrain the exercise by the Agent or any of the
Lenders of their rights and remedies under the Loan Documents or contest in any
manner the perfection, priority or validity of any lien held by the Agent in any
of the Bank Collateral.
4. Event of Default. The term "Event of Default" shall mean an Event of
Default under the Loan Agreement beyond any applicable grace and cure period.
5. Financial Covenant Default. The term "Financial Covenant Default" shall
mean an Event of Default which results solely from the violation of any now
existing or hereafter arising financial covenant contained in the Loan
Agreement, including, by way of illustration, those specific financial covenants
set forth in Sections 6.16, 6.17, 6.18, 6.19, and 6.20 of the Loan Agreement and
any supplement, addition, modification or amendment to those specific financial
covenants.
6. Liabilities. The term "Liabilities" means any and all obligations and
indebtedness of every kind and description, now or hereafter existing, whether
such debts or obligations are primary or secondary, direct or indirect, absolute
or contingent, sole, joint or several, secured or unsecured, due or to become
due, contractual or tortious, arising by operation of law, by overdraft, or
otherwise, including, without limitation, principal, interest, fees, late fees,
expenses, attorneys' fees and costs, and/or allocated fees and costs of the
Agent's in-house legal counsel, that have been or may hereafter be contracted or
incurred.
7. Loan Agreement. The term "Loan Agreement" means that certain Loan and
Security Agreement among the Obligors, the Lenders and Agent dated the date
hereof, and any subsequent supplement, modification, renewal, extension or
amendment thereto.
8. Loan Documents. The term "Loan Documents" means the Loan Agreement and
all other credit accommodations, notes, loan agreements, and any other
agreements and documents, now or hereafter existing, creating, evidencing,
guarantying, securing or relating to any or all of the Senior Liabilities,
together with all amendments, modifications, renewals, or extensions thereof.
9. Non-Covenant Default. The term "Non-Covenant Default" means an Event of
Default other than a Financial Covenant Default.
2
10. Obligor. The term "Obligor" means the Holdings, Crystal Rock, VPS and
each and every other maker, endorser, guarantor, or surety of or for the Senior
Liabilities.
11. Senior Liabilities. The term "Senior Liabilities" means all Liabilities
of the Obligors to any of the Lenders, the Agent and/or to any of the Affiliates
including, without limitation, any and all interest accruing on Senior
Liabilities after the commencement of any proceedings referred to in paragraph
B.5. hereof, notwithstanding any provision or rule of law which might restrict
the rights of the Lenders or Agent, as against the Obligors and/or anyone else,
to collect such interest. For purposes of this Agreement, Senior Liabilities
shall include all Liabilities of the Obligors to the Lenders and the Agent,
notwithstanding any right or power of any of the Obligors and/or anyone else to
assert any claim or defense as to the invalidity or unenforceability of any such
Senior Liabilities.
12. Subordinated Lenders' Collateral. The term "Subordinated Lenders'
Collateral" means the personal property of the Obligors more fully described in
Schedule B attached hereto.
13. Subordinated Lending Group. The term "Subordinated Lending Group" means
Henry E. Baker, Joan A. Baker, John B. Baker, Peter K. Baker, and Ross S.
Rappaport, not individually, but as Trustee of the Peter K. Baker Life Insurance
Trust, the John B. Baker Insurance Trust and u/t/a dated December 16, 1991 f/b/o
Joan Baker et. al., each as holder of an Amended and Restated Subordinated
Promissory Note of Holdings dated the date hereof, as such Subordinated
Promissory Notes may be amended, restated or replaced from time to time, and any
successor holders of such Subordinated Promissory Notes.
14. Subordinated Liabilities. The term "Subordinated Liabilities" means all
Liabilities of the Obligors to the Subordinate Lender, including, without
limitation, all payments of principal and interest pursuant to that Amended and
Restated Subordinated Promissory Note dated the date hereof from Holdings
payable to the order of the Subordinated Lender in the original principal amount
of $5,200,000.00 (the "Subordinated Note") and that Guaranty dated October 5,
2000 as amended by amendment dated the date hereof from Platinum and VPS to
Subordinate Lender guarantying payments due under the Subordinated Note (the
"Subordinate Guaranty") but specifically excluding therefrom compensation from
the Obligors to the Subordinate Lender presently contemplated pursuant to the
existing employment agreement between any of the Obligors and the Subordinate
Lender, as the compensation clauses thereof may be amended from time to time
with the consent of the Agent, the normal reimbursement of expenses in the
ordinary course of business and indemnification of claims arising solely from
the Subordinate Lender's actions as an officer or director of any of the
Obligors.
15. Subordinated Loan Documents. The term "Subordinated Loan Documents"
means all credit accommodations, notes, loan agreements and any other agreements
and documents, now or hereafter existing, creating, evidencing, guarantying,
securing or relating to any or all of the Subordinated Liabilities, together
with all amendments, modifications, renewals or extensions thereof.
3
B. Subordination and Pledge.
1. Subordination to Senior Liabilities.
(a) Except as hereinafter expressly set forth in this Agreement or as the
Agent and Lenders may hereafter otherwise expressly consent in writing, the
payment of all Subordinated Liabilities shall be postponed and subordinated to
the indefeasible payment in full of all Senior Liabilities, and no payments or
other distributions whatsoever, including, without limitation, payments of
interest in respect of any Subordinated Liabilities shall be made, nor shall any
property or assets of the Borrower or other Obligor be applied to the purchase
or other acquisition or retirement of any Subordinated Liabilities, nor given as
collateral security to secure repayment of same.
(b) Notwithstanding the provisions in paragraph B.1(a) above, and subject
to the other terms of this Agreement, the Subordinate Lender may be granted a
security interest in the Subordinated Lenders' Collateral to secure the payments
of principal and interest and other amounts due pursuant to the Subordinated
Note.
(c) Notwithstanding the provisions of paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, the Obligors may make regularly scheduled
quarterly payments of interest under the Subordinated Note, at a rate not in
excess of twelve per cent (12%) per annum, and past due regularly scheduled
quarterly payments of interest under the Subordinated Note which were not paid
when scheduled to be paid because of the terms of this Agreement, including
interest at a rate not in excess of twelve per cent (12%) per annum on such past
due amounts, but only to the extent that the making of such payments would not
result in a Financial Covenant Default.
(d) Notwithstanding the provisions in paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, and provided that all the conditions in
the Loan and Security Agreement with respect to a request under the
Acquisition/Capital Asset Line of Credit (as defined in the Loan and Security
Agreement) for an advance to pay Subordinated Debt (as defined in the Loan and
Security Agreement) owed to the Subordinated Lending Group have been satisfied,
the Obligors may make principal payments on the Subordinated Debt (as defined in
the Loan and Security Agreement) to members of the Subordinated Lending Group
which in the aggregate do not exceed $5,000,000.
4
2. Pledge of Subordinated Loan Documents. In order to secure the due and
punctual payment and performance of the Senior Liabilities, the Subordinate
Lender hereby pledges, transfers, assigns, and grants to the Agent a continuing
security interest in and lien upon the Subordinated Loan Documents. The
Subordinate Lender has endorsed and delivered to the Agent physical possession
of any of the Subordinated Loan Documents which are instruments, including the
Subordinated Note and has executed Uniform Commercial Code financing statements
and such other documents and/or instruments as may be necessary or convenient to
perfect the security interests granted herein. Agent shall hold the Subordinated
Note and any other Subordinated Loan Documents which are instruments delivered
to the Agent as security for the due and punctual payment and performance of the
Senior Liabilities and notwithstanding the possession of the Subordinated Note
or such other Subordinated Loan Documents by the Agent, the Subordinate Lender
shall be entitled to receive payments thereunder to the extent expressly
permitted by the terms of this Agreement. Upon payment in full of the Senior
Liabilities, the Agent will deliver to the Subordinate Lender in care of Peter
K. Baker the Subordinated Note and any other Subordinated Loan Documents in its
possession.
3. Subordination of Security Interest of Subordinated Liabilities. Any
security interest now or hereafter held by the Subordinate Lender and granted by
any of the Obligors to secure any of the Subordinated Liabilities, including the
security interest described in paragraph B.1(b), is hereby immediately made
subordinate, junior and postponed in priority and effect to the priority and
effect of the security interest purported to be created by any of the Loan
Documents, as if (and whether or not) the Agent's or any Lender's security
interest had been perfected by possession, by timely filing of financing
statements, or by any other means prior to the time the security interest with
respect to the Subordinated Liabilities is perfected, and prior to the filing of
any financing statements in connection with the Subordinated Liabilities. The
Subordinate Lender agrees to execute and deliver to the Agent all instruments,
including, without limitation, Forms UCC-3, subordinations of lien, and
subordinations of mortgage which, in the reasonable opinion of the Agent, are
necessary or convenient to effectuate the purposes of this paragraph and this
Agreement.
4. Further Assurances of Pledge of Subordinated Liabilities. The
Subordinate Lender will (i) promptly notify the Agent of the creation of any
Subordinated Liabilities and of the issuance of any promissory note or other
instrument to evidence any Subordinated Liabilities; (ii) cause any Subordinated
Liabilities which are not already evidenced by a promissory note or other
instrument of the Obligors to be so evidenced; (iii) as collateral security for
the Senior Liabilities, endorse, deliver and pledge to the Agent any and all
promissory notes and/or other instruments evidencing Subordinated Liabilities,
and otherwise assign and/or pledge to the Agent any or all Subordinated
Liabilities and the Subordinated Loan Documents, all in a manner satisfactory to
the Agent in its sole discretion, and (iv) promptly give the Agent written
notice of any default by any Obligor under the Subordinated Note or any
agreement securing Obligors' obligations under any of the other Subordinated
Loan Documents.
Further Assurances of Agent. Agent will endeavor to deliver to the Subordinate
Lender in care of Peter K. Baker prompt notice of any Event of Default or
Financial Covenant Default under the Loan Agreement or any of the other Loan
Documents of which the Agent becomes aware but the failure of the Agent to
promptly deliver any such notice will not affect any of the rights or
obligations of the parties under this Agreement.
5
5. Rights of Agent to Collect Subordinated Liabilities. In the event of,
and commencing with the date thereof, any dissolution, winding up, liquidation,
reorganization or other similar proceedings relating to any Obligor or to any of
their creditors, or to any of their property (whether voluntary or involuntary,
partial or complete, and whether in bankruptcy, insolvency or receivership, or
upon an assignment for the benefit of creditors, or any other marshalling of the
assets and liabilities of any Obligor, or any sale of all or substantially all
of the assets of any Obligor, or otherwise), the Senior Liabilities shall first
be paid in full before the Subordinate Lender shall be entitled to receive
and/or to retain any payment or distribution in respect of the Subordinated
Liabilities; provided that the Subordinate Lender shall be entitled to receive
and retain any securities issued in connection with reorganization proceedings
which are junior in right of repayment to the Senior Liabilities to the extent
set forth herein, are treated as Subordinated Liabilities hereunder and are
subject to all the provisions of this Agreement, and, in order to implement the
foregoing (i) all payments and distributions of any kind or character in respect
of the Subordinated Liabilities to which any of the Subordinate Lender would be
entitled but for the provisions of this Agreement (other than such junior
securities) will be made directly to the Agent; (ii) the Subordinate Lender
shall promptly file a claim or claims, in the form required in such proceedings,
for the full outstanding amount of the Subordinated Liabilities, and shall cause
said claim or claims to be approved and all payments and other distributions in
respect thereof (other than such junior securities) to be made directly to the
Agent; (iii) the Subordinate Lender hereby irrevocably agrees that the Agent
may, in its sole discretion, in the name of the Subordinate Lender or otherwise,
demand, sue for, collect, receive, and receipt for any and all such payments or
distributions, and file, prove, and vote or consent in any such proceedings with
respect to, any and all claims of the Subordinate Lender relating to the
Subordinated Liabilities; and (iv) the Subordinate Lender hereby ratifies all of
the foregoing acts or omissions on the Agent's part or behalf and waives any
claim, counterclaim or defense of the Subordinate Lender which may be alleged to
arise from such acts or omissions.
6. Protection of Agent's Rights in Subordinated Liabilities. In the event
that the Subordinate Lender receives any payment or other distribution of any
kind or character from any Obligor or any other source whatsoever in respect of
any of the Subordinated Liabilities, other than as expressly permitted by the
terms of this Agreement, such payment or other distribution shall be received in
trust for the Lenders and the Agent and promptly turned over by the Subordinate
Lender to the Agent. The Subordinate Lender will mark its books and records, and
cause the Obligors to mark their books and records, so as to clearly indicate
that the Subordinated Liabilities are subordinated in accordance with the terms
of this Agreement, and will cause to be clearly inserted in any promissory note
or other instrument which at any time evidences any of the Subordinated
Liabilities a statement to the effect that the payment thereof is subordinated
in accordance with the terms of this Agreement. The Subordinate Lender will
execute such further documents and instruments and take such further action as
the Agent may from time to time reasonably request to carry out the intent of
this Agreement. The Subordinate Lender hereby irrevocably appoints the Agent its
attorney in fact, said appointment being coupled with an interest, to execute
such further documents and instruments and take such further action on behalf of
the Subordinate Lender as the Agent may from time to time deem reasonable to
carry out the intent of this Agreement, including, without limitation, the
actions set forth in paragraph B.4. hereof.
6
7. Treatment of Payment of Subordinated Liabilities. All payments and
distributions received by the Agent or any Lender in respect of the Subordinated
Liabilities, to the extent received in or converted into cash, may be applied by
the Agent and Lenders first to the payment of any and all expenses (including
attorneys' fees and disbursements and the allocated fees, expenses and cost of
in-house counsel) paid or incurred by the Agent in enforcing this Agreement or
in endeavoring to collect or realize upon any of the Subordinated Liabilities,
and any balance thereof shall, solely as between the Subordinate Lender and the
Lenders and Agent, be applied by the Agent, in such order of application as the
Agent may from time to time select, toward the payment of any of the Senior
Liabilities remaining unpaid. As between the Obligors and any of their
creditors, no such payments or distributions of any kind or character shall be
deemed to be payments or distributions in respect of the Senior Liabilities;
and, notwithstanding any such payments or distributions received by the Agent or
any Lender in respect of the Subordinated Liabilities and so applied by the
Agent and Lenders toward the payment of the Senior Liabilities, the Subordinate
Lender shall be subrogated to the then existing rights of the Agent and Lenders,
if any, in respect of the Senior Liabilities, only at such time as the Lenders
and Agent shall have received indefeasible payment of the full amount of the
Senior Liabilities.
8. Waivers. The Subordinate Lender hereby waives (i) any and all notice of
the receipt and acceptance by the Agent or any Lender of this Agreement; (ii)
except as set forth in paragraph B.4, notice of the existence, incurrence, or
non-payment of all or any of the Senior Liabilities; (iii) all diligence in
collection or protection of or realization upon any of the Senior Liabilities or
any security therefor; and (iv) any obligation with respect to the marshalling
of assets by the Agent or any Lender.
9. Prohibition on Changes in Subordinated Liabilities.
(a) Except as herein set forth in paragraph B.9(b), the Subordinate Lender
will not without the prior written consent of the Agent (i) cancel, waive,
forgive, amend, modify, transfer or assign, or attempt to enforce or collect, or
subordinate to any Liabilities other than the Senior Liabilities, any
Subordinated Liabilities or any rights in respect thereof; (ii) convert any
Subordinated Liabilities into stock or other securities in any of the Obligors;
(iii) take any Collection Action; (iv) commence, or join with any other creditor
in commencing, any bankruptcy, reorganization or insolvency proceedings with
respect to any of the Obligors, or (v) take any other action prejudicial to or
inconsistent with the Agent's and Lenders' rights and first priority secured
position with respect to the Obligors, the Bank Collateral and collateral for
the Senior Liabilities.
(b) Notwithstanding the provisions of paragraph B.9(a), if any default has
occurred under any of the Subordinated Loan Documents and such default has
continued in existence for a period of one hundred eighty (180) consecutive days
after the Subordinated Lenders have provided written notice of the existence of
such default to the Agent (the "Standstill Period"), the Subordinated Lender may
proceed to take legal action against the Obligors for the sole purpose of
obtaining a judgment against the Obligors; provided, however, at no time either
before or after the expiration of the Standstill Period, may any Subordinated
Lender take any action or Collection Action to enforce a security interest in,
liquidate or otherwise receive payment from any collateral for the Senior
Liabilities, including the Bank Collateral or Subordinated Lenders' Collateral,
unless and until the Lenders and Agent have been indefeasibly paid in full for
all Senior Liabilities.
7
10. Continuing Agreement. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect notwithstanding,
without limitation, the death, incompetency or dissolution of the Subordinate
Lender or that at any time or from time to time all Senior Liabilities may have
been paid in full if any of the Loan Documents have not been terminated.
11. Permitted Changes in Senior Liabilities. The Agent or any Lender may,
from time to time, whether before or after any discontinuance of this Agreement,
at its sole discretion and without notice to the Subordinate Lender, take any or
all of the following actions: (i) retain or obtain a security interest in any
property to secure any of the Senior Liabilities; (ii) retain or obtain the
primary or secondary obligation of any other Obligor or Obligors with respect to
any of the Senior Liabilities; (iii) extend, renew (whether or not longer than
the original period), alter or exchange any of the Senior Liabilities; (iv)
release or compromise any obligation of any nature of any Obligor with respect
to any of the Senior Liabilities; and, (v) release its security interest or lien
in, allows its security interest or lien to be unperfected, surrender, release
or permit any substitution or exchange for, all or any part of any property
securing any of the Senior Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any Obligor with respect to
any such property.
12. Disposition of Assets. The Subordinate Lender agree that any
disposition by the Agent or any Lender of any collateral for the Senior
Liabilities, whether by collection, sale, or other manner of liquidation, after
an Event of Default under the Loan Documents, if conducted in a commercially
reasonable manner, may not be challenged or contested by the Subordinate Lender
on the grounds of commercial unreasonableness. The Subordinate Lender agrees
that the Agent and Lenders may use such means of collection and exercise such
diligence with respect thereto as the Agent or such Lender, in its sole
discretion, deems appropriate under the circumstances and may enter into such
compromise with and give such releases and acquittances to account debtors or
other obligors of the Obligors' receivables as it determines in its sole
discretion, without obtaining the agreement or concurrence of or giving notice
to the Subordinate Lender and the Subordinate Lender hereby waive all right to
require that its agreement or consent be obtained or that it be given notice.
The Subordinate Lender further agrees that it will release its security interest
on any collateral (including the Subordinated Lenders' Collateral) for the
Senior Liabilities upon the sale or other disposition thereof at the request of
the Agent, whether or not any proceeds therefrom will pay any of the
Subordinated Liabilities.
C. Representations and Warranties. The Subordinate Lender hereby represents
and warrants that (i) the Subordinate Lender has the necessary power and
capacity to make and perform this Agreement and such making and performance have
been duly authorized by all necessary actions on the part of the Subordinate
Lender; (ii) the making and performance by the Subordinate Lender of this
Agreement does not and will not violate any provision of law or regulation or
result in the breach of, or constitute a default or require any consent under,
any indenture or other agreement or instrument to which it is a party or by
which any of its properties may be bound; and (iii) this Agreement is the legal,
valid and binding obligation of the Subordinate Lender, enforceable against the
Subordinate Lender in accordance with its terms.
8
D. Remedies. Upon the occurrence of any Event of Default, or upon the
breach of any representation, covenant or agreement in this Agreement by any
Obligor or the Subordinate Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent may
immediately, without further notice, resort to all of its rights and remedies
herein, in any document (including the Loan Agreement and any of the Loan
Documents) by and between the Agent or any Lender and any Obligor, or in any in
any instrument evidencing any obligation under any such document, at law or in
equity. The Agent agrees that it shall proceed, to the extent commercially
reasonable, against all the assets of the Obligors before liquidating the
Subordinated Note. The Agent shall endeavor to give the Obligors prompt notice
of the acceleration of the Senior Liabilities but failure to give such notice
shall not affect any action taken by Agent and Agent shall not incur any
liability for any failure to deliver such notice.
E. Miscellaneous.
1. Remedies Cumulative; No Waiver. The rights, powers and remedies of the
Agent and Lenders provided in this Agreement and any of the Loan Documents are
cumulative and not exclusive of any right, power or remedy provided by law or
equity. No failure or delay on the part of the Agent or any Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy.
2. Notices. Notices and communications under this Agreement shall be in
writing and shall be given by (i) hand-delivery, (ii) first class mail (postage
prepaid), or (iii) reliable overnight commercial courier (charges prepaid) to
the addresses listed in this Agreement. Notice by overnight courier shall be
deemed to have been given and received on the date scheduled for delivery.
Notice by mail shall be deemed to have been given and received three (3)
calendar days after the date first deposited in the United States Mail. Notice
by hand-delivery shall be deemed to have been given and received upon delivery.
A party may change its address by giving written notice to the other party as
specified herein.
3. Costs and Expenses. Whether or not the transactions contemplated by this
Agreement or the Loan Documents are fully consummated, the Obligors shall
promptly pay (or reimburse, as the Agent may elect) all costs and expenses which
the Agent has incurred or may hereafter incur in connection with the
negotiation, preparation, reproduction, interpretation, perfection, protection
of collateral, administration and enforcement of this Agreement and the other
Loan Documents, the collection of all amounts due under this Agreement and the
other Loan Documents, and all amendments, modifications, consents or waivers, if
any, to the Loan Documents. The Obligors' reimbursement obligations under this
Paragraph shall survive any termination of this Agreement or any other Loan
Document and are deemed part of the Senior Liabilities.
9
4. Governing Law. This Agreement shall be construed in accordance with and
governed by the substantive laws of the State of Connecticut without reference
to conflict of laws principles.
5. Integration; Amendment. This Agreement and the other Loan Documents
constitute the sole agreement of the parties with respect to the subject matter
hereof and thereof and supersede all oral negotiations and prior writings with
respect to the subject matter hereof and thereof. No amendment of this
Agreement, and no waiver of any one or more of the provisions hereof shall be
effective unless set forth in writing and signed by the parties hereto.
6. Successors and Assigns. This Agreement (i) shall be binding upon the
Subordinate Lender, the Obligors executing this Agreement and the Agent and,
where applicable, their respective heirs, executors, administrators, successors
and assigns, and (ii) shall inure to the benefit of the Subordinate Lender, the
Obligors, the Agent and the Lenders and, where applicable, their respective
heirs, executors, administrators, successors and permitted assigns; provided,
however, that the Subordinate Lender and the Obligors may not assign their
rights or obligations hereunder or any interest herein without the prior written
consent of the Agent, and any such assignment or attempted assignment by the
Subordinate Lender and/or any of the Obligors shall be void and of no effect
with respect to the Agent and the Lenders. The Lenders may from time to time
sell or assign, in whole or in part, or grant participations in the Loans and/or
the Agreement and/or the obligations evidenced thereby. The Subordinate Lender
authorizes the Agent and Lenders to provide information concerning the
Subordinate Lender and the Obligors to any prospective purchaser, assignee or
participant.
7. Severability and Consistency. The illegality, unenforceability or
inconsistency of any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Agreement or
any instrument or agreement required hereunder. The Loan Documents and this
Agreement are intended to be consistent. However, in the event of any
inconsistencies between and/or among this Agreement and any of the Loan
Documents, such inconsistency shall not affect the validity or enforceability of
this Agreement or any of the Loan Documents. In the event of any inconsistency
or ambiguity in this Agreement or any of the Loan Documents, this Agreement and
the Loan Documents shall not be construed against any one party but shall be
interpreted consistent with the Agent's policies and procedures.
8. Consent to Jurisdiction and Service of Process. The Subordinate Lender
irrevocably appoints Ross Rapaport, c/o Pepe & Hazard, 30 Jeliff Lane,
Southport, CT 06490-1436 as its attorney upon whom may be served any notice,
process or pleading in any action or proceeding against it arising out of or in
connection with this Agreement. If service of process cannot be delivered to the
Subordinate Lender as specified by statute, the Subordinate Lender agrees that,
with court approval, it may be served by regular or certified mail at the
address set forth herein. The Subordinate Lender hereby consents and agrees that
(i) any action or proceeding against it may be commenced and maintained in any
court within the State of Connecticut or in the United States District Court for
the District of Connecticut by service of process on Ross Rapaport and (ii) the
courts of the State of Connecticut and the United States District Court for the
District of Connecticut shall have jurisdiction with respect to the subject
matter hereof and the person of the Subordinate Lender and the Subordinated
Liabilities. The Subordinate Lender agrees that any action brought by the
Subordinate Lender on account of this Agreement shall be commenced and
maintained only in a court in the federal judicial district or county in which
the Agent has its principal place of business in Connecticut.
10
9. Prejudgment Remedies. The Subordinate Lender hereby acknowledges that
the transactions contemplated herein constitute commercial transactions.
Pursuant to Section 52-278f of the Connecticut General Statutes, the Subordinate
Lender hereby waives and relinquishes all rights to notice and hearing as
provided in Sections 52-278a through 52-278g of said Connecticut General
Statutes prior to the securing of any prejudgment remedy against the Subordinate
Lender in connection with the Liabilities or any of the instruments or documents
executed in connection herewith.
10. Provisions Solely for the Benefit of the Lenders and Agent. The
provisions of this Agreement are solely to define the relative rights and
obligations of the Lenders and Agent and the Subordinate Lender, and no other
person or entity, including, without limitation, any of the Obligors, shall have
any rights hereunder or as a result of the provisions hereof.
11. Agent for Subordinate Lender. The Subordinate Lender's Agent hereby
agrees to be bound by the terms and provisions of this Agreement and agrees not
to make any payment or distribution or to otherwise take any action which is
contrary to the provisions of this Agreement.
12. Judicial Proceedings; Waivers. THE SUBORDINATE LENDER AND THE AGENT
ACKNOWLEDGE AND AGREE THAT (i) ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT OR INSTITUTED BY THE AGENT, THE SUBORDINATE LENDER OR ANY
SUCCESSOR OR ASSIGN OF THE AGENT OR THE SUBORDINATE LENDER, ON OR WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH
RESPECT HERETO, OR THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY AND
EACH PARTY WAIVES THE RIGHT TO TRIAL BY JURY; (ii) EACH WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; AND (iii) THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND THE LENDERS WOULD NOT EXTEND CREDIT IF THE WAIVERS
SET FORTH IN THIS SECTION WERE NOT A PART OF THIS AGREEMENT.
13. Counterparts. This Agreement may be executed and delivered in any
number of counterparts each of which shall constitute an original, but all of
which taken together shall constitute but one and the same agreement. Delivery
of an executed signature page to this Agreement by facsimile transmission shall
be effective as delivery of a manually signed counterpart of this Agreement.
11
IN WITNESS WHEREOF, the Subordinate Lender has executed and delivered to
the Agent this Agreement, as of the day and year first above written.
WITNESSED BY:
- ----------------------- --------------------------------------
Peter K. Baker
Address: 1050 Buckingham Street
Watertown, CT 06795
- -----------------------
- ----------------------- --------------------------------------
Ross S. Rapaport, not individually but
as Trustee of the Peter K. Baker Life
Insurance Trust, The John B. Baker
Insurance Trust and u/t/a dated
December 16, 1991 f/b/o Joan Baker
et. al., as agent for the Subordinate
Lender
Address: 1050 Buckingham Street
Watertown, CT 06795
WEBSTER BANK, as Agent
__________________________ By:______________________
Richard A. O'Brien
Its Senior Vice President
__________________________ Address: 145 Bank Street
Waterbury, CT 06702
12
STATE OF _____________)
) ss: ________ __________, 2003
COUNTY OF ____________)
Personally appeared Peter K. Baker, signer and sealer of the foregoing
instrument and acknowledged the same to be his free act and deed, before me.
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
STATE OF _____________)
) ss: ________ ____________, 2003
COUNTY OF ____________)
Personally appeared Ross S. Rapaport, not individually but as Trustee of the
Peter K. Baker Life Insurance Trust, the John B. Baker Insurance Trust and U/T/A
dated December 16, 1991 F/B/O Joan Baker et. al, as agent for the Subordinate
Lender, signer and sealer of the foregoing instrument and acknowledged the same
to be his free act and deed as Trustee and agent, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
STATE OF CONNECTICUT_______)
) ss: Hartford March __, 2003
COUNTY OF HARTFORD_________)
Personally appeared Richard A. O'Brien, Senior Vice President of Webster Bank,
as Agent, signer and sealer of the foregoing instrument and acknowledged the
same to be his free act and deed as such officer and the free act and deed of
Webster Bank, as Agent, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
13
The Obligors signing below hereby acknowledge receipt of a copy of the foregoing
Agreement, waive notice of acceptance thereof by the Agent and Lenders, and
agree to be bound by the terms and provisions thereof. The Obligors signing
below further agree to make no payments or distributions, or grant any security
interest, contrary to the terms and provisions of this Agreement and to do every
other act and thing necessary or appropriate to carry out such terms and
provisions. Upon the occurrence of any Event of Default, or upon the breach of
any representation, covenant or agreement in this Agreement by any of the
Obligors or the Subordinated Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent and Lenders
may immediately, without further notice, resort to all of its rights and
remedies herein, in any document (including the Loan Agreement and any of the
Loan Documents) by and between the Agent or any Lender and any Obligor, or in
any in any instrument evidencing any obligation under any such document, at law
or in equity.
Dated: As of the ___ day of March, 2003
VERMONT PURE HOLDINGS, LTD.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
CRYSTAL ROCK SPRING WATER COMPANY
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: 1050 Buckingham Street
Watertown, CT 06795
VERMONT PURE SPRINGS, INC.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
14
SCHEDULE A
Bank Collateral
"Collateral" means Receivables, Inventory, Equipment, Patents, Trademarks,
Investment Property, Additional Collateral, and the Premises, but excluding
personal property subject to a purchase money lien permitted by Section 6.1 of
the Loan Agreement to the extent the terms of such purchase money lien prohibit
further liens or encumbrances.
"Additional Collateral" means (i) all General Intangibles, including Payment
Intangibles and Software and all Supporting Obligations related thereto, (as
such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time) of every kind and description of the Obligors,
including without limitation federal, state and local tax refund claims of all
kinds, whether now existing or hereafter arising; (ii) all of Obligors' Deposit
Accounts, Letter of Credit Rights and all Supporting Obligations related thereto
(as such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time), whether now owned or hereafter created, wherever
located, together with the rights to withdraw from said Deposit Accounts and
make deposits to the same and the right to draw under Letters of Credit; (iii)
all monies, securities, instruments, cash and other property of Obligors and the
proceeds thereof, now or hereafter held or received by, or in transit to, any
Lender from or for Obligors, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of Obligors' deposits (general or
special, balances, sums, proceeds and credits of Obligors with any Lender at any
time existing); (iv) all interests in real property held or owned by Obligors,
including all leasehold interests; (v) all rights under contracts and license
agreements for water; (vi) all books, records, customer lists, ledger cards,
computer programs, computer tapes, disks, printouts and records, and other
property and general intangibles at any time evidencing or relating to any of
the foregoing, whether now in existence or hereafter created; (vii) all other
personal property and fixtures of the Obligors, whether now existing or
hereafter arising or created; and all proceeds of the foregoing and all proceeds
of any insurance on the foregoing.
"Equipment" means all Equipment, Farm Products and Fixtures (as such terms are
defined in the Uniform Commercial Code as in effect in Connecticut on the date
of this Agreement), including all machinery, equipment, furniture, fixtures,
tools, parts, supplies and motor vehicles, now owned and hereafter acquired, by
Obligors of whatsoever name, nature, kind or description, wherever located, and
all additions and accessions thereto and replacements or substitutions therefor,
and all proceeds thereof and all proceeds of any insurance thereon.
"Inventory" means all Inventory and Goods and all Supporting Obligations related
thereto (as such terms are defined in the Uniform Commercial Code as in effect
in Connecticut from time to time) of whatsoever name, nature, kind or
description now owned and hereafter acquired by Obligors, wherever located,
including without limitation all contract rights with respect thereto and
documents representing the same, all goods held for sale or lease or to be
furnished under contracts of service, finished goods, raw materials, materials
used or consumed by Obligors, parts, supplies, and all wrapping, packaging,
advertising and shipping materials and any documents relating thereto, and all
labels and other devices, names and marks affixed or to be affixed thereto for
purposes of selling or of identifying the same or the seller or manufacturer
thereof, and all right, title and interest of Obligors therein and thereto, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Investment Property" means all investment property (as such term is defined in
the Uniform Commercial Code as adopted in Connecticut from time to time) of
whatever type or nature now owned or hereafter acquired by the Obligors,
including without limitation, all certificated securities, all uncertificated
securities, all security entitlements, all security accounts, all commodity
contracts, all commodity accounts and all financial assets of every type and
nature and all rights thereto or therein, and all financial accounts of every
type and nature and all rights thereto or therein, and all Supporting
Obligations (as such term is defined in the Uniform Commercial Code as adopted
in Connecticut from time to time) related thereto and all proceeds and products
thereof, including without limitation, all insurance proceeds and fidelity bond
proceeds related thereto.
"Patents" means all of Obligors' right, title and interest, present and future,
in and to (a) all letters patent of the United States or any other country, all
right, title and interest therein and thereto, and all registrations and
recordings thereof, including without limitation applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States or any state thereof or any other country
or any political subdivision thereof, all whether now owned or hereafter
acquired by Obligors; and (b) all reissues, continuations, continuations-in-part
or extensions thereof and all licenses thereof; and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing.
"Premises" means the following real property owned by Obligors:
Route 66 Factory, Randolph, VT
Chase Road, Randolph, VT
North Randolph Road, Randolph, VT
Alice E. LaFrance, Route 66, Randolph, VT (approximately 5 acres) Gary
LaFrance, Route 66, Randolph, VT (approximately 20 acres)
"Receivables" means (i) all of Obligors' now owned and hereafter acquired,
present and future, Accounts, Chattel Paper, Documents, Instruments and
Supporting Obligations related thereto, (as such terms are defined in the
Uniform Commercial Code as in effect in Connecticut from time to time) and
contract rights, including without limitation all obligations to Obligors for
the payment of money, whether arising out of Obligors' sale of goods or
rendition of services or otherwise (all hereinafter called "Accounts") and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
(ii) all of Obligors' rights, remedies, security and liens, in, to and in
respect of the Accounts, present and future, including without limitation,
rights of stoppage in transit, replevin, repossession and reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, guaranties or
other contracts of suretyship with respect to the Accounts, deposits or other
security for the obligation of any debtor or obligor in any way obligated on or
in connection with any Accounts, and credit and other insurance, and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
and (iii) all of Obligors' right, title and interest, present and future, in, to
and in respect of all goods relating to, or which by sale have resulted in,
Accounts, including without limitation all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing any Accounts, and all returned, reclaimed or repossessed goods, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Trademarks" means all of Obligors' right, title and interest, present and
future, in and to (i) all trademarks, trade names, trade styles, service marks,
prints and labels on which said trademarks, trade names, trade styles and
service marks have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all right, title and
interest therein and thereto, and all registrations and recordings thereof,
including without limitation applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof, or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Obligors;
(ii) all reissues, extensions or renewals thereof and all licenses thereof; and
(iii) the goodwill of the business symbolized by each of the Trademarks, and all
customer lists and other records of Obligors relating to the distribution of
products bearing the Trademarks; and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing.
SCHEDULE B
Subordinated Lender Collateral
The following property, whether now existing or subsequently acquired, and
all additions, substitutions, accessions, replacements, proceeds, and products
thereof or thereto: all tangible and intangible assets and properties of each of
Vermont Pure Holdings, Ltd., a Delaware corporation formerly named "VP Merger
Parent, Inc.", Vermont Pure Springs, Inc., a Delaware corporation, Platinum
Acquisition Corp., f/k/a Vermont Pure Holdings (each a "Company"), including
without limitation all furniture, fixtures, equipment, raw materials, inventory,
other goods, accounts, contract rights, rights to the payment of money,
insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and other investment
property, deposit accounts, rights to proceeds of letters of credit and all
general intangibles including, without limitation, all tax refund claims,
license fees, patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, rights to sue and recover for
past infringement of patents, trademarks and copyrights, computer programs,
computer software, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature pursuant
to which any Company possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess, use or have
authority to possess or use property (whether tangible or intangible) of such
Company, and all recorded data of any kind or nature, regardless of the medium
of recording including, without limitation, all software, writings, plans,
specifications and schematics (each of which terms has the meaning ascribed to
in the Uniform Commercial Code, as in effect in the State of Connecticut)
(collectively, the "Collateral"); provided that notwithstanding the foregoing,
such grant of security interest shall not extend to, and the term "Collateral"
shall not include any cash and cash equivalents at any time owned by any
Company.
Exhibit 10.23
SUBORDINATION AND PLEDGE AGREEMENT
March 5, 2003
WHEREAS, VERMONT PURE HOLDINGS, LTD., a Delaware corporation with a principal
executive office at Catamount Industrial Park, Route 66, Randolph, Vermont 05060
("Holdings"), CRYSTAL ROCK SPRING WATER COMPANY, a Connecticut corporation with
an office at 1050 Buckingham Street, Watertown, Connecticut 06795 ("Crystal
Rock"), and VERMONT PURE SPRINGS, INC., a Delaware corporation with an office at
Catamount Industrial Park, Route 66, Randolph, Vermont 05060 ("VPS", and
collectively with Holdings and Crystal Rock, the "Obligors ") are now indebted
to ROSS S. RAPAPORT, NOT INDIVIDUALLY BUT AS TRUSTEE OF THE PETER K. BAKER LIFE
INSURANCE TRUST, THE JOHN B. BAKER INSURANCE TRUST AND U/T/A DATED DECEMBER 16,
1991 F/B/O JOAN BAKER ET AL. (the "Subordinate Lender") and may from time to
time hereafter become indebted to the Subordinate Lender in further amounts; and
WHEREAS, Ross S. Rapaport, not individually but as Trustee of the Peter K. Baker
Life Insurance Trust, The John B. Baker Insurance Trust and u/t/a dated December
16, 1991 f/b/o Joan Baker et. al. is acting as agent (the "Subordinate Lender's
Agent") for Subordinate Lender pursuant to certain of the Subordinated Loan
Documents; and
WHEREAS, the Obligors have requested, and may from time to time hereafter
request, the lenders under that certain Loan and Security Agreement dated as of
the 5th day of March, 2003, as the same may be amended from time to time, by and
among the Obligors, each of the lenders which is a signatory thereto
(individually, together with its successors and assigns, a "Lender" and
collectively, the "Lenders") and Webster Bank, as agent (in such capacity,
together with its successors and assigns in such capacity, the "Agent" ) to make
or agree to make loans, extensions of credit or other financial accommodations
to the Obligors (the "Loans"); and
WHEREAS, the Lenders, as a condition to the making or continuation of the Loans,
has required the Subordinate Lender to execute and deliver this Subordination
and Pledge Agreement (together with all schedules and any exhibits attached
hereto and amendments or modifications hereto in effect from time to time, the
"Agreement").
NOW, THEREFORE, in order to induce the Lenders to make, or continue to make the
Loans and in consideration thereof, the Subordinate Lender agrees as follows:
A. Definitions. As used herein, the following terms shall have the
following meanings:
1. Affiliate. The term "Affiliate" means any of each of the Lenders direct
and indirect affiliates and subsidiaries.
2. Bank Collateral. The term "Bank Collateral" means the personal property
of the Obligors described in Schedule A and any other real or personal property
of any of the Obligors in which the Agent, any Lender or an Affiliate may
hereafter be granted a security interest, mortgage interest or other similar
interest.
3. Collection Action. The term "Collection Action" means to (i) exercise or
enforce any rights or remedies or assert any claims against the Bank Collateral
or Subordinated Lenders' Collateral; (ii) make any claim or commence or initiate
any action, lawsuit, case or proceeding against any of the Obligors or join
together or with any creditor other than, with its consent, the Agent in any
action, lawsuit, case or proceeding against the Obligors (including, but not
being limited to, proceedings under the Bankruptcy Code); (iii) contact any
account of any of the Obligors or attach or take possession of any Bank
Collateral or Subordinated Lenders' Collateral or exercise any right of
foreclosure or any right or remedy with respect to any of the Obligors or the
Bank Collateral or Subordinated Lenders' Collateral; or (iv) take any other
action prejudicial to or inconsistent with the Lenders' and Agent's rights and
first priority secured position with respect to the Obligors or the Bank
Collateral, including, without limitation, any action that will impede,
interfere with, restrict, or restrain the exercise by the Agent or any of the
Lenders of their rights and remedies under the Loan Documents or contest in any
manner the perfection, priority or validity of any lien held by the Agent in any
of the Bank Collateral.
4. Event of Default. The term "Event of Default" shall mean an Event of
Default under the Loan Agreement beyond any applicable grace and cure period.
5. Financial Covenant Default. The term "Financial Covenant Default" shall
mean an Event of Default which results solely from the violation of any now
existing or hereafter arising financial covenant contained in the Loan
Agreement, including, by way of illustration, those specific financial covenants
set forth in Sections 6.16, 6.17, 6.18, 6.19, and 6.20 of the Loan Agreement and
any supplement, addition, modification or amendment to those specific financial
covenants.
6. Liabilities. The term "Liabilities" means any and all obligations and
indebtedness of every kind and description, now or hereafter existing, whether
such debts or obligations are primary or secondary, direct or indirect, absolute
or contingent, sole, joint or several, secured or unsecured, due or to become
due, contractual or tortious, arising by operation of law, by overdraft, or
otherwise, including, without limitation, principal, interest, fees, late fees,
expenses, attorneys' fees and costs, and/or allocated fees and costs of the
Agent's in-house legal counsel, that have been or may hereafter be contracted or
incurred.
7. Loan Agreement. The term "Loan Agreement" means that certain Loan and
Security Agreement among the Obligors, the Lenders and Agent dated the date
hereof, and any subsequent supplement, modification, renewal, extension or
amendment thereto.
8. Loan Documents. The term "Loan Documents" means the Loan Agreement and
all other credit accommodations, notes, loan agreements, and any other
agreements and documents, now or hereafter existing, creating, evidencing,
guarantying, securing or relating to any or all of the Senior Liabilities,
together with all amendments, modifications, renewals, or extensions thereof.
2
9. Non-Covenant Default. The term "Non-Covenant Default" means an Event of
Default other than a Financial Covenant Default.
10. Obligor. The term "Obligor" means the Holdings, Crystal Rock, VPS and
each and every other maker, endorser, guarantor, or surety of or for the Senior
Liabilities.
11. Senior Liabilities. The term "Senior Liabilities" means all Liabilities
of the Obligors to any of the Lenders, the Agent and/or to any of the Affiliates
including, without limitation, any and all interest accruing on Senior
Liabilities after the commencement of any proceedings referred to in paragraph
B.5. hereof, notwithstanding any provision or rule of law which might restrict
the rights of the Lenders or Agent, as against the Obligors and/or anyone else,
to collect such interest. For purposes of this Agreement, Senior Liabilities
shall include all Liabilities of the Obligors to the Lenders and the Agent,
notwithstanding any right or power of any of the Obligors and/or anyone else to
assert any claim or defense as to the invalidity or unenforceability of any such
Senior Liabilities.
12. Subordinated Lenders' Collateral. The term "Subordinated Lenders'
Collateral" means the personal property of the Obligors more fully described in
Schedule B attached hereto.
13. Subordinated Lending Group. The term "Subordinated Lending Group" means
Henry E. Baker, Joan A. Baker, John B. Baker, Peter K. Baker, and Ross S.
Rappaport, not individually, but as Trustee of the Peter K. Baker Life Insurance
Trust, the John B. Baker Insurance Trust and u/t/a dated December 16, 1991 f/b/o
Joan Baker et. al., each as holder of an Amended and Restated Subordinated
Promissory Note of Holdings dated the date hereof, as such Subordinated
Promissory Notes may be amended, restated or replaced from time to time, and any
successor holders of such Subordinated Promissory Notes.
14. Subordinated Liabilities. The term "Subordinated Liabilities" means all
Liabilities of the Obligors to the Subordinate Lender, including, without
limitation, all payments of principal and interest pursuant to that Amended and
Restated Subordinated Promissory Note dated the date hereof from Holdings
payable to the order of the Subordinated Lender in the original principal amount
of $5,200,000.00 (the "Subordinated Note") and that Guaranty dated October 5,
2000 as amended by amendment dated the date hereof from Platinum and VPS to
Subordinate Lender guarantying payments due under the Subordinated Note (the
"Subordinate Guaranty") but specifically excluding therefrom compensation from
the Obligors to the Subordinate Lender presently contemplated pursuant to the
existing employment agreement between any of the Obligors and the Subordinate
Lender, as the compensation clauses thereof may be amended from time to time
with the consent of the Agent, the normal reimbursement of expenses in the
ordinary course of business and indemnification of claims arising solely from
the Subordinate Lender's actions as an officer or director of any of the
Obligors.
15. Subordinated Loan Documents. The term "Subordinated Loan Documents"
means all credit accommodations, notes, loan agreements and any other agreements
and documents, now or hereafter existing, creating, evidencing, guarantying,
securing or relating to any or all of the Subordinated Liabilities, together
with all amendments, modifications, renewals or extensions thereof.
3
B. Subordination and Pledge.
1. Subordination to Senior Liabilities.
(a) Except as hereinafter expressly set forth in this Agreement or as the
Agent and Lenders may hereafter otherwise expressly consent in writing, the
payment of all Subordinated Liabilities shall be postponed and subordinated to
the indefeasible payment in full of all Senior Liabilities, and no payments or
other distributions whatsoever, including, without limitation, payments of
interest in respect of any Subordinated Liabilities shall be made, nor shall any
property or assets of the Borrower or other Obligor be applied to the purchase
or other acquisition or retirement of any Subordinated Liabilities, nor given as
collateral security to secure repayment of same.
(b) Notwithstanding the provisions in paragraph B.1(a) above, and subject
to the other terms of this Agreement, the Subordinate Lender may be granted a
security interest in the Subordinated Lenders' Collateral to secure the payments
of principal and interest and other amounts due pursuant to the Subordinated
Note.
(c) Notwithstanding the provisions of paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, the Obligors may make regularly scheduled
quarterly payments of interest under the Subordinated Note, at a rate not in
excess of twelve per cent (12%) per annum, and past due regularly scheduled
quarterly payments of interest under the Subordinated Note which were not paid
when scheduled to be paid because of the terms of this Agreement, including
interest at a rate not in excess of twelve per cent (12%) per annum on such past
due amounts, but only to the extent that the making of such payments would not
result in a Financial Covenant Default.
(d) Notwithstanding the provisions in paragraph B.1(a) above, so long as no
Event of Default exists and is continuing, and so long as no event exists and is
continuing which, with the giving of notice or the passage of time or both,
would constitute an Event of Default, and provided that all the conditions in
the Loan and Security Agreement with respect to a request under the
Acquisition/Capital Asset Line of Credit (as defined in the Loan and Security
Agreement) for an advance to pay Subordinated Debt (as defined in the Loan and
Security Agreement) owed to the Subordinated Lending Group have been satisfied,
the Obligors may make principal payments on the Subordinated Debt (as defined in
the Loan and Security Agreement) to members of the Subordinated Lending Group
which in the aggregate do not exceed $5,000,000.
4
2. Pledge of Subordinated Loan Documents. In order to secure the due and
punctual payment and performance of the Senior Liabilities, the Subordinate
Lender hereby pledges, transfers, assigns, and grants to the Agent a continuing
security interest in and lien upon the Subordinated Loan Documents. The
Subordinate Lender has endorsed and delivered to the Agent physical possession
of any of the Subordinated Loan Documents which are instruments, including the
Subordinated Note and has executed Uniform Commercial Code financing statements
and such other documents and/or instruments as may be necessary or convenient to
perfect the security interests granted herein. Agent shall hold the Subordinated
Note and any other Subordinated Loan Documents which are instruments delivered
to the Agent as security for the due and punctual payment and performance of the
Senior Liabilities and notwithstanding the possession of the Subordinated Note
or such other Subordinated Loan Documents by the Agent, the Subordinate Lender
shall be entitled to receive payments thereunder to the extent expressly
permitted by the terms of this Agreement. Upon payment in full of the Senior
Liabilities, the Agent will deliver to the Subordinate Lender in care of Peter
K. Baker the Subordinated Note and any other Subordinated Loan Documents in its
possession.
3. Subordination of Security Interest of Subordinated Liabilities. Any
security interest now or hereafter held by the Subordinate Lender and granted by
any of the Obligors to secure any of the Subordinated Liabilities, including the
security interest described in paragraph B.1(b), is hereby immediately made
subordinate, junior and postponed in priority and effect to the priority and
effect of the security interest purported to be created by any of the Loan
Documents, as if (and whether or not) the Agent's or any Lender's security
interest had been perfected by possession, by timely filing of financing
statements, or by any other means prior to the time the security interest with
respect to the Subordinated Liabilities is perfected, and prior to the filing of
any financing statements in connection with the Subordinated Liabilities. The
Subordinate Lender agrees to execute and deliver to the Agent all instruments,
including, without limitation, Forms UCC-3, subordinations of lien, and
subordinations of mortgage which, in the reasonable opinion of the Agent, are
necessary or convenient to effectuate the purposes of this paragraph and this
Agreement.
4. Further Assurances of Pledge of Subordinated Liabilities. The
Subordinate Lender will (i) promptly notify the Agent of the creation of any
Subordinated Liabilities and of the issuance of any promissory note or other
instrument to evidence any Subordinated Liabilities; (ii) cause any Subordinated
Liabilities which are not already evidenced by a promissory note or other
instrument of the Obligors to be so evidenced; (iii) as collateral security for
the Senior Liabilities, endorse, deliver and pledge to the Agent any and all
promissory notes and/or other instruments evidencing Subordinated Liabilities,
and otherwise assign and/or pledge to the Agent any or all Subordinated
Liabilities and the Subordinated Loan Documents, all in a manner satisfactory to
the Agent in its sole discretion, and (iv) promptly give the Agent written
notice of any default by any Obligor under the Subordinated Note or any
agreement securing Obligors' obligations under any of the other Subordinated
Loan Documents.
5
Further Assurances of Agent. Agent will endeavor to deliver to the Subordinate
Lender in care of Peter K. Baker prompt notice of any Event of Default or
Financial Covenant Default under the Loan Agreement or any of the other Loan
Documents of which the Agent becomes aware but the failure of the Agent to
promptly deliver any such notice will not affect any of the rights or
obligations of the parties under this Agreement.
5. Rights of Agent to Collect Subordinated Liabilities. In the event of,
and commencing with the date thereof, any dissolution, winding up, liquidation,
reorganization or other similar proceedings relating to any Obligor or to any of
their creditors, or to any of their property (whether voluntary or involuntary,
partial or complete, and whether in bankruptcy, insolvency or receivership, or
upon an assignment for the benefit of creditors, or any other marshalling of the
assets and liabilities of any Obligor, or any sale of all or substantially all
of the assets of any Obligor, or otherwise), the Senior Liabilities shall first
be paid in full before the Subordinate Lender shall be entitled to receive
and/or to retain any payment or distribution in respect of the Subordinated
Liabilities; provided that the Subordinate Lender shall be entitled to receive
and retain any securities issued in connection with reorganization proceedings
which are junior in right of repayment to the Senior Liabilities to the extent
set forth herein, are treated as Subordinated Liabilities hereunder and are
subject to all the provisions of this Agreement, and, in order to implement the
foregoing (i) all payments and distributions of any kind or character in respect
of the Subordinated Liabilities to which any of the Subordinate Lender would be
entitled but for the provisions of this Agreement (other than such junior
securities) will be made directly to the Agent; (ii) the Subordinate Lender
shall promptly file a claim or claims, in the form required in such proceedings,
for the full outstanding amount of the Subordinated Liabilities, and shall cause
said claim or claims to be approved and all payments and other distributions in
respect thereof (other than such junior securities) to be made directly to the
Agent; (iii) the Subordinate Lender hereby irrevocably agrees that the Agent
may, in its sole discretion, in the name of the Subordinate Lender or otherwise,
demand, sue for, collect, receive, and receipt for any and all such payments or
distributions, and file, prove, and vote or consent in any such proceedings with
respect to, any and all claims of the Subordinate Lender relating to the
Subordinated Liabilities; and (iv) the Subordinate Lender hereby ratifies all of
the foregoing acts or omissions on the Agent's part or behalf and waives any
claim, counterclaim or defense of the Subordinate Lender which may be alleged to
arise from such acts or omissions.
6. Protection of Agent's Rights in Subordinated Liabilities. In the event
that the Subordinate Lender receives any payment or other distribution of any
kind or character from any Obligor or any other source whatsoever in respect of
any of the Subordinated Liabilities, other than as expressly permitted by the
terms of this Agreement, such payment or other distribution shall be received in
trust for the Lenders and the Agent and promptly turned over by the Subordinate
Lender to the Agent. The Subordinate Lender will mark its books and records, and
cause the Obligors to mark their books and records, so as to clearly indicate
that the Subordinated Liabilities are subordinated in accordance with the terms
of this Agreement, and will cause to be clearly inserted in any promissory note
or other instrument which at any time evidences any of the Subordinated
Liabilities a statement to the effect that the payment thereof is subordinated
in accordance with the terms of this Agreement. The Subordinate Lender will
execute such further documents and instruments and take such further action as
the Agent may from time to time reasonably request to carry out the intent of
this Agreement. The Subordinate Lender hereby irrevocably appoints the Agent its
attorney in fact, said appointment being coupled with an interest, to execute
such further documents and instruments and take such further action on behalf of
the Subordinate Lender as the Agent may from time to time deem reasonable to
carry out the intent of this Agreement, including, without limitation, the
actions set forth in paragraph B.4. hereof.
6
7. Treatment of Payment of Subordinated Liabilities. All payments and
distributions received by the Agent or any Lender in respect of the Subordinated
Liabilities, to the extent received in or converted into cash, may be applied by
the Agent and Lenders first to the payment of any and all expenses (including
attorneys' fees and disbursements and the allocated fees, expenses and cost of
in-house counsel) paid or incurred by the Agent in enforcing this Agreement or
in endeavoring to collect or realize upon any of the Subordinated Liabilities,
and any balance thereof shall, solely as between the Subordinate Lender and the
Lenders and Agent, be applied by the Agent, in such order of application as the
Agent may from time to time select, toward the payment of any of the Senior
Liabilities remaining unpaid. As between the Obligors and any of their
creditors, no such payments or distributions of any kind or character shall be
deemed to be payments or distributions in respect of the Senior Liabilities;
and, notwithstanding any such payments or distributions received by the Agent or
any Lender in respect of the Subordinated Liabilities and so applied by the
Agent and Lenders toward the payment of the Senior Liabilities, the Subordinate
Lender shall be subrogated to the then existing rights of the Agent and Lenders,
if any, in respect of the Senior Liabilities, only at such time as the Lenders
and Agent shall have received indefeasible payment of the full amount of the
Senior Liabilities.
8. Waivers. The Subordinate Lender hereby waives (i) any and all notice of
the receipt and acceptance by the Agent or any Lender of this Agreement; (ii)
except as set forth in paragraph B.4, notice of the existence, incurrence, or
non-payment of all or any of the Senior Liabilities; (iii) all diligence in
collection or protection of or realization upon any of the Senior Liabilities or
any security therefor; and (iv) any obligation with respect to the marshalling
of assets by the Agent or any Lender.
9. Prohibition on Changes in Subordinated Liabilities.
(a) Except as herein set forth in paragraph B.9(b), the Subordinate Lender
will not without the prior written consent of the Agent (i) cancel, waive,
forgive, amend, modify, transfer or assign, or attempt to enforce or collect, or
subordinate to any Liabilities other than the Senior Liabilities, any
Subordinated Liabilities or any rights in respect thereof; (ii) convert any
Subordinated Liabilities into stock or other securities in any of the Obligors;
(iii) take any Collection Action; (iv) commence, or join with any other creditor
in commencing, any bankruptcy, reorganization or insolvency proceedings with
respect to any of the Obligors, or (v) take any other action prejudicial to or
inconsistent with the Agent's and Lenders' rights and first priority secured
position with respect to the Obligors, the Bank Collateral and collateral for
the Senior Liabilities.
7
(b) Notwithstanding the provisions of paragraph B.9(a), if any default has
occurred under any of the Subordinated Loan Documents and such default has
continued in existence for a period of one hundred eighty (180) consecutive days
after the Subordinated Lenders have provided written notice of the existence of
such default to the Agent (the "Standstill Period"), the Subordinated Lender may
proceed to take legal action against the Obligors for the sole purpose of
obtaining a judgment against the Obligors; provided, however, at no time either
before or after the expiration of the Standstill Period, may any Subordinated
Lender take any action or Collection Action to enforce a security interest in,
liquidate or otherwise receive payment from any collateral for the Senior
Liabilities, including the Bank Collateral or Subordinated Lenders' Collateral,
unless and until the Lenders and Agent have been indefeasibly paid in full for
all Senior Liabilities.
10. Continuing Agreement. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect notwithstanding,
without limitation, the death, incompetency or dissolution of the Subordinate
Lender or that at any time or from time to time all Senior Liabilities may have
been paid in full if any of the Loan Documents have not been terminated.
11. Permitted Changes in Senior Liabilities. The Agent or any Lender may,
from time to time, whether before or after any discontinuance of this Agreement,
at its sole discretion and without notice to the Subordinate Lender, take any or
all of the following actions: (i) retain or obtain a security interest in any
property to secure any of the Senior Liabilities; (ii) retain or obtain the
primary or secondary obligation of any other Obligor or Obligors with respect to
any of the Senior Liabilities; (iii) extend, renew (whether or not longer than
the original period), alter or exchange any of the Senior Liabilities; (iv)
release or compromise any obligation of any nature of any Obligor with respect
to any of the Senior Liabilities; and, (v) release its security interest or lien
in, allows its security interest or lien to be unperfected, surrender, release
or permit any substitution or exchange for, all or any part of any property
securing any of the Senior Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any Obligor with respect to
any such property.
12. Disposition of Assets. The Subordinate Lender agree that any
disposition by the Agent or any Lender of any collateral for the Senior
Liabilities, whether by collection, sale, or other manner of liquidation, after
an Event of Default under the Loan Documents, if conducted in a commercially
reasonable manner, may not be challenged or contested by the Subordinate Lender
on the grounds of commercial unreasonableness. The Subordinate Lender agrees
that the Agent and Lenders may use such means of collection and exercise such
diligence with respect thereto as the Agent or such Lender, in its sole
discretion, deems appropriate under the circumstances and may enter into such
compromise with and give such releases and acquittances to account debtors or
other obligors of the Obligors' receivables as it determines in its sole
discretion, without obtaining the agreement or concurrence of or giving notice
to the Subordinate Lender and the Subordinate Lender hereby waive all right to
require that its agreement or consent be obtained or that it be given notice.
The Subordinate Lender further agrees that it will release its security interest
on any collateral (including the Subordinated Lenders' Collateral) for the
Senior Liabilities upon the sale or other disposition thereof at the request of
the Agent, whether or not any proceeds therefrom will pay any of the
Subordinated Liabilities.
8
C. Representations and Warranties. The Subordinate Lender hereby represents
and warrants that (i) the Subordinate Lender has the necessary power and
capacity to make and perform this Agreement and such making and performance have
been duly authorized by all necessary actions on the part of the Subordinate
Lender; (ii) the making and performance by the Subordinate Lender of this
Agreement does not and will not violate any provision of law or regulation or
result in the breach of, or constitute a default or require any consent under,
any indenture or other agreement or instrument to which it is a party or by
which any of its properties may be bound; and (iii) this Agreement is the legal,
valid and binding obligation of the Subordinate Lender, enforceable against the
Subordinate Lender in accordance with its terms.
D. Remedies. Upon the occurrence of any Event of Default, or upon the
breach of any representation, covenant or agreement in this Agreement by any
Obligor or the Subordinate Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent may
immediately, without further notice, resort to all of its rights and remedies
herein, in any document (including the Loan Agreement and any of the Loan
Documents) by and between the Agent or any Lender and any Obligor, or in any in
any instrument evidencing any obligation under any such document, at law or in
equity. The Agent agrees that it shall proceed, to the extent commercially
reasonable, against all the assets of the Obligors before liquidating the
Subordinated Note. The Agent shall endeavor to give the Obligors prompt notice
of the acceleration of the Senior Liabilities but failure to give such notice
shall not affect any action taken by Agent and Agent shall not incur any
liability for any failure to deliver such notice.
E. Miscellaneous.
1. Remedies Cumulative; No Waiver. The rights, powers and remedies of the
Agent and Lenders provided in this Agreement and any of the Loan Documents are
cumulative and not exclusive of any right, power or remedy provided by law or
equity. No failure or delay on the part of the Agent or any Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy.
2. Notices. Notices and communications under this Agreement shall be in
writing and shall be given by (i) hand-delivery, (ii) first class mail (postage
prepaid), or (iii) reliable overnight commercial courier (charges prepaid) to
the addresses listed in this Agreement. Notice by overnight courier shall be
deemed to have been given and received on the date scheduled for delivery.
Notice by mail shall be deemed to have been given and received three (3)
calendar days after the date first deposited in the United States Mail. Notice
by hand-delivery shall be deemed to have been given and received upon delivery.
A party may change its address by giving written notice to the other party as
specified herein.
3. Costs and Expenses. Whether or not the transactions contemplated by this
Agreement or the Loan Documents are fully consummated, the Obligors shall
promptly pay (or reimburse, as the Agent may elect) all costs and expenses which
the Agent has incurred or may hereafter incur in connection with the
negotiation, preparation, reproduction, interpretation, perfection, protection
of collateral, administration and enforcement of this Agreement and the other
Loan Documents, the collection of all amounts due under this Agreement and the
other Loan Documents, and all amendments, modifications, consents or waivers, if
any, to the Loan Documents. The Obligors' reimbursement obligations under this
Paragraph shall survive any termination of this Agreement or any other Loan
Document and are deemed part of the Senior Liabilities.
9
4. Governing Law. This Agreement shall be construed in accordance with and
governed by the substantive laws of the State of Connecticut without reference
to conflict of laws principles.
5. Integration; Amendment. This Agreement and the other Loan Documents
constitute the sole agreement of the parties with respect to the subject matter
hereof and thereof and supersede all oral negotiations and prior writings with
respect to the subject matter hereof and thereof. No amendment of this
Agreement, and no waiver of any one or more of the provisions hereof shall be
effective unless set forth in writing and signed by the parties hereto.
6. Successors and Assigns. This Agreement (i) shall be binding upon the
Subordinate Lender, the Obligors executing this Agreement and the Agent and,
where applicable, their respective heirs, executors, administrators, successors
and assigns, and (ii) shall inure to the benefit of the Subordinate Lender, the
Obligors, the Agent and the Lenders and, where applicable, their respective
heirs, executors, administrators, successors and permitted assigns; provided,
however, that the Subordinate Lender and the Obligors may not assign their
rights or obligations hereunder or any interest herein without the prior written
consent of the Agent, and any such assignment or attempted assignment by the
Subordinate Lender and/or any of the Obligors shall be void and of no effect
with respect to the Agent and the Lenders. The Lenders may from time to time
sell or assign, in whole or in part, or grant participations in the Loans and/or
the Agreement and/or the obligations evidenced thereby. The Subordinate Lender
authorizes the Agent and Lenders to provide information concerning the
Subordinate Lender and the Obligors to any prospective purchaser, assignee or
participant.
7. Severability and Consistency. The illegality, unenforceability or
inconsistency of any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Agreement or
any instrument or agreement required hereunder. The Loan Documents and this
Agreement are intended to be consistent. However, in the event of any
inconsistencies between and/or among this Agreement and any of the Loan
Documents, such inconsistency shall not affect the validity or enforceability of
this Agreement or any of the Loan Documents. In the event of any inconsistency
or ambiguity in this Agreement or any of the Loan Documents, this Agreement and
the Loan Documents shall not be construed against any one party but shall be
interpreted consistent with the Agent's policies and procedures.
8. Consent to Jurisdiction and Service of Process. The Subordinate Lender
irrevocably appoints Ross Rapaport, c/o Pepe & Hazard, 30 Jeliff Lane,
Southport, CT 06490-1436 as its attorney upon whom may be served any notice,
process or pleading in any action or proceeding against it arising out of or in
connection with this Agreement. If service of process cannot be delivered to the
Subordinate Lender as specified by statute, the Subordinate Lender agrees that,
with court approval, it may be served by regular or certified mail at the
address set forth herein. The Subordinate Lender hereby consents and agrees that
(i) any action or proceeding against it may be commenced and maintained in any
court within the State of Connecticut or in the United States District Court for
the District of Connecticut by service of process on Ross Rapaport and (ii) the
courts of the State of Connecticut and the United States District Court for the
District of Connecticut shall have jurisdiction with respect to the subject
matter hereof and the person of the Subordinate Lender and the Subordinated
Liabilities. The Subordinate Lender agrees that any action brought by the
Subordinate Lender on account of this Agreement shall be commenced and
maintained only in a court in the federal judicial district or county in which
the Agent has its principal place of business in Connecticut.
10
9. Prejudgment Remedies. The Subordinate Lender hereby acknowledges that
the transactions contemplated herein constitute commercial transactions.
Pursuant to Section 52-278f of the Connecticut General Statutes, the Subordinate
Lender hereby waives and relinquishes all rights to notice and hearing as
provided in Sections 52-278a through 52-278g of said Connecticut General
Statutes prior to the securing of any prejudgment remedy against the Subordinate
Lender in connection with the Liabilities or any of the instruments or documents
executed in connection herewith.
10. Provisions Solely for the Benefit of the Lenders and Agent. The
provisions of this Agreement are solely to define the relative rights and
obligations of the Lenders and Agent and the Subordinate Lender, and no other
person or entity, including, without limitation, any of the Obligors, shall have
any rights hereunder or as a result of the provisions hereof.
11. Agent for Subordinate Lender. The Subordinate Lender's Agent hereby
agrees to be bound by the terms and provisions of this Agreement and agrees not
to make any payment or distribution or to otherwise take any action which is
contrary to the provisions of this Agreement.
12. Judicial Proceedings; Waivers. THE SUBORDINATE LENDER AND THE AGENT
ACKNOWLEDGE AND AGREE THAT (i) ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT OR INSTITUTED BY THE AGENT, THE SUBORDINATE LENDER OR ANY
SUCCESSOR OR ASSIGN OF THE AGENT OR THE SUBORDINATE LENDER, ON OR WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH
RESPECT HERETO, OR THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY AND
EACH PARTY WAIVES THE RIGHT TO TRIAL BY JURY; (ii) EACH WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; AND (iii) THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND THE LENDERS WOULD NOT EXTEND CREDIT IF THE WAIVERS
SET FORTH IN THIS SECTION WERE NOT A PART OF THIS AGREEMENT.
11
13. Counterparts. This Agreement may be executed and delivered in any
number of counterparts each of which shall constitute an original, but all of
which taken together shall constitute but one and the same agreement. Delivery
of an executed signature page to this Agreement by facsimile transmission shall
be effective as delivery of a manually signed counterpart of this Agreement.
IN WITNESS WHEREOF, the Subordinate Lender has executed and delivered to
the Agent this Agreement, as of the day and year first above written.
WITNESSED BY:
- ------------------------- --------------------------------------
Ross S. Rapaport, not individually but
as Trustee of the Peter K. Baker Life
Insurance Trust, The John B. Baker
Insurance Trust and u/t/a dated
December 16, 1991 f/b/o Joan Baker
et. al.
Address: c/o Pepe & Hazard LLP
30 Jelliff Lane
Southport, CT 06490-1436
- ------------------------- --------------------------------------
Ross S. Rapaport, not individually but
as Trustee of the Peter K. Baker Life
Insurance Trust, The John B. Baker
Insurance Trust and u/t/a dated
- ------------------------- December 16, 1991 f/b/o Joan Baker
et. al., as agent for the Subordinate
Lender
Address: 1050 Buckingham Street
Watertown, CT 06795
WEBSTER BANK, as Agent
- -------------------------- By:______________________
Richard A. O'Brien
Its Senior Vice President
Address: 145 Bank Street
Waterbury, CT 06702
- -------------------------
12
STATE OF _____________)
) ss: __________ ___________, 2003
COUNTY OF ____________)
Personally appeared Ross S. Rapaport, not individually but as Trustee of the
Peter K. Baker Life Insurance Trust, the John B. Baker Insurance Trust and U/T/A
dated December 16, 1991 F/B/O Joan Baker et. al, signer and sealer of the
foregoing instrument and acknowledged the same to be his free act and deed as
Trustee, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
STATE OF _____________)
) ss: __________ ___________, 2003
COUNTY OF ____________)
Personally appeared Ross S. Rapaport, not individually but as Trustee of the
Peter K. Baker Life Insurance Trust, the John B. Baker Insurance Trust and U/T/A
dated December 16, 1991 F/B/O Joan Baker et. al, as agent for the Subordinate
Lender, signer and sealer of the foregoing instrument and acknowledged the same
to be his free act and deed as Trustee and agent, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
STATE OF CONNECTICUT)
) ss: Hartford March __, 2003
COUNTY OF HARTFORD )
Personally appeared Richard A. O'Brien, Senior Vice President of Webster Bank,
as Agent, signer and sealer of the foregoing instrument and acknowledged the
same to be his free act and deed as such officer and the free act and deed of
Webster Bank, as Agent, before me.
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission expires:
-------------
13
The Obligors signing below hereby acknowledge receipt of a copy of the foregoing
Agreement, waive notice of acceptance thereof by the Agent and Lenders, and
agree to be bound by the terms and provisions thereof. The Obligors signing
below further agree to make no payments or distributions, or grant any security
interest, contrary to the terms and provisions of this Agreement and to do every
other act and thing necessary or appropriate to carry out such terms and
provisions. Upon the occurrence of any Event of Default, or upon the breach of
any representation, covenant or agreement in this Agreement by any of the
Obligors or the Subordinated Lender, or in the event of the termination of this
Agreement, all of the Senior Liabilities shall, without notice or demand, become
immediately due and payable at the option of the Agent and the Agent and Lenders
may immediately, without further notice, resort to all of its rights and
remedies herein, in any document (including the Loan Agreement and any of the
Loan Documents) by and between the Agent or any Lender and any Obligor, or in
any in any instrument evidencing any obligation under any such document, at law
or in equity.
Dated: As of the ___ day of March, 2003
VERMONT PURE HOLDINGS, LTD.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
CRYSTAL ROCK SPRING WATER COMPANY
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: 1050 Buckingham Street
Watertown, CT 06795
VERMONT PURE SPRINGS, INC.
By:______________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
Address: Catamount Industrial Park
Route 66
Randolph, VT 05060
14
SCHEDULE A
Bank Collateral
"Collateral" means Receivables, Inventory, Equipment, Patents, Trademarks,
Investment Property, Additional Collateral, and the Premises, but excluding
personal property subject to a purchase money lien permitted by Section 6.1 of
the Loan Agreement to the extent the terms of such purchase money lien prohibit
further liens or encumbrances.
"Additional Collateral" means (i) all General Intangibles, including Payment
Intangibles and Software and all Supporting Obligations related thereto, (as
such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time) of every kind and description of the Obligors,
including without limitation federal, state and local tax refund claims of all
kinds, whether now existing or hereafter arising; (ii) all of Obligors' Deposit
Accounts, Letter of Credit Rights and all Supporting Obligations related thereto
(as such terms are defined in the Uniform Commercial Code as in effect in
Connecticut from time to time), whether now owned or hereafter created, wherever
located, together with the rights to withdraw from said Deposit Accounts and
make deposits to the same and the right to draw under Letters of Credit; (iii)
all monies, securities, instruments, cash and other property of Obligors and the
proceeds thereof, now or hereafter held or received by, or in transit to, any
Lender from or for Obligors, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of Obligors' deposits (general or
special, balances, sums, proceeds and credits of Obligors with any Lender at any
time existing); (iv) all interests in real property held or owned by Obligors,
including all leasehold interests; (v) all rights under contracts and license
agreements for water; (vi) all books, records, customer lists, ledger cards,
computer programs, computer tapes, disks, printouts and records, and other
property and general intangibles at any time evidencing or relating to any of
the foregoing, whether now in existence or hereafter created; (vii) all other
personal property and fixtures of the Obligors, whether now existing or
hereafter arising or created; and all proceeds of the foregoing and all proceeds
of any insurance on the foregoing.
"Equipment" means all Equipment, Farm Products and Fixtures (as such terms are
defined in the Uniform Commercial Code as in effect in Connecticut on the date
of this Agreement), including all machinery, equipment, furniture, fixtures,
tools, parts, supplies and motor vehicles, now owned and hereafter acquired, by
Obligors of whatsoever name, nature, kind or description, wherever located, and
all additions and accessions thereto and replacements or substitutions therefor,
and all proceeds thereof and all proceeds of any insurance thereon.
"Inventory" means all Inventory and Goods and all Supporting Obligations related
thereto (as such terms are defined in the Uniform Commercial Code as in effect
in Connecticut from time to time) of whatsoever name, nature, kind or
description now owned and hereafter acquired by Obligors, wherever located,
including without limitation all contract rights with respect thereto and
documents representing the same, all goods held for sale or lease or to be
furnished under contracts of service, finished goods, raw materials, materials
used or consumed by Obligors, parts, supplies, and all wrapping, packaging,
advertising and shipping materials and any documents relating thereto, and all
labels and other devices, names and marks affixed or to be affixed thereto for
purposes of selling or of identifying the same or the seller or manufacturer
thereof, and all right, title and interest of Obligors therein and thereto, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Investment Property" means all investment property (as such term is defined in
the Uniform Commercial Code as adopted in Connecticut from time to time) of
whatever type or nature now owned or hereafter acquired by the Obligors,
including without limitation, all certificated securities, all uncertificated
securities, all security entitlements, all security accounts, all commodity
contracts, all commodity accounts and all financial assets of every type and
nature and all rights thereto or therein, and all financial accounts of every
type and nature and all rights thereto or therein, and all Supporting
Obligations (as such term is defined in the Uniform Commercial Code as adopted
in Connecticut from time to time) related thereto and all proceeds and products
thereof, including without limitation, all insurance proceeds and fidelity bond
proceeds related thereto.
"Patents" means all of Obligors' right, title and interest, present and future,
in and to (a) all letters patent of the United States or any other country, all
right, title and interest therein and thereto, and all registrations and
recordings thereof, including without limitation applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States or any state thereof or any other country
or any political subdivision thereof, all whether now owned or hereafter
acquired by Obligors; and (b) all reissues, continuations, continuations-in-part
or extensions thereof and all licenses thereof; and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing.
"Premises" means the following real property owned by Obligors:
Route 66 Factory, Randolph, VT
Chase Road, Randolph, VT
North Randolph Road, Randolph, VT
Alice E. LaFrance, Route 66, Randolph, VT (approximately 5 acres) Gary
LaFrance, Route 66, Randolph, VT (approximately 20 acres)
"Receivables" means (i) all of Obligors' now owned and hereafter acquired,
present and future, Accounts, Chattel Paper, Documents, Instruments and
Supporting Obligations related thereto, (as such terms are defined in the
Uniform Commercial Code as in effect in Connecticut from time to time) and
contract rights, including without limitation all obligations to Obligors for
the payment of money, whether arising out of Obligors' sale of goods or
rendition of services or otherwise (all hereinafter called "Accounts") and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
(ii) all of Obligors' rights, remedies, security and liens, in, to and in
respect of the Accounts, present and future, including without limitation,
rights of stoppage in transit, replevin, repossession and reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, guaranties or
other contracts of suretyship with respect to the Accounts, deposits or other
security for the obligation of any debtor or obligor in any way obligated on or
in connection with any Accounts, and credit and other insurance, and all
proceeds of the foregoing and all proceeds of any insurance on the foregoing;
and (iii) all of Obligors' right, title and interest, present and future, in, to
and in respect of all goods relating to, or which by sale have resulted in,
Accounts, including without limitation all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing any Accounts, and all returned, reclaimed or repossessed goods, and
all proceeds of the foregoing and all proceeds of any insurance on the
foregoing.
"Trademarks" means all of Obligors' right, title and interest, present and
future, in and to (i) all trademarks, trade names, trade styles, service marks,
prints and labels on which said trademarks, trade names, trade styles and
service marks have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all right, title and
interest therein and thereto, and all registrations and recordings thereof,
including without limitation applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof, or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Obligors;
(ii) all reissues, extensions or renewals thereof and all licenses thereof; and
(iii) the goodwill of the business symbolized by each of the Trademarks, and all
customer lists and other records of Obligors relating to the distribution of
products bearing the Trademarks; and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing.
SCHEDULE B
Subordinated Lender Collateral
The following property, whether now existing or subsequently acquired, and
all additions, substitutions, accessions, replacements, proceeds, and products
thereof or thereto: all tangible and intangible assets and properties of each of
Vermont Pure Holdings, Ltd., a Delaware corporation formerly named "VP Merger
Parent, Inc.", Vermont Pure Springs, Inc., a Delaware corporation, Platinum
Acquisition Corp., f/k/a Vermont Pure Holdings (each a "Company"), including
without limitation all furniture, fixtures, equipment, raw materials, inventory,
other goods, accounts, contract rights, rights to the payment of money,
insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and other investment
property, deposit accounts, rights to proceeds of letters of credit and all
general intangibles including, without limitation, all tax refund claims,
license fees, patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, rights to sue and recover for
past infringement of patents, trademarks and copyrights, computer programs,
computer software, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature pursuant
to which any Company possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess, use or have
authority to possess or use property (whether tangible or intangible) of such
Company, and all recorded data of any kind or nature, regardless of the medium
of recording including, without limitation, all software, writings, plans,
specifications and schematics (each of which terms has the meaning ascribed to
in the Uniform Commercial Code, as in effect in the State of Connecticut)
(collectively, the "Collateral"); provided that notwithstanding the foregoing,
such grant of security interest shall not extend to, and the term "Collateral"
shall not include any cash and cash equivalents at any time owned by any
Company.
Exhibit 10.25
ACQUISITION/CAPITAL ASSET LINE OF CREDIT NOTE
$___________ Hartford, Connecticut
March 5, 2003
FOR VALUE RECEIVED, the undersigned, VERMONT PURE HOLDINGS, LTD., a
Delaware corporation with an office located at Catamount Industrial Park, Route
66, Randolph, Vermont 05060 ("Holdings"), CRYSTAL ROCK SPRING WATER COMPANY, a
Connecticut corporation with an office at 1050 Buckingham Street, Watertown,
Connecticut 06795 ("Crystal Rock"), and VERMONT PURE SPRINGS, INC., a Delaware
corporation with an office at Catamount Industrial Park, Route 66, Randolph,
Vermont 05060 ("VPS", and collectively with Holdings and Crystal Rock, the
"Obligors"), hereby jointly and severally promise to pay to the order of
________________, a _____________ (individually, together with its successors
and assigns, the "Lender"), at its office at _____________, __________,
____________ ______ or at such other place as the holder hereof may designate,
the principal amount advanced hereunder and remaining unpaid, up to a maximum
amount of ____________ MILLION ______________ AND 00/100 DOLLARS ($____________)
(the "Principal Amount") in lawful money of the United States, together with
interest on the Principal Amount, beginning on the date hereof, before and after
maturity or judgment, at a per annum rate determined as provided in that certain
Loan and Security Agreement dated as of the 5th day of March, 2003, as the same
may be amended from time to time (as so amended from time to time the "Loan and
Security Agreement"), by and among the Obligors, each of the lenders, including
the Lender, which is a signatory thereto (collectively, the "Lenders") and
Webster Bank, as agent (in such capacity, together with its successors and
assigns in such capacity, the "Agent"). All payments shall be made in lawful
money of the United States in immediately available funds. All capitalized terms
not defined herein shall have the meanings assigned to such terms in the Loan
and Security Agreement.
1. Interest Rate. The interest rate hereunder shall be as set forth in the
Loan and Security Agreement.
2. Requests for Advances. Requests for advances hereunder shall be as set
forth in the Loan and Security Agreement.
3. Payments of Interest. Payments of interest hereunder shall be as set
forth in the Loan and Security Agreement.
4. Payments of Principal. Payments of principal hereunder shall be as set
forth in the Loan and Security Agreement.
5. Prepayments. Prepayments of principal hereunder shall be as set forth in
the Loan and Security Agreement.
6. Costs and Expenses. The Obligors shall pay all taxes levied or assessed
on this Note or the debt evidenced hereby against the Lender, together with all
costs, expenses and attorneys' and other professional fees incurred in any
action to collect and/or enforce this Note or to enforce the Loan and Security
Agreement or any other agreement relating to this Note or the Loan and Security
Agreement or any other agreement or in any litigation or controversy arising
from or connected with the Loan and Security Agreement or any other agreement,
or this Note.
7. Increased Costs. In the event that applicable law, treaty or regulation
or directive from any government, governmental agency or regulatory authority,
or any change therein or in the interpretation or application thereof, or
compliance by the Lender with any request or directive (whether or not having
the force of law) from any central bank or government, governmental agency or
regulatory authority, shall:
a. subject the Lender to any tax of any kind whatsoever
(except taxes on the overall net income of the
Lender) with respect to the Loan and Security
Agreement, this Note or any of the loans made by it,
or change the basis of taxation of payments to the
Lender in respect thereof (except for changes in the
rate of tax on the overall net income of the Lender);
b. impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar
requirements against assets held by, deposits or
other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other
acquisition of funds by, any office of the Lender,
including (without limitation) pursuant to
Regulations of the Board of Governors of the Federal
Reserve System; or
c. in the opinion of the Lender, cause this Note, any
loan made under this Note or under the Loan and
Security Agreement to be included in any calculations
used in the computation of regulatory capital
standards; or
d. impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
an amount that the Lender deems to be material, of making, converting into,
continuing and/or maintaining the loans made pursuant to this Note and the Loan
and Security Agreement or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of such loans, then, in any
case, the Obligors shall promptly pay the Lender, upon its demand, such
additional amounts necessary to compensate the Lender for such additional costs
or such reduction in payment, as the case may be (collectively the "Additional
Costs"). The Lender shall certify the amount of such Additional Costs to the
Obligors, and such certification, absent manifest error, shall be deemed
conclusive. In determining such amount, the Lender shall use any reasonable
averaging and attribution methods.
2
8. Indemnity. The Obligors agree to indemnify the Lender and to hold the
Lender harmless from any loss (including any of the additional costs referred to
above and any lost profits) or expense that it may sustain or incur as a
consequence of (i) a default by any Obligor in the payment of the principal of
or interest due on this Note, or (ii) the making of a prepayment of the
Principal Amount bearing interest based upon the LIBOR Rate on a day which is
not the last day of the then current Interest Period applicable thereto,
including, but not limited to, in each case any such loss or expense arising
from the reemployment of funds obtained by it or from fees, interest or other
amounts payable to terminate the deposits from which such funds were obtained.
The Agent shall prepare a certificate as to any additional amounts payable to it
pursuant to this Section, which certificate shall be submitted by the Lender to
the Obligors and shall, absent manifest error, be deemed conclusive.
9. Lawful Interest. All agreements between Obligors and Lender are hereby
expressly limited so that in no event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to Lender for the use or the
forbearance of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest,
then this Note shall be governed by such new law as of its effective date. In
this regard, it is expressly agreed that it is the intent of Obligors and Lender
in the execution, delivery and acceptance of this Note to contract in strict
compliance with the laws of the State of Connecticut from time to time in
effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the Loan Documents at the time of performance of
such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
any circumstances whatsoever Lender should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between Obligors and Lender.
10. Events of Default. The Obligors agree that the occurrence of an Event
of Default under the Loan and Security Agreement shall constitute an Event of
Default under this Note. This Note is one of the Acquisition/Capital Asset Line
of Credit Notes referred to in, and is entitled to the benefits of, the Loan and
Security Agreement. Reference is hereby made to the Loan and Security Agreement
for the other terms and conditions relating to the Loan evidenced by this Note
which are incorporated in this Note by reference. Upon the occurrence and during
the continuance of any Event of Default, the Lender, at its option, may declare
all amounts outstanding hereunder, together with accrued interest thereon and
all applicable late charges, other amounts due under this Note and all other
liabilities and obligations of the Obligors to the Lender to be immediately due
and payable, whereupon the same shall become immediately due and payable; all of
the foregoing without demand, presentment, protest, notice of dishonor or other
notice of any kind, all of which are hereby expressly waived by the Obligors.
Failure to exercise such option shall not constitute a waiver of the right to
3
exercise the same in the event of any subsequent default. Notwithstanding the
foregoing, upon the occurrence of an Event of Default relating to the bankruptcy
or insolvency of any Obligor or any guarantor, all amounts outstanding
hereunder, together with accrued interest thereon and all applicable late
charges, other amounts due under this Note and all other liabilities and
obligations of the Obligors to the Lender shall be immediately due and payable.
Upon the occurrence and during the continuance of any Event of Default, without
in any way affecting the Agent's or Lender's other rights and remedies, or after
maturity or judgment, the interest rate applicable to the outstanding principal
balance of this Note shall be as set forth in the Loan and Security Agreement.
The Lender shall endeavor to give the Obligors prompt notice of the acceleration
of the unpaid balance owed under this Note but failure to give such notice shall
not affect any action taken by Lender and Lender shall not incur any liability
for any failure to deliver such notice.
11. Lien and Right of Setoff. Each Obligor hereby grants to Lender a lien,
security interest and right of setoff as security for all liabilities and
obligations to Lender or any other lender under the Loan and Security Agreement,
whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Lender or any entity under common control with Lender,
or in transit to any of them. At any time, without demand or notice, Lender may,
if an event which constitutes or which with notice or lapse of time, or both,
would constitute an Event of Default under this Note, the Loan and Security
Agreement or any of the other Loan Documents has occurred and is continuing, set
off the same or any part thereof and apply the same to any liability or
obligation of any Obligor to Lender or any other lender under the Loan and
Security Agreement even though unmatured and regardless of the adequacy of any
other collateral securing the Loans. ANY AND ALL RIGHTS TO REQUIRE LENDER TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF ANY OBLIGOR, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
12. No Waiver. Failure by the Lender to insist upon the strict performance
by Obligors of any terms and provisions herein shall not be deemed to be a
waiver of any terms and provisions herein, and the Lender shall retain the right
thereafter to insist upon strict performance by the Obligors of any and all
terms and provisions of this Note or any agreement securing the repayment of
this Note.
13. Governing Law. This Note shall be governed by the laws of the State of
Connecticut.
14. Replacement Note. Upon receipt of an affidavit of an officer of Lender
as to the loss, theft, destruction or mutilation of this Note or any other Loan
Document which is not of public record, and, in the case of any such mutilation,
upon cancellation of this Note or other Loan Document, or in the case of any
such loss, theft or destruction, upon an agreement by the holder thereof to
indemnify Obligors for losses in connection therewith, Obligors will issue, in
lieu thereof, a replacement Note or other Loan Document in the same principal
amount thereof and otherwise of like tenor.
4
15. Joint and Several Liability. All obligations, covenants and agreements
of the Obligors pursuant to this Note or any of the other Loan Documents shall
be the joint and several obligations, covenants and agreements of each of the
Obligors.
16. Agency Agreement. The provisions of this Note and all payments made
under this Note shall be subject to the terms of the Agency Agreement.
17. Prejudgment Remedy and Other Waivers. EACH OBLIGOR ACKNOWLEDGES THAT
THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES ITS RIGHT
TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR
AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH LENDER MAY DESIRE TO USE, AND FURTHER, WAIVES DILIGENCE, DEMAND,
PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF PROTEST,
AND NOTICE OF ANY RENEWALS OR EXTENSIONS OF THIS NOTE, ALL SURETYSHIP DEFENSES
AND ALL RIGHTS UNDER ANY STATUTE OF LIMITATION. EACH OBLIGOR ACKNOWLEDGES THAT
IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
18. Jury Waiver. EACH OBLIGOR AND LENDER MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR
ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT
FOR LENDER TO ACCEPT THIS NOTE AND MAKE THE LOAN. EACH OBLIGOR ACKNOWLEDGES THAT
IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
5
IN WITNESS WHEREOF, the Obligors have caused this Note to be duly
executed as of the 5th day of March, 2003.
VERMONT PURE HOLDINGS, LTD.
By________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
CRYSTAL ROCK SPRING WATER COMPANY
By____________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
VERMONT PURE SPRINGS, INC.
By____________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
6
Exhibit 10.26
REVOLVING LINE OF CREDIT NOTE
$___________ Hartford, Connecticut
March 5, 2003
FOR VALUE RECEIVED, the undersigned, VERMONT PURE HOLDINGS, LTD., a
Delaware corporation with an office located at Catamount Industrial Park, Route
66, Randolph, Vermont 05060 ("Holdings"), CRYSTAL ROCK SPRING WATER COMPANY, a
Connecticut corporation with an office at 1050 Buckingham Street, Watertown,
Connecticut 06795 ("Crystal Rock"), and VERMONT PURE SPRINGS, INC., a Delaware
corporation with an office at Catamount Industrial Park, Route 66, Randolph,
Vermont 05060 ("VPS", and collectively with Holdings and Crystal Rock, the
"Obligors"), hereby jointly and severally promise to pay to the order of
________________, a _____________ (individually, together with its successors
and assigns, the "Lender"), at its office at _____________, __________,
____________ ______ or at such other place as the holder hereof may designate,
the principal amount advanced hereunder and remaining unpaid, up to a maximum
amount of ____________ MILLION ______________ AND 00/100 DOLLARS ($____________)
(the "Principal Amount") in lawful money of the United States, together with
interest on the Principal Amount, beginning on the date hereof, before and after
maturity or judgment, at a per annum rate determined as provided in that certain
Loan and Security Agreement dated as of the 5th day of March, 2003, as the same
may be amended from time to time (as so amended from time to time the "Loan and
Security Agreement"), by and among the Obligors, each of the lenders, including
the Lender, which is a signatory thereto (collectively, the "Lenders") and
Webster Bank, as agent (in such capacity, together with its successors and
assigns in such capacity, the "Agent"). All payments shall be made in lawful
money of the United States in immediately available funds. All capitalized terms
not defined herein shall have the meanings assigned to such terms in the Loan
and Security Agreement.
1. Interest Rate. The interest rate hereunder shall be as set forth in the
Loan and Security Agreement.
2. Requests for Advances. Requests for advances hereunder shall be as set
forth in the Loan and Security Agreement.
3. Payments of Interest. Payments of interest hereunder shall be as set
forth in the Loan and Security Agreement.
4. Payments of Principal. Payments of principal hereunder shall be as set
forth in the Loan and Security Agreement.
5. Prepayments. Prepayments of principal hereunder shall be as set forth in
the Loan and Security Agreement.
6. Costs and Expenses. The Obligors shall pay all taxes levied or assessed
on this Note or the debt evidenced hereby against the Lender, together with all
costs, expenses and attorneys' and other professional fees incurred in any
action to collect and/or enforce this Note or to enforce the Loan and Security
Agreement or any other agreement relating to this Note or the Loan and Security
Agreement or any other agreement or in any litigation or controversy arising
from or connected with the Loan and Security Agreement or any other agreement,
or this Note.
7. Increased Costs. In the event that applicable law, treaty or regulation
or directive from any government, governmental agency or regulatory authority,
or any change therein or in the interpretation or application thereof, or
compliance by the Lender with any request or directive (whether or not having
the force of law) from any central bank or government, governmental agency or
regulatory authority, shall:
a. subject the Lender to any tax of any kind whatsoever (except
taxes on the overall net income of the Lender) with respect
to the Loan and Security Agreement, this Note or any of the
loans made by it, or change the basis of taxation of
payments to the Lender in respect thereof (except for changes
in the rate of tax on the overall net income of the Lender);
b. impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirements against
assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by,
or any other acquisition of funds by, any office of the
Lender, including (without limitation) pursuant to Regulations
of the Board of Governors of the Federal Reserve System; or
c. in the opinion of the Lender, cause this Note, any loan made
under this Note or under the Loan and Security Agreement to be
included in any calculations used in the computation of
regulatory capital standards; or
d. impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
an amount that the Lender deems to be material, of making, converting into,
continuing and/or maintaining the loans made pursuant to this Note and the Loan
and Security Agreement or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of such loans, then, in any
case, the Obligors shall promptly pay the Lender, upon its demand, such
additional amounts necessary to compensate the Lender for such additional costs
or such reduction in payment, as the case may be (collectively the "Additional
Costs"). The Lender shall certify the amount of such Additional Costs to the
Obligors, and such certification, absent manifest error, shall be deemed
conclusive. In determining such amount, the Lender shall use any reasonable
averaging and attribution methods.
2
8. Indemnity. The Obligors agree to indemnify the Lender and to hold the
Lender harmless from any loss (including any of the additional costs referred to
above and any lost profits) or expense that it may sustain or incur as a
consequence of (i) a default by any Obligor in the payment of the principal of
or interest due on this Note, or (ii) the making of a prepayment of the
Principal Amount bearing interest based upon the LIBOR Rate on a day which is
not the last day of the then current Interest Period applicable thereto,
including, but not limited to, in each case any such loss or expense arising
from the reemployment of funds obtained by it or from fees, interest or other
amounts payable to terminate the deposits from which such funds were obtained.
The Agent shall prepare a certificate as to any additional amounts payable to it
pursuant to this Section, which certificate shall be submitted by the Lender to
the Obligors and shall, absent manifest error, be deemed conclusive.
9. Lawful Interest. All agreements between Obligors and Lender are hereby
expressly limited so that in no event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to Lender for the use or the
forbearance of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest,
then this Note shall be governed by such new law as of its effective date. In
this regard, it is expressly agreed that it is the intent of Obligors and Lender
in the execution, delivery and acceptance of this Note to contract in strict
compliance with the laws of the State of Connecticut from time to time in
effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the Loan Documents at the time of performance of
such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
any circumstances whatsoever Lender should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between Obligors and Lender.
10. Events of Default. The Obligors agree that the occurrence of an Event
of Default under the Loan and Security Agreement shall constitute an Event of
Default under this Note. This Note is one of the Revolving Line of Credit Notes
referred to in, and is entitled to the benefits of, the Loan and Security
Agreement. Reference is hereby made to the Loan and Security Agreement for the
other terms and conditions relating to the Loan evidenced by this Note which are
incorporated in this Note by reference. Upon the occurrence and during the
continuance of any Event of Default, the Lender, at its option, may declare all
amounts outstanding hereunder, together with accrued interest thereon and all
applicable late charges, other amounts due under this Note and all other
liabilities and obligations of the Obligors to the Lender to be immediately due
and payable, whereupon the same shall become immediately due and payable; all of
the foregoing without demand, presentment, protest, notice of dishonor or other
notice of any kind, all of which are hereby expressly waived by the Obligors.
Failure to exercise such option shall not constitute a waiver of the right to
exercise the same in the event of any subsequent default. Notwithstanding the
foregoing, upon the occurrence of an Event of Default relating to the bankruptcy
or insolvency of any Obligor or any guarantor, all amounts outstanding
hereunder, together with accrued interest thereon and all applicable late
charges, other amounts due under this Note and all other liabilities and
obligations of the Obligors to the Lender shall be immediately due and payable.
Upon the occurrence and during the continuance of any Event of Default, without
in any way affecting the Agent's or Lender's other rights and remedies, or after
maturity or judgment, the interest rate applicable to the outstanding principal
balance of this Note shall be as set forth in the Loan and Security Agreement.
The Lender shall endeavor to give the Obligors prompt notice of the acceleration
of the unpaid balance owed under this Note but failure to give such notice shall
not affect any action taken by Lender and Lender shall not incur any liability
for any failure to deliver such notice.
3
11. Lien and Right of Setoff. Each Obligor hereby grants to Lender a lien,
security interest and right of setoff as security for all liabilities and
obligations to Lender or any other lender under the Loan and Security Agreement,
whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Lender or any entity under common control with Lender,
or in transit to any of them. At any time, without demand or notice, Lender may,
if an event which constitutes or which with notice or lapse of time, or both,
would constitute an Event of Default under this Note, the Loan and Security
Agreement or any of the other Loan Documents has occurred and is continuing, set
off the same or any part thereof and apply the same to any liability or
obligation of any Obligor to Lender or any other lender under the Loan and
Security Agreement even though unmatured and regardless of the adequacy of any
other collateral securing the Loans. ANY AND ALL RIGHTS TO REQUIRE LENDER TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF ANY OBLIGOR, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
12. No Waiver. Failure by the Lender to insist upon the strict performance
by Obligors of any terms and provisions herein shall not be deemed to be a
waiver of any terms and provisions herein, and the Lender shall retain the right
thereafter to insist upon strict performance by the Obligors of any and all
terms and provisions of this Note or any agreement securing the repayment of
this Note.
13. Governing Law. This Note shall be governed by the laws of the State of
Connecticut.
14. Replacement Note. Upon receipt of an affidavit of an officer of Lender
as to the loss, theft, destruction or mutilation of this Note or any other Loan
Document which is not of public record, and, in the case of any such mutilation,
upon cancellation of this Note or other Loan Document, or in the case of any
such loss, theft or destruction, upon an agreement by the holder thereof to
indemnify Obligors for losses in connection therewith, Obligors will issue, in
lieu thereof, a replacement Note or other Loan Document in the same principal
amount thereof and otherwise of like tenor.
4
15. Joint and Several Liability. All obligations, covenants and agreements
of the Obligors pursuant to this Note or any of the other Loan Documents shall
be the joint and several obligations, covenants and agreements of each of the
Obligors.
16. Agency Agreement. The provisions of this Note and all payments made
under this Note shall be subject to the terms of the Agency Agreement.
17. Prejudgment Remedy and Other Waivers. EACH OBLIGOR ACKNOWLEDGES THAT
THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES ITS RIGHT
TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR
AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH LENDER MAY DESIRE TO USE, AND FURTHER, WAIVES DILIGENCE, DEMAND,
PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF PROTEST,
AND NOTICE OF ANY RENEWALS OR EXTENSIONS OF THIS NOTE, ALL SURETYSHIP DEFENSES
AND ALL RIGHTS UNDER ANY STATUTE OF LIMITATION. EACH OBLIGOR ACKNOWLEDGES THAT
IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
18. Jury Waiver. EACH OBLIGOR AND LENDER MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR
ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT
FOR LENDER TO ACCEPT THIS NOTE AND MAKE THE LOAN. EACH OBLIGOR ACKNOWLEDGES THAT
IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
5
IN WITNESS WHEREOF, the Obligors have caused this Note to be duly
executed as of the 5th day of March, 2003.
VERMONT PURE HOLDINGS, LTD.
By________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
CRYSTAL ROCK SPRING WATER COMPANY
By____________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
VERMONT PURE SPRINGS, INC.
By____________________________
Name: Timothy G. Fallon
Title: Chief Executive Officer
6
Exhibit 10.28
Webster Bank
Webster Plaza
Waterbury, CT 06702
March 14, 2003
Mr. Bruce MacDonald
CFO
Vermont Pure Holdings, Inc
Route 66
Catamount Commercial Park
Randolph, VT 05060
Re: Commercial loan and security agreement dated 10/5/00
Dear Bruce:
Reference is made to Section 1.1 (jjj) of the above referenced loan and security
agreement. You, as CFO, have advised Webster Bank that Vermont Pure Holdings
will be in violation of the debt service covenant for the period ending 1/31/03
as set forth in section 6.17 and defined in section 1.1 (n) of the above
referenced agreement.
Webster Bank hereby consents to a one time waiver of this covenant.
Very Truly Yours,
/s/ Carol Carver
Carol Carver
Vice President
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Vermont Pure
Holdings, Ltd. (the "Company") for the quarter ended January 31, 2003, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
the undersigned Chief Executive Officer of the Company, certifies, to the best
knowledge and belief of the signatory, pursuant to 18 U.S.C. ss.1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
/s/ Timothy G. Fallon
Timothy G. Fallon
Chief Executive Officer
Date: March 17, 2003
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Vermont Pure
Holdings, Ltd. (the "Company") for the quarter ended January 31, 2003, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
the undersigned Chief Financial Officer of the Company, certifies, to the best
knowledge and belief of the signatory, pursuant to 18 U.S.C. ss.1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
/s/ Bruce S. MacDonald
Bruce S. MacDonald
Chief Financial Officer
Date: March 17, 2003