Item 1.01 Entry into a Material Definitive Agreement
On January 20, 2023, Seneca Foods Corporation, Seneca Foods, LLC, Seneca Snack Company, Green Valley Foods, as Borrowers, and certain subsidiaries of Borrowers as Guarantors (collectively, the "Company") entered into a Second Amended and Restated Loan and Guaranty Agreement (the "Loan Agreement") with Farm Credit East, ACA. The Loan Agreement amends, restates and replaces in its entirety the Amended and Restated Loan and Guaranty Agreement dated as of May 28, 2020 (as amended from time to time, the “Existing Loan Agreement”). The Loan Agreement continues the term loan under the Existing Loan Agreement and designates such loan as “Term Loan A-1” and adds a second term loan designated as “Term Loan A-2”, each as summarized below:
Term Loan A-1
The Loan Agreement continues certain aspects of the original $100 million term loan from the Existing Agreement, namely Term Loan A-1 will continue to bear interest at a fixed interest rate of 3.3012%, mature on June 1, 2025, and remain unsecured. Principal payments in the amount of $1 million together with interest on the unpaid principal amount outstanding will also continue to be payable quarterly on March 1, June 1, September 1 and December 1 each year, which commenced on September 1, 2020. As of January 25, 2023, the outstanding principal amount of Term Loan A-1 was $90 million.
Term Loan A-2: The Loan Agreement adds an additional term loan in the amount of $175 million that will mature on January 20, 2028 and is secured by a portion of the Company’s property, plant and equipment. Term Loan A-2 bears interest at a variable interest rate based upon SOFR plus an additional margin determined by the Company’s leverage ratio. Principal payments in the amount of $1.5 million together with interest on the unpaid principal amount outstanding will be payable quarterly on March 1, June 1, September 1 and December 1 each year, commencing March 1, 2023. The proceeds of Term Loan A-2 shall be used for working capital and general company purposes, including the repayment of loans outstanding under the Company’s revolving credit facility.
The Company's obligations under the Loan Agreement are jointly and severally guaranteed by all existing and future domestic subsidiaries of the Company, subject to certain exceptions. Obligations under the Loan Agreement may be declared due and payable upon the occurrence of certain events of default, as defined in the Loan Agreement, including failure to pay any obligations when due and payable, failure to comply with any covenant or representation of any loan document, any change of control, cross-defaults and certain other events as set forth in the Loan Agreement, with grace periods in some cases.
The Loan Agreement contains restrictive covenants usual and customary for loans of its type, which include, with specified exceptions, limitations on the ability of the Company and its subsidiaries to engage in certain business activities, incur debt, have liens, pay dividends or make other distributions, enter into affiliate transactions, consolidate, merge or acquire or dispose of assets, and make certain investments, acquisitions and loans. The Loan Agreement also requires the Company to satisfy certain financial covenants including minimum EBITDA and minimum tangible net worth which apply to both terms loans described above.
The foregoing description of the Loan Agreement is not complete and is qualified in its entirety by the terms and provisions of the Loan Agreement, a copy of which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.