FOURTH AMENDMENT AND WAIVER
TO
LOAN AND SECURITY AGREEMENT
This Fourth Amendment and Waiver to Loan and Security Agreement
(this
"Amendment") is executed as of June 3,
2005, by GALAXY NUTRITIONAL FOODS, INC.,
a Delaware corporation ("Borrower") and
TEXTRON FINANCIAL CORPORATION, a
Delaware corporation ("Lender").
RECITALS
A. Lender and Borrower have established a revolving loan credit
facility pursuant to that certain Loan and
Security Agreement dated as of May
27, 2003, as such agreement may have been
previously amended, modified or
supplemented (as so amended, the
"Agreement").
B. Borrower has failed to comply with (i) Section 6.1(e) of the
Agreement by failing to deliver the
financial projections for the Fiscal Year
ending March 31, 2006 in the time frame
provided in such Section (the "Financial
Projection Default"), (ii) Section 7.4 of
the Agreement by making Unfunded
Capital Expenditures in excess of $100,000
for the Fiscal Year ended March 31,
2005 (the "Capital Expenditure Default"),
(iii) Section 7.6(a) of the Agreement
by permitting its Fixed Charge Coverage
Ratio to be less than 1:40 to 1:00 for
the Fiscal Quarters ended December 31, 2004
and March 31, 2005 (the "Fixed
Charge Coverage Ratio Default"), and (iv)
Section 7.6(b) of the Agreement by
permitting its Adjusted Tangible Net Worth
to be less than the amount set forth
in such Section for the Fiscal Quarter
ended March 31, 2005 (the "Tangible Net
Worth Default" and, together with the
Financial Projections Default, the Capital
Expenditure Default and the Fixed Charge
Coverage Ratio Default, the "Existing
Defaults").
C. Borrower has requested and Lender has agreed to a temporary
Overadvance (as defined below) in the
amount not to exceed $750,000.
D. Borrower has requested that certain terms of the Agreement
be
amended.
E. Borrower has requested that Lender waive the Existing Defaults,
and
the parties wish to set forth herein the
terms of the Overadvance referred to
above.
F. Lender has agreed to the requested amendments and waivers on
the
terms and conditions set forth in this
Amendment.
AGREEMENT
In reliance upon the representations, warranties and covenants
of
Borrower set forth in the Agreement, Lender
and Borrower agree as follows:
1.
Definitions. Capitalized terms not defined in this Amendment shall
have
the definitions given to them in the
Agreement, where applicable, or the UCC as
amended from time to time.
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2.
Amendment to Definitions. The Agreement is amended by deleting
the
definitions of "Adjusted Tangible Net
Worth", "Dilution Reserve", "Fixed Charge
Coverage Ratio", "SouthTrust" and
"SouthTrust Collateral" from the Agreement and
substituting the following new definitions
therefore:
"Adjusted Tangible Net Worth" means, with respect to Borrower,
the sum of (i) stockholder's equity, including preferred stock,
determined in accordance with GAAP and (ii) subordinated
indebtedness
(if any), minus the sum of (a) Intangible Assets, (b) all loans
or
advances to any Person, and (c) prepaid expenses.
"Dilution Reserve" means, as of any date of determination, the
reserve established by Lender to reduce the advance rate against
the
Eligible Receivables in an amount not greater than the amount by
which
bad debt write-downs, credits, returns, discounts and
allowances
related to the Receivables (excluding bad debt write-downs
associated
with Receivables from Del Sunshine) (the "Dilutive Items") exceed
five
percent (5%) of the Receivables (the "Dilution"), which shall
be
effective upon receipt by Lender of the most recently completed
report
of the field examination of the books, records and other assets
of
Borrower conducted pursuant to Section 3.2 or under any other
provision
of this Agreement; the Dilution shall be based on the greater of
the
Dilutive Items for (x) the previous three (3) months or (y) the
previous twelve (12) months, in each case as set forth in the
most
recently completed field examination.
"Fixed Charge Coverage Ratio" means, for any period, the ratio
of (i) Borrower's EBITDA plus all accrued expenses associated with
the
Employment Contract which are deducted from revenue in determining
Net
Income of Borrower for such period minus all cash payments made
under
the Employment Contract minus Unfunded Capital Expenditures minus
taxes
actually paid by Borrower in cash minus distributions and
dividends
paid by Borrower in cash, to (ii) Borrower's Interest Expense
plus
payments (including scheduled amortization payments) for Money
Borrowed
(including Capital Lease payments) made by Borrower, in each case
for
such period.
"SouthTrust" means Wachovia Bank, National Association f/k/a
SouthTrust Bank and its successors and permitted assigns.
"SouthTrust Collateral" means the collateral in which Borrower
has granted to SouthTrust a security interest as more fully
described
in that certain Security Agreement (Machinery and Equipment) dated
as
of March 10, 2000, as it has been and may hereafter be amended,
supplemented, extended or restated from time to time.
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3.
Further Amendments to Definitions.
(a) The
Agreement is amended by deleting the reference to "Revolving
Credit Limit" from the second line of the
definition of "Borrowing Base" and
substituting "Revolving Credit Facility" in
lieu thereof.
(b) The
Agreement is amended by deleting the reference to "(xii)" from
the
twenty-third line of the definition of
"Collateral" and substituting "(xiii)" in
lieu thereof.
4. Amendment to
Section 1.6. Section 1.6 of the Agreement, Renewal and
Termination, is amended by deleting
paragraph (a) of such Section in its
entirety and substituting the following
therefor:
"(a) This Agreement shall expire on the Termination Date. This
Agreement shall be automatically renewed for additional one (1)
year
periods upon expiration of the Initial Term unless terminated by
Lender
or Borrower as provided in this Section 1.6. Borrower may
terminate
this Agreement at the expiration of the Initial Term or at the end
of
each Renewal Term by giving written notice of such termination
to
Lender at least ninety (90) days prior to the effective date of
such
termination, and, if such termination date is on a date other than
the
end of the Initial Term or a Renewal Term, by payment to Lender of
the
Early Termination Fee as provided in Section 2.5 hereof. Lender
may
terminate this Agreement (i) at the expiration of the Initial Term
or
at the end of each Renewal Term by giving written notice of
such
termination to Borrower at least ninety (90) days prior to the
effective date of such termination, and (ii) at any time during
the
existence of an uncured Event of Default."
5.
Amendment to Article VI. Article VI of the Agreement is amended
by
adding the a new Section 6.17 at the end
thereof to read as follows:
"Section 6.17 Retention of Consultants. Borrower acknowledges
that Lender shall have the right at any time to retain (either
directly
or through counsel) an independent accounting or consulting firm
to
conduct ongoing reviews of the business and operations of Borrower
and
that the reasonable fees and expenses of any such firm shall be
reimbursed by Borrower pursuant to Section 11.7. Borrower agrees
to
cooperate with any such firm and agrees also that such firm
will
constitute representatives of Lender for purposes of Section 6.2
and,
accordingly, shall be permitted during normal business hours,
to
examine, copy and make extracts from the books and records of
Borrower,
to visit any of Borrower's business locations, and to discuss
Borrower's business and affairs with its officers, all subject to
the
confidentiality provisions of this Agreement and to the extent
reasonably requested by such firm retained by Lender."
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6.
Amendment to Section 7.6(a). Section 7.6(a) of the Agreement is
amended
by deleting such subsection in its entirety
and substituting the following
therefor:
"(a) Borrower shall not permit the Fixed Charge Coverage Ratio
to be less than the ratio set forth below, as of the
