-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CrFNHRPgwl4Wzr9gJbzd7UR8xu8GzEQLxbVN8W9gZ8m7EB15N0popFrzJ2ZnOXKF 4X33qzMjXfoyTLmtgl1wuQ== 0000950116-95-000500.txt : 19951119 0000950116-95-000500.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950116-95-000500 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SQUARE INDUSTRIES INC CENTRAL INDEX KEY: 0000093134 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 132610905 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04979 FILM NUMBER: 95592801 BUSINESS ADDRESS: STREET 1: 921 BERGEN AVE CITY: JERSEY CITY STATE: NJ ZIP: 07306 BUSINESS PHONE: 2017980090 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------------------- FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 ----------------- |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition from ___________________ to ________________________ Commission file number 0-4979 ------ SQUARE INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its Charter) NEW YORK 13-2610905 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 921 Bergen Avenue, Jersey City, New Jersey 07306 - ------------------------------------------- -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 798-0090 -------------- Not Applicable - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report 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 issuer was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes ___X___ No ______ Shares of Common Stock outstanding at September 30, 1995: 1,166,356 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES INDEX PART I. Page No. -------- Consolidated Balance Sheets - September 30, 1995 (unaudited) and December 31, 1994 (audited) 3 Consolidated Statements of Operations - for the nine and three months ended September 30, 1995 and 1994 (unaudited) 5 Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and 1994 (unaudited) 6 Notes to Consolidated Financial Statements 8 Management's Discussion and Analysis of Results of Operations and Financial Condition 13 PART II. Other Information 17 SIGNATURES 18 2 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, 1995 December 31, 1994 (Unaudited) (Audited) ----------- --------- ASSETS Current Assets: Cash $ 1,793,000 $ 1,226,000 Trade and other receivables 786,000 781,000 Prepaid expenses 1,582,000 1,660,000 Other current assets 549,000 555,000 Prepaid and refundable income taxes 292,000 353,000 ----------- ----------- Total current assets 5,002,000 4,575,000 ----------- ----------- Property, Equipment and Improvements, net 24,766,000 25,067,000 ----------- ----------- Other Assets: Deferred expenses (net of amortization) 2,295,000 890,000 Security deposits and other assets 2,410,000 1,932,000 ----------- ----------- 4,705,000 2,822,000 ----------- ----------- $34,473,000 $32,464,000 =========== ===========
See notes to consolidated financial statements 3 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, 1995 December 31, 1994 (Unaudited) (Audited) ----------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 1,159,000 $ 830,000 Accrued expenses 4,523,000 4,400,000 Accrued local rent tax (Note 4) 1,232,000 1,189,000 Current portion of long-term debt (Note 2) 652,000 1,210,000 Other liabilities 231,000 479,000 ---------- ---------- Total current liabilities 7,797,000 8,108,000 ---------- ---------- Deferred Rent 2,856,000 2,433,000 ---------- ---------- Long-Term Debt - less current portion (Note 2) 18,692,000 17,059,000 ---------- ---------- Deferred Taxes 174,000 174,000 ---------- ---------- Security Deposits - Customers 292,000 257,000 ---------- ---------- Stockholders' Equity: Common stock, $.01 par value; authorized 2,000,000 shares; issued, 1,218,389 shares and 1,205,689 shares 12,000 12,000 Common stock, subscribed 12,500 shares as of December 31, 1994 -0- 119,000 Additional paid-in capital 3,278,000 3,158,000 Retained earnings 1,825,000 1,529,000 Less: Treasury stock at cost, 52,033 shares as of September 30, 1995 and 12,837 shares as of December 31, 1994 (236,000) (59,000) Notes receivable for common stock subscribed -0- (119,000) Cumulative translation adjustment (217,000) (207,000) ----------- ----------- 4,662,000 4,433,000 ----------- ----------- $34,473,000 $32,464,000 =========== ===========
See notes to consolidated financial statements 4 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For The Nine Months Ended For The Three Months Ended September 30, September 30, ------------------------- --------------------------- 1995 1994 1995 1994 ------ ------ ------ ----- Parking service revenue $45,328,000 $44,093,000 $14,624,000 $14,768,000 Service station revenue 3,071,000 2,984,000 1,100,000 1,041,000 ---------- ---------- ----------- ----------- Total revenues 48,399,000 47,077,000 15,724,000 15,809,000 ---------- ---------- ----------- ----------- Costs and expenses: Cost of parking services 37,103,000 38,702,000 11,799,000 12,653,000 Operating costs - service station 3,112,000 3,029,000 1,086,000 1,057,000 General and administrative expenses 5,455,000 5,244,000 1,894,000 1,754,000 Provision for local rent tax (Note 4) 45,000 45,000 15,000 15,000 Interest 1,518,000 1,317,000 498,000 470,000 Write-off of assets 316,000 478,000 316,000 -0- ---------- ---------- ---------- ---------- Total costs and expenses 47,549,000 48,815,000 15,608,000 15,949,000 ---------- ---------- ---------- ---------- Earnings (Loss) from Parking and Service Station Operations 850,000 (1,738,000) 116,000 (140,000) Provision (Benefit) For Income Taxes (Note 6) 554,000 (587,000) 174,000 (47,000) --------- ---------- -------- --------- Net Earnings (Loss) $ 296,000 $ (1,151,000) $ (58,000) $ (93,000) ========= ============= ========== ========== Earnings (Loss) Per Share (Note 5) $ 0.23 $ (0.96) $ (0.05) $ (0.08) ========= ============= ========== ========== Computation of Shares - Weighted average of common stock outstanding and subscribed (Note 5) 1,262,474 1,192,809 1,166,356 1,192,852 ========= ========= ========= =========
See notes to consolidated financial statements 5 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Nine Months Ended September 30, -------------------------- 1995 1994 --------- --------- Cash Flows From Operating Activities: Net earnings (loss) $ 296,000 $(1,151,000) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Amortization of: Deferred expenses 31,000 26,000 Lease acquisition costs 13,000 76,000 Excess of cost over fair market value of net assets acquired -0- 103,000 Depreciation and amortization 1,159,000 1,264,000 Write-off of assets 316,000 478,000 Equity adjustment for foreign currency translations (10,000) (19,000) Increase (decrease) in cash from changes in assets and liabilities: Trade and other receivables (5,000) 120,000 Prepaid expenses and other current assets 20,000 (97,000) Prepaid and refundable income taxes 61,000 (486,000) Deferred expenses, net (1,439,000) (32,000) Security deposits and other assets (491,000) (216,000) Accounts payable, accrued expenses, accrued local rent tax and other liabilities 247,000 684,000 Deferred rent 423,000 (221,000) Security deposits - customers 35,000 31,000 --------- --------- Net cash provided by (used in) operating activities 656,000 560,000 --------- ---------
See notes to consolidated financial statements 6 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Nine Months Ended September 30, ----------------------------- 1995 1994 ----------- ---------- Cash Flows From Investing Activities: Additions to land, buildings, equipment and improvements $(1,165,000) $(774,000) ----------- ---------- Net cash used in investing activities (1,165,000) (774,000) ----------- ---------- Cash Flows From Financing Activities: Proceeds from borrowings 2,223,000 4,015,000 Payments and current maturities on long-term debt (1,148,000) (3,370,000) Proceeds from exercise of stock options and warrants 1,000 1,000 ----------- ---------- Net cash provided by financing activities 1,076,000 646,000 ----------- ---------- Net Increase in Cash 567,000 432,000 Cash, Beginning of Period 1,226,000 623,000 ----------- ---------- Cash, End of Period $1,793,000 $1,055,000 =========== ========== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $1,181,000 $1,131,000 Income taxes, net of refunds received $819,000 $(108,000)
Supplemental Schedule of Noncash Financing Activities: An officer/stockholder satisfied the balance of his note receivable to the Company, including accrued interest of $57,637, which note had been issued in connection with the exercise of a warrant to purchase shares of common stock by transferring 39,196 shares of common stock to the Company. The market value of the stock at the date of the transfer was $176,382. As a result, the Company issued to the officer/stockholder 12,500 shares of common stock. See notes to financial statements 7 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 NOTE 1 - The accompanying consolidated balance sheet as of September 30, 1995 and the consolidated statements of operations for the nine and three months ended September 30, 1995 and 1994 and the consolidated statements of cash flows for the nine months ended September 30, 1995 and 1994, respectively, are unaudited, but in the opinion of the Company, all adjustments (consisting of normal recurring accruals) necessary to present fairly the results of operations for such periods have been made. The financial statements should be read in conjunction with the Annual Report on Form 10K of the Company, for the period ended December 31, 1994. The Company changed, effective December 31, 1994, its fiscal year end from the last day in February to December 31st. As a result, the comparative 1994 financial statements have been restated to conform to current period presentation. The accompanying consolidated financial statements include the accounts of a foreign subsidiary and all domestic subsidiaries. All significant intercompany accounts and transactions have been eliminated. The results of operations for the nine and three months ended September 30, 1995 are not necessarily indicative of the results to be expected for the full year. NOTE 2 - Long-term debt consisted of the following: Interest Rate September 30, 1995 ------------- ------------------ Bank Loan: Facility I Prime + 2% 11,753,000 Facility II Prime + 2% 1,688,000 Notes Payable to Officers 10.25% 500,000 Notes Payable 7.25% - 10% $ 1,221,000 Mortgages Payable 7% - 11% 4,182,000 ---------- 19,344,000 Less current portion 652,000 ---------- $18,692,000 ===========
8 NOTE 2 - (continued) Facility I provides for a line of credit of $12,800,000, and is subject to the aggregate face amount of outstanding letters of credit plus unpaid drawings not exceeding $1,500,000. Facility II is a term loan that was payable in consecutive quarterly payments of $225,425. On October 31, 1995, Amendment No. 10 to the Company's bank loan agreement was executed. The amendment provides for an extension of the maturity dates of the Facility I principal to June 30, 1998 with respect to $61,900, to September 30, 1998 with respect to $150,000 and to December 31, 1998 with respect to $11,541,100 and extends the quarterly installment payment dates for Facility II to calendar quarters ending in the period June 30, 1996 to June 30, 1998. The amendment provides for prepayment of principal to the extent of 50% of the Company's cash flow above designated levels. The amendment also provides that commencing November 1, 1995 interest is to be paid at the rate of 4% per annum with the balance of the interest rate (the Bank's prime plus 2% per annum) to be accrued and deferred. The portion deferred will be paid or forgiven depending on the Company achieving reductions in its operating expenses from those for the year ended December 31, 1994 as follows: if the amount of the reduction as of December 31, 1995 is at least $500,000, the amounts deferred during November and December 1995 will be forgiven; if the amount of the reduction as of December 31, 1996 is at least $600,000, the amounts deferred during 1996 will be forgiven; and if the amount of the reduction as of December 31, 1997 is at least $700,000, the amounts deferred during 1997 and 1998 will be forgiven. The failure to achieve the designated level of reduction for any period will result in the obligation to pay the amount deferred during the applicable period. Debt covenants under the Credit Agreement as amended, include a limitation on indebtedness under mortgage obligations and financial covenants as to maintenance of minimum net worth, total liabilities to net worth and operating cash flow ratios. On June 28, 1995 two principal officers loaned $500,000 to the Company with interest payable at the same rate as the Facility I loan. As a condition of Amendment No. 10, the officers agreed to a revision of their loans, changing the terms from demand loans to loans to be repaid following the payment of the Facility loans with provisions for prepayment to the extent of 50% of the principal payments paid to the Bank under the credit agreement after the Bank has received post - October 31, 1995 principal payments of at least $1,000,000 and for the deferral of the interest in excess of 3.99% per annum (the loan interest rate to December 31, 1995 is 10.25% and prime plus 2% thereafter) until the Facility loans have been paid in full. 9 Under their amended loan agreement, they surrendered their rights to collateral which was to be provided under the original loan agreement and subordinated their loans to the Company's obligations under the Credit Agreement. In consideration of the original extension of the loans and the foregoing amendment, the Company issued to each of the officers a five year non-transferable Warrant to purchase 75,000 shares of the Company's Common Stock at a price of $6.40 per share, the average of the closing sales prices of the Common Stock on NASDAQ for June 28, 1995, and the two immediately prior days in which trades were effected in the stock. The consolidated Balance Sheet as of September 30, 1995 gives retroactive effect to Amendment No. 10 to the Company's credit facility agreement and the amendment of the loan agreement with two principal officers of the Company. Certain subsidiaries of the Company periodically acquire land/or buildings with a view to their future use in whole or in part as parking facilities. The properties are generally purchased subject to long-term mortgages. The mortgages vary in their payment terms and interest rates, some requiring only the payment of interest during the first five years. The mortgages payable are collateralized by the underlying assets which have a book value of $6,076,200. The two facility loans are collateralized by the stock of subsidiaries of the Company, except those whose stock may not be pledged because of prohibitions in leases and mortgages. Aggregate maturities on long-term debt are as follows: Year Ending September 30, ------------------------- 1996 $ 652,000 1997 1,002,000 1998 920,000 1999 12,654,000 2000 3,838,000 Remainder 278,000 --------- $19,344,000 =========== 10 NOTE 3 - FOREIGN OPERATIONS (CANADA) Summarized information relating to the Canadian operation is as follows:
September 30, 1995 December 31, 1994 ------------------ ----------------- Total assets $634,000 $589,000 Total liabilities 1,456,000 1,231,000 Deficiency in assets (822,000) (642,000)
For the nine month periods ended September 30, 1995 and September 30, 1994, net loss for the Canadian operation was $178,000 and $220,000, respectively. NOTE 4 - The Company received notices of determination from a municipal local authority for commercial rent tax which relate to the period June 1, 1978 through May 31, 1987 assessing the Company, net of payments, an aggregate of $907,005. The Company believes that the provision, which covers these assessments, possible future assessments, and related expenses through September 30, 1995, is adequate. NOTE 5 - EARNINGS PER SHARE Earnings (loss) per share has been computed using the weighted average number of shares of common stock outstanding and subscribed and the dilutive effect, if any, of common stock equivalents outstanding. Common stock equivalents were not included in the computation of loss per share for the nine months ended September 30, 1994 and for the three months ended September 30, 1995 and 1994 since their effect was anti-dilutive. NOTE 6 - INCOME TAXES The provision for income taxes of $554,000 for the nine month period ended September 30, 1995 is based on the effective tax rate expected for the year and includes (i) federal income taxes, (ii) income taxes of state and local jurisdictions for which the Company's operations were profitable and for which no net operating loss benefit is available, (iii) minimum corporate taxes for certain subsidiaries and (iv) an adjustment during the three-months ended September 30, 1995 for under-accruals in prior periods for federal and state income taxes for prior periods. No changes have been made to the deferred tax asset valuation allowances since Management is not able to conclude that realization of these deferred tax assets is more likely than not as a result of the Company's earnings history. Reductions to the valuation allowance will be recorded when, in the opinion of management, the 11 Company's ability to generate taxable income for a period of time is more certain. The income tax benefit of $587,000 for the nine month period ended September 30, 1994 reflects the benefit applicable to the loss for the period less minimum corporate taxes for certain subsidiaries. NOTE 7 - CONTINGENCIES Litigation: Various lawsuits against the Company have arisen in the course of the Company's business. In certain of these matters, large and/or indeterminate amounts are sought. In the opinion of the Company, any uninsured ultimate liability which could result from such litigation would not have a material adverse effect on the Company's financial position or the results of its operations. Letters of Credit: As of September 30, 1995, the Company's contingent debt amounted to approximately $1,025,500 under standby Letters of Credit issued pursuant to terms of its line of credit (Facility I). NOTE 8 WRITE-OFF OF ASSETS During the nine months ended September 30, 1995 and 1994, the Company wrote off leasehold acquisition costs, deferred expenses, fixed assets, and other miscellaneous charges relating to certain locations. 12 SQUARE INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations The improved operating results recorded for the 1994 fiscal year (the 10 months ended December 31, 1994) continued into the current year. Parking service revenues for the nine months ended September 30, 1995 (the "1995 Nine-Month Period") were greater by $1,235,000 (2.8%) than those for the nine-months ended September 30, 1994 (the "1994 Nine-Month Period"). For the three months ended September 30, 1995 (the "1995 Three-Month Period") parking service revenues which were $144,000 (1.0%) less than those for the three months ended September 30, 1994 (the "1994 Three-Month Period") would also have been higher but for a $562,000 payment made to the Company during 1994 in settlement of a dispute as to a parking location. The principal reason for the continued improvement was a net increase in parking capacity of approximately 2,400 cars which was effected during the nine months ended September 30, 1995 and increased patronage largely due to mild winter weather in the regions in which the Company operates as compared with one of the most severe winters in the Company's history in 1994 which caused a sharp curtailment of traffic near the Company's parking locations. The Company achieved a reduction of parking operating costs of $1,599,000 (4.1%) between the nine-month comparative periods and $854,000 (6.7%) between the three-month comparative periods, which resulted in reductions as percentages of parking revenues from 87.8% to 81.9% between the nine-month comparative periods and from 85.7% to 80.7% between the three-month comparative periods. The lower costs were principally due to economies in operations, primarily staff reductions, and a net reduction of two in the number of parking locations operated by the Company, including termination of unprofitable locations which were responsible in part for the $478,000 of asset write-offs in the 1994 Nine-Month Period, partially offset by a modest increase in labor costs resulting from two labor agreements the Company executed during nine months ended September 30, 1995. Two additional labor agreements are expected to be executed by December 31, 1995 and to result in a further modest increase in labor costs. The Company's gasoline station operation remained marginal due to the intense competition which adversely affects the industry and the area in which the Company's station is located. Revenues increased, primarily as a result of increased gasoline prices, by $87,000 (2.9%) between the comparative nine-months periods and $59,000 (5.7%) between the comparative three-month periods. Operation of the station produced losses for the 1995 and 1994 Nine- Month Periods of ($41,000) and ($45,000), respectively, and a slight operating profit 13 of $14,000 for the three months ended September 30, 1995 as compared to an operating loss of ($16,000), for the three months ended September 30, 1994. General and administrative expenses increased by $211,000 (4.0%) between the nine- month comparative periods and $140,000 (8.0%) between the three-month comparative periods. The increases reflect principally modest increases in salaries and travel expenses and the cost incurred with respect to a proposed real estate transaction which was terminated, partially offset by reductions due to the fewer locations under supervision and operating economies. As a result, such costs as a percentage of parking revenues (gasoline station operations require insignificant amounts of such expenses) increased from 11.9% to 12.0% between the nine-month periods and from 11.9% to 13.0% between the three-month periods. The increases in interest expense of $201,000 (15.3%) and $28,000 (6.0%), respectively, between the nine-month and three-month comparative periods were primarily the result of the higher interest rates caused by increases in the rate provided by amendments effected in June and October 1994 to the Company's credit facility, increases in the prime rate, and, with respect to the three-month comparative periods, increased borrowings. For the three months ended September 30, 1995, the Company effected a write-off of unamortized assets of $316,000 related to certain unprofitable locations as compared to asset write-offs of $478,000 taken during January and February, 1994. The 65.2% provision for income taxes for the 1995 Nine Month Period, and the provision of $174,000 despite pre-tax earnings of $116,000 for the 1995 Three Month Period are due principally to (i) minimum corporate income taxes imposed by the state and City of New York and the states of Pennsylvania and New Jersey, (ii) the non-deductibility for income tax purposes of the loss suffered by the Company's Canadian operations ($178,000 and $73,000, respectively for the nine and three- month periods), (iii) income taxes in jurisdictions in which the Company's operations were profitable and for which no net operating loss was available and (iv) an adjustment during the three-months ended September 30, 1995 for under-accruals in prior periods for federal and state income taxes for prior periods. Liquidity and Capital Resources As of September 30, 1995, the Company had a decrease of $738,000 in its working capital deficit ($2,795,000) from the working capital deficit ($3,533,000) as of December 31,1994, principally as a result of the extension of the maturity dates of the Company's Facility II loan installments provided by the amendment to the credit agreement discussed below. Operating activities provided net cash of $656,000 for the 1995 Nine-Month Period as compared to $560,000 for the 1994 Nine-Month Period; the difference principally the result of the materially better operating results, partially offset by a material increase in deferred expenses, principally due to adjustments of rents. 14 Additions to land, buildings, equipment and improvements amounted to $1,165,000 net for the 1995 Nine-Month Period, a $391,000 increase in the net amount expended or accrued during the 1994 Nine-Month Period for this purpose. The Company anticipates capital expenditures of not more than $1,500,000 for the full year ending December 31, 1995, to be financed from the Company's operations, borrowings and joint ventures with equity co-venturers. The Company derived net cash from financing activities of $1,076,000 and $646,000 respectively, during the 1995 Nine-Month Period and the 1994 Nine-Month Period, with the difference principally resulting from loans of $500,000 from its officers in July 1995 and lower loan payments during the 1995 Nine-Month Period. As a result of the foregoing, the Company increased its cash balances by $567,000 as compared with an increase of $432,000 for the 1994 Nine-Month Period. On October 31, 1995 the Company's credit agreement with its Bank lender was amended to provide more favorable terms with respect to principal payments, interest payments and the financial covenants. The maturity dates of the Facility I credit loan principal were extended to June 30, 1998 with respect to $61,900, September 30, 1998 with respect to $150,000 and December 31, 1998 with respect to the balance, which as of September 30, 1995, amounted to $11,540,753, and the quarterly installment payment dates for the Facility II term loan in the aggregate principal amount of $1,688,100 were deferred to the calendar quarters ending in the period June 30, 1996 to June 30, 1998. The amendment provides for prepayment of principal to the extent of 50% of the Company's cash flow above designated levels. The amendment also provides that commencing November 1, 1995 interest is to be paid at the rate of 4% per annum, with the balance of the interest rate (the Bank's prime plus 2% per annum) to be accrued but deferred. The portion deferred will be paid or forgiven depending on the Company achieving reductions in its operating expenses from those for the year ended December 31, 1994 as follows: if the amount of the reduction as of December 31, 1995 is at least $500,000, the amounts deferred during November and December 1995 will be forgiven; if the amount of the reduction as of December 31, 1996 is at least $600,000 the amounts deferred during 1996 will be forgiven; and if the amount of the reduction as of December 31, 1997 is at least $700,000, the amounts deferred during 1997 and 1998 will be forgiven. The failure to achieve the designated level of reduction for any period will result in the obligation to pay the amount deferred during the applicable period at the end of such period. As a condition of the amendment to the credit agreement, Messrs. Lowell Harwood and Sanford Harwood, respectively Chairman and Assistant Chairman, entered into an amendment of their loan agreement with the Company relating to loans by them in the aggregate amount of $500,000, changing them from demand loans to loans to be repaid following the payment of the Facility loans with provisions for prepayment to the extent of 50% of the principal payments paid to the Bank under the credit agreement after the Bank has received post - October 31, 1995 principal payments of at least $1,000,000 and for the deferral of the interest in excess of 3.99% per annum (the loan interest rate after December 31, 1995 is the Bank's prime rate plus 2%) until the Facility 15 loans have been paid in full. Under their amended loan agreement, they surrendered their rights to collateral which was to be provided under the original loan agreement and subordinated their loans to the Company's obligations under the credit agreement. The Company believes that funds generated from its operations and additional mortgage loans with respect to properties acquired or developed will be sufficient to finance its capital and operational requirements for the 12 months ended September 30, 1996. 16 Part II - Other Information Item 5. Other Information See "Management's Discussion and Analysis of Results of Operations and Financial Condition" for information with respect to (i) Amendment No. 10 executed on October 31, 1995 to the Company's Credit Agreement with NatWest Bank N.A. (the "Bank") extending the maturity dates of the Company's Facility I and Facility II loans, providing for a deferral and possible forgiveness of the loan interest in excess of 4% per annum and modifying the financial covenants; and (ii) an amendment to the loan agreement between the Company and Messrs. Lowell Harwood, Chairman, and Sanford Harwood, Assistant Chairman, Secretary and Director, making their demand loans in the aggregate amount of $500,000 payable after the Facility loans have been paid in full, subject to prepayments of 50% of the loan principal payments to the Bank after the Bank has received after October 31, 1995 principal loan payments in the amount of $1,000,000, deferring that portion of the loan interest in excess of 3.99% per annum to the date the Facility Loans have been paid in full (the interest rate after December 31, 1995 is the Bank's prime rate plus 2%), subordinating the loans to the Company's obligations to the Bank and eliminating the Company's obligation to collaterize the loan. In consideration of the original extension of the loans and the foregoing amendment, the Company issued to each of Messrs. Lowell and Sanford Harwood a five year non-transferable Warrant to purchase 75,000 shares of the Company's Common Stock at a price of $6.40 per share, the average of the closing sales prices of the Common Stock on NASDAQ for June 28, 1995, the date of the original loan agreement and the two immediately prior days in which trades were effected in the stock. Item 6. Exhibits and Reports on Form 8-K a) Exhibits 10(a) Copy of Amendment No. 10, dated October 31, 1995 to the Credit Agreement between the Company and NatWest Bank N.A.. 10(b) Copy of Amendment, dated October 31, 1995, to the Loan Agreement between the Company and Lowell Harwood and Sanford Harwood. 10(c) Form of Warrant, dated October 31, 1995, issued to each of Lowell Harwood and Sanford Harwood. 27. Financial Data Schedule b) No reports on Form 8-K have been filed during the quarter ended September 30, 1995. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SQUARE INDUSTRIES, INC. s/ Sanford Harwood -------------------------------------- Sanford Harwood Assistant Chairman s/ John Kowal -------------------------------------- John Kowal Controller and Chief Financial Officer Dated: November 13, 1995 18 EX-10 2 EXHIBIT 10(A) Exhibit 10(a) AMENDMENT NO. 10 TO CREDIT AGREEMENT THIS AMENDMENT NO. 10 TO CREDIT AGREEMENT (this "Amendment No. 10"), dated as of October 31, 1995, is by and among NatWest Bank N.A. (as successor to National Westminster Bank USA, the "Bank"), Square Industries, Inc., a New York corporation (the "Borrower"), and 808 Square Corp., a New York corporation ("808 Corp."). RECITALS: WHEREAS, the Bank, the Borrower and 808 Corp. have previously entered into that certain Credit Agreement dated July 5, 1988, as amended by Amendment No. 1 thereof dated July 26, 1988, Amendment No. 2 thereof dated as of February 28, 1990, Amendment No. 3 thereof dated April 18, 1990, Amendment No. 4 thereof dated as of April 30, 1990, Amendment No. 5 thereof dated as of February 28, 1991, Amendment No. 6 thereof dated June 4, 1992, Amendment No. 7 thereof dated as of February 28, 1993, Amendment No. 8 thereof dated as of February 28, 1994 and Amendment No. 9 thereof dated as of October 11, 1994 (as amended, the "Credit Agreement"), pursuant to which the Bank agreed to make loans to and issue letters of credit for the account of the Borrower and 808 Corp.; WHEREAS, the obligations of the Borrower and 808 Corp. under the Credit Agreement are guaranteed by certain subsidiaries of the Borrower (the "Subsidiary Guarantors"); WHEREAS, the Borrower and 808 Corp. desire that the Credit Agreement be amended in certain respects; -1- WHEREAS, the Bank is willing to amend the Credit Agreement upon the terms and subject to the conditions of this Amendment No. 10; and WHEREAS, capitalized terms not defined herein shall have the meanings ascribed to such terms in the Credit Agreement; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 AMENDMENTS Subject to the satisfaction of the conditions contained in Article 5 hereof, effective as of the Tenth Amendment Effective Date (as defined below), the Credit Agreement is hereby amended as follows: 1.01. Article 1 of the Credit Agreement is hereby amended by: (a) Deleting the definition of "Credit Loan Termination Date" in its entirety and replacing it with the following: ""Credit Loan Termination Date" - December 31, 1998" (b) Deleting the definition of "Excess Cash Flow" in its entirety and replacing it with the following: ""Excess Cash Flow" - for any fiscal year or calendar quarter of the Borrower, the Cash Flow in excess of the Projected Cash Flow for such fiscal year or quarter set forth or reflected in the Borrower's financial projections attached as Exhibit 2.5(e) hereto ("Projected Cash Flow"). For each calendar quarter during 1997 and during 1998 the Projected Cash Flow shall be set forth on a schedule to be prepared by the Borrower and delivered to the Bank at least 30 days prior to the relevant calendar quarter, provided however, that the Projected Cash Flows for the four calendar quarters of each of 1997 and 1998 do not -2- exceed the Projected Cash Flow for that year as set forth in Exhibit 2.5(e)." (c) Adding thereto the following definitions in the appropriate alphabetical order: ""Amendment No. 10" - Amendment No. 10 To Credit Agreement dated as of the Tenth Amendment Closing Date by and among the Borrower, 808 Corp. and the Bank." ""Cash Flow" - for any quarter or fiscal quarter or any fiscal year of the Borrower and its subsidiaries, the net cash flow as determined in accordance with generally accepatable accounting principles including paid interest on Indebtedness less the sum of (i) principal payment on Indebtedness, (ii) capital expenditures, (iii) lease renewal and replacement costs, and (iv) real estate and income tax payments." ""Projected Cash Flow" - for any fiscal quarter, as defined under "Excess Cash Flow."" ""Tenth Amendment Closing Date" - October 31, 1995." 1.02. Subsection 2.1(a) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(a) The Borrower and the Bank acknowledge and agree that as of the Tenth Amendment Closing Date the Borrower has outstanding loans (individually, a "Credit Loan" and collectively the "Credit Loans") in the aggregate principal amount of $11,758,452.70 and outstanding Letters of Credit in the aggregate face amount of $1,025,000.00, owing to the Bank and which shall continue to be outstanding pursuant to the terms and conditions of this Agreement and the other Loan Documents. The Borrower and the Bank further acknowledge and agree that the Commitment of the Bank has terminated as of the Tenth Amendment Closing Date and the Bank is no longer obligated to made or advance any additional Credit Loans or Letters of Credit, provided that any Letter of Credit existing on the Tenth Amendment Closing Date may, at the option of the Borrower so long as no Default or Event of Default has occurred and is continuing, be extended to a date prior to the Credit Loan Termination Date." 1.03. Subsection 2.1(b) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: -3- "(b) The Borrower and the Bank acknowledge and agree that as of the Tenth Amendment Closing Date the Borrower has outstanding a term loan (the "Square Term Loan") in the aggregate principal amount of $1,688,100.00 owing to the Bank which shall continue to be outstanding pursuant to the terms and conditions of this Agreement and the other Loan Documents." 1.04. Subsection 2.1(d) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(d) Subject to the terms of this Agreement, the Credit Loans may be repaid at any time and from time to time, in whole or in part, without premium or penalty, and any amount so repaid may not be reborrowed." 1.05. Subsection 2.1(e) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(e) [intentionally omitted]" 1.06. Subsection 2.5(e) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(e) Not later than twenty one (21) days after each fiscal quarter of the Borrower, the Borrower shall repay the Credit Loans in an amount equal to fifty percent (50%) of any Excess Cash Flow, if any, for such fiscal quarter. Any such repayments shall be applied to the remaining scheduled principal installments of the Credit Loans in the inverse order of maturity. In the event the Borrower's Cash Flow in any fiscal quarter is less than the Projected Cash Flow for such fiscal quarter (any such difference being referred to as a "Cash Flow Deficit"), the Borrower may carry forward the Cash Flow Deficit to any succeeding fiscal quarters and apply such Cash Flow Deficit to reduce the Excess Cash Flow for any such succeeding fiscal quarter." 1.07. Subsection 2.8(a) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(a) The Borrower shall pay to the Bank the principal amount of the Credit Loans on the dates and in the amounts as follows: Payment Date Amount ------------ ------ June 30, 1998 $61,900.00 September 30, 1998 $150,000.00 December 31, 1998 $11,546,552.70 or the then outstanding principal amount of the Credit Loans" -4- 1.08. Subsection 2.8(b) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(b) The Borrower shall pay to the Bank the principal amount of the Square Term Loan on the dates and in the amounts as follows: Payment Date Amount ------------ ------ June 30, 1996 $250,000.00 September 30, 1996 $250,000.00 December 31, 1996 $250,000.00 March 31, 1997 $250,000.00 June 30, 1997 $150,000.00 September 30, 1997 $150,000.00 December 31, 1997 $150,000.00 March 31, 1998 $150,000.00 June 30, 1998 $ 88,100.00" 1.09. Subsection 2.9(a) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(a) The Borrower and the Bank acknowledge and agree that as of the Tenth Amendment Closing Date the aggregate amount of accrued and unpaid interest on the Credit Loans is $514,006.79 (the "Credit Loan Prior Interest"), that $191,900.79 of the Credit Loan Prior Interest has been paid by the Borrower to the Bank on the Tenth Amendment Closing Date and that the Borrower will pay to the Bank the unpaid portion the Credit Loan Prior Interest on the dates and in the amounts as follows: Payment Date Amount January 31, 1996 $107,369.00 February 28, 1996 $107,369.00 March 31, 1996 $107,368.00 -5- Commencing on November 1, 1995, the unpaid principal amount of the Credit Loans shall accrue interest for the period commencing on November 1, 1995 until the Credit Loans shall be paid in full, unless adjusted as provided below, at a rate per annum equal to the Prime Rate plus two percent (2.0%) (the "Existing Rate"). Borrower shall engage an independent consultant who is acceptable to the Bank (the "Consultant") (the firm of Ballenger, Budetti and Associates LLP is acceptable to the Bank) to determine whether reductions in the operating and general and administrative costs of the Borrower and its subsidiaries (collectively for purposes of this Section 2.9(a) and Section 2.9(b), the "Borrower") of $500,000 (the "Threshold Amount") or more have been effected from those incurred in 1994. The determination shall be in the form of a comparison of the annualized (i) costs of operations for the quarter ended December 31, 1994 for the parking locations operated by the Borrower during that quarter (the "1994 Locations") and (ii) general and administrative expenses of the Borrower for the quarter ended December 31, 1994 as compared (a) with respect to calendar 1995, the annualized costs of operations of the 1994 Locations and general and administrative costs of the Borrower during the quarter ended December 31, 1995; (b) with respect to 1996, the annualized costs of operations of the 1994 Locations and general and administrative costs of the Borrower during the quarter ended December 31, 1996 and (c) with respect to 1997, the annualized costs of operations of the 1994 Locations and general and administrative costs of the Borrower during the quarter ended December 31, 1997. The comparison shall take into consideration inter alia, payroll costs, including overtime, and the discontinuation or termination of unprofitable 1994 Locations, but shall not include with respect to general and administrative expenses, extraordinary items and the costs incurred with respect to the negotiation and execution of Amendment No. 10 and the costs incurred, including the commitment fee, in seeking and negotiating a proposed secured loan from Greyrock Capital Group Co., Inc. On the last day of each month, commencing on November 30, 1995, the Borrower shall pay the Bank accrued interest on the unpaid principal amount of the Credit Loans at a rate per annum equal to four (4.0%) (the "Current Pay Rate"), with the unpaid portion of the accrued interest for each month to be deferred (such portion of deferred and unpaid interest, the "Deferred Interest") until paid or forgiven as provided below. In the event that the reduction in the operating costs and general and administrative expenses for calendar 1995 as determined above is at least the Threshold Amount, then (i) the amount of Deferred Interest for the period from November 1, 1995 to December 31, 1995 shall be forgiven and shall no longer be payable by the Borrower and (ii) the unpaid principal amount of the Credit Loans shall accrue interest for the period commencing as of January 1, 1996 until the Credit Loans shall be paid in full, unless adjusted as provided below, at a rate per annum equal to the Prime Rate (the "Reduction Rate"), with accrued interest payable by the Borrower to the Bank on the last day of each month at the Current Pay Rate and -6- with the unpaid portion of the accrued interest for each month being deferred as Deferred Interest until paid or forgiven as provided below; provided, however, that if the cost reduction was less than the Threshold Amount, then (A) no adjustment to the Existing Rate shall occur and (B) all Deferred Interest for the period from November 1, 1995 to December 31, 1995 shall be due and payable in full on the last day of the month in which the determination by the Consultant is delivered to the Bank. During 1996 the Borrower shall continue to pay accrued interest on the last day of each month at the Current Pay Rate, with any Deferred Interest from and after January 1, 1996 being paid or forgiven as provided below. In the event that the reduction in the operating costs and general and administrative expenses for 1996 as determined above is at least the Threshold Amount plus $100,000, then (i) the amount of Deferred Interest for the period from January 1, 1996 to December 31, 1996 shall be forgiven and shall no longer be payable by the Borrower and (ii) the unpaid principal amount of the Credit Loans shall accrue interest for the period commencing as of January 1, 1997 until the Credit Loans shall be paid in full, unless adjusted as provided below, at the Reduction Rate, with accrued interest payable by the Borrower to the Bank on the last day of each month at the Current Pay Rate and with the unpaid portion of the accrued interest for each month being deferred as Deferred Interest until paid or forgiven as provided below; provided, however, that if the cost reduction is less than the Threshold Amount plus $100,000, then (A) the unpaid principal amount of the Credit Loans shall accrue interest for the period commencing as of January 1, 1997 until the Credit Loans shall be paid in full, unless adjusted as provided below, at the Existing Rate and (B) all Deferred Interest for the period from January 1, 1996 to December 31, 1996 shall be due and payable in full on the last day of the month in which determination by the Consultant was delivered to the Bank. During 1997 and 1998, the Borrower shall continue to pay accrued interest on the last day of each month at the Current Pay Rate, with any Deferred Interest from and after January 1, 1997 being paid or forgiven as provided below. In the event that the reduction in the operating costs and general and administrative expenses for 1997 as determined above is a least the Threshold Amount plus $200,000, then the amount of Deferred Interest for the period from January 1, 1997 until the Credit Loans shall be paid in full shall be forgiven and shall no longer be payable by the Borrower; provided, however, that if the cost reduction is less than the Threshold Amount plus $200,000, then (A) the unpaid principal amount of the Credit Loans shall accrue interest for the period commencing as of January 1, 1998 until the Credit Loans shall be paid in full at the Existing Rate, (B) all Deferred Interest from the period from January 1, 1997 to December 31, 1997 shall be due and payable in full on the last day of the month in which the determination by the Consultant was delivered to the Bank and (C) during 1998 the Borrower shall continue to pay accrued interest on the last day of each month at the Current Pay Rate, with any Deferred Interest from and after January 1, 1998 being payable in full on December 31, 1998." -7- 1.10. Subsection 2.9(b) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(b) The Borrower and the Bank acknowledge and agree that as of the Tenth Amendment Closing Date the aggregate amount of accrued and unpaid interest on the Square Term Loan is $49,490.19 (the "Square Term Loan Prior Interest"), that $17,500.19 of the Square Term Loan Prior Interest has been paid by the Borrower to the Bank on the Tenth Amendment Closing Date and that the Borrower will pay to the Bank the unpaid portion the Square Term Loan Prior Interest on the dates and in the amounts as follows: Payment Date Amount ------------ ------ January 31, 1996 $10,663.00 February 28, 1996 $10,663.00 March 31, 1996 $10,664.00 Commencing on November 1, 1995, the unpaid principal amount of the Square Term Loan shall accrue interest for the period commencing on November 1, 1995 until the Square Term Loan shall be paid in full, unless adjusted as provided below, at a rate per annum equal to the Prime Rate plus two percent (2.0%) (the "Existing Rate"). On the last day of each month, commencing on November 30, 1995, the Borrower shall pay the Bank accrued interest on the unpaid principal amount of the Square Term Loan at a rate per annum equal to four (4.0%) (the "Current Pay Rate"), with the unpaid portion of the accrued interest for each month to be deferred (such portion of deferred and unpaid interest, the "Deferred Interest") until paid or forgiven as provided below. In the event that the reduction in the cost of operations and general and administrative expenses of the Borrower for calendar 1995 from those for calendar 1994 as determined in Section 2.9(a) is at least the Threshold Amount, then (i) the amount of Deferred Interest for the period from November 1, 1995 to December 31, 1995 shall be forgiven and shall no longer be payable by the Borrower and (ii) the unpaid principal amount of the Square Term Loan shall accrue interest for the period commencing as of January 1, 1996 until the Square Term Loan shall be paid in full, unless adjusted as provided below, at a rate per annum equal to the Prime Rate (the "Reduction Rate"), with accrued interest payable by the Borrower to the Bank on the last day of each month at the Current Pay Rate and with the unpaid portion of the accrued interest for each month being deferred as Deferred Interest until paid or forgiven as provided below; provided, however, that if the amount of the cost reduction is less than the Threshold Amount, then (A) no adjustment to the Existing Rate shall occur and (B) all Deferred Interest for the period from November 1, 1995 to December 31, -8- 1995 shall be due and payable in full on the last day of the month in which the determination by the Consultant is delivered to the Bank. During 1996 the Borrower shall continue to pay accrued interest on the last day of each month at the Current Pay Rate, with any Deferred Interest from and after January 1, 1996 being paid or forgiven as provided below. In the event the reduction in the cost of operations and general and administrative expenses of the Borrower for calendar 1996 from those for calendar 1994 as determined in Section 2.9(a) is at least the Threshold Amount plus $100,000, then (i) the amount of Deferred Interest for the period from January 1, 1996 to December 31, 1996 shall be forgiven and shall no longer be payable by the Borrower and (ii) the unpaid principal amount of the Square Term Loan shall accrue interest for the period commencing as of January 1, 1997 until the Square Term Loan shall be paid in full, unless adjusted as provided below, at the Reduction Rate, with accrued interest payable by the Borrower to the Bank on the last day of each month at the Current Pay Rate and with the unpaid portion of the accrued interest for each month being deferred as Deferred Interest until paid or forgiven as provided below; provided, however, that if the amount of the cost reduction is less than the Threshold Amount plus $100,000, then (A) the unpaid principal amount of the Square Term Loan shall accrue interest for the period commencing as of January 1, 1997 until the Square Term Loan shall be paid in full, unless adjusted as provided below, at the Existing Rate and (B) all Deferred Interest for the period from January 1, 1996 to December 31, 1996 shall be due and payable in full on the last day of the month in which the determination by the Consultant is delivered to the Bank. During 1997 and 1998, the Borrower shall continue to pay accrued interest on the last day of each month at the Current Pay Rate, with any Deferred Interest from and after January 1, 1997 being paid or forgiven as provided below. In the event the reduction in the cost of operations and general and administrative expenses of the Borrower for calendar 1997 from those for calendar 1994 as determined in Section 2.9(a) is at least the Threshold Amount plus $200,000, then the amount of Deferred Interest for the period from January 1, 1997 to December 31, 1998 shall be forgiven and shall no longer be payable by the Borrower; provided, however, that if the amount of the cost reduction is less than the Threshold Amount plus $200,000, then (A) the unpaid principal amount of the Square Term Loan shall accrue interest for the period commencing as of January 1, 1998 until the Square Term Loan shall be paid in full at the Existing Rate, (B) all Deferred Interest for the period from January 1, 1997 to December 31, 1997 shall be due and payable in full on the last day of the month in which the determination by the Consultant is delivered to the Bank and (C) the Borrower shall continue to pay accrued interest on the last day of each month at the Current Pay Rate, with any Deferred Interest from and after January 1, 1998 being payable in full on December 31, 1998." 1.11. Subsection 2.9(c) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(c) [Intentionally omitted]" -9- 1.12. Subsection 2.9(e) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(e) Except as provided in the next sentence, accrued interest on each Loan shall be payable (i) as provided in Subsections 2.9(a) and (b) hereof and (ii) upon the payment of each Loan (but only on the principal paid). Interest which is payable at the Post-Default Rate shall be payable on demand of the Bank." 1.13. Subsection 2.10(a) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it with the following: "(a) The Credit Loans and the reimbursement obligations of the Borrower with respect to the Letters of Credit outstanding on the Tenth Amendment Closing Date shall be evidenced by a single promissory note of the Borrower (as amended, amended and restated, and supplemented from time to time, the "Credit Note") in substantially the form of Exhibit A to Amendment No. 10, payable to the order of the Bank in the principal amount of $12,783,452.70 and otherwise duly completed." 1.14. Subsection 2.10(c) of the Credit Agreement is hereby amended by deleting such Subsection in its entirety and replacing it as follows: "(c) The Square Term Loan shall be evidenced by a single promissory note of the Borrower (as amended, amended and restated, and supplemented from time to time, the "Square Term Note") in substantially the form of Exhibit B to Amendment No. 10, payable to the order of the Bank in a principal amount of $1,688,100.00 and otherwise duly completed." 1.15. Section 6.9 of the Credit Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following: "Section 6.9 Financial Covenants. Have or maintain with respect to the Borrower and its consolidated Subsidiaries (determined on a consolidated basis): (a) Net Worth at all times during the periods set forth below in the amounts not less than the amount set forth below opposite each such period: -10- Period Minimum Net Worth ------ ----------------- 10/1/95-12/31/95 $4,200,000 1/1/96-3/31/96 $4,000,000 4/1/96-6/30/96 $4,200,000 7/1/96-9/30/96 $4,100,000 10/1/96-12/31/96 $4,300,000 1/1/97-3/31/97 $4,100,000 4/1/97-6/30/97 $4,400,000 7/1/97-9/30/97 $4,200,000 10/1/97-12/31/97 $4,200,000 1/1/98-3/31/98 $4,500,000 4/1/98-12/31/98 $4,500,000 (b) A ratio of Total Liabilities to Net Worth at all times during the periods set forth below at not more than the ratio set forth below opposite each such period: Period Minimum Ratio ------ ------------- 10/1/95-12/31/95 6.75 to 1 1/1/96-3/31/96 7.00 to 1 4/1/96-6/30/96 6.75 to 1 7/1/96-9/30/96 7.00 to 1 10/1/96-12/31/96 6.50 to 1 1/1/97-3/31/97 6.75 to 1 4/1/97-6/30/97 6.50 to 1 7/1/97-9/30/97 6.75 to 1 10/1/97-12/31/97 6.40 to 1 1/1/98-3/31/98 6.60 to 1 4/1/98-12/31/98 6.30 to 1 (c) At the end of each fiscal quarter ending during the periods set forth below, the Operating Cash Flow Ratio for the immediately preceding four fiscal quarters at not less than the following: -11- Minimum Operating Cash Flow Ratio: Period Ratio ------ ----- 10/1/95-12/31/95 1.00 to 1 1/1/96-3/31/96 1.00 to 1 4/1/96-6/30/96 1.00 to 1 7/1/96-9/30/96 1.00 to 1 10/1/96-12/31/96 1.00 to 1 1/1/97-3/31/97 1.00 to 1 4/1/97-6/30/97 1.00 to 1 7/1/97-9/30/97 1.00 to 1 10/1/97-12/31/97 1.00 to 1 1/1/98-3/31/98 1.00 to 1 4/1/98-12/31/98 1.00 to 1 1.16. Article 6 of the Credit Agreement is hereby amended by adding a new Section 6.14 at the end thereof as follows: "Section 6.14 New York Mortgage. Pay to the Bank on or before June 30, 1996 all mortgage recording taxes which are payable upon the recording of the mortgage covering the property owned by 47th Street Parking Associates located at 131-135 East 47th Street, New York, New York (the "47th Street Mortgage"), and provide the Bank with a mortgagee's title insurance policy or policies, which shall be issued to the Bank in form and by a company or companies satisfactory to the Bank insuring that the 47th Street Mortgage constitutes a valid, direct first mortgage lien, in an aggregate principal amount of not less than $3,000,000 of the Loans upon the fee simple title of 47th Street Parking Associates, and execute and deliver, or cause to be executed and delivered, such other agreements, instruments and documents as the Bank may reasonably require to effect the purposes of the 47th Street Mortgage; provided, however, that if an Event of Default occurs on or prior to June 30, 1996, the Bank may record the 47th Street Mortgage and all of the foregoing costs and expenses (including, without limitation, mortgage recording tax and title insurance costs) shall be immediately due and payable by the Borrower." 1.17. Section 7.1 of the Credit Agreement is hereby amended by adding a new subsection (f) at the end thereof as follows: -12- "(f) Indebtedness of the Borrower in an aggregate principal amount not to exceed $500,000 owing to Lowell Harwood and Sanford Harwood; provided that (i) such Indebtedness be evidenced by the promissory notes (the "Shareholder Notes") dated the Tenth Amendment Closing Date, copies of which have been delivered, and are in form and substance satisfactory, to the Bank pursuant to Amendment No. 10, (ii) such Indebtedness is subordinated to the Obligations pursuant to the subordination agreement (the "Subordination Agreement") dated as of the Tenth Amendment Closing Date and executed pursuant to Amendment No. 10." 1.18. Section 7.11 of the Credit Agreement is hereby amended by adding at the end thereof the following: "or modify, amend, supplement or terminate, or agree to modify, amend, supplement or terminate the Shareholder Notes or the Subordination Agreement" 1.19. The Credit Agreement is hereby amended by attaching Exhibit 2.5(e) thereto in the form of Exhibit 2.5(e) to this Amendment No. 10. ARTICLE 2 AMENDED AND RESTATED NOTES 2.01. Simultaneously with the execution and delivery of this Amendment No. 10, the Borrower shall execute and deliver to the Bank a Fifth Amended and Restated Credit Note in the form of Exhibit A attached hereto in substitution for, and in fifth restatement of, the indebtedness evidenced by the Credit Note. Upon the execution of the Fifth Amended and Restated Credit Note and delivery thereof by the Borrower to the Bank, the Bank shall mark the existing Credit Note "Amended and Restated by Substitution of Amended and Restated Credit Note" and shall return it to the Borrower. All interest accrued and unpaid on the existing Credit Note through the date of execution and delivery of the Fifth Amended and Restated Credit Note shall be evidenced by and payable under the Fifth Amended and Restated Credit Note. -13- 2.02. Simultaneously with the execution and delivery of this Amendment No. 10, the Borrower shall execute and deliver to the Bank a First Amended and Restated Square Term Note in the form of Exhibit B attached hereto in restatement of, the indebtedness evidenced by the Square Term Note. Upon the execution of the First Amended and Restated Square Term Note and delivery thereof by the Borrower to the Bank, the Bank shall mark the existing Square Term Note "Amended and Restated by Substitution of Amended and Restated Square Term Note" and shall return it to the Borrower. All interest accrued and unpaid on the existing Square Term Note through the date of execution and delivery of the First Amended and Restated Square Term Note shall be evidenced by and payable under the First Amended and Restated Square Term Note. ARTICLE 3 ACKNOWLEDGMENTS AND CONFIRMATIONS 3.01. Each of the Borrower and 808 Corp. acknowledges and confirms that: (a) the Liens granted pursuant to the Security Documents secure, without limitation, the Indebtedness, liabilities and obligations of the Borrower to the Bank under this Amendment No. 10 and the Fifth Amended and Restated Credit Note and the First Amended and Restated Square Term Note (collectively, the "Restated Notes"), whether or not so stated in the Security Documents, and that the term "Obligations" or "Liabilities" as used in the Security Documents (or any other term used therein to refer to the Indebtedness, liabilities and obligations of the Borrower to the Bank) includes, without limitation, Indebtedness, liabilities and obligations to the Bank under the Credit Agreement, as amended by this Amendment No. 10, and the Restated Notes; (b) all references in the Credit Agreement, the Security Documents, the other Loan Documents and in any other agreements, instruments and documents executed and delivered pursuant to any of the foregoing to the "Credit -14- Agreement" and, in the case of the Credit Agreement to "this Agreement", shall be deemed to refer to the Credit Agreement, as amended hereby; and (c) all references in the Credit Agreement, the Security Documents, the other Loan Documents and in any other agreement, instrument or document executed and delivered pursuant to any of the foregoing to the "Notes" shall be deemed to refer to the Restated Notes. ARTICLE 4 REPRESENTATIONS AND WARRANTIES 4.01. The Borrower and 808 Corp. each represents and warrants to the Bank that: (a) each of the representations and warranties set forth in Article 3 of the Credit Agreement is true in all respects as of the date hereof and with the same effect as though made on the date hereof, and is hereby incorporated herein in full by reference as if fully restated herein in its entirety, except for changes in the ordinary course of business, which are not, either singly or in the aggregate, materially adverse to the business or financial condition of the Borrower and its Subsidiaries taken as a whole; (b) it has the power and authority to execute, deliver and perform this Amendment No. 10, the Restated Notes and the other documents and instruments executed pursuant hereto (collectively, the "Amendment Documents"); (c) it has taken all necessary action, corporate or otherwise, to authorize the execution, delivery and performance of the Amendment Documents; and (d) the Amendment Documents constitute the valid and legally binding obligations of the Borrower and 808 Corp. to the extent a party thereto, each enforceable in accordance with their respective terms. -15- ARTICLE 5 CONDITIONS 5.01. The effectiveness of the amendments contained in Article 1 of this Amendment No. 10 shall be subject to the satisfaction of the following conditions: (a) The Bank shall have received: (i) the duly executed and delivered Restated Notes, (ii) a legal opinion from counsel to the Borrower, 808 Corp. and the Subsidiary Guaranters in form and substance satisfactory to the Bank, (iii) a Subordination Agreement in the form of Exhibit C attached hereto duly executed and delivered by all parties thereto, (iv) copies of promissory notes executed by and delivered by the Borrower in favor of Lowell Harwood and Sanford Harwood in form and substance satisfactory to the Bank, (v) mortgage modifications duly executed and delivered by the Borrower and the Subsidiaries of the Borrower with respect to each existing mortgage which secures the Obligations and title insurance endorsements with respect thereto as requested by the Bank, all in form and substance satisfactory to the Bank, and (vi) a duly executed mortgage in form and substance satisfactory to the Bank with respect to the property owned by 47th Street Parking Associates and located at 131-135 East 47th Street, New York, New York; (b) The Borrower shall have paid to the Bank past due interest in the amount of $209,400.98; and (c) The Borrower shall have paid to the Bank all legal fees and disbursements incurred by the Bank in connection with the preparation, negotiation and execution of this Amendment No. 10 and any documents, instruments and agreements required hereby. -16- ARTICLE 6 MISCELLANEOUS; NO WAIVER 6.01. The provisions of Article 10 of the Credit Agreement shall govern this Amendment No. 10 with respect to the subject matter set forth therein. THIS AMENDMENT NO. 10, THE RESTATED NOTES, THE SECURITY DOCUMENTS, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS ACKNOWLEDGED, AMENDED AND CONFIRMED HEREBY, AND ALL OTHER DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH AND THEREWITH, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 6.02. Whether or not the transactions contemplated by this Amendment No. 10 are consummated, the Borrower will pay all fees and out-of-pocket expenses of the Bank incurred in connection with such transactions, including all reasonable fees and disbursements of legal counsel to the Bank. 6.03. Except as specifically amended herein, the Credit Agreement and each of the other Loan Documents shall remain in full force and effect in accordance with their respective terms. 6.04. This Amendment No. 10 may be signed in any number of counterparts which, when taken together, shall constitute one and the same document. -17- IN WITNESS WHEREOF, the undersigned has executed this Amendment No. 10 on the date first above written. NATWEST BANK N.A. By:___________________________ Title:________________________ SQUARE INDUSTRIES, INC. By:___________________________ Title:________________________ 808 SQUARE CORP. By:___________________________ Title:________________________ -18- The undersigned Subsidiary Guarantors of all or a portion of the obligation under, arising out of, or relating to the Credit Agreement and the other Loan Documents, including without limitation, the Notes, hereby consent to the execution and delivery of this Amendment No. 10 and confirm and agree that our respective Guarantees shall remain in full force and effect and shall not be released or otherwise modified. Dated: October 31, 1995 306 West 44 Corp. Park/Fly, Inc. 47th Street Parking, Inc. Square Philadelphia Corp. Square Juniper Corp. 810 Square Corp. 6&30 Garage Corp. Square Brighton Corp., Inc. Second Avenue Commercial, Inc. Square 43rd Corp. Public Square Parking Corp. Leslie Craig Corp. 643 Broad Street Corp. 808 Square Corp. Gailgal Holding Corp. Reboy Development Corp. Marbern Industries, Inc. S.P. Parking, Inc. Square Plus Operating of New Jersey, Inc. Elzab Development Corp. Square Plus Operating Corp. Square 30th St. Corp. 400 Square Garage Corp. 161 St. Parking Corp. 112 W. 25th St. Square Corp. 12th & Sansom Parking Corp. [signatures continue on following page] -19- [signatures continued from previous page] Square Fulton Corp. Square Liberty Corp. 714 Smithfield Corp. Pennsylvania Square Corp. Square Alpha Corp. Square Cadman Corp. Broad Newark Corporation 125 Halsey Corp. Broad Newark Urban Renewal Corporation By:___________________________ Title:_________________________ 47th Street Parking Associates By: 47th Street Parking, Inc., General Partner By:___________________________ Title:_________________________ -20- The undersigned hereby consent to the execution and delivery of this Amendment No. 10 and confirm and agree that our respective Pledge Agreements shall remain in full force and effect as modified hereby. Dated: October 31, 1995 SQUARE INDUSTRIES, INC. By:___________________________ Title:_________________________ SQUARE PLUS OPERATING CORP. By:___________________________ Title:_________________________ SQUARE PLUS OPERATING OF NEW JERSEY, INC. By:___________________________ Title:_________________________ -21- EXHIBIT 2.5(e) Financial Projections 22 Exhibit A to Amendment No. 10 FIFTH AMENDED AND RESTATED CREDIT NOTE $12,783,452.70 As of October 31, 1995 New York, New York FOR VALUE RECEIVED, SQUARE INDUSTRIES, INC., a New York corporation (the "Borrower"), hereby promises to pay to the order of NATWEST BANK N.A. (the "Bank") on such dates as provided in the Credit Agreement referred to below at the Applicable Lending Office of the Bank, the principal sum of Twelve Million Seven Hundred Eighty-Three Thousand Four Hundred Fifty-Two Dollars and Seventy Cents ($12,783,452.70) (or such lesser amount as shall equal the aggregate principal amount of the Credit Loans and reimbursement obligations with respect to Letters of Credit outstanding from time to time made by the Bank under the Credit Agreement referred to below), in lawful money of the United States of America and in immediately available funds, and to pay interest thereon in like money and funds, for the period commencing on the date of such Credit Loan or reimbursement obligations until such Credit Loan or reimbursement obligations is paid in full, at the rates per annum and on the dates hereinafter provided. This Note is the Credit Note referred to in the Credit Agreement, dated July 5, 1988 (as amended from time to time the "Credit Agreement"), between the Borrower, 808 Square Corp. and the Bank and evidences Credit Loans made by the Bank thereunder. This Note is entitled to certain security as further described in the Credit Agreement. Capitalized terms used in this Note have the respective meanings assigned to them in the Credit Agreement. This Note shall bear interest from the date of each Credit Loan made by the Bank until such Credit Loan shall be paid in full, at a rate per annum (computed on the basis of a year of 360 days and actual days elapsed, including the first day but excluding the last in the period for which payable) as provided in the Credit Agreement. Notwithstanding the foregoing, the Borrower shall pay interest on the unpaid principal balance of any Credit Loan and any unpaid reimbursement obligation with respect to any Letter of Credit, and on any interest payable hereunder (to the extent permitted by law) which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise), for the period commencing on the due date thereof until the payment in full at the applicable Post-Default Rate. Except as provided in the next -23- sentence, accrued interest on the principal amount of this Note shall be payable as provided in the Credit Agreement. Interest payable at the Post-Default Rate shall be payable on demand of the Bank. Anything in this Note or the Credit Agreement to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Bank to the extent that the Bank's receipt thereof would not be permissible under the law or laws applicable to the Bank limiting the rates of interest which may be changed or collected by the Bank. Any such payments of interest which are not made as a result of the limitations referred to in the preceding sentence shall be made by the Borrower on the earliest Payment Date or Dates on which the receipt thereof would be permissible under the laws applicable to the Bank limiting the rates of interest which may be charged or collected by the Bank. Such deferred interest shall not bear interest. The Borrower hereby expressly authorizes the Bank, at the option of the Bank, to record on the schedule annexed to this Note (or on a supplemental schedule thereto) the principal amount and date of each Credit Loan made by the Bank under the Credit Agreement and the amount of each payment and prepayment of principal of each such Credit Loan received by the Bank, provided however, that failure to make any such notation shall not affect the rights of the Bank or the obligations of the Borrower hereunder or under the Credit Agreement in respect of such Credit Loans. The amount of each Credit Loan made by the Bank under the Credit Agreement and the amount of each payment and prepayment of principal of each such Credit Loan received by the Bank shall be determined by the notations on the schedule annexed to this Note or by the ledgers and records maintained by the Bank. Upon the occurrence and continuance of an Event of Default, the entire unpaid balance of the principal hereof an accrued interest hereon shall immediately become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. This Note has been executed and delivered in New York, New York and shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. SQUARE INDUSTRIES, INC. By:__________________________ Title:_________________________ -24- SCHEDULE TO FIFTH AMENDED AND RESTATED CREDIT NOTE MADE BY SQUARE INDUSTRIES, INC. AND PAYABLE TO THE ORDER OF NATWEST BANK N.A.
Date of Principal Date of Principal Notation Amount Principal Amount Paid Balance Loan of Loan Payment or Prepaid Outstanding Made By - ---- ------- ------- ---------- ----------- -------
-25- Exhibit B to Amendment No. 10 FIRST AMENDED AND RESTATED SQUARE TERM NOTE $1,688,100.00 As of October 31, 1995 New York, New York FOR VALUE RECEIVED, SQUARE INDUSTRIES, INC., a New York corporation (the "Borrower"), hereby promises to pay to the order of NATWEST BANK N.A. (the "Bank") on such dates as provided in the Credit Agreement referred to below at the Applicable Lending Office of the Bank, the principal sum of One Million Six Hundred Eighty- Eight Thousand One Hundred Dollars ($1,688,100.00), in lawful money of the United States of America and in immediately available funds, and to pay interest thereon in like money and funds, for the period commencing on the date of such Square Term Loan until such Square Term Loan is paid in full, at the rates per annum and on the dates hereinafter provided. This Note is the Square Term Note referred to in the Credit Agreement, dated July 5, 1988 (as amended from time to time the "Credit Agreement"), between the Borrower, 808 Square Corp. and the Bank and evidences Square Term Loans made by the Bank thereunder. This Note is entitled to certain security as further described in the Credit Agreement. Capitalized terms used in this Note have the respective meanings assigned to them in the Credit Agreement. This Note shall bear interest from the date hereof until such Square Term Loan shall be paid in full, at a rate per annum (computed on the basis of a year of 360 days and actual days elapsed, including the first day but excluding the last in the period for which payable) as provided in the Credit Agreement. Notwithstanding the foregoing, the Borrower shall pay interest on the unpaid principal balance of the Square Term Loan and on any interest payable hereunder (to the extent permitted by law) which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise) for the period commencing on the due date thereof until the payment in full at the applicable Post-Default Rate. Except as provided in the next sentence, accrued interest on the principal amount of this Note shall be payable as provided in the Credit Agreement. Interest payable at the Post-Default Rate shall be payable on demand of the Bank. -26- Anything in this Note or the Credit Agreement to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Bank to the extent that the Bank's receipt thereof would not be permissible under the law or laws applicable to the Bank limiting the rates of interest which may be changed or collected by the Bank. Any such payments of interest which are not made as a result of the limitations referred to in the preceding sentence shall be made by the Borrower on the earliest Payment Date or Dates on which the receipt thereof would be permissible under the laws applicable to the Bank limiting the rates of interest which may be charged or collected by the Bank. Such deferred interest shall not bear interest. The Borrower hereby expressly authorizes the Bank, at the option of the Bank, to record on the schedule annexed to this Note (or on a supplemental schedule thereto) the amount of each payment and prepayment of principal of the Square Term Loan received by the Bank, provided however, that failure to make any such notation shall not affect the rights of the Bank or the obligations of the Borrower hereunder or under the Credit Agreement in respect of the Square Term Loan. The amount of the Square Term Loan made by the Bank under the Credit Agreement and the amount of each payment of principal of the Square Term Loan received by the Bank shall be determined by the notations on the schedule annexed to this Note or by the ledgers and records maintained by the Bank. Upon the occurrence and continuance of an Event of Default, the entire unpaid balance of the principal hereof an accrued interest hereon shall immediately become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. This Note has been executed and delivered in New York, New York and shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. SQUARE INDUSTRIES, INC. By:__________________________ Title:_________________________ -27- SCHEDULE TO FIRST AMENDED AND RESTATED SQUARE TERM NOTE MADE BY SQUARE INDUSTRIES, INC. AND PAYABLE TO THE ORDER OF NATWEST BANK N.A.
Date of Principal Date of Principal Notation Amount Principal Amount Paid Balance Loan of Loan Payment or Prepaid Outstanding Made By - ---- ------- ------- ---------- ----------- -------
-28- Exhibit C to Amendment No. 10 SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT (this "Agreement") is made as of October 31, 1995 by and among Square Industries, Inc., a New York corporation (the "Borrower"), 808 Square Corp., a New York corporation ("808 Corp."), NatWest Bank N.A. (the "Bank") and Lowell Harwood and Sanford Harwood (collectively, the "Creditors"). RECITALS: WHEREAS, the Borrower, 808 Corp. and the Bank are parties to that certain Credit Agreement dated as of July 5, 1998, as amended (the "Credit Agreement") pursuant to which the Bank has made certain financial accommodations to the Borrower and 808 Corp. on the terms and conditions set forth therein; WHEREAS, as a condition to entering into Amendment No. 10 to Credit Agreement dated as of the date hereof, the Bank has required that the Creditors enter into this Agreement; and WHEREAS, the Creditors are entering into this Agreement to induce the Bank to enter into Amendment No. 10 to Credit Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Definitions. Each capitalized term used herein and not otherwise defined herein shall have the meaning ascribed to it by the Senior Credit Agreement. When used herein, the following terms shall have the meanings indicated: "Post-Petition Interest" shall mean interest accruing in respect of Senior Indebtedness after the commencement of any bankruptcy, insolvency, receivership or similar proceedings by or against the Borrower at the rate applicable to such Senior Indebtedness pursuant to the Senior Credit Agreement, whether or not such interest is allowed as a claim enforceable against the Borrower in any such proceeding and any other interest that would have accrued but for the commencement of such proceedings. "Senior Credit Agreement" means the Credit Agreement, as from time to time amended, supplemented restated, modified, refunded, refinanced or replaced. "Senior Indebtedness" shall mean the Obligations and all indebtedness, obligations and liabilities of every kind and nature now existing or hereafter arising, of the Borrower and/or 808 Corp. under, in connection with, or evidenced by, the Senior Credit Agreement -29- and the other Loan Documents, including, without limitation, all principal, premium (if any), interest (including Post-Petition Interest), fees, costs, expenses, indemnities and liabilities provided for therein, and any renewals, extensions, modifications and refundings of any of the foregoing; provided, however, that the aggregate amount of Senior Indebtedness for purposes of this Agreement shall not exceed $16,000,000. "Subordinated Indebtedness" means all principal, interest, fees and all other amounts from time to time owing by the Borrower to one or more of the Creditors pursuant to the promissory notes dated as of the date hereof and executed by the Borrower in favor of the Creditors, and any renewals, extensions, modifications and refundings of any of the foregoing (the "Subordinated Notes"). Subordinated Indebtedness shall also include any and all principal, interest, fees and all other amounts owing with respect to any loans advanced by one or more of the Creditors to the Borrower or any of its subsidiaries after the date hereof without the prior written consent of the Bank and for which a separate subordination agreement in the form of this Agreement has not been executed and delivered by the Creditors and the Borrower. References to a "holder of Subordinated Indebtedness" shall be deemed references to the Creditors and any assignee or successor of any of them with respect to Subordinated Indebtedness. 2. Subordination Provisions. (a) Subordination. The Borrower, for itself and its successors, covenants and agrees, and each holder of the Subordinated Indebtedness by such holder's execution hereof or acceptance of any Subordinated Indebtedness, likewise covenants and agrees, that the payment of the Subordinated Indebtedness is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full in cash of all Senior Indebtedness. For all purposes hereof, a payment or distribution on account of the Subordinated Indebtedness may consist of cash, property or securities, by set-off or otherwise, and a payment or distribution on account of the Subordinated Indebtedness shall include, without limitation, any redemption, purchase or other acquisition of the Subordinated Indebtedness. (b) Distribution on Dissolution, Liquidation and Reorganization. Upon any distribution of assets of the Borrower, upon any foreclosure, dissolution, winding up or liquidation of the Borrower, whether voluntary or involuntary, or upon any reorganization, readjustment, arrangement or similar proceeding relating to the Borrower, or any of its property, and whether in bankruptcy, insolvency or receivership proceedings or otherwise: (i) the holders of all Senior Indebtedness shall be entitled to receive payment in full in cash of the Senior Indebtedness before the holder or holders of the Subordinated Indebtedness are entitled -30- to receive any payment with respect to the Subordinated Indebtedness; and (ii) any payment or distribution of assets of the Borrower of any kind or character, whether in cash, property or securities, to which the holder or holders of the Subordinated Indebtedness would be entitled except for the provisions hereof shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness (or to the agent for such holders) to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. If any holder of Subordinated Indebtedness does not file a proper claim or proof of debt in the form required in any proceeding referred to above prior to thirty (30) days before the expiration of the time to file such claim in such proceeding, then the holder of any such Senior Indebtedness is hereby irrevocably appointed the agent and attorney-in-fact (in its own name or in the name of any holder of any Subordinated Indebtedness or otherwise), but shall have no obligation, to execute, verify, deliver and file any such proofs of claim, consents, assignments or other instruments for or on behalf of such holder. Each holder of the Subordinated Indebtedness agrees that while it shall retain the right to vote its claim and otherwise act in any bankruptcy, insolvency or similar proceedings related to the Borrower (including, without limitation, the right to vote to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension), such holder will not take any acts or vote in any way so as to contest the enforceability of the subordination provisions set forth herein. (c) Default Under Senior Indebtedness. No payment or distribution of any kind or character shall be made by the Borrower on account of the Subordinated Indebtedness if, at the time of such payment or distribution, there shall exist a default in the payment of the principal of, premium, if any, or interest on, or any other amount owing with respect to Senior Indebtedness or a Default or Event of Default has occurred and is continuing. The Borrower may resume payments in respect of the Subordinated Indebtedness (including any missed payments) when such Default or Event of Default shall have been cured or waived in writing by the applicable entity in accordance with the terms of the Senior Credit Agreement, or all of the Senior Indebtedness shall have been paid in full in cash. (d) Payment Remittance. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Borrower, or any payment by or on behalf of, of any kind or -31- character, whether in cash, property or securities, prohibited by any of the foregoing paragraphs 2(b) or 2(c) shall be paid to or received by any holder of Subordinated Indebtedness, then and in such event such payment or distribution shall be held in trust for the benefit of the holders of Senior Indebtedness and paid over and delivered forthwith to the holders of Senior Indebtedness (or to the agent for such holders), for application to the payment of all Senior Indebtedness remaining unpaid until all such Senior Indebtedness shall have been paid in full in cash. (e) Subrogation. If any amount payable in respect of the Subordinated Indebtedness is paid over to the holders of Senior Indebtedness, then subject to the payment in full in cash of all Senior Indebtedness, the holder or holders of the Subordinated Indebtedness shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Borrower applicable to Senior Indebtedness until the principal of and interest on the Subordinated Indebtedness shall be paid in full in cash and, for the purposes of such subrogation, no such payments or distributions to the holders of Senior Indebtedness of cash, property or securities otherwise distributable to the holder or holders of the Subordinated Indebtedness shall, as between the Borrower, its creditors other than the holders of Senior Indebtedness, and the holder or holders of the Subordinated Indebtedness, be deemed to be a payment by the Borrower to or on account of Senior Indebtedness. (f) Standstill. During any period in which a payment or distribution of assets of the Borrower is prohibited by paragraph 2(b) or 2(c) above, no holder of any Subordinated Indebtedness shall take any action to accelerate, collect or otherwise exercise any right or remedy in respect of such Subordinated Indebtedness other than the filing of such documents as may be necessary to preserve the rights of such holder relative to such Subordinated Indebtedness in any proceeding referenced in paragraph 2(b) above. (g) Payments Permitted. Nothing contained herein shall affect the obligation of the Borrower to make, or prevent the Borrower from making, at any time except as provided in paragraph 2(b) or 2(c) above, payments of principal of or interest on the Subordinated Indebtedness, in each case as required by the terms of the Subordinated Notes as in effect on the date hereof and subject also to such limitations as to the amount, timing or source of any such payments imposed by the Senior Credit Agreement. (h) Reliance re Identification of Persons. Upon any distribution of assets of the Borrower or payments by or on behalf of the Borrower referred to herein, the holders of the Subordinated Indebtedness shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in paragraph 2(a) hereof are pending and upon a certificate of the debtor in possession, bankruptcy trustee, liquidating trustee or agent or other Person making any distribution to the holders of the -33- Subordinated Indebtedness for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Borrower, the amount thereof or payable thereon, and all other facts pertinent thereto. (i) Waiver and Consent. Each holder of the Subordinated Indebtedness waives any and all notice of the acceptance of these provisions or of the creation, renewal, extension or accrual, now or at any time in the future, of any Senior Indebtedness or of the reliance of the holders of the Senior Indebtedness on these provisions. Each holder of the Subordinated Indebtedness acknowledges and agrees that (i) the subordination provisions set forth herein shall be specifically enforceable against such Persons by the holders of the Senior Indebtedness, and (ii) without notice to or further assent by it, the Senior Indebtedness may from time to time, in whole or in part, be renewed, extended, increased, refunded or released by the holders thereof, as they may deem advisable, the credit agreements and any other instruments or documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated. (j) Subordination Unaffected by Certain Events. The rights set forth herein of the holders of the Senior Indebtedness as against each holder of the Subordinated Indebtedness shall remain in full force and effect without regard to, and shall not be impaired or affected by: (i) any act or failure to act on the part of the Borrower or 808 Corp.; (ii) any extension or indulgence in respect of any payment or prepayment of the Senior Indebtedness or any part thereof or in respect of any other amount payable to any holder of the Senior Indebtedness; or (iii) any amendment, modification or waiver of, or addition or supplement to, or deletion for, or compromise, release, consent or other action in respect of, any of the terms of any Senior Indebtedness or any other agreement which may be made relating to any Senior Indebtedness; or (iv) any exercise or nonexercise by any holder of Senior Indebtedness of any right, power, privilege or remedy under or in respect of such Senior Indebtedness or the Subordinated Indebtedness or any waiver of any such right, power, privilege or remedy or any default in respect of such Senior Indebtedness or the Subordinated Indebtedness, or any receipt by any holder of Senior Indebtedness of any security, or any failure by such holder to perfect a security interest in, or any exchange, sale, release or surrender by such holder of, any security for the payment of such Senior Indebtedness; or (v) any merger or consolidation of the Borrower or any of its Subsidiaries into or with any of its Subsidiaries or into or -34- with any other Person, or any sale, lease or transfer of any or all of the assets of the Borrower or any of its Subsidiaries to any other Person; or (vi) the absence of any notice to, or knowledge by, any holder of the Subordinated Indebtedness of the existence or occurrence of any of the matters or events set forth in the foregoing clauses (i) through (v). (k) Reinstatement of Subordination. The obligations of each holder of the Subordinated Indebtedness under the subordination provisions set forth herein shall continue to be effective, or be reinstated, as the case may be, as to any payment in respect of any Senior Indebtedness that is rescinded or must otherwise be returned by the holder of such Senior Indebtedness upon the occurrence or as a result of any proceeding, all as though such payment had not been made. (l) Legend. The Creditors shall cause each document or instrument creating or evidencing Subordinated Indebtedness to bear the following legend: "The obligations of the Borrower hereunder are subordinated to certain Senior Indebtedness to the extent and on the terms set forth in that certain Subordination Agreement dated as of October 31, 1995 by and among Square Industries, Inc., 808 Square Corp., NatWest Bank N.A., Lowell Harwood and Sanford Harwood, as such agreement is from time to time amended." 3. Amendment of Documents. Prior to the payment in full in cash of the Senior Indebtedness and notwithstanding anything to the contrary in the Subordinated Notes, the Borrower and the Creditors shall not amend, modify or supplement the Subordinated Notes in violation of Section 7.11 of the Credit Agreement or of any successor provision in any Senior Credit Agreement. 4. Sale or Transfer. In the event of any proposed sale, assignment, disposition or other transfer of all or any portion of the Subordinated Indebtedness, the holder thereof, prior to the consummation of any such action, shall cause the transferee thereof to execute and deliver to the holders of Senior Indebtedness (or the agent for such holders) an agreement substantially identical to this Agreement, providing for the continued subordination, to the extent set forth herein, of the portion of the Subordinated Indebtedness so transferred to the Senior Indebtedness, as provided herein and for the continued effectiveness of all of the rights of the holders of the Senior Indebtedness with respect to such transferred Subordinated Indebtedness. Notwithstanding the failure to execute and/or deliver any such agreement, the subordination of the Subordinated Indebtedness to the Senior Indebtedness effected hereby shall survive any sale, assignment, disposition or other transfer of all or any portion of the Subordinated Indebtedness. -35- 5. Miscellaneous. (a) Subject to paragraph 2(h) above, the provisions of this Agreement are solely for the purpose of defining the relative rights of the holders of Subordinated Indebtedness and Creditors on the one hand and the holders of Senior Indebtedness on the other, and shall not be deemed to create any rights or priorities in any other Person, including without limitation, the Borrower. (b) This Agreement may be amended only by a written instrument signed by the Bank and the Creditors. No waiver of any term or provision of this Agreement shall be effective unless it is in writing and signed by the party against whom such waiver is sought to be enforced. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Agreement may be signed in one or more counterparts which, when taken together, shall constitute one and the same document. (c) Any notices provided for hereunder shall be given in accordance with Section 9.9 of the Credit Agreement, and, in the case of the Creditors, shall be addressed to such Creditors in care of the Borrower in accordance with Section 9.9 of the Credit Agreement. (d) If any provision of this Agreement shall be prohibited by or be invalid under applicable law, such provision shall be deemed ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (e) The paragraph headings used in this Agreement are for convenience only and shall not effect the interpretation of any of the provisions hereof. (f) THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. -36- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. SQUARE INDUSTRIES, INC. By: ________________________ Title: _____________________ 808 SQUARE CORP. By: ________________________ Title: _____________________ NATWEST BANK N.A. By: ________________________ Title: _____________________ ---------------------------- LOWELL HARWOOD ---------------------------- SANFORD HARWOOD EX-10 3 EXHIBIT 10(B) Exhibit 10(b) AMENDMENT TO LOAN AGREEMENT Agreement dated October 31, 1995 between Square Industries, Inc. a New York corporation (the "Borrower") and Messrs. Lowell Harwood and Sanford Harwood (collectively the "Lenders") amending the Loan Agreement dated June 28, 1995 among the Borrowers and the Lenders. WHEREAS, the Borrower simultaneous herewith is entering into Amendment No. 10, dated October 31, 1995 to its Credit Agreement with NatWest Bank NA, formerly National Westminster Bank, USA (the "Bank") originally dated July 6, 1988 and as amended thereafter from time to time (the "Credit Agreement") which relate to two loans, the Facility I Loan in the outstanding principal amount of approximately $11,730,000 and the Facility II Loan in the outstanding principal amount of approximately $1,688,000, to provide inter alia, for an extension of the final maturity date of the Facility I Loan to December 31, 1998 and of the Facility II Loan to June 30, 1998 and a reduction of the interest payable with respect to both loans subject to the satisfaction of certain conditions to be set forth in the Amendment No. 10 to the Credit Agreement (the Credit Agreement as amended is hereinafter referred to as the "Credit Agreement".) WHEREAS, the Credit Agreement provides that the terms of the loans extended by the Lenders be revised in accordance with the terms set forth hereinafter (the "Agreement Amendment")set forth. IT IS HEREBY AGREED that: - 1 - 1. The amount of funds to be advanced by the Lenders to the Borrower shall not exceed the amount advanced by them as of the date hereof, which exclusive of interest accrued on advances extended, amount to an aggregate of $500,000 by both Lenders, or $250,000 by each Lender (the "Harwood Loans"). 2. A. The rate of interest payable by the Borrower to the Lenders on the Harwood Loans shall be as follows: i. From the date the Harwood Loans were advanced through December 31, 1995, 10.25% per annum. ii. From January 1, 1996 to payment in full of the principal of the Harwood Loans, the rate of interest payable by the Borrower to the Bank pursuant to the Credit Agreement. iii. After the date of payment in full of both the Facility I and Facility II (the "Bank Loans Repayment Date"), the rate thereafter equivalent to the highest rate of interest then payable by the Borrower with respect to any loans then outstanding from any bank or investment banking institution having an outstanding principal amount of at least of $100,000 or, if no such loan is outstanding, at the prime rate of the Bank. B. Interest shall be paid as follows: i. Accrued unpaid interest calculated at the rate of 3.99% per annum from the date or dates of the Harwood Loans shall be paid on the date hereof, with payment of the balance of the amount accrued through the date hereof to be paid on the Bank Loans Repayment Date. - 2 - ii. Accrued interest commencing with the date hereof shall be paid monthly in arrears at the rate of 3.99% per annum with the balance of the accrued and unpaid interest to be paid on the Bank Loans Repayment Date. 3. As long as either Facility Loan remains outstanding, the principal of the Harwood Loans shall not be payable until the Bank has received principal payments after October 31, 1995 aggregating $1,000,000 on either or both Facility Loans. Principal payments of the Harwood Loans shall be made thereafter to the extent of 50% (25% for each Lender) of the amount of principal of Facility Loans paid by the Borrower in excess of the foregoing $1,000,000 with payment to be made to the Lenders within two business days of the date of payment of the Facility Loan or Loans principal. 4. Each Lender hereby agrees to deliver to Borrower the Note previously issued by Borrower to him under the Loan Agreement in exchange for the Note in the form of Exhibit A hereto executed by the Borrower. i. The obligations of the Borrower hereunder are subordinated to certain Senior Indebtedness to the extent and on the terms set forth in that certain Subordination Agreement dated as of October 31, 1995 by and among Square Industries, Inc., 808 Square Corp., NatWest Bank N.A., and the Lenders as such agreement is from time to time amended. - 3 - 5. The obligation of the Borrower under the original Loan Agreement to provide collateral for the loans is hereby terminated. SQUARE INDUSTRIES, INC. By: --------------------------------- Brett Harwood, President --------------------------------- Lowell Harwood --------------------------------- Sanford Harwood - 4 - EXHIBIT A to EXHIBIT 10(b) The obligations of the Borrower hereunder are subordinated to certain Senior Indebtedness to the extent and on the terms set forth in that certain Subordination Agreement dated as of October 31, 1995 by and among Square Industries, Inc., 808 Square Corp., NatWest Bank N.A., the Lender and Sanford Harwood as such agreement is from time to time amended. NOTE $250,000 As of June 28, 1995, as Amended October 31, 1995 Jersey City, New Jersey FOR VALUE RECEIVED, SQUARE INDUSTRIES, INC., a New York Corporation (the "Borrower"), hereby promises to pay the order of LOWELL HARWOOD (the "Lender"), the principal sum of Two Hundred Fifty Thousand Dollars ($250,000), in lawful money of the United States of America and in immediately available funds, and to pay interest on the unpaid principal amount the Loan, like money and funds, for the period commencing on the date or dates the Loan was advanced to the Borrower by the Lender until such Loan is paid in full, at the rates per annum and on the dates set forth in the Agreement. This Note is the Note referred to in the Loan Agreement, dated June 28, 1995 among the Borrower, Lender and Sanford Harwood, as amended by the Amendment to Loan Agreement dated October 31, 1995 among such parties (collectively the "Agreement"). Capitalized terms used in this Note have the respective meanings assigned to them in the Agreement. This Note shall bear interest from the date or dates the Loan was advanced to the Borrower by the Lender until such Loan shall be paid in full, at the rate or rates per annum (computed on the basis of a year of 360 days and actual days elapsed, including the first day but excluding the last in the period for which payable) specified in the Agreement with payment of interest to be made in accordance with the Agreement. Payment of the principal shall be subject to the payment after October 31, 1995 of at least $1,000,000 of principal of loans extended by National Westminster Bank, USA (the "Bank") pursuant to the Credit Agreement dated July 6, 1988 and as amended from time to time between the Bank and the Borrower and certain of its subsidiaries with payment of principal thereafter to be an amount equal to 50% of the amount of loan principal paid to the Bank in excess of the foregoing $1,000,000. Anything in this Note or the Agreement to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender's receipt thereof would not be permissible under the law or laws applicable to the Lender limiting the rates of interest which may be charged or collected by the Lender. Any such payments of interest which are not made as a result of the limitations referred to in the preceding sentence shall be made by the Borrower on the earliest payment date on which the receipt thereof would be permissible under the laws applicable to the Lender limiting the rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest. - 1 - This Note has been executed and delivered in Jersey City, New Jersey, and shall be governed by, and construed and interpreted in accordance with, the laws of the State of New Jersey. SQUARE INDUSTRIES, INC. By: --------------------------- Brett Harwood, President - 2 - EX-10 4 EXHIBIT 10(C) EXHIBIT 10(c) VOID AFTER 5:00 P.M., NEW YORK TIME, ON OCTOBER 31, 2000 OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON THE NEXT FOLLOWING BUSINESS DAY, UNLESS EXTENDED BY SQUARE INDUSTRIES, INC., AS PROVIDED HEREIN. No. ------ WARRANT TO PURCHASE 75,000 SHARES OF COMMON STOCK TRANSFER RESTRICTED -- SEE SECTION 6.01 WARRANT TO PURCHASE COMMON STOCK OF SQUARE INDUSTRIES, INC. This certifies that, for value received, Harwood (the "Warrant Holder") is entitled to purchase from Square Industries, Inc., a corporation incorporated under the laws of the State of New York (the "Company"), subject to the terms and conditions hereof, at any time on or after 9:00 A.M., New York time, on November 1, 1995, and before 5:00 P.M., New York time, on October 31, 2000 (or, if such day is not a Business Day, as defined herein, at or before 5:00 P.M., New York time, on the next following Business Day) the number of fully paid and non-assessable shares of Common Stock (par value $.01) of the Company (the "Common Stock") stated above at the Exercise Price (as defined herein). The Exercise Price and the number of shares purchasable hereunder are subject to adjustment as provided below. ARTICLE 1 Definitions Section .. (1)The term "Warrant Holder" as used herein means the person or entity named above or any person or entity in whose name this Warrant shall be registered upon the books to be maintained by the Company for that purpose. (2) The term "Business Day" as used herein shall mean a day other than a Saturday, Sunday or other day on which banks in the State of New York are authorized by law to remain closed. (3) The term "Exercise Price" as used herein means $6.40 as such price may be adjusted from time to time pursuant to Article III. (4) The term "Expiration Date" as used herein means 5:00 P.M., New York time, on October 31, 2000. (5) The term "Warrant Shares" as used herein means the shares of Common Stock, or other securities deliverable upon exercise of the Warrant. ARTICLE II Duration and Exercise of Warrant Section 2.01. Subject to provisions of Section 4.01 hereof, this Warrant may be exercised at any time after 9:00 A.M., New York time, on November 1, 1995, and before 5:00 P.M., New York time, on October 31, 2000 (or, if such day is not a Business Day, at or before 5:00 P.M., New York time, on the next following Business Day). If this Warrant is not exercised at or before 5:00 P.M., New York time, on the Expiration Date it shall become void, and all rights hereunder shall thereupon cease. Section 2.02. (1) The Warrant Holder may exercise this Warrant, in whole or in part, upon surrender of this Warrant with the Subscription Form hereon duly executed, to the Company at its corporate office at 921 Bergen Avenue, Jersey City, New Jersey 07306, together with the full Warrant Price for each share of Common Stock to be purchased in lawful money of the United States, or by certified check, bank draft or postal or express money order payable in United States Dollars to the order of the Company and upon compliance with and subject to the conditions set forth herein. (2) Upon receipt of this Warrant with the Subscription Form duly executed and accompanied by payment of the aggregate Warrant Price for the shares of Common Stock for which this Warrant is then being exercised, the Company will cause to be issued certificates for the total number of whole shares of Common Stock for which this Warrant is being exercised in such denominations as are required for delivery to the Warrant Holder, and the Company shall thereupon deliver such certificates to the Warrant Holder. (3) In case the Warrant Holder shall exercise this Warrant with respect to less than all of the shares of Common Stock that may be purchased under this Warrant, the Company will execute a new Warrant for the balance of the shares of Common Stock that may be purchased upon exercise of this Warrant and deliver such new Warrant to the Warrant Holder. The Company shall not be required to issue any fraction of a share in connection with the exercise of this Warrant, and in any case where the Warrant Holder would, except for the provisions of this Section 4.04, be entitled under the terms of this Warrant to receive a fraction of a share upon the exercise of this Warrant, the Company shall, upon the exercise of this Warrant and receipt of the Warrant Price, issue the largest number of whole shares purchasable upon -2- exercise of this Warrant. The Company shall not be required to make any cash or other adjustment in respect of such fraction of a share to which the Warrant Holder would otherwise be entitled. The Warrant Holder, by the acceptance of the Warrant, expressly waives his right to receive a certificate of any fraction of a share or a fractional Warrant upon exercise hereof. (4) The Company covenants and agrees that it will pay when due and payable any and all taxes which may be payable in respect of the issue of this Warrant, or the issue of any Warrant Shares upon the exercise of this Warrant. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in issuance or delivery of this Warrant or Warrant Shares in a name other than that of the Warrant Holder at the time of surrender, and until the payment of such tax, shall not be required to issue such Warrant Shares. ARTICLE III Adjustment of Shares of Common Stock Purchasable and of Exercise Price Section 3.01. The Exercise Price at which Common Stock shall be purchasable shall be as set forth in Section (a) hereof, or, after adjustment as provided in this Section (f), shall be such price as so adjusted. Section 3.02. The Exercise Price shall be subject to adjustments from time to time as follows: (1) Except as hereinafter provided, in case the Company shall at any time after the date hereof issue or sell any shares of Common Stock (including shares held in the Company's treasury) for a consideration per share less than the Exercise Price in effect immediately prior to the issuance or sale of such shares, or without consideration, then, and thereafter successively upon each issuance or sale, the Exercise Price in effect immediately prior to each such issuance or sale shall forthwith be reduced to a price determined by dividing: (a) an amount equal to (i) the total number of shares of Common Stock outstanding immediately prior to such issuance or sale multiplied by the Exercise Price in effect immediately prior to such issuance or sale, plus (ii) the consideration, if any, received by the Company upon such issuance or sale, by (b) the total number of shares of Common Stock outstanding immediately after such issuance or sale. -3- For the purposes of any computation to be made in accordance with the provisions of this clause (1), the following provisions shall be applicable: (i) In case of the issuance or sale of shares or Common Stock for a consideration part or all of which shall be cash, the amount of the cash received by the Company for such shares (or, if shares of Common Stock are offered by the Company for subscription, the subscription price, or, if shares of Common Stock shall be sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price) before deducting therefrom any compensation paid or discount allowed in the sale, underwriting or purchase thereof by underwriters or dealers or others performing similar services or any expenses incurred in connection therewith. (ii) In case of the issuance or sale (otherwise than as a dividend or other distribution on any stock of the Company or as provided in (iv) or on conversion or exchange of other securities of the Company) of shares of Common Stock for a consideration part or all of which shall be other than cash, the amount of the consideration therefor other than cash shall be deemed to be the value of such consideration, as determined in good faith by the Board of Directors of the Company, at or about, but as of, the date of the adoption of the resolution authorizing such issuance, irrespective of accounting treatment. The reclassification of securities other than Common Stock into securities including Common Stock shall be deemed to involve the issuance for a consideration other than cash of such Common Stock immediately prior to the close of business on the date fixed for the determination of security holders entitled to receive such Common Stock. (iii) Shares of Common Stock issuable by way of dividend or other distribution on any stock of the Company shall be deemed to have been issued immediately after the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution and without consideration. (iv) In the event of a merger, consolidation or acquisition of assets by the Company, the consideration received by the Company for the securities issued by the Company shall be deemed to equal the cash and "market value" of the securities issued by the Company. "Market value" of securities issued shall be the lesser of the market value of the securities on the date an agreement in principle with respect to such merger, consolidation or purchase is reached among the parties or on the date the agreement of consolidation, merger or purchase is executed. -4- (v) The number of shares of Common Stock at any time outstanding shall not include any shares then owned or held by or for the account of the Company, but shall include the aggregate number of shares deliverable in respect of the options, rights and convertible and exchangeable securities referred to in the next succeeding clause (2) at all times while such options, rights or securities remain outstanding and unexercised, unconverted or unexchanged, as the case may be, and therefore to the extent such options, rights or securities have been exercised, converted or exchanged. (2) In case the Company shall at any time after the date hereof issue options or rights to subscribe for shares of Common Stock (including shares held in the Company's treasury), or issue any securities convertible into or exchangeable for shares of Common Stock, for a consideration per share less than the Exercise Price in effect immediately prior to the issuance of such options or rights or convertible or exchangeable securities, or without consideration, the Exercise Price in effect immediately prior to the issuance of such options or rights or securities shall be reduced to a price determined by making a computation in accordance with the provisions of clause (1) of this Subsection, provided that: (a) the aggregate maximum number of shares of Common Stock deliverable under such options or rights shall be considered to have been delivered at the time such options or rights were issued, and for a consideration equal to the minimum purchase price per share of Common Stock provided for in such options or rights, plus the cash consideration (determined in the same manner as consideration received on the issue or sale of Common Stock), if any, received by the Company for such options or rights; (b) in no event shall any consideration be deemed to have been received by the Company in connection with any amounts deemed for financial statement purposes assignable to any option or rights to purchase shares of Common Stock of the Company as "original issue discount". (c) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or exchange for any such securities shall be considered to have been delivered at the time of issuance of such securities, and for a consideration equal to the consideration (determined in the same manner as consideration received on the issue or sale of Common Stock) received by the Company for such securities, plus the consideration, if any, to be received by the Company upon the exchange or conversion thereof; and (d) on the expiration of such options or rights, or the termination of such right to convert or exchange, the Exercise Price shall -5- forthwith be readjusted to such Exercise Price as would have obtained had the adjustments made upon the issuance of such options, rights or convertible or exchangeable securities been made upon the basis of the delivery of only the number of shares of Common Stock actually delivered upon the exercise of such options or rights or upon conversion or exchange of such securities. (3) In case the Company shall at any time subdivide or combine the outstanding shares of Common Stock, the Exercise Price shall forthwith be proportionately decreased in the case of sub-division or increased in the case of combination to the nearest one cent. Any such adjustment shall become effective at the close of business on the date that such subdivision or combination shall become effective. (4) Within a reasonable time after the close of each quarterly fiscal period of the Company during which the Exercise Price has been adjusted as herein provided, the Company shall mail to each Holder a certificate signed by the Chairman of the Board of Directors, the President or a Vice President of the Company and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, showing in detail in the facts requiring all such adjustments occurring during such period and the Exercise Price after each such adjustment; provided, however, that if at any time the Exercise Price is adjusted as herein provided in an amount equal to or exceeding five cents ($.05), the Company shall forthwith cause such certificate to be mailed with respect to such adjustment, after which the Company's obligations to give notice of such adjustment shall cease. Notwithstanding anything contained herein to the contrary, no adjustment of the Exercise Price other than pursuant to (3) above, shall be made: (i) If the amount of such adjustment shall be less than five cents ($.05), but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment so carried forward, shall amount to not less than five cents ($.05). (ii) In connection with the issuance or sale of Common Stock upon the exercise of options or rights or upon the conversion or exchange of convertible or exchangeable securities in any case where the adjustment provided in this Subsection was made upon the issuance of such options, rights, or convertible or exchangeable securities by reason of the provisions of clause (2) of this Subsection. (iii) By reason of the grant of any options and issuance of any shares under the Company's Stock Option Plan, as amended from time to time. Section 3.03. In the event that the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock or by a subdivision of the outstanding shares of Common Stock, which may include a stock split, then, from and after the time at which the -6- adjusted Exercise Price becomes effective pursuant to Section 3.02 by reason of such dividend or subdivision, the number of shares issuable upon the exercise of each Warrant shall be increased in proportion to such increase in outstanding shares. In the event that the number of outstanding shares of Common Stock is decreased by a combination of the outstanding shares of Common Stock, then, from and after the time at which the adjusted Exercise Price becomes effective pursuant to Section 3.02 by reason of such combination, the number of shares issuable upon the exercise of this Warrant shall be decreased in proportion to such decrease in outstanding shares. Section 3.04. In the event of an adjustment of the Exercise Price, the number of shares of Common Stock (or reclassified stock) issuable upon exercise of this Warrant after such adjustment shall be equal to the number determined by dividing: (a) an amount equal to the product of (i) the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such adjustment, and (ii) the Exercise Price immediately prior to such adjustment; by (b) the Exercise Price immediately after such adjustment. Section 3.05. In the case of any reorganization or reclassification of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) or in the case of any consolidation of the Company with, or merger of the Company with another corporation after which no securities of the Company will be publicly held, or in the case of any sale, lease or conveyance of all, or substantially all, of the property, assets, business and goodwill of the Company as an entity, the holder of each Warrant then outstanding shall thereafter have the right, except as provided under Section 3.02, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, consolidation, merger or sale by a holder of such Warrant would have had the right to purchase immediately prior to such reorganization, reclassification, consolidation, merger or sale, at a price equal to the aggregate Exercise Price then in effect pertaining to such Warrant (the kind, amount and price of such stock and other securities to be subject to adjustment as herein provided). Section 3.06. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, theretofore or thereafter issued, this Warrant may continue to express the same price and number and kind of shares as are stated in the warrant initially issued. Section 3.07. The Company may retain a firm of independent public accountants of recognized national standing (who may be any such firm regularly employed by the Company) to make any computation required under this Article III, and a Certificate signed by such firm shall be conclusive evidence of the correctness of any computation made hereunder. -7- Section 3.08. Distribution of Assets: In case, prior to the expiration of this Warrant by exercise or by its terms, the Company shall at any time make any distribution of its assets to holders of its Common Stock as a liquidating or partial liquidating dividend, by way of return of capital, or otherwise (other than as either a cash dividend payable out of any surplus legally available of the payment of dividends under the laws of the State of New York or as a stock dividend as provided in this Article III, then the Holder, on the exercise of this Warrant after the date of record for the determination of holders of Common Stock entitled to such distribution of assets or dividend, shall be entitled to receive for the Exercise Price, in addition to Common Stock, the amount of such assets or dividend which such Holder would have received if he had been the holder of record of such shares of Common Stock on the record date for the determination of those entitled to such distribution. ARTICLE IV Other Provisions Relating to Rights of Warrant Holder Section 4.01. The Warrant Holder, as such, shall not be entitled to vote or receive dividends or be deemed the holder of shares of Common Stock for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Warrant Holder, as such, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any action by the Company (whether upon any recapitalization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings or other action affecting shareholders (except for notices provided for in this Warrant), receive dividends or subscription rights, or otherwise until this Warrant shall have been exercised and the Warrant Shares purchasable upon the exercise hereof shall have become deliverable as provided in Article II, at which time the person or persons in whose name or names the certificate or certificates for the Warrant Shares being purchased are to be issued shall be deemed the holder or holders of record of such shares for all purposes; provided, however, that any such exercise on any date when the stock transfer books of the Company shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for such shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open and this Warrant shall not be deemed to have been exercised, in -8- whole or in part as the case may be, until such next succeeding day on which such stock transfer books are open for the purpose of determining entitlement to dividends on such Common Stock, and such exercise shall be at the actual Warrant Price in effect as such date. Section 4.02. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may in its discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as, and in substitution for, this Warrant. Section 4.03. (1) The Company covenants and agrees that at all times it shall reserve and keep available for the exercise of this Warrant such number of authorized shares of Common Stock as are sufficient to permit the exercise in full of this Warrant. (2) The Company covenants that all shares of Common Stock issued on exercise of this Warrant will be validly issued, fully paid, nonassessable and free of preemptive rights. Section 4.04. Anything contained herein to the contrary notwithstanding, the Company shall not be required to issue any shares of Common Stock upon exercise of this Warrant unless the shares have been registered under the Securities Act of 1933 or in the opinion of counsel to the Company such issuance is exempt from registration thereunder. Section 4.05. Notices to the Warrant Holder provided for in this Warrant shall be deemed given or made by the Company if sent by mail, first-class or registered, postage prepaid, addressed to the Warrant Holder at his last known address as it shall appear on the books of the Company. ARTICLE V Treatment of Warrant Holder Section 5.01. Prior to due presentment for registration of transfer of this warrant, the Company may deem and treat the Warrant Holder as the absolute owner of this warrant (notwithstanding any notation of ownership or other writing hereon) for the purpose of any exercise hereof and for all other purposes and the Company shall not be affected by any notice to the contrary. -9- ARTICLE VI Restrictions on Transfer of Warrants Section 6.01. Neither this Warrant nor any rights represented hereby shall be transferable or assignable by the Warrantholder, otherwise than by will or by the laws of descent and distribution or to a member of the immediate family of the Warrantholder who agrees to be bound by the provisions of this Article, and this Warrant shall be exercisable, only by the Warrantholder or his permitted assignee, and any attempt to transfer or assign this Warrant in violation of the foregoing shall be void and of no force or effect. Section 6.02. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen or destroyed Warrant shall thereupon become void. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not the Warrant so lost, stolen, destroyed or mutilated shall be at any time enforceable by anyone. ARTICLE VII Other Matters Section 7.01. The Company will from time to time promptly pay, subject to the provisions of paragraph (4) of Section 2.02, all taxes and charges that may be imposed upon the Company in respect of the issuance or delivery of Warrant Shares upon the exercise of this Warrant. Section 7.02. All the covenants and provisions of this Warrant by or for the benefit of the Company shall bind and inure to the benefit of its successors and assigns hereunder. Section 7.03. Notice or demand pursuant to this Warrant to be given or made by the Warrant Holder to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed, until another address is designated in writing by the Company, as follows: Square Industries, Inc. 921 Bergen Avenue Jersey City New Jersey 07306 Attention: President -10- Any notice or demand authorized by this Warrant to be given or made by the Company to or on the Warrant Holder shall be given in accordance with the provisions of Section 4.05. Section 7.04. The validity, interpretation and performance of this Warrant shall be governed by the laws of the State of New York. Section 7.05. Nothing in this Warrant expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the Company and the Warrant Holder any right, remedy or claim under promise or agreement hereof, and all covenants, conditions, stipulations, promises and agreements in this Warrant contained shall be for the sole and exclusive benefit of the Company and its successors and of the Warrant Holder. Section 7.06. The Article headings herein are for convenience only and are not part of this Warrant and shall not affect the interpretation thereof. IN WITNESS WHEREOF, this Warrant has been duly executed by the Company under its corporate seal as of the 31st day of October, 1995. SQUARE INDUSTRIES, INC. By_______________________ President Attest: ___________________ Secretary The undersigned as Warrant Holders agrees to the provisions of this Warrant. ------------------------- -11- SUBSCRIPTION FORM To be Executed By The Warrant Holder If He Desires To Exercise The Warrant In Whole Or In Part: To: Square Industries, Inc. The undersigned (_________________________________) Please insert Social Security or other identifying number of Subscriber hereby irrevocably elects to exercise the right of purchase represented by the within warrant for, and to purchase thereunder, shares of Common Stock provided for therein and tenders payment herewith to the order of Square Industries, Inc. in the amount of $ and, if said number of shares of Common Stock shall not be all the shares of Common Stock purchasable hereunder, that a new Warrant for the balance remaining of the shares of Common Stock purchasable under the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below: Address: _________________________________________ Date: _____________ Signature __________________________ Note: The Signature of this Subscription must correspond with the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever. -12- SQUARE INDUSTRIES, INC. FINANCIAL DATA SCHEDULE THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND THE UNAUDITED STATEMENT OF INCOME FOR THE NINE MONTHS THEN ENDED CONTAINED IN THE REPORT ON FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 OF SQUARE INDUSTRIES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
Item Number Item Description - ----------- ---------------- 5-02(1) Cash and cash items $1,793,000 5-02(2) Marketable securities -0- 5-02(3)(a)(1) Notes and accounts receivable -- trade 786,000 5-02(4) Allowances for doubtful accounts -0- 5-02(6) Inventory -0- 5-02(9) Total current assets 5,002,000 5-02(13) Property, plant and equipment 31,687,000 5-02(14) Accumulated depreciation 6,921,000 5-02(18) Total assets 34,473,000 5-02(21) Total current liabilities 7,797,000 5-02(22) Bonds, mortgages and similar debt -0- 5-02(28) Preferred stock -- mandatory redemption -0- 5-02(29) Preferred stock -- no mandatory redemption -0- 5-02(30) Common stock 12,000 5-02(31) Other stockholders' equity 4,650,000 5-02(32) Total liabilities and stockholders' equity 34,473,000 5-02(b)1(a) Net sales of tangible products -0- 5-03(b)1 Total revenues 48,399,000 5-03(b)2(a) Cost of tangible goods sold -0- 5-03(b)2 Total costs and expenses applicable to sales and revenues 40,215,000 5-03(b)3 Other costs and expenses 5,816,000 5-03(b)5 Provision for doubtful accounts and notes -0- 5-03(b)(8) Interest and amortization of debt discount 1,518,000 5-03(b)(10) Income before taxes and other items 850,000 5-03(b)(11) Income tax expense 554,000 5-03(b)(14) Income/loss continuing operations 296,000 5-03(b)(15) Discontinued operations -0- 5-03(b)(17) Extraordinary items -0- 5-03(b)(18) Cumulative effect -- changes in accounting principles -0- 5-03(b)(19) Net income or loss 296,000 5-03(b)(20) Earnings per share -- primary 0.23 5-03(b)(20) Earnings per share -- fully diluted 0.23
EX-27 5 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-30-1995 SEP-30-1995 1,793,000 0 786,000 0 0 5,002,000 31,687,000 6,921,000 34,473,000 7,797,000 0 0 0 12,000 4,650,000 34,473,000 0 48,399,000 0 40,215,000 5,816,000 0 1,518,000 850,000 554,000 296,000 0 0 0 296,000 0.23 0.23
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