<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
--------------------
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 1998
or
Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
--------- ---------
Commission file number 0-23429
-------
Broughton Foods Company
-----------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-4135-025
---------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
210 N. Seventh Street
P.O. Box 656
Marietta, Ohio 45750
------------------------------ -----------------
(Address of principal (Zip Code)
executive office)
(740) 373-4121
------------------------------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,774,335 shares of the
Company's Common Stock ($1.00 par value) were outstanding as of April 30,
1998.
1
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
December 31, 1997 and March 31, 1998
Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1998
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and qualitative disclosures about market risk
PART II. OTHER INFORMATION
Item 2. Changes in securities and use of proceeds
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
All other schedules and compliance information called for by the instructions
to Form 10-Q have been omitted since the required information is not present or
not present in amounts sufficient to require submission.
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BROUGHTON FOODS COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
DECEMBER, 31, MARCH 31,
1997 1998
------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $9,633,184 $9,197,875
Accounts receivable, less allowance for doubtful accounts of
$465,000 at December 31, 1997 and $457,000 at
March 31, 1998 12,767,043 12,220,752
Inventories 3,551,281 3,789,925
Prepaid expenses 897,017 936,926
Refundable income taxes 230,775 ----
Deferred income taxes 100,437 100,437
-------------- --------------
Total current assets 27,179,737 26,245,915
-------------- --------------
Property, plant and equipment, at cost:
Buildings 5,958,861 5,958,861
Machinery and equipment 18,935,308 19,004,365
Leasehold improvements 464,156 467,164
Assets under construction 798,093 977,330
-------------- --------------
26,156,418 26,407,720
Less accumulated depreciation and amortization 11,586,612 11,382,448
-------------- --------------
14,569,806 15,025,272
Land 1,662,819 1,724,218
-------------- --------------
16,232,625 16,749,490
-------------- --------------
Cash surrender value of officer's life insurance, net of policy
loans of $2,920 at December 31, 1997 197,775 ----
Other assets 2,296,389 2,406,908
Prepaid pension costs 341,968 559,259
-------------- --------------
2,836,132 2,966,167
-------------- --------------
Total assets $46,248,494 $45,961,572
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
BROUGHTON FOODS COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
DECEMBER 31, MARCH 31,
1997 1998
------------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable $8,124,356 $7,121,421
Accrued expenses and other 2,321,899 2,278,433
Current installments on term debt 21,767 22,830
Income taxes payable 18,536 198,788
------------- -------------
Total current liabilities 10,486,558 9,621,472
------------- -------------
Term debt, net of current installments 36,530 30,156
Deferred income taxes 2,423,385 2,423,385
Other 314,016 486,875
Commitments and contingencies
Shareholders' equity:
Common stock, $1 par value; 10,000,000
shares authorized, 6,314,575 shares issued 6,314,575 6,314,575
Additional paid-in capital 20,482,702 20,482,702
Retained earnings 6,698,452 7,110,131
------------- -------------
33,495,729 33,907,408
Less 540,240 shares of common stock in treasury,
at cost 507,724 507,724
------------- -------------
Total shareholders' equity 32,988,005 33,399,684
------------- -------------
Total liabilities and shareholders' equity $46,248,494 $45,961,572
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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BROUGHTON FOODS COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1998
---------------- ----------------
<S> <C> <C>
Net sales $19,825,824 $34,751,119
Cost of sales 15,754,157 27,130,177
---------------- ---------------
Gross profit 4,071,667 7,620,942
Operating costs and expenses:
Selling and distribution 3,057,158 5,747,480
General and administrative expenses 445,178 887,895
---------------- ---------------
3,502,336 6,635,375
---------------- ---------------
Income from operations 569,331 985,567
Other income (expense):
Interest income and other, net 39,056 159,481
Interest expense (42,336) (1,626)
----------------- ----------------
(3,280) 157,855
----------------- ----------------
Income before income taxes 566,051 1,143,422
Total income tax expense 220,760 443,027
---------------- ---------------
Net income $345,291 $700,395
================ ===============
Earnings per common share:
Basic $0.08 $0.12
================ ===============
Diluted $0.08 $0.12
================ ===============
Shares used in computing earnings per
common share:
Basic 4,119,660 5,774,335
================ ===============
Diluted
4,122,500 5,774,335
================ ===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
BROUGHTON FOODS COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $345,291 $700,395
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 218,486 434,416
Bad debt expense 24,877 12,000
Gain on disposal of property, plant and equipment --- (7,500)
Change in deferred gain on sale of fixed assets --- (9,099)
Change in assets and liabilities:
Accounts receivable 270,124 534,291
Inventories (65,488) (238,644)
Prepaid expenses 35,439 (39,909)
Refundable income taxes 168,651 230,775
Other assets --- (140,938)
Prepaid and accrued pension costs 37,737 (217,291)
Accounts payable 123,825 (1,002 ,935)
Accrued expenses and other 19,069 (19,281)
Accrued taxes (20,872) (24,185)
Income taxes payable (113,700) 180,252
------------- -------------
Total adjustments 698,148 (308,048)
------------- -------------
Net cash provided by operating activities 1,043,439 392,347
------------- -------------
Cash flows from investing activities:
Proceeds from disposal of property, plant and equipment 383,500
Proceeds from termination of officer's life insurance 197,775
Purchases of property, plant and equipment (80,739) (1,114,903)
------------- --------------
Net cash used in investing activities (80,739) (533,628)
------------- --------------
Cash flows from financing activities:
Payments on term debt (55,001) (5,311)
Dividends paid (27,464) (288,717)
------------- --------------
Net cash used in financing activities (82,465) (294,028)
------------- --------------
Net increase (decrease) in cash and cash equivalents 880,235 (435,309)
</TABLE>
CONTINUED,
6
<PAGE> 7
BROUGHTON FOODS COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1998
------------- -------------
<S> <C> <C>
Cash and cash equivalents, beginning of period 2,307,815 9,633,184
------------- -------------
Cash and cash equivalents, end of period $3,188,050 $9,197,875
============= =============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $42,336 $1,643
============= =============
Income taxes $282,664 ---
============= =============
Supplemental disclosure of noncash investing and
financing activities:
The Company declared a $.05 per share dividend on
February 25, 1998 to shareholders of record on
March 27, 1998, payable on April 9, 1998. $288,717
=============
The Company recorded a deferred gain in February 1998
as a result of a sale leaseback of certain equipment. $181,958
=============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
7
<PAGE> 8
BROUGHTON FOODS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. BUSINESS OPERATIONS AND BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Interim
results are not necessarily indicative of results for a full year.
A summary of the Company's significant accounting policies is presented on
pages F-7 to F-10 of its 1997 Annual Report on Form 10-K. Users of financial
information produced for interim periods are encouraged to refer to the
footnotes contained in the Annual Report on Form 10-K when reviewing interim
financial results. There has been no material change in the accounting policies
followed by the Company during 1997.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the unaudited consolidated financial
position, results of operations and cash flows of Broughton Foods Company and
subsidiary for interim periods.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." The
adoption of this statement did not have an impact on the Company's presentation
of financial statements for the period ended March 31, 1998.
2. INVENTORIES
Inventories are valued at the lower of cost or market with cost determined on
the first-in, first-out ("FIFO") method using standard costs which approximate
actual. The major components of inventory at December 31, 1997 and March 31,
1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
---------------- ----------------
<S> <C> <C>
Raw products and finished goods $1,966,156 $2,236,402
Ingredients 450,480 437,518
Warehouse, packaging supplies and other 1,134,645 1,116,005
---------------- ----------------
$3,551,281 $3,789,925
================ ================
</TABLE>
3. DEBT
On March 30, 1998, the Company finalized an agreement with a bank to provide
for two additional credit facilities, in addition to the Company's $4.0 million
line of credit agreement with another bank that was in place at December 31,
1997. The first facility provides for a $15.0 million line of credit with
interest at either the Bank's prime rate or LIBOR plus a margin. The borrowings
under this agreement are uncollateralized and the Company pays a commitment fee
on unused borrowings ranging from .20% to .35%. The second facility is a $5.0
million uncollateralized capital expenditure line of credit at either the
Bank's prime rate or LIBOR plus a margin. The borrowings under this commitment
provide for monthly interest-only payments for one year, converting to term
debt to be paid over seven years.
8
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BROUGHTON FOODS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The most restrictive covenants under these agreements are the maintenance of a
maximum funded debt to Earnings Before Interest Expense, Taxes, Depreciation
and Amortization (EBITDA) ratio, a minimum tangible net worth, a minimum
Earnings Before Interest and Taxes (EBIT) to interest expense ratio and a
cashflow coverage ratio.
4. COMMITMENTS AND CONTINGENCIES
The former Southern Belle Dairy received a Notice of Proposed Debarment dated
June 1, 1994, from the United States Department of Agriculture (USDA). The
USDA proposed to debar the former Southern Belle Dairy from engaging in
contracts and other transactions involving all federal agency procurement and
nonprocurement programs for up to three years as a result of previously settled
antitrust violations. On April 18, 1995, the former Southern Belle Dairy
entered into a Compliance Agreement in Lieu of Debarment with the USDA. The
agreement is for a three-year period and requires the former Southern Belle
Dairy to establish and maintain a compliance program which includes, among
other things, the establishment of an Ethics Committee and formal ethics and
education training for all employees.
By notice dated December 31, 1997, the USDA suspended the Southern Belle
Division from federal procurement and nonprocurement programs and proposed to
debar the Division for a period that by regulation would not exceed three
years, based on alleged breaches of the Compliance Agreement by Southern Belle,
prior to its merger with the Company. The Company has challenged the USDA's
action in an administrative proceeding. The matter is currently under review
by the USDA.
5. SUBSEQUENT EVENTS
On May 11, 1998, Broughton Foods Company entered into a definitive agreement to
acquire London's Farm Dairy, Inc. of Port Huron, Michigan. Consummation of the
acquisition is subject to the prior notification and waiting requirements under
the Hart-Scott-Rodino Act and other conditions to closing.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a leading manufacturer and distributor of fresh milk and related
dairy products in Ohio, West Virginia, Kentucky, Tennessee and parts of the
eastern United States. The Company has grown primarily through internal growth
and strategic acquisitions. Through such growth, the Company has realized
regional economies of scale and operational efficiencies. The Company operates
through three major divisions - - the Dairy Division based in Marietta, Ohio;
the Foods Division based in Charleston, West Virginia; and the Southern Belle
Division based in Somerset, Kentucky.
The Company completed an acquisition of Southern Belle Dairy Company ("Southern
Belle") of Somerset, Kentucky in December 1997. The Company has had an
increase in sales, cost of sales and operating expenses for the first quarter
1998 compared with the first quarter 1997 due to the Southern Belle
acquisition. As a result of this acquisition, the Company has taken and expects
to take a number of actions intended to integrate the operations of Southern
Belle with the Company's existing operations and to reduce certain product
costs and overall, selling, general and administrative expenses. The Company
has successfully implemented synergy savings involving the utilization of
butterfat, a raw material required in the production of many items within the
Foods Division, including heavy whipping cream, table cream, aerosol whipped
toppings and half-and-half. Southern Belle does not manufacture non-fluid dairy
products and, therefore, does not utilize butterfat, a by-product of its fluid
milk manufacturing processes and an integral raw material required in the
production of non-fluid dairy products. Accordingly, as a result of the
Southern Belle acquisition, the Company has received cost savings from less
dependence on the "spot" market for its butterfat requirements. The Dairy
Division is currently successfully manufacturing for the Southern Belle
Division both plastic pints and soft-serve mixes. Southern Belle previously
purchased soft-serve mixes from an outside supplier and had not initiated a
plastic pint product within its market segment. In addition to the products
that have been successfully integrated into the Company, additional cost
savings are anticipated to be achieved through the further integration of ice
cream, sour cream and cottage cheese production, all products that Southern
Belle has historically purchased from outside suppliers and which will now be
supplied by the Company. The Company's Foods Division is currently
manufacturing for the Southern Belle Division a full complement of UHT products
including heavy whipping cream, half-and-half and non-dairy creamers. The
Company has been successful in integrating many of the cost saving synergies
identified in the Southern Belle acquisition, however, there can be no
assurance that the Company will be successful in integrating the remaining
operations of Southern Belle and realizing additional cost savings in the
future.
The Company's net sales consist primarily of sales of products derived from raw
milk, including fluid milk, frozen desserts, cultured products, and UHT
products. Revenues are recognized by the Company when the Company's products
are received by the customer. The Company's revenues are subject to quarterly
fluctuations caused by seasonal variations in the demand for milk and dairy
products.
The Company's cost of sales consists primarily of raw materials, including milk
and items procured from outside parties, such as packaging material, and
manufacturing costs, including direct labor and overhead. Significant factors
affecting the Company's cost of sales include the costs of raw materials and
labor and benefit rates.
The Company's operating costs consist of selling, distribution, general and
administrative components. These costs include salaries for sales and marketing
personnel, certain administrative personnel and executive salaries as well as
salary and related costs for transportation and distribution.
RESULTS OF OPERATIONS
The following table presents certain financial information concerning the
Company's results of operations, including certain information presented as a
percentage of net sales.
10
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THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C> <C> <C>
Net sales $ 19,826 100.0% $ 34,751 100.0%
Cost of sales 15,754 79.5 27,130 78.1
Gross profit 4,072 20.5 7,621 21.9
Operating costs
and expenses 3,503 17.7 6,635 19.1
Operating income 569 2.9 986 2.8
Other income, net (3) --- 158 0.5
------------ ------------ ------------ ------------
Net income $345 1.7% $700 2.0%
============ ============
Earnings per
common share:
Basic $0.08 $0.12
============ ============
Diluted $0.08 $0.12
============ ============
Shares used in
computing earnings
per common share:
Basic 4,120 5,774
============ ============
Diluted 4,123 5,774
============ ============
</TABLE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Net Sales
Net sales for the first quarter 1998 increased $14.9 million or 75.3%, to $34.8
million from $19.8 million for the first quarter 1997. The increase in net
sales was primarily due to the acquisition of Southern Belle in December 1997.
Therefore, a full quarter's sales were reflected in the first quarter 1998 net
sales amounts.
Cost of Sales
Cost of sales for the first quarter 1998 increased $11.4 million or 72.2%, to
$27.1 million from $15.8 million in the first quarter 1997. Cost of sales as a
percentage of net sales, however, decreased to 78.1% in the first quarter 1998
from 79.5% in the first quarter 1997 primarily as a result of (i) less
dependence on the spot market for the Company's internal butterfat
requirements, (ii) the production of certain products by the Company which were
previously purchased from outside suppliers and (iii) a change in customer mix
toward customers requiring additional delivery service with such sales
typically having a lower cost basis as a percentage of net sales. The factors
representing the decrease in cost of sales as a percentage of net sales were
partially offset by an overall increase in raw material costs in the first
quarter 1998 compared to the first quarter 1997.
Operating expenses
Operating expenses for the first quarter 1998 increased $ 3.1 million, or
89.5%, to $6.6 million from $3.5 million in the first quarter 1997. Operating
expenses as a percentage of net sales were 19.1% for the first quarter 1998
compared to 17.7% for the first quarter 1997. Operating expenses as a
percentage of net sales increased primarily due to the Southern Belle
acquisition which resulted in an increase in the mix of customers requiring
additional delivery services compared to customers utilizing the Company's dock
pickup program and drop shipment program.
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<PAGE> 12
Other income
Other income for the first quarter 1998 was $158,000 compared to an expense of
$3,000 for the first quarter 1997. The increase in other income was primarily
the result of additional interest income from funds remaining in the Company's
treasury as a result of the Company's initial public offering and a reduction
in interest expense due to the Company extinguishing substantially all of its
interest bearing debt in December 1997.
Net income
Net income for the first quarter 1998 increased $355,000 to $700,000, or $0.12
per share on a diluted basis, from $345,000, or $0.08 per share on a diluted
basis, for the first quarter 1997. The increase in net income is primarily
attributed to additional sales as a result of the acquisition of Southern
Belle.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its capital expenditures and working
capital requirements through cash generated from operating activities. Although
no specific decisions have been made, management is currently evaluating
improvements to existing manufacturing capacity, including upgrading existing
facilities and production equipment, constructing new facilities, using
facilities gained in acquisition transactions, or any combination of such
measures.
During the first quarter 1998 as compared to the first quarter 1997, capital
expenditures increased $1.0 million to $1.1 million from $81,000 in the first
quarter 1997. The capital expenditures were partially offset by cashflows from
investing activities for the sale of certain trailers due to the Company's
conversion to primarily all leased vehicles of $376,000 and cash received due
to the Company canceling an insurance policy on previous officers of Southern
Belle in the amount of $198,000. The Company anticipates that capital
expenditures in future periods will exceed historical levels. The Company is
currently considering a number of alternatives to upgrade and expand existing
plant and facilities and/or to construct new facilities. The Company intends to
seek financing for the expansion plans through a combination of grants or loans
from state development agencies, bank borrowings or excess cash flow from
operations. In addition, if such financing is not available or is on terms that
the Company does not view as favorable, the Company may be required to limit or
curtail the scope of the expansion plans.
On March 30, 1998, the Company finalized a loan commitment agreement with a
bank that was entered into on February 16, 1998. The agreement provides for two
additional credit facilities, in addition to the Company's $4.0 million line of
credit agreement with another bank. The first facility provides for a $15.0
million line of credit with interest at either the Bank's prime rate or LIBOR
plus a margin. The borrowings under this agreement are uncollateralized and the
Company pays a commitment fee on unused borrowings ranging from .20% to .35%.
The second facility is a $5.0 million uncollateralized capital expenditure line
of credit at either the Bank's prime rate or LIBOR plus a margin. The
borrowings under this commitment are uncollateralized and provide for monthly
interest-only payments for one year, converting to term debt to be paid over
seven years.
The most restrictive covenants under these agreements are the maintenance of a
maximum funded debt to Earnings Before Interest Expense, Taxes, Depreciation
and Amortization (EBITDA) ratio, a minimum tangible net worth, a minimum
Earnings Before Interest and Taxes (EBIT) to interest expense ratio, a cashflow
coverage ratio as well as other restrictive covenants which are included in the
credit agreement dated March 30, 1998. The discussion of the terms of the
credit agreement dated March 30, 1998 is qualified in its entirety by reference
to such agreement. (See Exhibit 10)
Inflation
The impact of inflation on the Company's business has been insignificant to
date and the Company believes that it will continue to be insignificant for the
foreseeable future.
12
<PAGE> 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
NOT APPLICABLE.
Special Note Regarding Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q that are not
historical fact are "forward-looking" statements and involve important risks
and uncertainties. Such risks and uncertainties, which are detailed in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, and
other filings with the Securities and Exchange Commission, could cause the
Company's results to differ materially from the Company's current expectations
as expressed herein.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company completed its initial public offering pursuant to a registration
statement on Form S-1 (Registration No. 333-37387) with an effective date of
December 8, 1997 and trading commencing on December 9, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on April 29, 1998. A total
of two matters were voted upon at the Annual Meeting:
1. Adoption of the Amended and Restated Code of Regulations - The regulations
were approved by a vote of 3,398,348 shares for; 3,450 against; 5,700
withheld votes and 945,987 broker non-votes.
2. Election of Directors - The nominees listed in the proxy statement dated
April 3, 1998, were elected to the terms of office as disclosed therein as
follows:
<TABLE>
<CAPTION>
DIRECTOR VOTES FOR VOTES AGAINST VOTES WITHHELD
<S> <C> <C> <C>
Marshall T. Reynolds 4,338,785 --- 5,300
Philip E. Cline 4,338,785 --- 5,300
George W. Broughton 4,338,785 --- 5,300
Ronald V. Arthur, II 4,338,785 --- 5,300
Robert E. Evans 4,338,785 --- 5,300
Charles R. Hooten, Jr. 4,338,785 --- 5,300
Neal W. Scaggs 4,338,785 --- 5,300
Philip Todd Shell 4,338,785 --- 5,300
Kirby J. Taylor 4,338,785 --- 5,300
Paul T. Theisen 4,338,785 --- 5,300
Thomas W. Wright 4,338,785 --- 5,300
Martin P. Shearer 4,338,785 --- 5,300
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit #4 - Amended and Restated Code of Regulations
Exhibit #10 - Credit agreement dated March 30, 1998
Exhibit #27 - Financial Data Schedule
(B) REPORTS ON FORM 8-K
There were none.
14
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROUGHTON FOODS COMPANY
By: /s/ Philip E. Cline
-------------------
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1998
By: /s/ Todd R. Fry
---------------
Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 14, 1998
15
<PAGE> 1
Exhibit 4.0
BROUGHTON FOODS COMPANY
Amended and Restated Code of Regulations
Effective as of April 29, 1998
ARTICLE I
SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of shareholders
of the corporation for the election of directors, the consideration of reports
to be laid before such meeting, and the transaction of such other business as
may properly be brought before such meeting shall be held on a date and at a
time, either within or without the State of Ohio, as may be fixed by the board
of directors, annually, and specified in the notice of the meeting.
SECTION 2. Special Meetings. Special meetings of the
shareholders of the corporation may be held on any day, when called by the
chairman of the board, or by the president, or, in case of the president's
absence, death or disability, by the vice president authorized to exercise the
authority of the president, or by the board of directors acting at a meeting,
or by a majority of the directors acting without a meeting, or by the person or
persons who hold at least fifty per cent of all the shares outstanding and
entitled to vote thereat. Upon request in writing delivered to the president
or the secretary by any persons entitled to call a meeting of shareholders,
such officer shall forthwith cause to be given to the shareholders entitled
thereto notice as set forth in Section 3 of this Article I, below.
SECTION 3. Notice of Meetings. Not less than seven (7) or more
than sixty (60) days before the date fixed for a meeting of shareholders,
written notice stating the time, place, and purposes of such meeting shall be
given by or at the direction of the president, secretary or assistant
secretary, or any other person or persons required or permitted by these
regulations to give such notice. The notice shall be given by personal
delivery or by mail to each shareholder entitled to notice of the meeting who
is of record as of the day next preceding the day on which notice is given or,
if a record date therefor is duly fixed, of record as of said date; if mailed,
the notice shall be addressed to the shareholders at their respective addresses
as they appear on the records of the corporation. Notice of the time, place,
and purposes of any meeting of shareholders may be waived in writing, either
before or after the holding of such meeting, by any shareholders, which writing
shall be filed with or entered upon the record of the meeting. The attendance
of any shareholder at any such meeting without protesting, prior to or at the
commencement of the meeting, the lack of proper notice shall be deemed to be a
waiver by him of notice of such meeting.
SECTION 4. Quorum; Adjournment. Except as may be otherwise
provided by law or by the Articles of Incorporation, at any meeting of the
shareholders the holders of shares entitling them to exercise a majority of the
voting power of the corporation present in person or by proxy shall constitute
a quorum for such meeting; provided, however, that
<PAGE> 2
no action required by law, by the Articles of Incorporation, or by these
Regulations to be authorized or taken by a designated proportion of the shares
of any particular class or of each class of the corporation may be authorized
or taken by a lesser proportion; and provided, further, that the holders of a
majority of the voting shares represented thereat, whether or not a quorum is
present, may adjourn such meeting from time to time; if any meeting is
adjourned, notice of such adjournment need not be given if the time and place
to which such meeting is adjourned are fixed and announced at such meeting.
SECTION 5. Proxies. Persons entitled to vote shares or to act
with respect to shares may vote or act in person or by proxy. Without
affecting any vote previously taken, the person appointing a proxy may revoke a
revocable appointment by a later appointment received by the corporation or by
giving notice of revocation to the corporation in writing or in open meeting
prior to the voting of such proxy. The presence at a meeting of the person
appointing a proxy does not revoke the appointment.
SECTION 6. Action without a Meeting. Except as provided in
Article VIII, shareholders of the Corporation may not take any action without a
meeting duly called.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number. The number of directors of the Corporation
shall be twelve (12). Notwithstanding the foregoing, the board of directors
may change the number of directors, from time to time by resolution adopted by
a majority of the board of directors, provided, however, that in no event shall
the number of directors be less than three (3). The number of directors may be
changed by the shareholders at an annual meeting or a special meeting called
for the purpose of changing the number of directors, at which a quorum is
present, by the affirmative vote of the holders of a majority of the shares
which are represented at the meeting and entitled to vote on the proposal.
Prior to an annual meeting at which a shareholder or shareholders propose to
vote to change the number of directors or a special meeting of shareholders
called by shareholders for the purpose of changing the number of directors as
permitted by Section 2 of Article I, the shareholder or shareholders who wish
make such proposal to change the number of directors at an annual meeting or
who call such special meeting are required to provide notice to the Corporation
of the intention to make such proposal or call such special meeting no later
than 120 days prior to the intended meeting date.
SECTION 2. Election of Directors; Vacancies. The directors
shall be elected at each annual meeting of shareholders or at a special meeting
called for the purpose of electing directors. At a meeting of shareholders at
which directors are to be elected, only persons nominated as candidates shall
be eligible for election as directors and the candidates receiving the greatest
number of votes shall be elected, assuming that a quorum is present. In the
event of the occurrence of any vacancy or vacancies in the board of directors,
however caused, the remaining directors, though less than a majority of the
whole authorized number of directors, may, by the vote of a majority of their
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<PAGE> 3
number, fill any such vacancy for the unexpired term. No reduction in the
number of directors shall of itself have the effect of shortening the term of
any incumbent director.
SECTION 3. Term of Office; Resignations. Each director shall
hold office until the next annual meeting of the shareholders and until his
successor is elected, or until his earlier resignation, removal from office or
death. Any director may resign at any time by oral statement to that effect
made at a meeting of the board of directors or in a writing to that effect
delivered to the secretary, such resignation to take effect immediately or at
such other time as the director may specify. Directors of the corporation may
be removed in accordance with the law of the State of Ohio.
SECTION 4. Organization Meeting. Immediately after each annual
meeting of the shareholders, the newly elected directors shall hold an
organization meeting for the purpose of electing officers and transacting any
other business. Notice of such meeting need not be given.
SECTION 5. Regular Meetings. Regular meetings of the board of
directors may be held at such times and places within or without the State of
Ohio as may be provided for in resolutions adopted by the board of directors
and upon notice, if any, as shall be so provided.
SECTION 6. Special Meetings. Special meetings of the board of
directors may be held at any time within or without the State of Ohio upon call
by the chairman of the board or the president or by not less than one-third of
the directors. Notice of the time and place of each such meeting shall be
served upon, telephoned or facsimiled to each director at least twenty-four
hours, or mailed or telegraphed to each director at his address as shown on the
books of the corporation at least forty-eight hours prior to the time of the
meeting, which notice need not specify the purposes of the meeting; provided,
however, that attendance of any director at any such meeting without
protesting, prior to or at the commencement of the meeting shall be deemed to
be a waiver by him of notice of such meeting; and such notice may be waived in
writing, either before or after the holding of such meeting, by any director,
which writing shall be filed with or entered upon the records of the meeting.
Unless otherwise indicated in the notice thereof, any business may be
transacted at any organization, regular or special meeting.
SECTION 7. Quorum; Adjournment. A quorum of the board of
directors shall consist of a majority of the directors then in office.
Provided, that a majority of the directors present at a meeting duly held,
whether or not a quorum is present, may adjourn such meeting from time to time;
if any meeting is adjourned, notice of such adjournment need not be given if
the time and place to which such meeting is adjourned are fixed and announced
at such meeting. At each meeting of the board of directors at which a quorum
is present, all questions and business shall be determined by a majority vote
of those present except as in these regulations otherwise expressly provided.
SECTION 8. Action Without a Meeting. Any action which may be
authorized or taken at a meeting of the board of directors may be authorized or
taken without a meeting with the affirmative vote or approval of, and in a
writing or writings signed by,
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<PAGE> 4
all of the directors, which writing or writings shall be filed with or entered
upon the records of the corporation.
SECTION 9. Committees. The board of directors may at any time
appoint from its members an executive or other committee or committees,
consisting of such number of members, not less than three, as the board of
directors may deem advisable, together with such alternates as the board of
directors may deem advisable, to take the place of any absent member or members
at any meeting of such committee. Each such member and each such alternate
shall hold office during the pleasure of the board of directors. Any such
committee shall act only in the intervals between meetings of the board of
directors and shall have such authority of the board of directors as may, from
time to time, be delegated by the board of directors, except the authority to
fill vacancies in the board of directors or in any committee of the board of
directors. Subject to the aforesaid exceptions, any person dealing with the
corporation shall be entitled to rely upon any act or authorization of an act
by any such committee, to the same extent as an act or authorization of the
board of directors. Each committee shall keep full and complete records of all
meetings and actions, which shall be open to inspection by the directors.
Unless otherwise ordered by the board of directors, any such committee may
prescribe its own rules for calling and holding meetings, and for its own
method of procedure, and may act at a meeting by a majority of its members or
without a meeting by a writing or writings signed by all of its members.
ARTICLE III
OFFICERS
SECTION 1. Election and Designation of Officers. The board of
directors shall elect a president, a secretary, a treasurer, and, in its
discretion, may elect one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as the
board of directors may deem necessary. Any two or more of such offices may be
held by the same person, but no officer shall execute, acknowledge, or verify
any instrument in more than one capacity, if such instrument is required to be
executed, acknowledged, or verified by two or more officers.
SECTION 2. Term of Office; Vacancies. The officers of the
corporation shall hold office, subject to the pleasure of the board of
directors, until their successors are elected, except in case of resignation,
removal from office, or death. The board of directors may remove any officer
at any time with or without cause by a majority vote of the directors then in
office, subject to contract rights. Any vacancy in any office may be filled by
the board of directors.
SECTION 3. Authority and Duties of Officers. The officers of
the corporation shall have such authority and shall perform such duties as are
customarily incident to their respective offices or as may be specified from
time to time by the board of directors, regardless of whether such authority
and duties are customarily incident to such office.
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<PAGE> 5
SECTION 4. Delegation of Authority and Duties. The board of
directors is authorized to delegate the authority and duties of any officer to
any other officer and generally to control the action of the officers and to
require the performance of duties to those mentioned herein.
ARTICLE IV
COMPENSATION
SECTION 1. Directors and Members of Committees. Members of the
board of directors and members of any committee of the board of directors
shall, as such, receive such compensation, which may be either a fixed sum for
attendance at each meeting of the board of directors, or at each meeting of the
committee, or stated compensation payable at intervals, or shall otherwise be
compensated as may be determined by or pursuant to authority conferred by the
board of directors or any committee of the board of directors, which
compensation may be in different amounts for various members of the board of
directors or any committee. No member of the board of directors and no member
of any committee of the board of directors shall be disqualified from being
counted in the determination of a quorum or from acting at any meeting of the
board of directors or of a committee of the board of directors by reason of the
fact that matters affecting his own compensation as a director, member of a
committee of the board of directors, officer, or employee are to be determined.
SECTION 2. Officers. The compensation of officers of the
corporation, or the method of fixing such compensation, shall be determined by
or pursuant to authority conferred by the board of directors or any committee
of the board of directors. Such compensation may include pension, disability,
and death benefits, and may be by way of fixed salary, or on the basis of
earnings of the corporation, or any combination thereof, or otherwise, as may
be determined or authorized from time to time by the board of directors or any
committee of the board of directors.
ARTICLE V
INDEMNIFICATION
SECTION 1. Third Party Actions. The corporation shall indemnify
to the fullest extent permissible under the laws of the State of Ohio as
currently in effect or hereinafter amended any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, other than an action, suit, or proceeding by or in the right of
the corporation, by reason of the fact that he is or was a director or officer
of the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, domestic or foreign, nonprofit or
for profit, a limited liability company, or a partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys' fees),
judgments, decrees, fines, penalties, and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit, or
proceeding. The right to indemnification conferred in this Article V shall be
a contract
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<PAGE> 6
right and shall not be affected adversely as to any director of officer by any
amendment to this Amended and Restated Code of Regulations with respect to any
action or inaction occurring prior to such amendment.
SECTION 2. Derivative Actions. The corporation shall indemnify
to the fullest extent permissible under the laws of the State of Ohio as
currently in effect or hereinafter amended any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action or suit, by or in the right of the corporation to procure a judgment in
its favor, by reason of the fact that he is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, domestic or foreign, nonprofit or
for profit, a limited liability company, or a partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit.
SECTION 3. Advances of Expenses. Expenses of each person
indemnified under this Article V incurred in defending a civil, criminal,
administrative, or investigative action, suit, or proceeding or threat thereof,
may be paid by the corporation, as they are incurred, in advance of the final
disposition of such action, suit, or proceeding as authorized by the directors
in the specific case, upon receipt of an undertaking by or on behalf of the
person indemnified, to repay such amount if it ultimately is determined that he
is not entitled to be indemnified by the corporation.
SECTION 4. Employees and Agents. The corporation may, to the
extent authorized from time to time by the board of directors, grant rights to
indemnification, and to the advancement of expenses, to any employee or agent
of the corporation (or any person serving at the corporation's request as a
trustee, manager, member, employee or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust or other enterprise) or to any person who is
or was a director, officer, employee or agent of a constituent corporation
absorbed by the corporation as a director, trustee, officer, employee or agent
of another enterprise, in each case as determined by the board of directors to
the fullest extent of the provisions of this Article V in cases of the
indemnification and advancement of expenses of directors and officers of the
corporation, or to any lesser extent (or greater extent, if permitted by law)
as determined by the board of directors.
SECTION 5. Non-Exclusivity; Heirs. The indemnification provided
by this Article V shall not be deemed exclusive of, and shall be in addition
to, any other rights granted to those seeking indemnification under the
Articles, these regulations, any agreement, a vote of shareholders or
disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding their offices or
positions, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, member, manager or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
SECTION 6. Purchase of Insurance. The corporation may purchase
and maintain insurance or similar protection on behalf of any person who is or
was a director,
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<PAGE> 7
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee, manager,
member or agent of another corporation, domestic or foreign, nonprofit or for
profit, a limited liability company, or a partnership, joint venture, trust, or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article V. Insurance may be purchased from or
maintained with a person in which the corporation has a financial interest.
SECTION 7. Severability. In the event that any of the
provisions of this Article V (including any provision within a single section,
paragraph or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the full extent permitted by law.
ARTICLE VI
RECORD DATES
For any lawful purpose, including, without limitation, the
determination of the shareholders who are entitled to receive notice of or to
vote at a meeting of shareholders, receive payment of any dividend or
distribution, receive or exercise rights of purchase or subscription for, or
exchange or conversion of, shares or other securities, subject to contract
rights with respect thereto, or participate in the execution of written
consents, waivers, or releases, the board of directors may fix a record date in
accordance with the provisions of the Ohio General Corporation Law. The record
date for the purpose of the determination of the shareholders who are entitled
to receive notice of or to vote at a meeting of shareholders shall continue to
be the record date for all adjournments of such meetings, unless the board of
directors or the persons who shall have fixed the original record date shall,
subject to the limitations set forth in the Ohio General Corporation Law, fix
another date, and, in case a new record date is so fixed, notice thereof and of
the date to which the meeting shall have been adjourned shall be given to
shareholders of record as of such date in accordance with the same requirements
as those applying to a meeting newly called. The board of directors may close
the share transfer books against transfers of shares during the whole or any
part of the period provided for in this Article VI, including the date of the
meeting of shareholders and the period ending with the date, if any, to which
adjourned. If no record date is fixed therefor, the record date for
determining the shareholders who are entitled to receive notice of, or to vote
at, a meeting of shareholders shall be the date next preceding the day on which
notice is given, or the date next preceding the day on which the meeting is
held, as the case may be.
ARTICLE VII
CERTIFICATES FOR SHARES
SECTION 1. Form of Certificates and Signatures. Subject to
Section 2 of this Article VII, each holder of shares shall be entitled to one
or more certificates, signed by
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<PAGE> 8
the chairman of the board or the president or a vice president and by the
secretary, an assistant secretary, the treasurer, or an assistant treasurer of
the corporation, which shall certify the number and class of shares held by him
in the corporation, but no certificate for shares shall be executed or
delivered until such shares are fully paid. When such a certificate is
countersigned by an incorporated transfer agent or registrar, the signature of
any of said officers of the corporation may be facsimile, engraved, stamped, or
printed. Although any officer of the corporation whose manual or facsimile
signature is affixed to such a certificate ceased to be such officer before the
certificate is delivered, such certificate nevertheless shall be effective in
all respects when delivered.
SECTION 2. Uncertificated Shares. The Board of Directors may
provide by resolution that some or all of a series of any or all classes of
shares of the Corporation shall be uncertificated shares as permitted by Ohio
law.
SECTION 3. Transfer of Shares. Shares of the corporation shall
be transferable upon the books of the corporation by the holders thereof, in
person, or by a duly authorized attorney, upon surrender and cancellation of
certificates for a like number of shares of the same class or series, with duly
executed assignment and power of transfer endorsed thereon or attached thereto,
and with such proof of the authenticity of the signatures to such assignment
and power of transfer as the corporation or its agents may reasonably require.
SECTION 4. Lost, Stolen, or Destroyed Certificates. The
corporation may issue a new certificate for shares in place of any certificate
theretofore issued by it and alleged to have been lost, stolen, or destroyed,
and the board of directors may, in its discretion, require the owner, or his
legal representatives, to give the corporation a bond containing such terms as
the board of directors or the president or a vice president and the secretary
or the treasurer may require to protect the corporation or any person injured
by the execution and delivery of a new certificate.
SECTION 5. Transfer Agent and Registrar. The board of directors
may appoint, or revoke the appointment of transfer agents and registrars and
may require all certificates for shares to bear the signatures of such transfer
agents and registrars, or any of them.
ARTICLE VIII
AMENDMENTS
The regulations of the corporation may be amended, or new regulations
may be adopted, by the shareholders at a meeting held for such purpose, by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power on such proposal or without a meeting by the written
consent of the holders of shares entitling them to exercise two-thirds of the
voting power on such proposal. If the regulations are amended or new
regulations are adopted without a meeting of the shareholders, the secretary of
the corporation shall mail a copy of the amendment or the new regulations to
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<PAGE> 9
each shareholder who would have been entitled to vote thereon and did not
participate in the adoption thereof.
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<PAGE> 1
EXHIBIT 10.0
CREDIT AGREEMENT
dated as of
March 30, 1998
between
Broughton Foods Company
and
National City Bank
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
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<S> <C> <C>
SECTION 1. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 -
1.1 Revolving Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 -
1.2 Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 -
SECTION 2. INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -
2.1 Prime Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -
2.2 LIBO Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -
2.3 Notice of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 -
2.4 Interest Calculation and Interest Payment Date . . . . . . . . . . . . . . . . - 4 -
2.5 Additional Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4 -
2.6 Limitations on Requests and Elections. . . . . . . . . . . . . . . . . . . . . - 5 -
2.7 Illegality and Impossibility . . . . . . . . . . . . . . . . . . . . . . . . . - 6 -
2.8 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 -
2.9 Survival of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 -
2.10 Commitment Fee; Facility Fee; Documentation Fee; Cancellation and
Reduction and Increase of Commitment . . . . . . . . . . . . . . . . . . . . . - 7 -
2.11 Interest Rate after Default . . . . . . . . . . . . . . . . . . . . . . . . . - 8 -
SECTION 3. EVIDENCE OF THE LOAN AND TERMS OF PAYMENT. . . . . . . . . . . . . . . . . . . - 8 -
SECTION 4. PREPAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 -
SECTION 5. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 -
SECTION 6. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 -
SECTION 7. SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 -
SECTION 8. WARRANTIES AND REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . - 10 -
8.1 Subsidiaries and Other Affiliations. . . . . . . . . . . . . . . . . . . . . . - 10 -
8.2 Corporate Organization and Authority. . . . . . . . . . . . . . . . . . . . . - 10 -
8.3 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 11 -
8.4 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 11 -
8.5 Pending Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 11 -
8.6 Title to Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 11 -
8.7 Borrowing is Legal and Authorized. . . . . . . . . . . . . . . . . . . . . . . - 12 -
8.8 No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12 -
8.9 Government Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12 -
8.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13 -
8.11 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13 -
8.12 Restrictions on Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13 -
8.13 Environmental Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . - 14 -
8.14 Regulation U. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15 -
SECTION 9. CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15 -
9.1 Resolutions and Incumbency Certificate. . . . . . . . . . . . . . . . . . . . - 16 -
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
9.2 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 16 -
9.3 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . - 16 -
9.4 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 16 -
9.5 Warranties and Representations. . . . . . . . . . . . . . . . . . . . . . . . - 16 -
9.6 Corporate Authority and Good Standing . . . . . . . . . . . . . . . . . . . . - 17 -
SECTION 10. COMPANY BUSINESS COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . - 17 -
10.1 Payment of Taxes and Claims. . . . . . . . . . . . . . . . . . . . . . . . . . - 17 -
10.2 Maintenance of Properties and Corporate Existence. . . . . . . . . . . . . . . - 18 -
10.3 Sale of Assets or Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . - 19 -
10.4 Liens and Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 19 -
10.5 Other Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 20 -
10.6 Contingent Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 20 -
10.7 Operating Lease Rentals. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 20 -
10.8 Loans and Advances by the Company. . . . . . . . . . . . . . . . . . . . . . . - 20 -
10.9 Acquisition of Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . - 21 -
10.10 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 21 -
10.11 Sale of Receivables and Consignments. . . . . . . . . . . . . . . . . . . . . - 21 -
10.12 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 21 -
10.13 Ratio of Funded Debt to EBITDA. . . . . . . . . . . . . . . . . . . . . . . . - 22 -
10.14 Cash Flow Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . - 23 -
10.15 Ratio of EBIT to Interest Expense . . . . . . . . . . . . . . . . . . . . . . - 23 -
10.16 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 23 -
SECTION 11. INFORMATION AS TO COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . - 24 -
SECTION 12. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 25 -
12.1 Nature of Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 25 -
12.2 Default Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 26 -
SECTION 13. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 27 -
13.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 27 -
13.2 Reproduction of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . - 28 -
13.3 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 28 -
13.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 28 -
13.5 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 28 -
13.6 Entire Agreement; Duplicate Originals and Counterparts . . . . . . . . . . . . - 28 -
13.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 29 -
13.8 Accounting Terms and Computations. . . . . . . . . . . . . . . . . . . . . . . - 29 -
13.9 Consent to Jurisdiction and Waiver of Objection to Venue. . . . . . . . . . . - 29 -
13.10 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 30 -
13.11 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 30 -
</TABLE>
<PAGE> 4
CREDIT AGREEMENT
This Credit Agreement (this "Agreement") is entered into at Columbus,
Ohio, by and between National City Bank (hereinafter referred to as the
"Bank"), Columbus, Ohio, and Broughton Foods Company (hereinafter referred to
as the "Company"), as of the 30th day of March, 1998.
SECTION 1. CREDIT FACILITIES
1.1 Revolving Loan.
The Bank agrees to lend to the Company the sum of $15,000,000.00
(hereinafter referred to as the "Revolving Loan"), subject to the terms and
conditions of this Agreement. The Revolving Loan shall take the form of a
revolving credit, and the outstanding principal balance may be increased and
decreased an unlimited number of times. The Company's right to obtain advances
pursuant to the Revolving Loan shall terminate and the outstanding principal
balance shall be payable in full on March 30, 2000 (the "Revolving Loan
Termination Date"). The Bank shall have no obligation to advance or readvance
any sums pursuant to the Revolving Loan at any time when a set of facts or
circumstances exists, which, in and of itself or upon the giving of notice or
lapse of time, or both, would constitute an Event of Default under this
Agreement. Upon the mutual agreement of the Bank and the Company, the Revolving
Loan Termination Date may be extended for one or more successive periods of one
year each.
1.2 Line of Credit.
The Bank agrees to lend to the Company the sum of $5,000,000.00
(hereinafter referred to as the "Line of Credit"). The Line of Credit shall
initially take the form of a revolving credit and the outstanding principal
balance may during that initial time period be increased and decreased an
unlimited number of times. The Company's right to obtain advances pursuant to
the Line of Credit shall terminate on March 30, 1999 (the "Line of Credit
Termination Date"), and the principal balance outstanding under the Line of
Credit shall thereafter be repaid in eighty-four equal, consecutive monthly
installments. The Bank shall have no obligation to advance or readvance any
sums pursuant to the Line of Credit at any time when a set of facts or
circumstances exists, which, in and of itself or upon the giving of notice or
lapse of time, or both, would constitute an Event of Default under this
Agreement.
<PAGE> 5
SECTION 2. INTEREST RATE.
2.1 Prime Interest Rate.
The Company agrees to pay to the Bank monthly interest on the unpaid
balance of the Loan at a variable per annum rate of interest (the "Prime
Interest Rate") equal to the Prime Rate of the Bank, from time to time in
effect, with each change in the Prime Rate automatically and immediately
changing the interest rate on the Loan without notice to the Company. "Prime
Rate" as used herein shall mean the rate of interest announced by the Bank from
time to time to be its prime rate, whether or not the Bank shall at times lend
to borrowers at lower rates of interest or, if there is no such prime rate,
then its base rate or such other rate as may be substituted generally by the
Bank for the prime rate. Interest shall be calculated on a 360 day year basis
and shall be based on the actual number of days that elapse during the interest
calculation period. The Prime Interest Rate shall be applicable at all times
to all the unpaid principal balance of the Loan that is not subject to the
alternative interest rate option elected in the manner hereinafter provided.
"Prime Interest Rate Advance" shall mean any amount borrowed as part of the
Loan that bears interest at the Prime Interest Rate.
2.2 LIBO Rate.
The Company may from time to time while the Loan is permitted to revolve
elect to have interest accrue on all or part of the outstanding principal
balance of the Loan at a rate of interest equal to the Applicable Margin plus
the LIBO Rate. "LIBO Rate" shall mean, with respect to any LIBO Rate Advance
and the related Interest Period (as hereinafter defined), the per annum rate
that is equal to the quotient of:
(a) the actual or estimated arithmetic mean of the per annum rates
of interest at which deposits in U.S. dollars for the related Interest Period
and in an aggregate amount comparable to the amount of such LIBO Rate Advance
are being offered to U.S. banks by one or more prime banks in the London
interbank market, as determined by the Bank in its discretion based upon
reference to information appearing in Telerate, a service of Telerate Systems
Incorporated, in the section captioned "British Bankers Assoc. Interest
Settlement Rates," or any comparable index selected by the Bank, the obtaining
of rate quotations, or any other reasonable procedure, at approximately 11:00
a.m. London, England, time, on the second LIBO Business Day prior to the first
day of the
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<PAGE> 6
related Interest Period; all as determined by the Bank, such sum to be rounded
up, if necessary, to the nearest whole multiple of 1/16 of 1%; divided by
(b) a percentage equal to 100% minus the rate (expressed as a
percentage), if any, at which reserve requirements are imposed on the Bank, on
the second LIBO Business Day prior to the first day of the related Interest
Period, with respect to any "Eurocurrency liabilities" under Regulation D of
the Board of Governors of the Federal Reserve System or any other regulations
of any governmental authority having jurisdiction with respect thereto
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves) for a term comparable to such Interest Period. This
provision is for the benefit of the Bank and is not intended to increase the
expected yield to the Bank above the rates of interest provided for in this
Agreement.
"LIBO Rate Advance" shall mean any amount borrowed as part of the Loan
that bears interest at a rate calculated with reference to the LIBO Rate. All
LIBO Rate Advances shall be in a minimum amount of $500,000.00 and in an
integral multiple thereof. "LIBO Business Day" shall mean, with respect to any
LIBO Rate Advance, a day which is both a day on which the Bank is open for
business and a day on which dealings in U.S. dollar deposits are carried out in
the London interbank market.
2.3 Notice of Election.
The Company may initially elect to request an advance of any type,
continue an advance of one type as an advance of the then existing type or
convert an advance of one type to an advance of another type, by giving notice
thereof to the Bank in writing in the form of Exhibit A hereto not later than
10:00 a.m. Columbus, Ohio time, two LIBO Business Days prior to the date any
such continuation of or conversion to a LIBO Rate Advance is to be effective,
and not later than 10:00 a.m. Columbus, Ohio time on the date such continuation
or conversion is to be effective in all other cases, provided, that an
outstanding advance may only be converted on the last day of the then current
Interest Period (if applicable) with respect to such advance, and provided,
further, that upon the continuation or conversion of an advance such notice
shall also specify the Interest Period (if applicable) to be applicable thereto
upon such continuation or conversion. If the Company shall fail to timely
deliver such a notice with respect to any outstanding advance, the Company
shall be deemed to have elected to convert such advance to a Prime Interest
Rate Advance on the last day of the then current Interest Period with respect
to such advance.
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<PAGE> 7
2.4 Interest Calculation and Interest Payment Date.
"Interest Period" shall mean:
(a) With respect to any LIBO Rate Advance, an initial period
commencing, as the case may be, on the day such an advance shall be made by the
Bank, or on the day of conversion of any then outstanding advance to an advance
of such type, and ending on the date one (1), two (2), three (3) or four (4)
months thereafter, all as the Company may elect pursuant to Section 2.2 of this
Agreement, provided, that (a) any Interest Period with respect to a LIBO Rate
Advance that shall commence on the last LIBO Business Day of the calendar month
(or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last LIBO Business Day
of the appropriate subsequent calendar month; and (b) each Interest Period with
respect to a LIBO Rate Advance that would otherwise end on a day which is not a
LIBO Business Day shall end on the next succeeding LIBO Business Day or, if
such next succeeding LIBO Business Day falls in the next succeeding calendar
month, on the next preceding LIBO Business Day.
(b) With respect to a Prime Interest Rate Advance, an initial period
commencing, as the case may be, on the day such an advance shall be made by the
Bank, or on the day of conversion of any then outstanding advance to an advance
of such type, and ending on the day of conversion to an advance of a different
type.
Notwithstanding the provisions of (a) or (b) above, no Interest Period
shall be permitted which would end after the Revolving Loan Termination Date or
Line of Credit Termination Date respectively.
Interest shall be calculated on a 360 day year basis and shall be based
on the actual number of days which elapse during the interest calculation
period. Interest shall be due and payable on each Interest Payment Date.
"Interest Payment Date" shall mean (a) the last day of each Interest Period in
the case of a LIBO Rate Advance and, in the case of any Interest Period which
is longer than one (1) month for any such advance, the day of each succeeding
month that corresponds to the first day of such Interest Period; and (b) in the
case of a Prime Interest Rate Advance, the first business day of each month and
on the date of conversion from a Prime Interest Rate Advance to a LIBO Rate
Advance.
2.5 Additional Costs.
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<PAGE> 8
In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or any interpretation
or administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive of any such authority (whether or not having the force of
law), shall (a) affect the basis of taxation of payments to the Bank of any
amounts payable by the Company for LIBO Rate Advances under this Agreement
(other than taxes imposed on the overall net income of the Bank by the
jurisdiction, or by any political subdivision or taxing authority of any such
jurisdiction, in which the Bank has its principal office), or (b) shall impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by
the Bank, or (c) shall impose any other condition, requirement or charge with
respect to this Agreement or the Loan (including, without limitation, any
capital adequacy requirement, any requirement which affects the manner in which
the Bank allocates capital resources to its commitments or any similar
requirement), and the result of any of the foregoing is to increase the cost to
the Bank of making or maintaining the Loan or any advance thereunder, to reduce
the amount of any sum receivable by the Bank thereon, or to reduce the rate of
return on the Bank's capital, then the Company shall pay to the Bank, from time
to time, upon request of the Bank, additional amounts sufficient to compensate
the Bank for such increased cost, reduced sum receivable or reduced rate of
return to the extent the Bank is not compensated therefor in the computation of
the interest rates applicable to the Loan. A detailed statement as to the
amount of such increased cost, reduced sum receivable or reduced rate of
return, prepared in good faith and submitted by the Bank to the Company, shall
be conclusive and binding for all purposes relative to the Bank, absent
manifest error in computation. The Bank will make a good faith effort to
provide prompt notice to the Company of the occurrence of an event of the type
described in this Section, but no delay or failure in the giving of notice
shall excuse the Company from any payment obligations hereunder.
2.6 Limitations on Requests and Elections.
Notwithstanding any other provision of this Agreement to the contrary,
if, upon receiving a request for an advance or a request for a continuation of
an advance as an advance of the then existing type or conversion of an advance
to an advance of another type (a) in the case of any LIBO Rate Advance,
deposits in dollars for periods comparable to the Interest Period elected by
the Company are not available to the Bank in the London interbank
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<PAGE> 9
market, or (b) the LIBO Rate, as the case may be, will not accurately cover the
cost to the Bank of making or maintaining the related LIBO Rate Advance, or (c)
by reason of national or international financial, political or economic
conditions or by reason of any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or the interpretation
or administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive of such authority (whether or not having the force of
law), including without limitation exchange controls, it is impracticable,
unlawful or impossible for the Bank (i) to make the relevant LIBO Rate Advance
or (ii) to continue such advance as a LIBO Rate Advance or (iii) to convert an
advance to LIBO Rate Advance, then the Company shall not be entitled, so long
as such circumstances continue, to request a LIBO Rate Advance or a
continuation of or conversion to such advance from the Bank. In the event that
such circumstances no longer exist, the Bank shall again consider requests for
LIBO Rate Advances and requests for continuations of and conversions to such
advances.
2.7 Illegality and Impossibility.
In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or any interpretation
or administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive of such authority (whether or not having the force of
law), including without limitation exchange controls, shall make it unlawful or
impossible for the Bank to maintain any advance under this Agreement, the
Company shall upon receipt of notice thereof from the Bank, repay in full the
then outstanding principal amount of all advances made by the Bank together
with all accrued interest thereon to the date of payment and all amounts due to
the Bank under Section 2.8, (a) on the last day of the then current Interest
Period, if any, applicable to such advance, if the Bank may lawfully continue
to maintain such advance to such day, or (b) immediately if the Bank may not
continue to maintain such advance to such day. This provision is for the
benefit of the Bank and is not intended to increase the yield to the Bank above
the rates of interest provided for in this Agreement. This section 2.7 shall
apply only as long as such illegality exists. The Bank shall use reasonable,
lawful efforts to avoid the impact of such law, treaty, rule or regulation. As
an alternative to the repayment obligation provided in this Section 2.7, the
Company may, at its option, and at the time provided in this Section 2.7,
convert any affected advance to a Prime Interest Rate Advance.
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<PAGE> 10
2.8 Indemnification.
If the Company makes any payment of principal with respect to any LIBO
Rate Advance on any other date than the last day of an Interest Period
applicable thereto or if the Company fails to borrow any LIBO Rate Advance
after notice has been given to the Bank in accordance with Section 2.3, or
fails to make any payment of principal or interest in respect of an advance
when due or at the Revolving Loan Termination Date, the Company shall reimburse
the Bank on demand for any resulting loss or expense incurred by the Bank,
determined in the Bank's reasonable opinion, including without limitation any
loss incurred in obtaining, liquidating or employing deposits from third
parties. A detailed statement as to the amount of such loss or expense,
prepared in good faith and submitted by the Bank to the Company shall be
conclusive and binding for all purposes absent manifest error in computation.
2.9 Survival of Obligations.
The provisions of Sections 2.5 and 2.8 shall survive the termination of
this Agreement and the payment in full of all promissory notes outstanding
pursuant hereto.
2.10 Commitment Fee; Facility Fee; Documentation Fee; Cancellation and
Reduction and Increase of Commitment.
The Company agrees to pay to the Bank an annual commitment fee on the
average daily unused portion of the Revolving Loan at a rate equal to the
following: (a) from the date of this Agreement through March 31, 1999,
two-tenths of one percent (0.2%) of the average daily unused amount of the
Revolving Loan during the calendar quarter then ending; (b) following March 31,
1999, and for all quarters thereafter in which the ratio of the Company's
Funded Debt to EBITDA as of quarter end is less than 1.50 to 1.00, two-tenths
of one percent (0.2%) of the average daily unused amount of the Revolving Loan
during the calendar quarter then ending; (c) following March 31, 1999, and for
all quarters in which the ratio of the Company's Funded Debt to EBITDA as of
quarter end is equal to or
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<PAGE> 11
greater than 1.50 to 1.00 but less than 2.25 to 1.00, one-quarter of one
percent (0.25%) of the average daily unused amount of the Revolving Loan during
the calendar quarter then ending; (d) following March 31, 1999, and for all
quarters in which the ratio of the Company's Funded Debt to EBITDA as of
quarter end is equal to or greater than 2.25 to 1.00 but less than or equal to
3.00 to 1.00, three-tenths of one percent (0.30%) of the average daily unused
amount of the Revolving Loan during the calendar quarter then ending; and (e)
following March 31, 1999, and for all quarters in which the ratio of the
Company's Funded Debt to EBITDA as of quarter end is greater than 3.00 to 1.00,
thirty-five one-hundredths of one percent (0.35%) of the average daily unused
amount of the Revolving Loan during the calendar quarter then ending. The
commitment fee shall be payable quarterly in arrears beginning on March 31,
1998 (prorated for the number of days remaining in that calendar quarter) and
continuing on the last day of each calendar quarter thereafter. The Company
agrees to pay to the Bank on the date of this Agreement a one-time facility fee
with respect to the Revolving Loan in the amount of $22,500.00, of which sum
$9,375.00 has been paid prior to the date of this Agreement. The Company
agrees to pay to the Bank on the date of this Agreement a one-time
documentation fee with respect to the Line of Credit in the amount of
$7,500.00, of which sum $3125.00 has been paid prior to the date of this
Agreement. The Company shall be entitled, upon written notice to the Bank, to
cancel or reduce the total commitment provided for herein; provided, however,
that any such cancellation or reduction shall be irrevocable and all then
outstanding and unpaid principal (or amount thereof in excess of any remaining
commitment), interest, commitment fees and Additional Costs pursuant to Section
2.5 hereof due to the date of cancellation or reduction shall be paid in full
to the Bank.
2.11 Interest Rate after Default.
Upon the occurrence of any Event of Default and the expiration of any
applicable cure period, interest shall thereafter accrue on the outstanding
principal balance of all advances made pursuant to this Agreement at a rate
equal to the Prime Interest Rate plus two percent (2%) per annum.
SECTION 3. EVIDENCE OF THE LOAN AND TERMS OF PAYMENT.
The Revolving Loan shall be evidenced by a promissory note in the form
of Exhibit B to this Agreement, or by one or more notes subsequently executed
in substitution therefor. The Line of Credit shall be evidenced by a
promissory note in the form of Exhibit C to this Agreement, or by one or more
notes subsequently executed in
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<PAGE> 12
substitution therefor. Repayment of the Loan shall be made in accordance with
the terms of the note or notes then outstanding pursuant to this Agreement.
SECTION 4. PREPAYMENT.
Subject to the additional sums, if any, payable pursuant to Section 2
hereof, the Company, if not then in default hereunder, shall have the right to
prepay without penalty at any time and from time to time before maturity any
amount or amounts due to the Bank pursuant to this Agreement or to any note or
notes executed pursuant hereto. If made with respect to the Line of Credit
such prepayments, if any, shall be first applied to the latest maturing unpaid
installments. Any partial prepayment shall be in the minimum amount of
$500,000.00 or any integral multiple thereof.
SECTION 5. USE OF PROCEEDS.
The proceeds of the Revolving Loan shall be used by the Company for its
normal and customary working capital requirements and for the acquisition of
ownership interests in other companies engaged in the business of dairy
distribution, dairy food production and dairy collection. The proceeds of the
Line of Credit shall be used by the Company for capital expenditures required
in connection with the acquisition of other businesses or existing operations.
SECTION 6. COSTS AND EXPENSES.
The Company shall pay all costs and expenses incidental to the initial
extension of credit provided for in this Agreement; to any modification of this
Agreement or any of the loan documents related hereto; to any sale or proposed
sale of any interest herein by the Bank; or to the enforcement by the Bank of
its rights hereunder or under any of the related loan documents before or after
the occurrence of any Event of Default. Such costs shall include, but not be
limited to, fees and out-of-pocket expenses of the Bank's counsel, audit and
analysis fees, title insurance premiums and costs, recording fees, appraisal
fees, survey fees, inspection fees, revenue stamps and note and mortgage taxes.
SECTION 7. SECURITY.
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<PAGE> 13
The Loan shall be unsecured.
SECTION 8. WARRANTIES AND REPRESENTATIONS.
The Company warrants and represents to the Bank:
8.1 Subsidiaries and Other Affiliations.
The Company is not engaged in or a party to any partnership, joint
venture or limited liability company except as set forth on Exhibit D to this
Agreement. The Company has no subsidiaries except as set forth on such exhibit
and will not create or acquire any subsidiaries without the prior written
consent of the Bank. The Bank agrees to provide its consent to proposed
acquisitions by the Company upon the Bank's receipt from the Company of all the
following: (a) a financial analysis of the impact of the proposed acquisition
on the Company's financial condition, which analysis shall include a
prospective, projected pro forma balance sheet and prospective, projected pro
forma statements of income, retained earnings and cash flows, and which shall
be in all respects satisfactory to the Bank; (b) a copy of any letter of intent
or comparable communication or agreement entered into by the Company with
respect to the proposed acquisition; (c) a copy of the financial statements of
the company to be acquired for its last three full fiscal years, or if
financial statements for the last full fiscal year are not available, the most
recent financial statements provided to the Company with respect to that year;
(d) a certificate signed by the chief executive officer, president or chief
financial officer of the Company, certifying that the Company will remain in
full compliance with this Agreement immediately following the completion of the
proposed acquisition; and (e) such other information as the Bank may reasonably
request. The Bank agrees to use its best efforts to advise the Company of the
Bank's decision with respect to any such request within ten (10) business days
of its receipt of all the foregoing.
8.2 Corporate Organization and Authority.
The Company:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio;
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<PAGE> 14
(b) has all requisite power and authority and all necessary licenses
and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be
conducted; and
(c) is not doing business or conducting any activity in any
jurisdiction in which it has not duly qualified and become
authorized to do business.
8.3 Financial Statements.
The financial statements for the fiscal year ending December 31, 1997,
that have been supplied to the Bank have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly
represent the Company's financial condition as of such date. There has been no
material adverse change in the Company's financial condition since that date.
8.4 Full Disclosure.
The financial statements referred to in Section 8.3 do not, nor does
this Agreement or any written statement furnished by the Company to the Bank in
connection with obtaining the Loan, contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein not misleading. There is no fact which the Company has not disclosed
to the Bank in writing which materially affects the properties, business,
prospects, profits or condition (financial or otherwise) of the Company or the
ability of the Company to perform this Agreement.
8.5 Pending Litigation.
Except as described in Exhibit E to this Agreement there are no
proceedings pending, or to the knowledge of the Company threatened, against or
affecting the Company in any court or before any governmental authority or
arbitration board or tribunal which, individually or in the aggregate, involve
the possibility of materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the Company, or the
ability of the Company to perform this Agreement.
8.6 Title to Properties.
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<PAGE> 15
The Company has good and marketable title to all the property which it
purports to own (except as sold or otherwise disposed of in the ordinary course
of business), free from any liens and encumbrances, except as set forth on
Exhibit F to this Agreement.
8.7 Borrowing is Legal and Authorized.
(a) The Board of Directors of the Company has duly authorized the
execution and delivery of this Agreement and of the notes and documents
contemplated herein, and the notes executed in connection with this Agreement
will constitute valid and binding obligations of the Company enforceable in
accordance with their terms.
(b) The execution of this Agreement and related notes and documents
and the compliance by the Company with all the provisions of this Agreement are
within the corporate powers of the Company, and are legal and will not conflict
with, result in any breach in any of the provisions of, constitute a default
under, or result in the creation of any lien or encumbrance upon any property
of the Company under the provisions of, any agreement, charter instrument,
bylaw or other instrument to which the Company is a party or by which it may be
bound.
(c) There are no limitations in any indenture, mortgage, deed of
trust or other agreement or instrument to which the Company is now a party or
by which the Company may be bound with respect to the payment of principal or
interest on any indebtedness of the Company, including the notes to be executed
in connection with this Agreement.
8.8 No Defaults.
No event has occurred and no condition exists which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default pursuant
to this Agreement. The Company is not in violation in any material respect of
any term of any agreement, charter instrument, bylaw or other instrument to
which it is a party or by which it may be bound.
8.9 Government Consent.
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<PAGE> 16
Neither the nature of the Company or of its business or properties, nor
any relationship between the Company and any other entity or person, nor any
circumstance in connection with the execution of this Agreement, is such as to
require a consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority on the part of the Company as a
condition to the execution and delivery of this Agreement and the notes and
documents contemplated herein.
8.10 Taxes.
(a) All tax returns required to be filed by the Company in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and
other governmental charges upon the Company, or upon any of its respective
properties, which are due and payable have been paid. The Company does not
know of any proposed additional tax assessment against it.
(b) The provisions for taxes on the books of the Company for its
current fiscal period are adequate.
8.11 Compliance with Law.
The Company:
(a) is not in violation of any laws, ordinances, governmental rules
or regulations to which it is subject; and
(b) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business,
which violation or failure to obtain might materially and adversely affect the
business, prospects, profits, properties or condition (financial or otherwise)
of the Company.
8.12 Restrictions on Company.
The Company is not a party to any contract or agreement, or subject to
any charter or other corporate restriction, which materially and adversely
affects the business of the Company. The Company is not a party to any
contract or agreement which restricts the right or ability of the Company to
incur indebtedness, other than this Agreement. The Company has not agreed or
consented to cause or permit in the future (upon the happening of a
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<PAGE> 17
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a lien or encumbrance.
8.13 Environmental Protection.
The Company (a) has no actual knowledge of the permanent placement,
burial or disposal of any Hazardous Substances (as hereinafter defined) on any
real property owned by the Company (the "Premises"), of any spills, releases,
discharges, leaks, or disposal of Hazardous Substances that have occurred or
are presently occurring on, under, or onto the Premises, or of any spills,
releases, discharges, leaks or disposal of Hazardous Substances that have
occurred or are occurring off the Premises as a result of the Company's
improvement, operation, or use of the Premises which would result in
non-compliance with any of the Environmental Laws (as hereinafter defined); (b)
is and has been in compliance with all applicable Environmental Laws; (c) knows
of no pending or threatened environmental civil, criminal or administrative
proceedings against the Company relating to Hazardous Substances; (d) knows of
no facts or circumstances that would give rise to any future civil, criminal or
administrative proceeding against the Company relating to Hazardous Substances;
and (e) will not permit any of its employees, agents, contractors,
subcontractors, or any other person occupying or present on the Premises to
generate, manufacture, store, dispose or release on, about or under the
Premises any Hazardous Substances which would result in the Premises not
complying with the Environmental Laws.
As used herein, "Hazardous Substances" shall mean and include all
hazardous and toxic substances, wastes, materials, compounds, pollutants and
contaminants (including, without limitation, asbestos, polychlorinated
biphenyls, and petroleum products) which are included under or regulated by the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601, et seq., the Toxic Substances Control Act, 15
U.S.C. Section 2601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., the Water Quality Act of 1987, 33 U.S.C. Section
1251, et seq., and the Clean Air Act, 42 U.S.C. Section 7401, et seq., and any
state or local statute ordinance, law, code, rule, regulation or order
regulating or imposing liability (including strict liability) or standards of
conduct regarding Hazardous Substances (hereinafter the "Environmental Laws"),
but does not include such substances as are permanently incorporated into a
structure or any part thereof in such a way as to preclude their subsequent
release into the environment, or the permanent or temporary storage or disposal
of household
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<PAGE> 18
hazardous substances by tenants, and which are thereby exempt from or do not
give rise to any violation of the forementioned Environmental Laws.
Further, the Company hereby indemnifies the Bank and holds the Bank
harmless from and against any loss, damage, cost, expense or liability
(including strict liability) directly or indirectly arising out of or
attributable to the generation, storage, release, threatened release,
discharge, disposal or presence (whether prior to or during the term of the
Loan) of Hazardous Substances on, under or about the Premises (whether by the
Company or any employees, agents, contractor or subcontractors of the Company
or any predecessor in title or any third persons occupying or present on the
Premises), or the breach of any of the representations and warranties regarding
the Premises, including, without limitation: (a) those damages or expenses
arising under the Environmental Laws; (b) the costs of any required or
necessary repair, cleanup or detoxification of the Premises, including the soil
and ground water thereof, and the preparation and implementation of any
closure, remedial or other required plans; (c) damage to any natural resources;
and (d) all reasonable costs and expenses incurred by the Bank in connection
with clauses (a), (b) and (c) including, but not limited to reasonable
attorneys' fees.
The indemnification provided for herein shall not apply to any losses,
liabilities, damages, injuries, expenses or costs which: (i) arise from the
gross negligence or willful misconduct of the Bank, or (ii) relate to Hazardous
Substances placed or disposed of on the Premises after the Bank acquires title
to the Premises through foreclosure or otherwise.
8.14 Regulation U.
The Company is not engaged in the business of purchasing or selling
margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) or extending credit to others for the purpose of
purchasing or carrying margin stock and no part of the proceeds of any
borrowing hereunder will be used to purchase or carry any margin stock or for
any other purpose which would violate any of the margin regulations of said
Board of Governors.
SECTION 9. CLOSING CONDITIONS.
The obligation of the Bank to make the Loan shall be subject to the
following conditions precedent:
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<PAGE> 19
9.1 Resolutions and Incumbency Certificate.
The Bank shall have received a certificate signed by the secretary or
assistant secretary of the Company and dated as of the date of this Agreement
certifying the adoption of resolutions by the Company's Board of Directors, in
form and substance satisfactory to the Bank, authorizing the execution of this
Agreement and the notes, security documents and other documents and instruments
provided for herein and the performance of all the acts contemplated hereby,
together with a certificate signed by one of such officers certifying the names
and offices of each of the executive officers of the Company as of the date of
this Agreement, in form and substance satisfactory to the Bank, and containing
the signature of each officer authorized to sign this Agreement and any
documents and instruments to be executed in connection therewith.
9.2 Opinion of Counsel.
The Bank shall have received from counsel for the Company the closing
opinion described in Exhibit G to this Agreement.
9.3 Compliance with this Agreement.
The Company shall have performed and complied with all agreements and
conditions contained herein which are required to be performed or complied with
by the Company before or at closing.
9.4 Compliance Certificate.
The Bank shall have received a certificate dated the date upon which
this Agreement is executed and signed by the chief executive officer, president
or chief financial officer of the Company, certifying that the conditions
specified in Section 9.3 have been fulfilled.
9.5 Warranties and Representations.
On the date of each advance pursuant to the Loan, the warranties and
representations set forth in Section 8 hereof shall be true and correct on and
as of such date with the same effect as though such warranties and
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<PAGE> 20
representations had been made on and as of such date, except to the extent that
such warranties and representations expressly relate to an earlier date.
9.6 Corporate Authority and Good Standing.
The Bank shall have received a true and correct copy of the current
Articles of Incorporation of the Company, together with all amendments thereto,
certified by the Secretary of State of the state of incorporation of the
Company within the past thirty days; a true and correct copy of the Code of
Regulations of the Company, together with all amendments thereto, certified by
the secretary or assistant secretary of the Company to be in effect on the date
of this Agreement; and certificates of good standing as to the Company issued
within the past thirty days by the Secretary of State of the Company's state of
incorporation and the Secretary of State of each state in which the Company is
qualified to do business as a foreign corporation.
SECTION 10. COMPANY BUSINESS COVENANTS.
Effective on and after the date of this Agreement, so long as any of the
indebtedness provided for herein remains unpaid, the Company covenants as
follows:
10.1 Payment of Taxes and Claims.
The Company will pay before they become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its property; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, bailees and other like persons which,
if unpaid, might result in the creation of a lien or encumbrance
upon its property,
provided that items of the foregoing description need not be paid while being
contested in good faith and by appropriate proceedings and provided further
that adequate book reserves have been established with respect thereto
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and provided further that the Company's title to, and its right to use, its
property is not materially adversely affected thereby.
10.2 Maintenance of Properties and Corporate Existence.
The Company shall:
(a) Property--maintain its property in good condition and make all
renewals, replacements, additions, betterments and improvements
thereto which are deemed necessary by the Company;
(b) Insurance--maintain, with financially sound and reputable
insurers, insurance with respect to its properties and business
against such casualties and contingencies, of such types
(including but not limited to fire and casualty, public
liability, products liability, larceny, embezzlement or other
criminal misappropriation insurance) and in such amounts as is
customary in the case of corporations of established reputations
engaged in the same or a similar business and similarly
situated, and provide such evidence of such insurance coverage
as the Bank may request;
(c) Financial Records--keep true books of records and accounts in
which full and correct entries will be made of all its business
transactions, and reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with
generally accepted accounting principles consistently applied;
(d) Corporate Existence and Rights--do or cause to be done all
things necessary (i) to preserve and keep in full force and
effect its existence, rights and franchises, and (ii) to
maintain its status as a corporation duly organized and existing
and in good standing under the laws of the state of its
incorporation; and
(e) Compliance with Law--not be in violation of any laws,
ordinances, or governmental rules and regulations to which it is
subject and will not fail to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the
ownership of its properties or to the conduct of its business,
which violation or failure to obtain might materially and
adversely affect the business, prospects, profits, properties or
condition (financial or otherwise) of the Company.
10.3 Sale of Assets or Merger.
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<PAGE> 22
(a) Sale of Assets--The Company will not, except in the ordinary
course of business, sell, lease, transfer or otherwise dispose
of, any of its assets, provided that the foregoing restriction
does not apply to the sale of assets for a cash consideration to
one or more persons if the value of all assets so sold in one
twelve-month period (with the assets being valued at the greater
of net book or fair market value) does not exceed 5% of the
tangible net worth of the Company. The Company will not sell or
transfer any of its assets to any subsidiary without the prior
written consent of the Bank.
(b) Merger and Consolidation--The Company will not without the prior
written consent of the Bank or except as provided in Section 8.1
of this Agreement consolidate with or merge into any other
entity, or permit any other entity to consolidate with or merge
into it.
10.4 Liens and Encumbrances.
(a) Negative Pledge. The Company will not cause or permit or agree
or consent to cause or permit in the future (upon the happening
of a contingency or otherwise), any of its property, whether now
owned or hereafter acquired, to be subject to a lien or
encumbrance except:
(i) liens securing taxes, assessments or governmental
charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen,
landlords and other like persons provided the payment
thereof is not at the time required by Section 10.1;
(ii) liens incurred or deposits made in the ordinary course
of business in connection with workmen's compensation,
unemployment insurance, social security and other like
laws;
(iii) attachment, judgment and other similar liens arising in
connection with court proceedings, provided the
execution or other enforcement of such liens is
effectively stayed and the claims secured thereby are
being actively contested in good faith and by
appropriate proceedings;
(iv) reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions,
leases and other similar title exceptions or
encumbrances affecting real property, provided they do
not in the aggregate materially detract from the value
of said
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<PAGE> 23
property or materially interfere with its use in the
ordinary conduct of the Company's business;
(v) inchoate liens arising under ERISA to secure the
contingent liability of the Company;
(vi) purchase money security interests granted in connection
with the acquisition of personal property in the
ordinary course of business and securing no more than
$500,000 in indebtedness at any one time outstanding.
(b) Other Negative Pledge Agreements. The Company will not grant or
agree to provide in the future (upon the happening of a
contingency or otherwise), a "negative pledge" or other covenant
or agreement similar to the agreement contained in this Section
10.4 in favor of any other lender, creditor or third party.
10.5 Other Borrowings.
The Company will not create or incur any indebtedness of more than
$500,000 in the aggregate for borrowed money or advances, including through the
execution of capitalized lease agreements, unless such indebtedness shall be
subordinated to the satisfaction of the Bank to the Company's indebtedness to
the Bank.
10.6 Contingent Liabilities.
The Company will not guarantee, indorse or otherwise become surety for
or upon the obligations of others, except by indorsement of negotiable
instruments for deposit or collection in the ordinary course of business.
10.7 Operating Lease Rentals.
The Company will not without the prior written approval of the Bank
enter into operating leases providing in the aggregate for annual rentals which
exceed $6,500,000.
10.8 Loans and Advances by the Company.
The Company will not make any loans or advances to any person,
corporation or entity if such loans will exceed an aggregate total outstanding
at any one time of $1,000,000.
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<PAGE> 24
10.9 Acquisition of Capital Stock.
The Company shall not redeem or acquire any of its own capital stock
except through the use of the net proceeds from the simultaneous sale of an
equivalent amount of its capital stock.
10.10 Investments.
The Company shall not, except as provided in Section 8.1 of this
Agreement, purchase for investment securities of any kind excepting bonds or
other obligations of the United States, certificates of deposit issued by
commercial banks and commercial paper rated at least A-1 or P-1 and having a
maturity of not more than one year, nor shall the Company otherwise make any
investment in any corporation, partnership, limited liability company, joint
venture or other entity or enterprise.
10.11 Sale of Receivables and Consignments.
The Company shall not sell any of its accounts receivable or notes
receivable, with or without recourse, nor shall it assign or encumber any of
its accounts receivable or notes receivable; provided, that the Company may in
the ordinary course of business sell, assign or encumber receivables not
exceeding $100,000 in the aggregate during the term of this Agreement. The
Company shall not permit any of its inventory to be sold or transferred on
consignment or acquire or possess any inventory on consignment; provided, that
the Company may in the ordinary course of business place or acquire inventory
on consignment to the extent that the fair market value of all such inventory
does not exceed $100,000 in the aggregate during the term of this Agreement.
10.12 Tangible Net Worth.
The Company shall maintain a Tangible Net Worth of not less than
$28,000,000.00, plus, for each fiscal year end beginning with the 1998 fiscal
year, 50% of the Company's positive Net Income for such year and 50% of the net
proceeds from any sale of equities by the Company during such year. "Tangible
Net Worth" shall mean the
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<PAGE> 25
Company's equity, minus the sum of all the following: (i) the excess of cost
over the value of net assets of purchased businesses, rights, and other similar
intangibles, (ii) organizational expenses, (iii) goodwill, (iv) deferred
charges or deferred financing costs, (v) loans or advances to and/or accounts
or notes receivable from affiliates, (vi) non-compete agreements, (vii) all
other intangible assets, and (viii) all other assets not directly related to
the operation of the business of the Company. "Net Income" for any period
shall mean the net income (or deficit) of the Company for such period that, in
accordance with generally accepted accounting principles, would be included as
net income on the statements of income of the Company for such period (but
excluding any extraordinary gains or losses attributed to such period).
10.13 Ratio of Funded Debt to EBITDA.
The Company shall maintain at all times a ratio of Funded Debt to EBITDA
of not more than 4.00 to 1.00 through March 31, 1999, and thereafter of not
more than 3.15 to 1.00. The ratio of Funded Debt to EBITDA shall be determined
as of the last day of the most recently completed fiscal quarter. "Funded
Debt" shall be defined and determined in accordance with generally accepted
accounting principles and calculated as of the end of the most recently
completed fiscal quarter. "EBITDA" shall mean, for the period consisting of
the four most recently completed fiscal quarters, (a) the sum of the amounts
for such period, for the Company and for any companies acquired in their
entirety by the Company during such period (each an "Acquired Company"), of (i)
net income, (ii) interest expense, (iii) charges for federal, state, local and
foreign income taxes, (iv) depreciation, amortization expense and non-cash
charges that were deducted in determining net income, (v) extraordinary losses
(and any unusual losses arising outside the ordinary course of business not
included in extraordinary losses determined in accordance with generally
accepted accounting principles) and (vi) other non-operating expenses that have
been deducted in the determination of net income, minus (b) the sum of the
amounts for such period of (i) extraordinary gains (and any unusual gains
arising outside the ordinary course of business not included in extraordinary
gains determined in accordance with generally accepted accounting principles),
(ii) other non-operating income not already excluded from the determination of
net income and (iii) to the extent not deducted from total interest expense,
any net payments received during such period under interest rate contracts and
any interest income received in respect of cash investments.
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<PAGE> 26
10.14 Cash Flow Coverage Ratio.
The Company shall maintain at each fiscal quarter end a ratio of EBITDA
(as defined in Section 10.13), minus unfunded capital expenditures, minus
dividends, plus net proceeds from the sale of equities, to Debt Service of not
less than 2.00 to 1.00. The ratio shall be determined as of the last day of
each fiscal quarter for the four fiscal quarter period ending on such date.
"Debt Service" shall mean with respect to any period of four fiscal quarters,
the sum of (a) all amounts paid, without duplication, as interest on the
indebtedness of the Company and each Acquired Company for such period, as
determined in accordance with generally accepted accounting principles, less
interest paid other than in cash, plus (b) scheduled principal payments on term
obligations and capital leases of the Company and each Acquired Company for
such period.
10.15 Ratio of EBIT to Interest Expense.
The Company shall achieve as of the end of each fiscal year during the
term of this Agreement a ratio of EBIT to interest expense of not less than
2.50 to 1.00.
"EBIT" shall mean for the Company and each Acquired Company (a) the Net
Income (or deficit) for such period, plus (b) the aggregate amounts deducted in
determining such net income in respect of (i) all amounts paid (without
duplication) as interest on all indebtedness and obligations of the Company and
each Acquired Company for such period, all as determined in accordance with
generally accepted accounting principles, and (ii) income taxes for such
period, as determined in accordance with generally accepted accounting
principles. "Net Income" for any period shall mean the net income (or deficit)
of the Company or any Acquired Company for such period that, in accordance with
generally accepted accounting principles, would be included as net income on
the statements of income of the Company or such Acquired Company for such
period (but excluding any extraordinary gains or losses attributed to such
period).
10.16 ERISA.
The Company shall with respect to any pension plan or profit-sharing
plan in effect now or in the future:
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(a) at all times make prompt payment of contributions required to
meet the minimum funding standards set forth in Section 302
through 305 of ERISA with respect to its plan,
(b) promptly, after the filing thereof, furnish to the Bank copies
of each annual report required to be filed pursuant to Section
103 of ERISA in connection with its plan for the plan year,
including any certified financial statements or actuarial
statements required pursuant to said Section 103,
(c) notify the Bank immediately of any fact, including, but not
limited to, any "Reportable Event," as that term is defined in
Section 4043 of ERISA, arising in connection with the plan which
might constitute grounds for termination thereof by the Pension
Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a Trustee to
administer the plan,
(d) notify the Bank of any "Prohibited Transaction" as that term is
defined in Section 406 of ERISA.
The Company will not:
(e) engage in any "Prohibited Transaction," or
(f) terminate any such plan in a manner which could result in the
imposition of a lien on the property of the Company pursuant to
Section 4068 of ERISA.
SECTION 11. INFORMATION AS TO COMPANY.
The Company shall deliver the following to the Bank:
(a) within 45 days after the end of each fiscal quarter, financial
statements, including a balance sheet and statements of income,
retained earnings and cash flows, certified by the chief
executive officer, president or chief financial officer of the
Company as fairly representing the Company's financial condition
as of the end of such period;
(b) within 45 days after the end of each fiscal quarter, a statement
signed by the chief executive officer, president or chief
financial officer of the Company certifying that the Company is
in compliance with terms of this Agreement;
(c) within 90 days of the end of each fiscal year, an audited
financial statement prepared in accordance with generally
accepted accounting principles consistently applied by
independent public
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accountants satisfactory to the Bank, containing a balance sheet
and statements of income, retained earnings and cash flows,
along with any management letters written by such accountants;
(d) immediately upon filing, copies of all filings made with the
Securities and Exchange Commission or in compliance with any
state securities law;
(e) immediately upon becoming aware of the existence of any
condition or event which constitutes an Event of Default, a
written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to
take with respect thereto;
(f) at the request of the Bank, such other information as the Bank
may from time to time reasonably require.
SECTION 12. EVENTS OF DEFAULT.
12.1 Nature of Events.
An "Event of Default" shall exist if any of the following occurs and is
continuing:
(a) the Company fails to make any payment of principal on any note
executed in connection with this Agreement on or before the date
such payment is due;
(b) the Company fails to make any payment of interest on any note
executed in connection with this Agreement on or before five
days after the date such payment is due;
(c) the Company fails to perform or observe any covenant contained
in Sections 5, 10.1 through 10.11, 10.16 or 11(a) through 11(f)
of this Agreement;
(d) the Company fails to comply with any other provision of this
Agreement, and such failure continues for more than 30 days
after such failure shall first become known to any officer of
the Company;
(e) any warranty, representation or other statement by or on behalf
of the Company contained in this Agreement or in any instrument
furnished in compliance with or in reference to this Agreement
is false or misleading in any material respect;
(f) the Company becomes insolvent or bankrupt, or makes an
assignment for the benefit of creditors, or consents to the
appointment of a trustee, receiver or liquidator;
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(g) bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings are instituted by or against the Company
and, in the case of any such proceedings being instituted
against the Company, remain undismissed for a period of 60 days;
(h) a final judgment or judgments, from which no further right of
appeal exists, for the payment of money aggregating in excess of
$100,000.00 is or are outstanding against the Company and any
one of such judgments has been outstanding for more than 30 days
from the date of its entry and has not been discharged in full
or stayed;
(i) the Company fails to make any payment or to perform or observe
any covenant owing to the Bank or to any third party pursuant to
any agreement (other than in connection with no more than one
account payable arising in the ordinary course of business and
not exceeding in amount the sum of $100,000), and any applicable
grace period has expired;
(j) the Bank for any reason in good faith deems itself insecure with
respect to the repayment of the indebtedness provided for
herein.
12.2 Default Remedies.
(a) Acceleration--If an Event of Default exists, the Bank may
immediately exercise any right, power or remedy permitted to the Bank by law,
and shall have, in particular, without limiting the generality of the
foregoing, the right to declare the entire principal and all interest accrued
on all notes then outstanding pursuant to this Agreement to be forthwith due
and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Company.
(b) Nonwaiver; Remedies Cumulative--No course of dealing on the part
of the Bank, nor any delay or failure on the part of the Bank in exercising any
rights, powers or privileges hereunder, shall operate as a waiver of such
rights, powers or privileges or otherwise prejudice any of the Bank's rights
and remedies hereunder; nor shall any single or partial exercise thereof
preclude any further exercise thereof or the exercise of any other right, power
or privilege by the Bank. No right or remedy conferred upon or reserved to the
Bank under this Agreement is
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intended to be exclusive of any other right or remedy, and every right and
remedy shall be cumulative and in addition to every other right or remedy given
hereunder or now or hereafter existing under any applicable law. Every right
and remedy given by this Agreement or by applicable law to the Bank may be
exercised from time to time and as often as may be deemed expedient by the
Bank.
(c) Right of Set-Off--Upon the occurrence and during the continuance
of any Event of Default hereunder, the Bank and each of its participants or
assignees (the "Participants") is hereby authorized at any time and from time
to time, without notice to the Company (any such notice being expressly waived
by the Company) and to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank or
the Participants to or for the credit or the account of the Company against any
and all of the obligations of the Company now or hereafter existing under this
Agreement, irrespective of whether or not the Bank or such Participants shall
have made any demand hereunder and although such obligations may be unmatured.
SECTION 13. MISCELLANEOUS.
13.1 Notices.
(a) All communications under this Agreement or under the notes
executed pursuant hereto shall be in writing and shall be mailed by first class
mail, postage prepaid,
(1) if to the Bank, at the following address, or at such
other address as may have been furnished in writing to
the Company by the Bank:
National City Bank
155 East Broad Street
Columbus, Ohio 43251
Attention: George J. Fedeczko
Vice President
(2) if to the Company, at the following address, or at such
other address as may have been furnished in writing to
the Bank by the Company:
Broughton Foods Company
210 North Seventh Street
Marietta, Ohio 45750
Attention: Todd Fry
Chief Financial Officer
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(b) Any notice so addressed and mailed by registered or certified
mail shall be deemed to be given when so mailed.
13.2 Reproduction of Documents.
This Agreement and all documents relating hereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by the Bank at the closing or otherwise, and
(c) financial statements, certificates and other information previously or
hereafter furnished to the Bank, may be reproduced by the Bank by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process and the Bank may destroy any original document so
reproduced. The Company agrees and stipulates that any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Bank in the regular course of
business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
13.3 Survival.
All warranties, representations, and covenants made by the Company
herein or on any certificate or other instrument delivered by it or on its
behalf under this Agreement shall be considered to have been relied upon by the
Bank and shall survive the closing of the Loan regardless of any investigation
made by the Bank on its behalf. All statements in any such certificate or
other instrument shall constitute warranties and representations by the
Company.
13.4 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
legal representatives, successors and assigns of each of the parties.
13.5 Amendment and Waiver.
This Agreement may be amended, and the observance of any term of this
Agreement may be waived, with (and only with) the written consent of the
Company and the Bank.
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13.6 Entire Agreement; Duplicate Originals and Counterparts.
This Agreement constitutes the entire agreement and understanding
between the parties with respect to its subject matter and supersedes all oral
communications and all prior writings and understandings with respect thereto.
Two or more duplicate originals of this Agreement may be signed by the parties,
each of which shall be an original, but all of which together shall constitute
one and the same instrument. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
document, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
13.7 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Ohio.
13.8 Accounting Terms and Computations.
Whenever any accounting term shall be used herein or the character or
amount of any asset or liability or item of income or expense is required to be
determined, or any consolidation or other accounting computation is required to
be made, for the purpose of this Agreement, such accounting term, such
determination or computation shall, to the extent applicable and except as
otherwise specified in this Agreement, be defined or made (as the case may be)
in accordance with generally accepted accounting principles in the United
States applied (in the case of determinations or computations) on a basis
consistent with those applied in the preparation of the financial statements
referred to in Section 8.3 hereof.
13.9 Consent to Jurisdiction and Waiver of Objection to Venue.
The Company agrees that any legal action or proceeding with respect to
this Agreement or the notes or the transactions contemplated hereby may be
brought in the Court of Common Pleas of Franklin County, Ohio, or in the United
States District Court for the Southern District of Ohio, Eastern Division, and
the Company hereby irrevocably submits to and accepts generally and
unconditionally the jurisdiction of those courts with respect to its
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person, property and revenues and irrevocably consents to service of process in
any such action or proceeding by the mailing thereof by U.S. mail to the
Company at the Company's address set forth in Section 13.1 hereof.
The Company hereby irrevocably waives any objection to the laying of
venue of any such suit or proceeding in the above described courts, and
unconditionally waives and agrees not to plead or claim that any such suit or
proceeding brought in any such court has been brought in an inconvenient forum,
provided, that this provision shall not preclude the Company from seeking to
consolidate actions brought against it.
Nothing in this paragraph shall affect the right of the Bank to serve
process in any other manner permitted by law or limit the right of the Bank to
bring any such action or proceeding against the Company or to obtain execution
on any judgment in any other jurisdiction or in any other manner permitted by
law.
13.10 WAIVER OF JURY TRIAL.
THE PARTIES ACKNOWLEDGE THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE
BETWEEN THE PARTIES, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF WHICH THIS
AGREEMENT ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY JURY.
ACCORDINGLY, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY AS TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS
AGREEMENT OR TO ANY OF THE OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN
CONNECTION HEREWITH, AND WHETHER SUCH DISPUTE RELATES TO A CLAIM SOUNDING IN
TORT OR CONTRACT OR OTHERWISE.
13.11 Definitions.
The following are the definitions used in this Agreement:
"Acquired Company" is defined in Section 10.13.
"Agreement" is defined in the preamble.
"Applicable Margin" means the following with respect to the Revolving
Loan: (a) from the date of this Agreement through March 31, 1999, one
percent (1.000%) per annum if the ratio of the Company's Funded Debt to
EBITDA at the most recent quarter end was 3.15 to 1.00 or less, and one
and three-eighths percent (1.375%) per annum if the ratio of the
Company's Funded Debt to EBITDA at the most recent quarter end
-30-
<PAGE> 34
was greater than 3.15 to 1.00; (b) following March 31, 1999, one percent
(1%) per annum if the ratio of the Company's Funded Debt to EBITDA at
the most recent quarter end was less than 1.50 to 1.00; (c) following
March 31, 1999, one and one-quarter percent (1.25%) per annum if the
ratio of the Company's Funded Debt to EBITDA at the most recent quarter
end was equal to or greater than 1.50 to 1.00 but less than 2.25 to
1.00; (d) following March 31, 1999, one and one-half percent (1.50%)
per annum if the ratio of the Company's Funded Debt to EBITDA at the
most recent quarter end was equal to or greater than 2.25 to 1.00 but
less than or equal to 3.00 to 1.00; and (e) following March 31, 1999,
one and three-quarters percent (1.75%) per annum if the ratio of the
Company's Funded Debt to EBITDA at the most recent quarter end was
greater than 3.00 to 1.00.
"Applicable Margin" means the following with respect to the Line of
Credit: (a) from the date of this Agreement through March 31, 1999, one
and one-eighth percent (1.125%) per annum if the ratio of the Company's
Funded Debt to EBITDA at the most recent quarter end was 3.15 to 1.00 or
less, and one and three-eighths percent (1.375%) per annum if the ratio
of the Company's Funded Debt to EBITDA at the most recent quarter end
was greater than 3.15 to 1.00; (b) following March 31, 1999, one and
one-eighth percent (1.125%) per annum if the ratio of the Company's
Funded Debt to EBITDA at the most recent quarter end was less than 1.50
to 1.00; (c) following March 31, 1999, one and three-eighths percent
(1.375%) per annum if the ratio of the Company's Funded Debt to EBITDA
at the most recent quarter end was equal to or greater than 1.50 to 1.00
but less than 2.25 to 1.00; (d) following March 31, 1999, one and
five-eighths percent (1.625%) per annum if the ratio of the Company's
Funded Debt to EBITDA at the most recent quarter end was equal to or
greater than 2.25 to 1.00 but less than or equal to 3.00 to 1.00; and
(e) following March 31, 1999, one and seven-eighths percent (1.875%) per
annum if the ratio of the Company's Funded Debt to EBITDA at the most
recent quarter end was greater than 3.00 to 1.00.
"Bank" is defined in the preamble.
"Company" is defined in the preamble.
"Debt Service" is defined in Section 10.14.
"EBIT" is defined in Section 10.15.
"EBITDA" is defined in Section 10.13.
-31-
<PAGE> 35
"Environmental Laws" is defined in Section 8.13.
"Eurocurrency Liabilities" is defined in Section 2.2.
"Event of Default" is defined in Section 12.1.
"Funded Debt" is defined in Section 10.13.
"Hazardous Substances" is defined in Section 8.13.
"Interest Payment Date" is defined in Section 2.4.
"Interest Period" is defined in Section 2.4.
"LIBO Business Day" is defined in Section 2.2.
"LIBO Rate" is defined in Section 2.2.
"LIBO Rate Advance" is defined in Section 2.2.
"Line of Credit" is defined in Section 1.2.
"Line of Credit Termination Date" is defined in Section 1.2.
"Loan" means the Revolving Loan and the Line of Credit.
"Negative Pledge" is defined in Section 10.4.
"Net Income" is defined in Section 10.15.
"Note or Notes" is defined in Section 2.4.
"Participants" is defined in Section 12.2
"Premises" is defined in Section 8.13.
"Prime Rate" is defined in Section 2.1.
"Prime Interest Rate" is defined in Section 2.1.
"Prime Interest Rate Advance" is defined in Section 2.1
"Prohibited Transaction" is defined in Section 10.16.
"Reportable Event" is defined in Section 10.16.
"Revolving Loan" is defined in Section 1.1.
"Revolving Loan Termination Date" is defined in Section 1.1.
"Tangible Net Worth" is defined in Section 10.12.
-32-
<PAGE> 36
BROUGHTON FOODS COMPANY
By:
--------------------------------------
Its:
-------------------------------------
NATIONAL CITY BANK
By:
--------------------------------------
Its:
-------------------------------------
-33-
<PAGE> 37
EXHIBITS
Exhibit B - Promissory Note - Revolving Loan
Exhibit C - Promissory Note - Line of Credit
<PAGE> 38
EXHIBIT B
NATIONAL CITY BANK
REVOLVING NOTE
Columbus, Ohio
$15,000,000 March 30, 1998
Date of Maturity: March 30, 2000
FOR VALUE RECEIVED, BROUGHTON FOODS COMPANY, an Ohio corporation
("Borrower"), promises to pay to the order of National City Bank ("Bank"), in
lawful money of the United States of America, the principal sum of Fifteen
Million and 00/100 Dollars ($15,000,000) or such lesser unpaid principal amount
as may be advanced by Bank pursuant to the terms of the Credit Agreement of even
date herewith by and between Borrower and Bank, as same may be amended from time
to time (the "Agreement"). The proceeds of the loan evidenced hereby may be
advanced, repaid and readvanced in partial amounts during the term of this note
(this "Note"). The outstanding principal balance of this Note shall bear
interest, before and after default, as set forth in the Agreement. This Note is
due and payable in full on March 30, 2000 (subject to rights of acceleration
pursuant to the Agreement).
The principal amount of each loan made by Bank and the amount of each
prepayment made by Borrower shall be recorded by Bank on the schedule attached
hereto or in the regularly maintained data processing records of Bank. The
aggregate unpaid principal amount of all loans set forth in such schedule or in
such records shall be presumptive evidence of the principal amount owing and
unpaid on this Note. However, failure by Bank to make any such entry shall not
limit or otherwise affect Borrower's obligations under this Note or the
Agreement.
This Note is a promissory note referred to in the Agreement, and is
entitled to the benefits, and is subject to the terms, of the Agreement. The
principal of this Note is prepayable in the amounts and under the circumstances,
and its maturity is subject to acceleration upon the terms, set forth in the
Agreement. Except as otherwise expressly provided in the Agreement, if any
payment on this Note becomes due and payable on a day other than one on which
Bank is open for business (a "Business Day"), the maturity thereof shall be
extended to the next Business Day, and interest shall be payable at the rate
specified herein during such extension period.
In no event shall the interest rate on this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that a court
determines that Bank has received interest and other charges under this Note in
excess of the highest permissible rate applicable hereto, such excess shall be
deemed received on account of, and shall automatically be applied to reduce the
amounts due to Bank from Borrower under this Note, other than interest, and the
provisions hereof shall be deemed amended to provide
<PAGE> 39
for the highest permissible rate. If there are no such amounts
outstanding, Bank shall refund to Borrower such excess.
Presentment for payment, demand, notice of dishonor, protest, notice of
protest and all other demands and notices in connection with the delivery,
performance and enforcement of this Note, and consent to one or more repeals or
extensions of this Note are hereby waived.
This Note is being delivered in, is intended to be performed in, shall be
construed and enforceable in accordance with, and be governed by the internal
laws of, the State of Ohio without regard to principles of conflict of laws.
Borrower agrees that the state and federal courts in Franklin County, Ohio, or
any other court in which Bank initiates proceedings, shall have exclusive
jurisdiction over all matters arising out of this Note, and that service of
process in any such proceeding shall be effective if mailed to Borrower at its
address described in the Notices section of the Agreement.
This Note may not be changed orally, but only by an instrument in writing.
BORRFOWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
BORROWER OR THE BANK WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND BORROWER
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT BORROWER OR THE
BANK MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER TO THE WAIVER OF THE RIGHT OF
BORROWER TO TRIAL BY JURY.
Borrower authorizes any attorney of record to appear for it in any court
of record in the State of Ohio, after any obligation evidenced hereby (an
"Obligation") becomes due and payable whether by its terms or upon default,
waive the issuance and service of process, and release all errors, and confess a
judgment against it in favor of the holder of such Obligation, for the principal
amount of such Obligation plus interest thereon, together with court costs and
attorneys' fees. Borrower waives any conflict of interest caused by an attorney
that represents Bank acting as attorney for Borrower as set forth in this
section. Borrower also agrees that the attorney acting for Borrower as set forth
in this section may be compensated by Bank for such services, and Borrower
waives any conflict of interest caused by such compensation arrangement. Stay of
execution and all exemptions are hereby waived. If an Obligation is referred to
an attorney for collection, and the payment is obtained without the entry of a
judgment, the obligors shall pay to the holder of such obligation its attorneys'
fees.
<PAGE> 40
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
BROUGHTON FOODS COMPANY
By:
Its:
3
<PAGE> 41
EXHIBIT C
NATIONAL CITY BANK
REVOLVING NOTE
Columbus, Ohio
$5,000,000.00 March 30, 1998
Date of Maturity: March 30, 2006
FOR VALUE RECEIVED, BROUGHTON FOODS COMPANY, an Ohio corporation
("Borrower") promises to pay to the order of NATIONAL CITY BANK ("Bank"), in
lawful money of the United States of America, the principal sum of Five Million
Dollars ($5,000,000.00) or so much thereof as shall have been advanced by the
Bank at any time and not thereafter repaid pursuant to the terms of the Credit
Agreement of even date herewith by and between Borrower and Bank, as same may be
amended from time to time (the "Agreement"). The proceeds of the loan evidenced
hereby may be advanced, repaid and readvanced in partial amounts prior to March
30, 1999. The outstanding principal balance of this Note (this "Note") shall
bear interest, before and after default, as set forth in the Agreement.
The outstanding principal balance of this Note as of March 30, 1999, shall
be due and payable in eighty-four equal, consecutive monthly installments,
beginning on April 30, 1999, and continuing on the 30th day of each month
thereafter (subject to the rights of acceleration pursuant to the Agreement and
with each February payment to be due on the last day of that month). Accrued
interest shall be payable on the same dates as monthly installments of the
principal sum.
The principal amount of each loan made by Bank and the amount of each
prepayment made by Borrower shall be recorded by Bank on the schedule attached
hereto or in the regularly maintained data processing records of Bank. The
aggregate unpaid principal amount of all loans set forth in such schedule or in
such records shall be presumptive evidence of the principal amount owing and
unpaid on this Note. However, failure by Bank to make any such entry shall not
limit or otherwise affect Borrower's obligations under this Note or the
Agreement.
This Note is a promissory note referred to in the Agreement, and is
entitled to the benefits, and is subject to the terms, of the Agreement. The
principal of this Note is prepayable in the amounts and under the circumstances,
and its maturity is subject to acceleration upon the terms, set forth in the
Agreement. Except as otherwise expressly provided in the Agreement, if any
payment on this Note becomes due and payable on a day other than one on which
Bank is open for business (a "Business Day"), the maturity thereof shall be
extended to the next Business Day, and interest shall be payable at the rate
specified herein during such extension period.
In no event shall the interest rate on this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable
<PAGE> 42
hereto. In the event that a court determines that Bank has received interest and
other charges under this Note in excess of the highest permissible rate
applicable hereto, such excess shall be deemed received on account of, and shall
automatically be applied to reduce the amounts due to Bank from Borrower under
this Note, other than interest, and the provisions hereof shall be deemed
amended to provide for the highest permissible rate. If there are no such
amounts outstanding, Bank shall refund to Borrower such excess.
Presentment for payment, demand, notice of dishonor, protest, notice of
protest and all other demands and notices in connection with the delivery,
performance and enforcement of this Note, and consent to one or more repeals or
extensions of this Note are hereby waived.
This Note is being delivered in, is intended to be performed in, shall be
construed and enforceable in accordance with, and be governed by the internal
laws of, the State of Ohio without regard to principles of conflict of laws.
Borrower agrees that the state and federal courts in Franklin County, Ohio, or
any other court in which Bank initiates proceedings, shall have exclusive
jurisdiction over all matters arising out of this Note, and that service of
process in any such proceeding shall be effective if mailed to Borrower at its
address described in the Notices section of the Agreement.
This Note may not be changed orally, but only by an instrument in writing.
BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
BORROWER OR THE BANK WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND BORROWER
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT BORROWER OR THE
BANK MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER TO THE WAIVER OF THE RIGHT OF
BORROWER TO TRIAL BY JURY.
- 2 -
<PAGE> 43
Borrower authorizes any attorney of record to appear for it in any court
of record in the State of Ohio, after any obligation evidenced hereby (an
"Obligation") becomes due and payable whether by its terms or upon default,
waive the issuance and service of process, and release all errors, and confess a
judgment against it in favor of the holder of such Obligation, for the principal
amount of such Obligation plus interest thereon, together with court costs and
attorneys' fees. Borrower waives any conflict of interest caused by an attorney
that represents Bank acting as attorney for Borrower as set forth in this
section. Borrower also agrees that the attorney acting for Borrower as set forth
in this section may be compensated by Bank for such services, and Borrower
waives any conflict of interest caused by such compensation arrangement. Stay of
execution and all exemptions are hereby waived. If an Obligation is referred to
an attorney for collection, and the payment is obtained without the entry of a
judgment, the obligors shall pay to the holder of such obligation its attorneys'
fees.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
BROUGHTON FOODS COMPANY
By:
Its:
- 3 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998 AND THE STATEMENT OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 9,198
<SECURITIES> 0
<RECEIVABLES> 12,677
<ALLOWANCES> 457
<INVENTORY> 3,790
<CURRENT-ASSETS> 26,246
<PP&E> 26,408
<DEPRECIATION> 11,382
<TOTAL-ASSETS> 45,962
<CURRENT-LIABILITIES> 9,621
<BONDS> 30
0
0
<COMMON> 6,315
<OTHER-SE> 27,593
<TOTAL-LIABILITY-AND-EQUITY> 45,962
<SALES> 34,751
<TOTAL-REVENUES> 34,751
<CGS> 27,130
<TOTAL-COSTS> 27,130
<OTHER-EXPENSES> 6,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 1,143
<INCOME-TAX> 443
<INCOME-CONTINUING> 700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 700
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
