FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 2O549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1996
-------------------------------------
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 0-7166
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DOUGHTIE'S FOODS, INC.
(Exact name of Registrant as specified in its charter)
VIRGINIA 54-0903892
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
2410 WESLEY STREET, PORTSMOUTH, VIRGINIA 23707
(Address of principal executive offices)
(757) 393-6007
(Registrant's telephone number, including area code)
------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $1 par value - 998,052 shares as of November 6,
1996.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>
September 28, December 30,
1996 1995
_____________ ____________
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 145,303 $ 513,319
Accounts receivable, net:
Trade 7,741,427 5,758,536
Officers and employees 0 3,323
Inventories 5,118,427 4,849,104
Deferred income taxes 193,339 193,339
Prepaid expenses and other
current assets 273,131 246,679
_____________ ____________
Total Current Assets 13,471,627 11,564,300
_____________ ____________
PROPERTY, PLANT AND EQUIPMENT -
AT COST:
Land 280,827 280,827
Buildings 4,112,609 4,290,986
Delivery equipment 347,242 375,408
Plant and refrigeration equipment 4,054,054 3,869,561
Office equipment 699,019 695,034
Leasehold improvements 6,062 0
_____________ ____________
9,499,813 9,511,816
Less - accumulated depreciation 5,913,217 5,823,208
_____________ ____________
3,586,596 3,688,608
_____________ ____________
OTHER ASSETS 92,140 833,169
_____________ ____________
$ 17,150,363 $ 16,086,077
_____________ ____________
_____________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 533,333 $ 133,333
Accounts payable 1,829,910 1,547,107
Income taxes payable 363,398 0
Accrued salaries, commissions and
bonuses 127,392 76,706
Accrued employee group insurance 126 174,026
Other accrued liabilities 258,606 113,580
_____________ ____________
Total Current Liabilities 3,112,765 2,044,752
LONG-TERM DEBT - less current portion 6,338,334 6,688,334
DEFERRED INCOME TAXES 49,931 49,931
_____________ ____________
Total Liabilities 9,501,030 8,783,017
_____________ ____________
STOCKHOLDERS' EQUITY:
Common stock - $1 par value;
authorized 2,000,000 shares, issued
and outstanding 998,052 shares at
September 28, 1996 and 1,002,527
shares at December 30, 1995 998,052 1,002,527
Additional paid-in capital 2,812,171 2,823,597
Retained earnings 3,839,110 3,476,936
_____________ ____________
Total Stockholders' Equity 7,649,333 7,303,060
_____________ ____________
$ 17,150,363 $ 16,086,077
_____________ ____________
_____________ ____________
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
_____________________________________ ___________________________________
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
_____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
NET SALES $ 22,017,932 $ 21,273,919 $ 60,455,566 $ 58,697,877
COST OF GOODS SOLD 18,589,077 17,867,469 50,441,247 48,594,098
_____________ _____________ _____________ _____________
GROSS PROFIT 3,428,855 3,406,450 10,014,319 10,103,779
_____________ _____________ _____________ _____________
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,202,315 3,384,705 8,881,075 10,169,557
INTEREST EXPENSE 127,490 124,493 361,524 342,429
_____________ _____________ _____________ _____________
3,329,805 3,509,198 9,242,599 10,511,986
_____________ _____________ _____________ _____________
INCOME (LOSS) BEFORE
INCOME TAXES 99,050 (102,748) 771,720 (408,207)
INCOME TAX EXPENSE 37,144 19,100 289,395 13,500
_____________ _____________ _____________ _____________
NET INCOME (LOSS) $ 61,906 $ (121,848) $ 482,325 $ (421,707)
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
NUMBER OF SHARES USED IN
COMPUTING EARNINGS PER
SHARE 1,000,627 1,008,518 1,000,956 1,008,518
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
EARNINGS (LOSS) PER SHARE $ .06 $ (.12) $ .48 $ (.42)
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
CASH DIVIDENDS PER SHARE $ .04 $ .04 $ .12 $ .12
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
NINE MONTHS ENDED
_____________________________________
September 28, September 30,
1996 1995
_____________ ____________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 482,325 $ (421,707)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operations:
Depreciation 334,923 490,907
Gain on sale of property,
plant and equipment (700) (133,130)
(Increase) decrease in assets:
Accounts receivable, net (1,979,568) 332,176
Inventories (269,323) (699,533)
Prepaid expenses and other current
assets (26,452) (258,934)
Other assets 741,029 (1,023,597)
Increase (decrease) in liabilities:
Accounts payable 282,803 (241,977)
Income taxes payable 363,398 (399,504)
Accrued salaries, commissions and
bonuses 50,686 (81,924)
Accrued employee group insurance (173,900) 11,371
Other accrued liabilities 145,026 312,561
_____________ ____________
(49,753) (2,113,291)
_____________ ____________
Cash flows from investing activities:
Additions to property, plant and
equipment (232,911) (435,465)
Proceeds from sale of property,
plant and equipment 700 139,458
_____________ ____________
(232,211) (296,007)
_____________ ____________
Cash flows from financing activities:
Changes in long-term debt, including
current portion 50,000 2,170,000
Acquisition of treasury stock (15,901) (12,000)
Cash dividends (120,151) (120,902)
_____________ ____________
(86,052) 2,037,098
_____________ ____________
Net decrease in cash (368,016) (372,200)
Cash at beginning of period 513,319 1,361,207
_____________ ____________
Cash at end of period $ 145,303 $ 989,007
_____________ ____________
_____________ ____________
See Notes to Consolidated Financial Statements.
</TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 -
The consolidated financial statements include the accounts of
Doughtie's Foods, Inc. (the "Company") and its wholly-owned
subsidiary. All material intercompany accounts and transactions
have been eliminated in consolidation.
Although the accompanying financial statements are unaudited,
management believes that they contain all adjustments (consisting
only of normal recurring accruals) necessary to present fairly
the financial position as of September 28, 1996 and December
30,1995, results of operations for the quarters ended September
28, 1996 and September 30, 1995 and the nine months ended
September 28, 1996 and September 30, 1995, and cash flows for the
nine months ended September 28, 1996 and September 30, 1995. The
results of operations for the periods cited above are not
necessarily indicative of the results to be expected for the full
year.
Note 2 -
On July 20, 1995, the Company sold certain properties located in
Carrol County, Maryland. The gross sale price was $165,000, with
net cash proceeds of $135,610. The cash was used to reduce the
Company's long-term debt. The net pretax gain on the sale was
$130,055.
On September 3, 1995, the Company sold substantially all of the
assets of the Home Food Service operation to Value Added Food
Services, Inc., a Maryland corporation (VAFS) and ceased
operations in the consumer portion of its business due to
unprofitability. Vernon W. Mules, Chairman of the Board of the
Company, and his wife, are the principal stockholders of VAFS.
All finance receivables, inventory, delivery equipment,
processing equipment and office equipment were sold. The total
sale price was $1,154,173 with a $115,417 cash down payment and
the balance of $1,038,756 in the form of a note secured by the
assets sold and personal guarantee of the Chairman. The note is
due in twelve monthly payments beginning September 3, 1996.
Interest is due monthly at the prime rate of the Company's bank.
The assets were sold primarily at net book value, except for
finance receivables which were discounted by 10%. The net pretax
loss on the sale, including abandoned assets and other
write-offs, was $96,498.
During the fourth quarter of 1995, the Company incurred a
$763,000 pretax charge primarily to reduce the carrying value of
fixed assets and inventories of its TWB Gourmet Foods, Inc. 70%
joint venture to estimated net realizable value and to provide
for other costs to exit the business. TWB has incurred net
operating losses since inception in the fourth quarter of 1994;
the 1995 net operating loss approximated $1,390,000 including the
$763,000 charge. On September 6, 1996, the Company sold certain
assets of TWB and discontinued manufacturing of the associated
gourmet food products. The terms of the sale were a $30,000 cash
down payment, $20,000 assigned accounts receivable and $136,829
of free trade credit from the buyer for a total sale price of
$186,829. No gain or loss was recognized as a result of this
sales transaction.
On August 28, 1996, the Company merged its Dutterer's of
Manchester Corporation subsidiary into TWB Gourmet Foods, Inc. in
order to streamline operations.
Note 3 -
Inventories are stated at the lower of last-in, first-out (LIFO)
cost or market. Because inventory valuations under the LIFO
method are based on an annual determination, estimates must be
made at interim dates of year-end costs and levels of
inventories. The possibility of variations between estimated
year-end costs and levels of LIFO inventories and the actual
year-end amounts may materially affect the results of operations
as finally determined for the full year.
Note 4 -
Cash paid for interest totaled $127,490 and $124,493 for the
quarters ended September 28, 1996 and September 30, 1995 and
$361,524 and $342,429 for the nine months ended September 28,
1996 and September 30, 1995, respectively.
Cash paid for income taxes was $0 and $5,676 for the quarters
ended September 28, 1996 and September 30, 1995 and a net refund
of $166,900 and cash payments of $456,676 for the nine months
ended September 28, 1996 and September 30, 1995, respectively.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Sales for the quarter ended September 28, 1996 were $22.0
million or 3.50% higher than sales for the prior year's third
quarter of $21.3 million. Sales for the nine months ended
September 28, 1996 were $60.5 million or 2.99% higher than sales
of $58.7 million for the prior year's first nine months. Sales
under a contract with the United States Department of Defense of
$6.1 million more than offset a decrease in sales of $2.0 million
resulting from the sale of the consumer operation in the third
quarter of 1995.
The Company's gross profit margin (gross profit as a
percentage of net sales) decreased from 16.01% in the quarter
ended September 30, 1995, to 15.57% for the quarter ended
September 28, 1996. The gross profit margin for the nine months
decreased from 17.21% in 1995 to 16.56% in 1996. The elimination
of the consumer division with its higher mark-up was the primary
cause of this decline.
The Company's selling, general and administrative expenses,
expressed as a percentage of net sales decreased from 15.91% for
the third quarter of 1995 to 14.54% for the quarter ended
September 28, 1996 and decreased from 17.33% for the first nine
months of 1995 to 14.69% for the nine months ended September 28,
1996. The sale of the consumer operation was the primary
cause of the decline. The remainder of the decline was due to a
$312,000 decrease in health and commercial insurance.
Interest expense for the quarter ended September 28, 1996
decreased to .58% of sales compared to .59% of sales for the
third quarter of 1995 and increased to .60% of sales for the nine
months ended September 28, 1996 compared to .58% of sales for the
first nine months of 1995. As the interest on the Company's debt
is prime related, interest expense will increase or decrease in
subsequent periods based on fluctuations in the prime rate and
the borrowing levels of the Company.
Income tax expense was $289,395 for the nine months ended
September 28, 1996 compared to an income tax expense of $13,500
for the corresponding period of 1995. The lower effective tax
rate in 1995 resulted from the non-recognition of tax benefits
for the net operating loss of a subsidiary that is not a member
of the controlled group for income tax purposes.
The Company reported net income of $482,325 or $.48 per
share for the first nine months of 1996 compared to a net loss of
$421,707 or $.42 per share in the first nine months of 1995.
Losses incurred by TWB Gourmet Foods, Inc. accounted for $.44 of
the 1995 per share net loss. TWB incurred no loss or income in
1996 due to the $763,000 pretax charge established in the fourth
quarter of 1995.
Liquidity
- ---------
The Company uses a number of liquidity indicators for internal
evaluation purposes. Certain of these measures as of September 28, 1996 and
December 30, 1995 are set forth below:
<TABLE>
<CAPTION>
September 28, December 30,
1996 1995
____________ ____________
<S> <C> <C>
Total Debt to Total Debt Plus Stockholders' Equity .47 .48
Current Assets to Current Liabilities 4.33 5.66
Inventory Turnover (The Annualized Cost of Goods
Sold to Ending Inventory) 13.14 12.99
</TABLE>
The decrease in the current assets to current liabilities
ratio was caused by the increase in inventory and debt that were
required to service a sales contract with the United States
Department of Defense.
On July 20, 1995, the Company sold certain properties
located in Carrol County, Maryland. The gross sale price was
$165,000, with net cash proceeds of $135,610. The cash was used
to reduce the Company's long-term debt. The net pretax gain on
the sale was $130,055.
On September 3, 1995, the Company sold substantially all of
the assets of the Home Food Service operation to Value Added Food
Services, Inc., a Maryland corporation ("VAFS"), and ceased
operations in the consumer portion of its business due to
unprofitability. Vernon W. Mules, Chairman of the Board of the
Company, and his wife are the principal stockholders of VAFS.
All finance receivables, inventory, delivery equipment,
processing equipment and office equipment were sold. The total
sale price was $1,154,173 with a $115,417 cash down payment and
the balance of $1,038,756 in the form of a note, which is secured
by the assets sold and the personal guarantee of the Chairman.
The note is due in twelve monthly payments beginning September 3,
1996. Interest is due monthly at the prime rate of the Company's
bank. The assets were sold primarily at net book value, except
for finance receivables which were discounted by 10%. The net
pretax loss on the sale, including abandoned assets and other
write-offs, was $96,498.
During the fourth quarter of 1995, the Company incurred a
$763,000 pretax charge primarily to reduce the carrying value of
fixed assets and inventories of its TWB Gourmet Foods, Inc. 70%
joint venture to estimated net realizable value and to provide
for other costs to exit the business. TWB has incurred net
operating losses since inception in the fourth quarter of 1994;
the 1995 net operating loss approximated $1,390,000 including the
$763,000 charge. On September 6, 1996, the Company sold certain
assets of TWB and discontinued manufacturing of the associated
gourmet food products. The terms of the sale were a $30,000 cash
down payment, $20,000 assigned accounts receivable and $136,829
of free trade credit from the buyer for a total sale price of
$186,829. No gain or loss was recognized as a result of this
sales transaction.
On August 28, 1996, the Company merged its Dutterer's of
Manchester Corporation subsidiary into TWB Gourmet Foods, Inc. in
order to streamline operations.
Capital Resources
- -----------------
The Company's debt financing at September 28, 1996,
consisted of the following:
A $7,500,000 revolving bank note at prime. The prime rate
at September 28, 1996 was 8.25%. The note is due three years
after the annual renewal date, currently July, 1998, subject to
annual renewal. As of September 28, 1996, the Company had
borrowed $4,455,000 against this credit line and had $3,045,000
of additional borrowing capacity.
A $2,000,000 Industrial Revenue Bond from a bank for the
purpose of expanding the Company's plant and office facilities in
Portsmouth, Virginia at an annual interest rate of 91.50% of
prime. As of September 28, 1996, the Company had fully utilized
the Industrial Revenue Bond and the outstanding balance was
$766,667.
A $1,750,000 bank term loan at prime plus 0.50%. The loan
is to be repaid in quarterly installments of $100,000. As of
September 28, 1996, the outstanding balance was $1,650,000. The
funds were used to finance the increased inventory and accounts
receivable required to service a one-year contract awarded to the
Company in January 1996 by the United States Department of
Defense to furnish food items to various military installations.
The contract contains three yearly renewal options. The United
States Department of Defense had estimated annual sales volume to
be approximately $19 million. Based on actual sales volume to
date, estimated annual sales volume should approximate $12
million.
While the Company does not anticipate a material increase in
its capital requirements in the near future, such an increase, if
it occurs, is likely to be met through additional long-term debt
financing.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which
the Company or any of its subsidiaries is a party or to which any
of their property is the subject.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2(a)(1). Articles of Merger (with attached Plan of
Merger) Merging Dutterer's of Manchester Corporation (a Maryland
corporation) and TWB Gourmet Foods, Inc. (a Virginia
corporation), filed with the Virginia State Corporation
Commission on August 28, 1996.
2(a)(2). Articles of Merger Merging Dutterer's of
Manchester Corporation Into TWB Gourmet Foods, Inc., filed with
the Maryland State Department of Assessments and Taxation on
August 27, 1996.
10(g). Asset Purchase Agreement dated as of September
6, 1996 by and among Loetitia Adam St. James and Chris L. St.
James, TWB Gourmet Foods, Inc. (TWB), CP Specialty Foods, Inc.
(CP), and Doughtie's Foods, Inc., pursuant to which TWB sold
certain assets to CP.
27. Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
ended September 28, 1996.
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.
Date: November 12, 1996
DOUGHTIE'S FOODS, INC.
By: /s/ Marion S. Whitfield, Jr.
--------------------------------
Marion S. Whitfield, Jr.
Senior Vice President
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description
2(a)(1). Articles of Merger (with attached Plan of
Merger) Merging Dutterer's of Manchester Corporation (a Maryland
corporation) and TWB Gourmet Foods, Inc. (a Virginia
corporation), filed with the Virginia State Corporation
Commission on August 28, 1996.
2(a)(2). Articles of Merger Merging Dutterer's of
Manchester Corporation Into TWB Gourmet Foods, Inc., filed with
the Maryland State Department of Assessments and Taxation on
August 27, 1996.
10(g). Asset Purchase Agreement dated as of September
6, 1996 by and among Loetitia Adam St. James and Chris L. St.
James, TWB Gourmet Foods, Inc. (TWB), CP Specialty Foods, Inc.
(CP), and Doughtie's Foods, Inc., pursuant to which TWB sold
certain assets to CP.
27. Financial Data Schedule.
EXHIBIT 2 (a)(1)
ARTICLES OF MERGER
merging
DUTTERER'S OF MANCHESTER CORPORATION
(a Maryland corporation)
and
TWB GOURMET FOODS, INC.
(a Virginia corporation)
1. The Plan and Agreement of Merger (the "Plan") is
attached hereto as Exhibit A. The Board of Directors of each
corporation which is a party to the merger adopted the Plan and
recommended its approval to its shareholders.
2. Subsequent to its adoption by each party's Board
of Directors:
a. The Plan was adopted by the unanimous
written consent of the shareholders of Dutterer's of Manchester
Corporation, a Maryland corporation.
b. The Plan was adopted by the unanimous
written consent of the shareholders of TWB Gourmet Foods, Inc., a
Virginia corporation.
3. The surviving corporation is TWB Gourmet Foods,
Inc., a Virginia corporation.
DATED: August 23, 1996
---------------
DUTTERER'S OF MANCHESTER CORPORATION
By: /s/ Vernon W. Mules
---------------------
Its: President
--------------------
TWB GOURMET FOODS, INC.
By: /s/ Chris L. St. James
---------------------
Its: President
--------------------
PLAN OF MERGER
Merging
DUTTERER'S OF MANCHESTER CORPORATION, a Maryland Corporation
Into
TWB GOURMET FOODS, INC., a Virginia Corporation
1. Parties to the Merger; Effective Date. Pursuant
to the provision of the Virginia Stock Corporation Act,
Dutterer's of Manchester Corporation ("Dutterer's"), a Maryland
corporation shall be merged into TWB Gourmet Foods, Inc. ("TWB"),
a Virginia corporation. TWB will be the surviving corporation.
The merger (the "Merger") shall become effective on the date (the
"Effective Date") that the State Corporation Commission of
Virginia issues a certificate of merger (the "Certificate of
Merger").
2. Capitalization of Merging Corporations. a. The
authorized capital stock of Dutterer's is 100,000 shares of
common stock ("Dutterer's Common Stock"), par value $1.00, 25,000
of which shares are validly issued and outstanding, fully paid
and non-assessable and all of which are owned by Doughtie's
Foods, Inc., a Virginia corporation ("Doughties").
b. The authorized capital stock of TWB is 23,500
shares of Class A common stock and 1500 shares of Class B Common
Stock, with no par value ("TWB's Common Stock"), of which 3,500
shares of the Class A Common Stock and 1,500 shares of the Class
B Common Stock are validly issued and outstanding, fully paid and
non-assessable.
3. Effect of the Merger. From and after the
Effective Date i. TWB shall continue its corporate existence as a
Virginia corporation and the separate existence of Dutterer's
shall cease; ii. the Articles of Incorporation and Bylaws of TWB
in effect immediately prior to the Effective Date shall continue
to be its Articles of Incorporation and Bylaws until amended or
repealed in a manner provided by law; iii. each of the officers
and directors of TWB in office immediately prior to the Effective
Date shall remain its officers and directors, if they have not
resigned as of the Effective Date, until their respective
successors are duly elected or appointed; iv. the former holders
of the shares of TWB's Common Stock and Dutterer's Common Stock
shall only be entitled to the rights provided in this Plan of
Merger; and, v. TWB shall succeed to all of Dutterer's assets and
liabilities.
4. Conversion of Securities; Fractional Shares. Each
share of Dutterer's Common Stock issued and outstanding
immediately prior to the Effective Date, as a result of the
Merger and without any action on the part of the holder thereof,
shall be cancelled and converted into 4/5 of a share of Class A
Common Stock in TWB.
5. Exchange of Shares. a. Immediately prior to the
Effective Date, TWB will make available to McGuire, Woods, Battle
& Boothe, LLP (the "Exchange Agent"), for exchange pursuant to
this Plan of Merger, certificates representing the number of
shares of TWB's Common Stock which the holders of shares of
Dutterer's Common Stock will be entitled to receive as a result
of the Merger.
b. As soon as practicable after the Effective Date
the Exchange Agent shall mail to each holder of record of
Dutterer's Common Stock immediately prior to the Effective Date a
letter of transmittal which shall contain instructions for
exchanging shares of Dutterer's Common Stock for shares of TWB's
Common Stock. The letter of transmittal shall specify that title
to any certificate which formerly represented a share or shares
of Dutterer's Common Stock ("Dutterer Stock Certificate") being
submitted for exchange shall pass only upon delivery of such
certificate to, and receipt of such certificate by, the Exchange
Agent. Upon receipt by the Exchange Agent of a Dutterer Stock
Certificate, together with a duly executed letter of transmittal,
the Dutterer Stock Certificate shall be cancelled and the
Exchange Agent shall deliver to the former holder of such
Dutterer Stock Certificate a certificate representing the number
of shares of TWB Common Stock to which such shareholder is
entitled as a result of the Merger.
c. Dutterer and TWB are empowered to adopt further
rules and regulations, not inconsistent with the provisions of
this Plan of Merger, regarding the surrender and exchange of the
shares of Dutterer's Common Stock outstanding immediately prior
to the Effective Date including, without limitation, rules and
regulations for the exchange of shares issued without
certificates.
6. Transfer of Shares. a. If any shares of TWB's
Common Stock are to be issued in a name other than that in which
the Dutterer's Common Stock surrendered in exchange therefor was
registered, it shall be a condition of the issuance that the
certificate or certificates representing such Dutterer's Common
Stock be in proper form for transfer, and that the person
requesting the exchange shall i. pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of
shares of TWB's Common Stock in a name other than that of the
registered holder of the Dutterer's Common Stock surrendered or
ii. establish to the satisfaction of the Exchange Agent that such
tax has been paid or that no such tax is payable.
b. After the Effective Date there shall be no
transfers on the stock transfer books of Dutterer of the shares
of Dutterer's Common Stock which were issued and outstanding
immediately prior to the Effective Date.
7. Post Merger Matters. After the Effective Date the
former holders of shares of Dutterer's Common Stock shall not be
entitled to receive dividends or other distributions or to vote
or to exercise any rights as shareholders of TWB, unless the
shareholder owned TWB shares prior to the Effective Date until
their shares of Dutterer's Common Stock are surrendered for
exchange pursuant to this Plan of Merger, but, upon surrender of
their shares of Dutterer's Common Stock, all dividends and other
distributions not paid to them because of this provision shall be
paid, without interest. All dividends or other distributions
declared after the Effective Date with respect to TWB's Common
Stock, and payable to the holders of record thereof after the
Effective Date, which are payable to former holders of Dutterer's
Common Stock who have not surrendered such stock for exchange
pursuant to this Plan of Merger, shall be paid or delivered by
TWB to the Exchange Agent, in trust for the benefit of such
holders.
8. Termination of Duties of Exchange Agent. All
amounts held by the Exchange Agent for the payment of dividends
or other distributions to the holders of unexchanged shares of
Dutterer's Common Stock at the end of one year from the Effective
Date shall be delivered to TWB by the Exchange Agent, after which
time any former holders of Dutterer's Common Stock who have not
exchanged their shares shall, subject to applicable law, look
only to TWB, as a general creditor, for payment of such dividends
or distributions, without interest.
9. Termination of Merger. The Boards of Directors of
TWB and Dutterer may terminate and abandon the Merger at any time
prior to the issuance of the Certificate of Merger, subject to
any contractual rights, without further shareholder action, in
such manner as shall be agreed upon by such Boards of Directors.
TWB GOURMET FOODS, INC.
By: /s/ Chris L. St. James
--------------------
Its: President
-------------------
DUTTERER'S OF MANCHESTER CORPORATION
By: /s/ Vernon W. Mules
---------------------
Its: President
--------------------
EXHIBIT 2(a)(2)
ARTICLES OF MERGER
MERGING DUTTERER'S OF MANCHESTER CORPORATION
INTO
TWB GOURMET FOODS, INC.
THESE ARTICLES OF MERGER, dated the 23rd day of August,
1996, pursuant to Section 3-109 of the Corporations and
Associations Article of the Annotated Code of Maryland, as
amended (hereinafter referred to as the "Code"), are entered
into by and between the corporations named in Article THIRD
below, which are hereinafter collectively referred to as the
"Constituent Corporations".
FIRST: Each of the Constituent Corporations has agreed to
effect a merger, and the terms and conditions of the merger, the
manner of carrying the same into effect, and the manner and basis
of converting or exchanging the shares of issued stock of each of
the Constituent Corporations into different stock or other
consideration pursuant to Section 3-103 of the Code shall be as
set forth herein.
SECOND: TWB Gourmet Foods, Inc., a Virginia corporation,
shall be the surviving corporation (hereinafter sometimes
referred to as the "Surviving Corporation") in the merger.
THIRD: The parties to these Articles of Merger are TWB
Gourmet Foods, Inc. , a corporation organized under the general
corporation law of the Commonwealth of Virginia on August 3, 1994
and Dutterer's of Manchester Corporation, a Maryland corporation
(hereinafter referred to as "Dutterer's"). The Surviving
Corporation is not qualified or registered to do business in
Maryland.
FOURTH: As part of the merger, the Charter of the
Surviving Corporation shall be amended to increase the authorized
capitalization of the Surviving Corporation from 5,000 shares of
common stock divided into 3,500 shares of Class A Common Stock,
with no par value, and 1,500 shares of Class B Common Stock,
also with no par value, to 25,000 shares of common stock divided
into 23,500 shares of Class A Common Stock, with no par value,
and 1,500 shares of Class B Common Stock, also with no par value.
Other than the amendment described in the previous sentence,
there shall be no amendment to the Charter of the Surviving
Corporation effected as part of the merger.
FIFTH: Dutterer's has an authorized capitalization of
100,000 shares of a single class of common stock, par value of
One Dollar ($1.00) per share, of which shares 25,000 are issued
and outstanding; the aggregate par value of all shares of all
classes which Dutterer's has authority to issue being One Hundred
Thousand Dollars ($100,000).
The Surviving Corporation has an authorized
capitalization of 5,000 shares of common stock divided into 3,500
shares of Class A Common Stock, with no par value, and 1,500
shares of Class B Common Stock, also with no par value; 3,500 of
Class A Common Stock and 1,500 shares of Class B Common Stock are
issued and outstanding.
SIXTH: The manner and basis of converting or exchanging
the issued stock of each of the Constituent Corporations into
different stock or other consideration pursuant to Section 3-103
of the Code shall be as follows:
(a) Each share of capital stock of the Surviving
Corporation which is issued and outstanding on the Effective Date
(as defined in Article ELEVENTH herein) shall remain outstanding
as one share of capital stock of the Surviving Corporation.
(b) Each share of the capital stock of Dutterer's
issued and outstanding immediately prior to the Effective Date,
as a result of the merger and without any action on the part of
the holder thereof, shall be canceled and converted into 4/5ths
of a share of Class A Common Stock in the Surviving Corporation.
(c) After the merger transaction described above shall
have become effective, each holder of an outstanding certificate
or certificates theretofore representing capital stock of
Dutterer's shall surrender the same to the Surviving Corporation
and each such holder thereupon shall be entitled to receive in
exchange therefor a certificate or certificates representing the
number of shares of Class A Common Stock of the Surviving
Corporation into which the capital stock of Dutterer's
represented by the certificate or certificates so surrendered
shall have been converted or exchanged by the provisions hereof.
Until such surrender, capital stock of Dutterer's shall be deemed
for all corporate purposes, other than the payment of dividends,
to evidence ownership of the number of full shares of Class A
Common Stock of the Surviving Corporation to be delivered with
respect to such shares of such capital stock.
SEVENTH: The principal office of Dutterer's in the State of
Maryland is located in Baltimore City. Dutterer's owns an
interest in land in located Carroll County, Maryland.
EIGHTH: The principal office of the Surviving Corporation
in its state of organization is 2410 Wesley Street, Portsmouth,
Virginia 23707. The name and address in Maryland of the Resident
Agent of the Surviving Corporation is Michael L. Jennings, One
North Charles Street, Suite 1300, Baltimore, Maryland 21201.
NINTH: The board of directors of Dutterer's, by unanimous
written consent of the entire Board of Directors dated August __,
1996, duly adopted a resolution declaring that a merger
substantially upon the terms and conditions set forth in these
Articles of Merger was advisable and directing that the Articles
of Merger be submitted to Dutterer's sole stockholder for its
approval. The Articles of Merger were duly submitted to and
approved by the unanimous written consent of Dutterer's sole
stockholder.
The board of directors of the Surviving Corporation, by
unanimous written consent dated August __, 1996, duly adopted a
resolution declaring that a merger substantially upon the terms
and conditions set forth in these Articles of Merger was
advisable and directing that a Plan and Agreement of Merger (the
"Plan") setting forth such terms and conditions be submitted to
the Surviving Corporation's stockholders for their approval. The
Plan was duly submitted to and approved by the unanimous written
consent of the Surviving Corporation's stockholders.
TENTH: These Articles of Merger were duly advised,
authorized and approved in the manner and by the vote required by
the Charter of the Surviving Corporation and by the laws of the
Commonwealth of Virginia and by the Charter of Dutterer's and the
laws of the State of Maryland.
ELEVENTH: Upon the Effective Date:
(a) the assets and liabilities of Dutterer's shall be
taken up on the books of the Surviving Corporation at the amount
at which they shall at that time be carried on the books of
Dutterer's, subject to such adjustments, if any, as may be
necessary to conform to the Surviving Corporation's accounting
procedures; and
(b) all of the rights, privileges, immunities, powers,
purposes and franchises of Dutterer's and all property, real,
personal and mixed, and all debts due to Dutterer's on whichever
account shall be vested in the Surviving Corporation, and all
property rights, privileges, immunities, powers, purposes and
franchises, and all and every other interest shall be thereafter
as effectually the property of the Surviving Corporation as they
were of Dutterer's, and all debts, liabilities, obligations and
duties of Dutterer's shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as
if said debts, liabilities, obligations and duties had been
incurred or contracted by it.
The merger provided for by these Articles of Merger shall
become effective (the "Effective Date") and the separate
existence of Dutterer's, except insofar as continued by statute,
shall cease on the date which Articles of Merger are approved,
executed and acknowledged by Dutterer's and the Surviving
Corporation, as required by the laws of the Commonwealth of
Virginia, and are filed with the State Corporation Commission of
Virginia, and these Articles of Merger, duly advised, approved,
signed, acknowledged, sealed and verified by Dutterer's and the
Surviving Corporation, as required by the laws of the State of
Maryland, are filed for record with the State Department of
Assessments and Taxation of Maryland, as required by the laws of
the State of Maryland.
IN WITNESS WHEREOF, Dutterer's of Manchester Corporation and
TWB Gourmet Foods, Inc., have caused these Articles of Merger to
be signed in their respective corporate names and on their behalf
by the respective Presidents and witnessed or attested by their
respective Secretaries or Assistant Secretaries as of the 23rd
day of August, 1996.
ATTEST: DUTTERER'S OF MANCHESTER
CORPORATION
/s/ George D. Spicer, III By: /s/ Vernon W. Mules
- -------------------------- --------------------------
George D. Spicer, III, Vernon W. Mules, President
Asst. Secretary
ATTEST: TWB GOURMET FOODS, INC.
/s/ Loetitia Adam St. James By: /s/ Chris L. St. James
- --------------------------- ---------------------------
Loetitia Adam St. James, Chris L. St. James, President
Secretary
THE UNDERSIGNED, President of DUTTERER'S OF MANCHESTER
CORPORATION, who executed on behalf of said corporation the
foregoing Articles of Merger, of which this certificate is made a
part, hereby acknowledges, in the name and on behalf of said
corporation, the foregoing Articles of Merger, to be the
corporate act of said corporation and further certifies that, to
the best of his knowledge, information and belief, tile matters
and facts set forth therein with respect to the approval thereof
are true in all material respects, under the penalties of
perjury.
/s/ Vernon W. Mules
----------------------------
Vernon W. Mules
THE UNDERSIGNED, President of TWB GOURMET FOODS, INC., who
executed on behalf of said corporation the foregoing Articles of
Merger, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said corporation, the
foregoing Articles of Merger to be the corporate act of said
corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set
forth therein with respect to the approval thereof are true in
all material respects, under the penalties of perjury.
/s/ Chris L. St. James
-----------------------------
Chris L. St. James
EXHIBIT 10(g)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is dated as
of September 6, 1996 by and among LOETITIA ADAM ST. JAMES and
CHRIS L. ST. JAMES ("St. James"), TWB GOURMET FOODS, INC., a
Virginia corporation ("TWB") CP SPECIALTY FOODS, INC. ("CP
Specialty Foods") and DOUGHTIE'S FOODS, INC. (the "Doughtie's").
R E C I T A L S
A. Capitalized terms used in the Recitals to this
Agreement shall have the meanings assigned in Article I.
B. CP Specialty Foods desires to purchase certain assets
of TWB and TWB desires to sell certain assets of TWB to CP
Specialty Foods.
C. St. James has agreed to release TWB of any liability
under the Employment Contract or license agreement.
D. St. James, Doughtie's and TWB have agreed to execute
general releases, releasing each other from any and all
obligations unless expressly set forth herein to the contrary.
A G R E E M E N T
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the
following terms have the following meanings:
"Accounts Receivable" shall mean indebtedness owed to TWB
arising out of the ordinary course of business which are more
accurately listed in Schedule 3.6.
"Agreement" shall mean this Asset Purchase Agreement, as
amended, supplemented or otherwise modified from time to time.
"Closing Date" shall mean September 6, 1996.
"Collateral" shall mean Equipment, the License
Agreement, Inventory and Accounts Receivable.
"Contract Date" shall mean the date set forth on page 1 of
the Agreement.
"Contractual Obligation" shall mean as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or undertaking to which such Person is a
party or by which it or any of its property is bound.
"Employment Contract" shall refer to the employment
agreements between St. James and TWB dated September 5, 1994 as
the same may have been amended, supplemented or otherwise
modified from time to time.
"Financing Statements" shall refer to the documents filed
to perfect TWB's lien in the Collateral.
"GAAP" shall mean generally accepted accounting principles
as in effect from time to time.
"General Release" shall mean the General Mutual Release to
be executed by St. James, TWB, CP Specialty Foods and Doughtie's
at closing in a form acceptable to all parties and their counsel.
"Guarantors" shall refer to St. James.
"Indebtedness" as to any Person, at a particular time,
(a) all Indebtedness for borrowed money or for the deferred
purchase price of property or services in respect of which such
Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which such Person
otherwise assures a creditor against loss, including, without
limitation, accounts payable, accrued expenses and other current
liabilities, and inter-company accounts, and (b) all liabilities
secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for
the payment thereof.
"Inventory" shall mean good and useable raw material,
finished goods and supplies of CP Specialty Foods.
"Lease Agreement" shall mean the Industrial Lease
Agreement dated August 17, 1994 by and between Wendall's Machine
& Welding, Inc. and TWB.
"License Agreement" shall mean the License Agreement
between St. James and CP Specialty Foods dated April 24, 1996.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other
title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing,
and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Loan Documents" shall mean the collective reference to this
Agreement, the Note, the Security Documents, and all other
documents and agreements executed and delivered in connection
with this Agreement and/or the Loans, as any of the same may be
amended, supplemented, replaced, restated or otherwise modified
from time to time.
"Note" shall mean that certain Promissory Note dated
September __, 1996, made by CP Specialty Foods to TWB for
$20,000.00 as set forth in Section 4.1(A) of this Agreement.
"Obligors" shall refer to CP Specialty Foods under the
Note.
"Person" an individual, a partnership, a corporation, a
business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a Governmental Authority or any
other entity of whatever nature.
"Requirements of Law" shall mean as to any Person, the
certificate of incorporation and bylaws or other organizational
or governing documents of such Person, and any law, treaty, rule
or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or
binding upon such Person or any of it properties or to which such
Person or any of its property is subject.
"Security Agreement" shall refer to the agreement between
CP Specialty Foods and TWB which provides TWB with a Lien on the
Collateral.
"Security Documents" shall mean the collective reference to
the Security Agreement and Financing Statements and all other
documents and agreements securing the Loan, in whole or in part,
as any of the same may be amended, supplemented, replaced,
restated or otherwise modified from time to time.
Section 1.2 Other Definitional Provisions. Except as
otherwise specified herein, all references herein (I) to any
Person shall be deemed to include such Person's successors,
transferees and assignees, but only, in the case of transferees
and assignees of the parties to this Agreement, to the extent the
applicable transfer or assignment complies with the provisions of
this Agreement, and (ii) to any applicable law defined or
referred to herein shall be deemed references to such applicable
law as the same may have been or may be amended or supplemented
from time to time.
a. When used in this Agreement, the words "herein",
"hereof", and "hereunder" and words of similar import shall
refer to this Agreement as a whole and not to any provision
of this Agreement, and the words "section", "schedule" and
"exhibit" shall refer to Sections of and Schedules and
Exhibits to this Agreement unless otherwise specified.
b. Whenever the context so requires, each gender
includes the other genders, and the singular number includes
the plural, and vice versa.
c. All terms defined in this Agreement shall have
such defined meanings when used in the Loan Documents except
as otherwise expressly stated therein.
d. When used in this Agreement in conjunction with a
reference to the Loan or any Loan Documents, the terms
"related" and "relate to" shall refer to events,
circumstances or conditions directly affecting or directly
applying to the particular maker, endorser, guarantor or
grantor or pledgor of collateral with respect to the Loan,
as the case may be.
Section 1.3 Captions. Article and Section captions in this
Agreement are included for convenience of reference only and
shall not constitute a part of this Agreement for any other
purpose.
ARTICLE II
RELEASE OF LIEN
Doughtie's hereby agrees to release its lien against the
Collateral and to authorize the sale of TWB's assets upon the
agreement of St. James, CP Specialty Foods and TWB to the terms
set forth in this Asset Purchase Agreement.
ARTICLE III
SALE OF ASSETS
Section 3.1 Purchase and Sale of Assets. At the Closing
Date, TWB agrees to sell and transfer to CP Specialty Foods, and
CP Specialty Foods agrees to purchase and acquire from TWB, the
assets set forth in Schedule 3.1, which is attached hereto and
made a part hereof by reference (the "Purchased Assets").
Section 3.2 Excluded Assets. The following are not
included in the Purchased Assets and for emphasis are expressly
excluded, namely (I) cash, cash equivalents, Merchandise Credits
and securities, (ii) any accounts receivables due from orders
filled by TWB prior to April 24, 1996, (iii) the licenses and
permits which are not assignable and (iv) all Equipment not
listed on Schedule 3.1.
Section 3.3 Assumed Liabilities. At the Closing, CP
Specialty Foods will not assume any of the liabilities and
obligations of TWB except for making the September rental payment
of the Lease Agreement and any claim asserted by the ABC chain.
Doughtie's shall no longer have any implied or express obligation
to guaranty obligations due by TWB which obligations arose
subsequent to April 24, 1996 .
Section 3.4 Purchase Price. CP Specialty Foods agrees to
pay TWB a purchase price equal to One Hundred Seventy-Five
Thousand Four Hundred Sixteen and 00/100 Dollars ($175,416.00).
The price consists of the following; (I) Thirty Thousand and
00/100 Dollars ($30,000.00) in cash at closing; ; (ii) an
assignment of $20,000 in current accounts receivable within 45
days after closing and (iii) a trade credit (without interest) to
Doughtie's Foods, Inc. of $125,416 which can be used over six (6)
years but not exceeding $5,000 in any month without the consent
of CP Specialty Foods. St. James agrees to unconditionally
guarantee the deferred portion of the purchase price and the
trade credit. The personal guaranty as it relates to the trade
credit shall be in a dollar amount equal to the unused balance of
the trade credit, which shall be due and owing within 45 days
after CP fails to satisfy all or part of any reasonable request
by Doughtie's Foods to provide product pursuant to the trade
credit or immediately, without further notice, in the event CP
files for protection under the Bankruptcy Code. CP shall not
impose any minimum quantities except as set forth in
Schedule 3.4.
Section 3.5 Security Agreement. The security agreement for
the trade credit and deferred portion of the Purchase Price shall
be in the form of Schedule 3.5.
Section 3.6 Application of Accounts Receivables, Cash and
Returned Merchandise Credit. On April 24, 1996 , TWB agreed to
transfer and assign its Accounts Receivables, cash and Returned
Merchandise Credit to Doughtie's to be applied, at its face value
amount to the obligations between Doughtie's and TWB. TWB, St.
James and CP Specialty Foods agree to reasonably cooperate with
Doughtie's in any efforts initiated to collect the Accounts
Receivables. TWB certifies that the Accounts Receivables set
forth on Schedule 3.6, which is attached hereto is an accurate
listing of the Accounts Receivables assigned to Doughtie's on
April 24, 1996.
ARTICLE IV
RELATED AGREEMENTS
Section 4.1 Other Agreements At the Closing Date, TWB,
St. James, CP Specialty Foods and Doughtie's will enter into
certain additional agreements (the "Related Agreements") as
follows: (A) Mutual Rescission of License and Escrow Agreement
between TWB and St. James and the return of formulas in the
possession of TWB or its agents which shall be in a separate
agreement acceptable to all parties and their counsel and which
shall be executed at closing; (B) Mutual release of liabilities
executed by Doughtie's, TWB and St. James which shall be in a
separate agreement acceptable to all parties and their counsel
and which shall be executed at closing; Separate Corporate
resolutions from TWB, Doughtie's and, CP Specialty Foods
authorizing the execution of all documents contemplated
hereunder; (D) CP Specialty Foods' agrees to hold prices charged
to Doughtie's Foods, Inc. at CP Specialty Foods' current
published rates, as of the date of this agreement, a copy of
which is attached as Schedule 4.1(d) for products sold to
Doughtie's by CP Specialty Foods for 18 months after the Closing
Date; (E) CP Specialty Foods will satisfy the claim for close-dated product
shipped by TWB to the ABC chain which is demanding
compensation and agrees to hold TWB harmless from such claim;
(F) The parties acknowledge that CP Specialty Foods has already
returned the unusable inventory; (G) If the $20,000 in assigned
accounts receivable have not been paid to Doughtie's Foods within
60 days after closing, CP Specialty Foods and St. James shall
jointly and severally be liable for this $20,000 pursuant to the
Note attached hereto as Schedule 4.1(g), which Note will be
secured by the security agreement attached hereto as
Schedule 3.5; (H) CP Specialty Foods agrees that during the
period while there is an unused balance on the trade credit, if
Doughtie's Foods is providing CP Specialty Foods product to any
of its customers, CP Specialty Foods will not sell its product to
the customers listed on the attached Schedule 4.1(h); nor will it
direct any distributor to do so, it being understood, however,
that CP Specialty Foods cannot control distributor sales;
(I) St. James shall at closing authorize Ron Gates as escrow
agent to deliver their 1500 shares of stock in TWB to TWB or its
designee.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TWB
TWB represents and warrants to CP Specialty Foods the
following:
5.1 Non-Contravention. The execution and delivery by TWB
of this Agreement and the Related Agreements do not, and the
consummation of the transactions contemplated hereby and thereby,
will not (I) result in a default, or give rise to any right of
termination, cancellation or acceleration (whether immediately or
after the giving of notice or the passage of time, or both),
under the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement, lease or other
instrument or obligation to which TWB is a party or by which TWB
or any of the purchased assets may be bound by a Person other
than Doughtie's, or (ii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to TWB, any of the
purchased assets or the business of the TWB.
5.2 Litigation. There are no actions, suits, claims,
investigations or proceedings (legal, administrative or
arbitrative) pending or threatened against TWB, whether at law or
in equity and whether civil or criminal in nature, before any
court, arbitrator, governmental department, commission, agency or
instrumentality, which, if adversely determined, could reasonably
be expected to affect the purchased assets. Furthermore, there
are no existing judgments, orders or decrees of any such court,
arbitrator, governmental department, commission, agency or other
instrumentality which have, or can reasonably be expected to
have, the effect described in the preceding sentence.
5.3 Title to Properties. TWB will deliver good and
marketable title to all of the purchased assets, free and clear
of any liens, mortgages, charges, security interests or other
encumbrances and has paid all sales taxes in connection with the
purchased assets, except for the security interest in Collateral
to secure Notes (collectively the "Encumbrances"). Doughtie's,
also, agrees to release its existing lien on the Purchase Assets.
5.4 Material Contracts. TWB has not breached any material
contract, lease or other agreement to which it is a party and has
no knowledge of a breach by any other party to any such material
contract, lease or other agreement, which affects or can
reasonably be expected to affect the purchased assets.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ST. JAMES
CP Specialty Foods represents and warrants to TWB the
following:
6.1 Organization; Authority. CP Specialty Foods has power
and authority to execute and deliver this Agreement and the
Related Agreements and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
CP Specialty Foods of this Agreement and the Related Agreement
and the consummation by him of the transactions contemplated
hereby and thereby, have been duly authorized by CP Specialty
Foods, and no other proceedings on the part of CP Specialty Foods
are necessary with respect thereto. This Agreement constitutes,
and the Related Agreements when executed and delivered by the
parties will constitute, valid and binding obligations of CP
Specialty Foods, enforceable in accordance with their terms
except as limited by (I) any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors'
rights generally or (ii) general principles of equity, whether
considered in a proceeding in equity or at law.
6.2 Consents and Approvals. There is no requirement
applicable to CP Specialty Foods to make any filing with, or to
obtain any consent or approval of any public body, business
entity or individual as a condition to the consummation of the
transactions contemplated by this Agreement.
6.3 Non-Contravention. The execution and delivery by CP
Specialty Foods of this Agreement and the Related Agreements does
not and will not result in a default, or give rise to any right
of termination, cancellation or acceleration (whether immediately
or after the giving of notice or the passage of time, or both),
under the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement, lease or other
instrument or obligation to which CP Specialty Foods is a party
or by which CP Specialty Foods may be bound, or violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to CP Specialty Foods.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Collection of Receivables. Doughtie's shall have
the right to initiate any collection actions against debtors who
are customers of TWB to collect Accounts Receivables. TWB shall
execute any and all documents necessary to properly transfer and
assign any Accounts Receivables to Doughtie's.
7.2 Expenses. Except as otherwise provided in this
Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby will be
paid by Doughtie's, CP Specialty Foods or St. James according to
which of them incurred such costs and expenses.
7.3 Public Announcements. The parties will consult with
each other before issuing any press releases or making any public
statements with respect to this Agreement, and the transactions
contemplated hereby, and will not issue any such press release or
make any such public statement without the consent of the other.
7.4 Subsequent Events. If any event shall occur after the
date of this Agreement and prior to the Closing which, had it
occurred prior to the execution of this Agreement, should have
been disclosed by TWB or CP Specialty Foods to the other or
Doughtie's in a representation and warranty or otherwise, then,
upon the happening of such event, the party which would have been
required to disclose the happening of such event prior to the
execution of this Agreement will promptly disclose it to the
other party.
7.5 Efforts to Consummate. Each of the parties agrees
to use its reasonable best efforts to consummate, as promptly as
practicable, the transactions contemplated hereby. Each party
agrees to cooperate fully with the other in assisting it to
comply with the provisions of this Section.
7.6 Further Assurances. TWB will use reasonable efforts to
implement the provisions of this Agreement, and for such purpose,
at the request of CP Specialty Foods or Doughtie's, will at or
after the Closing Date, without further consideration, promptly
execute and deliver such additional documents as CP Specialty
Foods or Doughtie's may reasonably deem necessary or desirable in
order to consummate more effectively the transactions
contemplated hereby and to vest in CP Specialty Foods title to
the purchased assets free and clear of any Encumbrances and
properly document St. James obligations under the Note and
Security Documents.
7.7 Labels. Doughtie's authorizes CP Specialty Foods to
use the remaining labels in TWB's Inventory which contain
Doughtie's UPC Header Code 78087. CP Specialty Foods, however,
cannot reorder any additional labels with Doughtie's UPC Header
Code. Furthermore, CP Specialty Foods agrees to indemnify and
hold Doughtie's harmless for any and all losses or claims filed
against the Doughtie's which result from CP Specialty Foods' use
of the remaining labels in its Inventory.
7.8 Restricted Authority. Chris St. James shall have no
authority to negotiate checks made payable to TWB, to dispose of
any of the Purchased Assets except as provided herein, or to
negotiate or modify the amount of the existing Accounts
Receivables. TWB and Doughtie's will not negotiate checks made
payable to CP Specialty Foods.
ARTICLE VIII
DOCUMENTS DELIVERED AT CLOSING
8.1 Deliveries by TWB. At the Closing or sooner in some
case TWB shall deliver the following:
(a) a Bill of Sale and Assignment and such other
documents as may be necessary to transfer to CP Specialty Foods
the Purchased Assets, all of which shall be in form satisfactory
to CP Specialty Foods; and
(b) an executed Mutual Release of License Agreement
and Escrow Agreement and formula held in escrow; and
an executed corporate resolution necessary to
authorize the transactions contemplated hereunder; and
(d) cash on hand and a proper assignment of
Accounts Receivables to Doughtie's; and
(e) an executed General Mutual Release Note to
Doughtie's; and
(f) such additional documents as CP Specialty Foods
or Doughtie's may reasonably request.
8.2 Deliveries by CP Specialty Foods. At the Closing CP
Specialty Foods shall deliver the following:
(a) settlement funds due TWB required under this
Agreement; and
(b) The executed Note and Security Documents; and
(c) Such other additional documents as CP Specialty
Foods or Doughtie's may reasonably request; and
(d) Mutual release of liabilities; and
(e) Mutual rescission of license.
8.3 Delivery by St. James. An unconditional guarantee
to pay the Note and trade credit, if necessary, and a mutual
release.
8.4 Closing Documents. All documents required under
this Agreement shall be in such form as provided in the Exhibits
or if not attached as an Exhibit in a form acceptable to all
parties and their counsel.
ARTICLE IX
CONDITIONS TO OBLIGATION OF CP SPECIALTY FOODS
The obligation of CP Specialty Foods to consummate the
transactions contemplated by this Agreement is subject, to the
extent not waived, to the following conditions.
9.1 Representations and Warranties. Each of the
representations and warranties of TWB contained in this Agreement
shall be true and correct in all respects as of the date of this
Agreement and as of the Closing.
9.2 Performance of this Agreement. TWB and Doughtie's
shall have complied with all of their obligations under this
Agreement.
9.3 Consents and Approvals. All consents and approvals
of governmental bodies, business entities or individuals which
TWB must obtain to transfer the purchased assets.
ARTICLE X
CONDITIONS TO OBLIGATION OF TWB
The obligation of TWB to consummate the transactions
contemplated by this Agreement is subject, to the extent not
waived, to the following conditions.
10.1 Representations and Warranties. Each of the
representations and warranties of CP Specialty Foods contained in
this Agreement shall be true and correct in all respects as of
the date of this Agreement and as of the Closing.
10.2 Performance of this Agreement. CP Specialty Foods
and Doughtie's shall have complied with all of its obligations
under this Agreement.
10.3 Corporate Authorization. All action required to be
taken by CP Specialty Foods in connection with the transactions
contemplated by this Agreement shall have been taken, all
documents incident thereto shall be reasonably satisfactory in
substance and form to TWB and Doughtie's and TWB and Doughtie's
shall have received such originals or copies of such documents as
it may reasonably request.
10.4 Merger. Dutterers of Manchester Corporation, a
Maryland corporation shall have merged into TWB.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF Doughtie's
The obligations of Doughtie's to consummate the transactions
contemplated by this Agreement is subject, to the extent not
waived of legally binding the transfer of St. James' interest in
TWB to TWB or its assigns at no additional cost to Doughtie's.
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices. All notices and other communications
required to be given to the parties hereto shall be in writing
and shall be (I) delivered personally, (ii) transmitted by
telefax or (iii) mailed by registered or certified mail (return
receipt requested and postage prepaid) as follows:
If to St. James, to:
Loetitia Adam St. James and Chris L. St. James
9304 Willow Terrace
Norfolk, Virginia
Telefax No.:531-9440
with a copy to:
Ronald M. Gates, Esquire
Payne, Gates, Farthing & Radd, P.C.
15th Floor, Dominion Tower
999 Waterside Drive
Norfolk, Virginia 23510
Telefax No.:627-6583
If to Doughtie's, to:
Vernon Mules
c/o Doughtie's Foods, Inc.
2700 Lord Baltimore Drive
Baltimore, Maryland 21244
with a copy to:
William R. Waddell, Esquire
9000 World Trade Center
Norfolk, Virginia 23510
(804) 640-3722
If to TWB, to:
Doughtie's Foods, Inc.
2410 Wesley Street
Portsmouth, Virginia 23707
and
Loetitia Adam St. James and Chris L. St. James
9304 Willow Terrace
Norfolk, Virginia
Telefax No.: 531-9440
or to such other business entities, individuals, addresses or
telefax numbers as the parties entitled thereto shall specify
from time to time by notice. If given personally or transmitted
by telefax, a notice or other communication shall be deemed to
have been given when it is received. If given by mail, it shall
be deemed to have been given on the third business day following
the day on which it was posted.
12.2 Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
12.3 Schedules. The information contained in any schedule
which is referred to in a representation or warranty shall be
deemed to have been disclosed in connection with, and be a part
of, that particular representation or warranty only, and shall
not be deemed a part of any other representation or warranty.
12.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
12.5 Miscellaneous. This Agreement (I) constitutes the
entire agreement and supersedes any prior agreements or
understandings, written or oral, between the parties with respect
to the subject matter hereof; (ii) is not intended to, and shall
not confer upon any other person or business entity other than
the parties hereto, any rights or remedies with respect to the
subject matter hereof; (iii) shall not be assigned by operation
of law or otherwise; and (iv) shall be governed in all respects
by the laws of the Commonwealth of Virginia without regard to its
choice of law rules.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed and their corporate seals to be hereto
affixed and attested by their duly authorized officers.
TWB GOURMET FOODS, INC.
By: /s/ Marion S. Whitfield, Jr.
-----------------------------
Its: Authorized Agent
----------------------------
/s/ Loetitia Adam St. James
--------------------------------
LOETITIA ADAM ST. JAMES
/s/ Chris L. St. James
--------------------------------
CHRIS L. ST. JAMES
DOUGHTIE'S FOODS, INC.
By: /s/ Marion S. Whitfield, Jr.
-----------------------------
Its: Senior Vice President
----------------------------
CP SPECIALTY FOODS, INC.
By: /s/ Andrew J. Feldman
-----------------------------
Its: President
----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OF
DOUGHTIE'S FOODS, INC. FOR THE NINE MONTHS ENDED SEPTEMBER 28,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-28-1996
<CASH> 145
<SECURITIES> 0
<RECEIVABLES> 8,142
<ALLOWANCES> 401
<INVENTORY> 5,118
<CURRENT-ASSETS> 13,472
<PP&E> 9,500
<DEPRECIATION> 5,913
<TOTAL-ASSETS> 17,150
<CURRENT-LIABILITIES> 3,113
<BONDS> 6,338
<COMMON> 998
0
0
<OTHER-SE> 6,651
<TOTAL-LIABILITY-AND-EQUITY> 17,150
<SALES> 60,456
<TOTAL-REVENUES> 60,456
<CGS> 50,441
<TOTAL-COSTS> 59,322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 362
<INCOME-PRETAX> 772
<INCOME-TAX> 290
<INCOME-CONTINUING> 482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 482
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
