FIFTH AMENDMENT AND WAIVER TO LOAN AND SECURITY AGREEMENT
AND CONSENT TO RELEASE OF LIENS AND SALE OF ASSETS
This Fifth
Amendment and Waiver to Loan and Security Agreement and Consent
to Release of Liens and Sale of Assets
(this "Amendment") is executed as of
November 14, 2005 and is effective as of
October 1, 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 7.6(a) of the
Loan
Agreement by permitting its Fixed Charge
Coverage Ratio to be less than the
amounts set forth in such Section for the
periods ended June 30, 2005, July 31,
2005, August 31, 2005 and September 30,
2005 (the "Fixed Charge Coverage Ratio
Default"), (ii) Section 7.6(b) of the Loan
Agreement by permitting its Adjusted
Tangible Net Worth to be less than the
amounts set forth in such Section for the
calendar months ended June 30, 2005, July
31, 2005, August 31, 2005 and
September 30, 2005 (the "Tangible Net Worth
Default") and (iii) Section 6.8 of
the Loan Agreement by permitting the
aggregate unpaid principal amount of the
Revolving Loan Advances to exceed the
Borrowing Base on various dates in July
2005 and August 2005 without an immediate
repayment of such excess (the
"Overadvance Default" and, together with
the Fixed Charge Coverage Ratio Default
and the Tangible Net Worth Default, the
"Existing Defaults").
C.
Pursuant to Section 7.2 of the Agreement, Borrower is not permitted
to
sell, consign, lease or remove from
Borrower's business locations any of
Borrower's assets.
D.
Borrower, pursuant to that certain Asset Purchase Agreement dated
June
30, 2005, by and between Borrower and
Schreiber Foods, Inc., a Wisconsin
corporation ("Buyer") (the "Asset Purchase
Agreement"), intends to sell the
"Purchased Assets" (as defined in the Asset
Purchase Agreement and hereinafter
referred to as the "Assets") to Buyer (such
sale, the "Asset Sale") and may, in
the future sell to one or more third
parties certain of its remaining equipment,
fixtures and other similar personal
property (such assets, the "Remaining
Equipment and Fixtures").
E.
Borrower, pursuant to that certain Supply Agreement dated June
30,
2005, by and between Borrower and Buyer
(the "Supply Agreement"), intends to
outsource to Buyer Borrower's manufacturing
processes with respect to its
products.
F.
Borrower has requested that certain terms of the Agreement be
amended.
G.
Borrower has requested that Lender waive the Existing Defaults.
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H.
Borrower has requested that Lender consent to the Asset Sale and
the
future sale of the Remaining Equipment and
Fixtures and release its Liens on the
Assets in connection with the Asset
Sale.
I.
Borrower has requested that Lender consent to the Supply Agreement
and
the transactions contemplated thereby.
J. Lender
has agreed to (i) consent to the Asset Sale and the sale of the
Remaining Equipment and Fixtures, (ii)
release its Liens on the Assets, (iii)
consent to the Supply Agreement and the
transactions contemplated thereby, (iv)
waive the Existing Defaults and (v) amend
the Agreement, all 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.
2.
Consent; Release of Liens.
(a) Lender hereby consents to (x) the Asset Sale, (y) the
Supply
Agreement
and the transactions contemplated thereby and (z) the sale of
the
Remaining Equipment and Fixtures, so long as:
(i) no Default or Event of Default has occurred and is
continuing or would be caused thereby;
(ii) the gross proceeds from the Asset Sale are not less than
$8,700,000;
(iii) Borrower shall, on the date of receipt of the proceeds
from the Asset Sale, repay the SouthTrust Debt in full;
(iv) Borrower shall (A) on the date of receipt of the proceeds
from the Asset Sale, repay the outstanding principal amount of
the
Revolving Loan Advances in an amount equal the amount of the
proceeds from the Asset Sale remaining after (1) repayment of
the
SouthTrust Debt and (2) the payment of (I) all past due
personal
property taxes of Borrower and (II) any other taxes of Borrower
due
in respect of the Asset Sale and (B) on the date of receipt of
the
proceeds from the sale of the Remaining Equipment and Fixtures,
repay the outstanding principal amount of the Revolving Loan
Advances in an amount equal the amount of the proceeds from
such
sale; and
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(v) Lender shall have received duly executed copies of the
Asset Purchase Agreement and the other documents executed and
delivered in connection therewith, in form and substance
satisfactory to Lender. Lender acknowledges it has previously
received executed copies of the Asset Purchase Agreement and
the
Supply Agreement.
(b) Upon execution of this Amendment by Borrower and Lender and
satisfaction of the conditions set forth in Section 1(a) hereof,
Lender
agrees to
file such documents as Borrower may reasonably request, at
Borrower's
expense, in order to release Lender's Lien on the Assets and,
when
requested by Borrower upon completion of the sale of the
Remaining
Equipment
and Fixtures, the Remaining Equipment and Fixtures, including,
without
limitation, Uniform Commercial Code Financing Statement
Amendments, as appropriate, for filing in each office where a
UCC
Financing
Statement has been filed or other instruments are required to
terminate
the filings or recordings in favor of Lender with respect to
the
Assets.
3.
Amendment to Definitions. The Agreement is amended by deleting
the
definitions of "Adjusted Tangible Net
Worth", "Fixed Charge Coverage Ratio" and
"Renewal Term" in their entirety from the
Agreement.
4. Further
Amendments to Definitions. The Agreement is amended by deleting
the definitions of "Availability Reserve",
"Borrowing Base" and "Capital
Expenditures" in their entirety from the
Agreement and inserting the following
new definitions in the appropriate
alphabetical location:
"Asset Purchase Agreement" means that certain Asset Purchase
Agreement
dated June 30, 2005, by and between Borrower and Buyer.
"Asset Sale" means the sale of the Assets by Borrower to Buyer.
"Asset Sale Closing Date" has the meaning given to it in
Section
6.18.
"Assets" means the "Purchased Assets" as defined in the Asset
Purchase
Agreement.
"Availability Reserve" means a reserve based on the requirement
that
excess
Availability under the Revolving Credit Facility be in an amount
of
not less
than (a) $600,000.00 at any time prior to (but not including)
the
Asset Sale
Closing Date or (b) $500,000.00 at any time on or after the
Asset Sale
Closing Date.
"Borrowing Base" means, with respect to Borrower, an amount in
dollars
equal to the lesser of (a) the Revolving Credit Facility, or
(b)
the sum,
without duplication, of: (i) up to eighty-five percent (85%) of
the net
amount of the Eligible Receivables; plus (ii) (A) on or prior
to
December
31, 2005, the lesser of (x) up to sixty percent (60%) of the
Eligible
Inventory and (y) $3,500,000.00 or (B) after December 31, 2005,
$0.00;
minus (iii) the Availability Reserve; minus (iv) the Dilution
Reserve;
and minus (v) other Reserves, if any.
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"Buyer" means Schreiber Foods, Inc., a Wisconsin corporation.
"Capital Expenditures" means the aggregate of all expenditures
made
and
liabilities incurred that, in accordance with GAAP, are required to
be
included
in or reflected by the property, plant, equipment or similar
fixed
assets accounts; provided, however, that in no event shall
Capital
Expenditures include any payments made
