FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 2O549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 30, 1995
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-7166
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)
Registrant's telephone number, including area code: (804) 393-6007
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $1.00
(Title of Class)
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.
X Yes No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
X
-------
Aggregate market value of voting stock held by non-affiliates of the
registrant as of March 14, 1996 (See Note, Item 5, for explanation of
calculation):
$ 1,488,188
----------------
Indicate the number of shares of Common Stock outstanding as of
March 14, 1996:
1,000,627
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DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference information from the registrant's
proxy statement for its annual meeting of stockholders scheduled for May
23, 1996.
<PAGE>
PART I.
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ITEM 1. BUSINESS
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General
- -------
Doughtie's Foods, Inc. (the "Company") was incorporated in Virginia
in November 1971 to engage in the sale and distribution of a wide
variety of meat and seafood products and other food items. Many of the
meat and seafood products sold by the Company are manufactured,
processed or produced by it, while other food items sold by the Company,
such as fruits, vegetables, condiments, and seasonings, are purchased by
the Company from other sources. The Company sells to commercial and
institutional customers, including supermarkets, restaurants,
cafeterias, independent food distributors, schools, hospitals, and other
public and private facilities. The Company's marketing area covers the
central, northern, and eastern portions of Virginia, as well as
Maryland, Washington, D.C., portions of North Carolina, and small areas
of Delaware. The Company's manufactured products, which are sold through
brokers, are marketed in approximately 30 states.
In August 1994, the Company entered into a joint venture with
Loetitia Adam-St. James and Chris L. St. James (collectively, the "St.
James"), trading as Thunder Bay Gourmet Foods, who manufactured and sold
a line of specialty gourmet food products (the "Thunder Bay Line").
Under the terms of the joint venture agreement, (i) the Company and the
St. James formed TWB Gourmet Foods, Inc., a Virginia corporation
("TWB"), (ii) TWB acquired substantially all of the assets of Thunder
Bay Gourmet Foods, and (iii) the St. James and TWB entered into a
license agreement granting TWB a perpetual, exclusive license and right
to manufacture, sell, market, advertise, promote and exploit the Thunder
Bay Line, and to use the related trademarks, including "Thunder Bay,"
worldwide. The Company owns seventy percent of the outstanding capital
stock of TWB. The remaining thirty percent of TWB is owned by the St.
James, who are continuing to manage the business. The Company has
provided TWB with a $600,000 line of credit for general working capital
purposes, including inventory, equipment and building improvement
financing. The line of credit is secured by liens on TWB's equipment,
accounts, inventories, and general intangibles. TWB's facilities are
located in Portsmouth, Virginia. TWB commenced operations during the
fourth quarter of 1994. During the fourth quarter of 1995, the Company
determined to exit the gourmet foods business as TWB has incurred
substantial net operating losses since its inception. Accordingly, the
Company incurred a $763,000 pretax charge in the fourth quarter to
reduce the carrying value of TWB's fixed assets and inventories to
estimated net realizable value and to provide for other costs to exit
this business.
In September 1995, the Company sold substantially all of the assets
of its Home Food Service operation (the "Home Food Service") 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 $1,154,000 with a
$115,000 cash down payment and the balance of $1,039,000 in the form of
a secured note, which is included in the Other Assets section of the
Company's consolidated balance sheet at December 30, 1995. 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 ten percent. The net loss on the sale, including
abandoned assets and other write-offs, was $96,000.
Products
- --------
The Company operates processing and manufacturing facilities in
Portsmouth, Virginia. These facilities are primarily involved in the
manufacture of pork and beef barbecue, hot dog sauce, meat loaf, chili
and other cooked meat products. Its subsidiary, TWB, also manufactures
and sells a line of specialty gourmet food products that are used
commercially.
The Company markets many of its products under its own label. Most
of its products are packaged under the registered trade name and service
mark "Doughtie's." Registration covering this mark remains in force
twenty years from the date of registration and may be renewed for
periods of twenty years. The Company's subsidiary, TWB, also holds a
perpetual, exclusive license to use the mark, "Thunder Bay."
The Company relies on several sources for the raw materials
necessary for these operations. Beef and pork are acquired from meat
wholesalers, including foreign sources, depending upon the quality and
cost. Storage capacity is available at each location, so that
sufficient meat inventories may be stored to provide continuous
production and to enable the Company to take advantage of favorable
market conditions.
Other supplies required for these operations, such as seasonings
and sauces, are generally available. The Company guards against
occasional shortages by warehousing a substantial supply of those items
in which shortages might develop. The Company has no long-term supply
contracts with respect to any of its raw material requirements.
Packaging materials can be obtained from several sources and are stocked
in sufficient quantities to provide continuous availability.
The Company offers to its institutional and commercial customers a
broad range of food items in addition to its meat products, including
frozen, refrigerated, canned, and dry items in the seafood, fruit,
vegetable, and other lines. Most items needed by such customers for the
operation of their business are offered by the Company, including eggs,
produce, staples such as flour and sugar, restaurant supplies, and a
limited amount of cooking and processing equipment. Availability of
such items is generally good. The Company has no material long-term
contracts with respect to any of such items.
Marketing and Distribution
- --------------------------
The Company maintains a central distribution center in Portsmouth,
Virginia, from which it handles the Company's commercial and
institutional food sales.
Sales of products manufactured or processed by the Company, as well
as sales of products purchased by the Company from others, are made
through a system of advance salespersons who take orders for subsequent
delivery. A fleet of approximately 36 trucks and 10 trailers is
employed in the delivery phase of the wholesale operations. The Company
experiences increased sales to customers in resort areas and parks
during the summer months as a result of increased patronage of these
businesses. The decline in sales to such customers during the winter
months is partially offset by sales to schools.
Prior to September 1995, the Company offered a Home Food Service
from which individuals could purchase a complete line of food and
related items and, if desired, a home freezer. Members of the Service
could order any item offered under the Service at any time and in any
reasonable quantity. The Service was offered in portions of Delaware,
Pennsylvania, Virginia and West Virginia and throughout the eastern and
central portions of Maryland through Dutterer's of Manchester
Corporation, a wholly owned subsidiary of the Company ("Dutterer's").
The Company operated facilities in Portsmouth, Virginia and in
Baltimore, Maryland, in connection with the Service. In September 1995,
the Company sold substantially all of the assets of the Service to VAFS
and ceased operations in the consumer portion of its business due to
unprofitability. See ITEM I, PART 1, BUSINESS: General.
Customers
- ---------
None of the Company's customers accounted for 10% or more of the
Company's consolidated revenue in fiscal year 1995.
Competition
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The Company's manufacturing and food processing, and commercial and
institutional food distribution operations face substantial competition
from other manufacturers and food distributors in the region. There are
many companies engaged in one or more of the same areas of the industry
as the Company, some of which are national companies having greater
resources and sales than the Company. There are also a large number of
regional and local companies that compete with the Company. Within
these areas of the food industry, competition is based primarily upon
price, service, and product quality. The Company believes it is
reasonably competitive with respect to all of these factors.
Research and Development
- ------------------------
The Company is constantly seeking to develop new products,
techniques, and formulas for processed products. It maintains a
technical services department which has responsibility for testing new
food preparation methods, various ingredient mixtures, quality control,
analytical procedures, and related matters. One employee of the Company
spends a majority of his time on such matters, and a number of
additional employees devote varying amounts of time (but in no case a
majority of their time) to such activities. The estimated dollar
amounts spent on developmental activities were $137,000 in 1993,
$143,000 in 1994, and $145,000 in 1995, all Company-sponsored.
Backlog
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Due to the nature of its business, the Company does not have a
material amount of backlog at any given time.
Regulation
- ----------
The Company's facilities are subject to U.S. Department of
Agriculture inspection pursuant to the Federal Meat Inspection Act
covering all facets of the manufacturing and processing procedures.
Government inspectors are regularly assigned to the Company's
facilities. The raw materials used, product contents, general
cleanliness of the facilities, and the care and storage of the products
are all subject to review by inspectors.
In addition, the Company is subject to various other statutes, such
as the Federal Food, Drug and Cosmetic Act, the Consumer Product Safety
Act, the Occupational Safety and Health Act, and various consumer credit
acts, regulating ingredients, packaging, general working conditions for
employees, vehicles, credit, and other matters. The Company has not
experienced any unusual difficulty in complying with such regulations.
Although the Company has never experienced a fuel shortage, its
operations could be adversely affected if sufficient quantities of
diesel or other fuels could not be obtained due to shortages or for
other reasons. Most of the Company's facilities are heated, and most
equipment operated, with natural gas.
The Company has not experienced any unusual difficulty in complying
with environmental regulations at any of its facilities. The Portsmouth
facility is subject to open air burning restrictions which require
refuse to be hauled off the premises rather than burned.
Employees
- ---------
As of December 30, 1995, the Company had approximately 255
employees. Approximately 51 of these employees working at the Company's
Portsmouth facilities are members of the Bakery, Confectionery and
Tobacco Workers' International Union, AFL-CIO, under a contract which
expired in October, 1995. The Company and the union are currently
negotiating a new contract.
Executive Officers
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STEVEN C. HOUFEK, 47, is the Company's President and Chief
Executive Officer. Mr. Houfek has been President of the Company since
August 1992 and was named Chief Executive Officer in May 1994. Prior to
May 1992, Mr. Houfek held various management positions with the Company,
including Executive Vice President from May 1987 to May 1992.
VERNON W. MULES, 66, is Chairman of the Board of Directors of the
Company. Prior to May 1994, Mr. Mules served as the Company's Chief
Executive Officer.
MARION S. WHITFIELD, JR., 50, has served as Senior Vice President
of the Company since May 1987. He served as Vice President of the
Company from May 1983 until May 1987.
MICHAEL S. LAROCK, 32, joined the Company in November 1994 and has
served as the Company's Treasurer and Secretary since that time. Prior
to November 1994, Mr. LaRock was an accountant with Price Waterhouse LLP
in Norfolk, Virginia.
THOMAS G. BROWN, 52, has served as Vice President - Purchasing,
Food Service Division since February 1994. Prior to that time, he was
Director of Purchasing, Food Service Division.
WILLIAM E. MOODY, JR., 46, has been Vice President - Sales, Food
Service Division since February 1994. Prior to that time, he was Sales
Manager, Food Service Division.
JERRY D. NIXON, 39, was elected Vice President - Government
Contract Operations, in February 1996. Mr. Nixon served as Vice
President - Operations, Food Service Division from February 1994 until
February 1996. Prior to that time, Mr. Nixon was Operations Manager,
Food Service Division.
LEVIS E. COTHRAN, 45, was elected Vice President - Operations and
Sales, Manufacturing Division, in October 1995. Between May 1994 and
October 1995, Mr. Cothran served as Vice President - Sales and
Marketing, Manufacturing Division. Between 1991 and 1994, Mr. Cothran
served as Sales Manager, Manufacturing Division. Prior to 1991, Mr.
Cothran was employed by Jac Pac Foods.
WILLIAM G. RATLIFF, 40, was elected Vice President - Operations,
Food Service Division in February 1996. Since joining the Company in
October 1994, Mr. Ratliff has served as Project Manager. Prior to
October 1994, Mr. Ratliff was a United States Navy Supply Corps Officer.
ROBERT F. HORTON, 28, was elected Vice President - Food Service
Division in February 1996. Mr. Horton has served as a district sales
manager for the Company's Food Service Division since October 1995.
Prior to that time, he was Program Accounts Manager.
ITEM 2. PROPERTIES
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The principal facilities of the Company and its subsidiaries are
listed below. Except as noted, all are fully utilized by the Company
and are adequate for the Company's purposes and needs.
(a) The Company owns approximately 10.2 acres of land in
Portsmouth, Virginia, on which are located a building complex, including
manufacturing facilities, cooler, freezer, and dry storage warehousing,
complete truck docking facilities, a garage, and the Company's principal
executive offices. The Company's $2,000,000 Industrial Revenue Bond is
secured by a lien on this property. In December 1991, the Company
completed the construction of an addition to the building complex
housing the manufacturing operations transferred from the Manchester,
Maryland plant.
(b) The Company's wholly-owned subsidiary, Dutterer's of
Manchester Corporation, owns approximately 4.5 acres of land in
Manchester, Maryland, on which are located a 20,000 square foot packing
house with a stock yard and sewage plant. An adjacent 45-acre farm is
leased by the subsidiary on a year-to-year basis to a private farm
operator. In December, 1991, the Company transferred the operations of
its Manchester facility to its Portsmouth, Virginia plant.
(c) The Company leases approximately 15,000 square feet of
warehouse space in Portsmouth, Virginia. This property is leased on a
month to month basis with monthly rental payments of $1,875.
(d) TWB leases approximately 6,618 square feet of office,
warehouse and manufacturing space in a building in Portsmouth, Virginia,
under a lease which calls for monthly rental payments of $1,475 until
September 30, 1995, and $1,625 per month thereafter. This lease expires
in September, 1996. The lease includes an option to purchase the
premises at any time prior to the expiration of the term.
(e) The Company leases approximately 16,597 square feet of
warehouse and office space in a warehouse building in Norfolk, Virginia,
under a lease which calls for monthly rental payments of $5,600. This
lease expires in February, 1997, and includes four one-year renewal
options.
(f) The Company subleases approximately 3,000 square feet of
freezer space in a warehouse building in Norfolk, Virginia, under a
lease which calls for monthly rental payments of $3,000. This lease
expires in February, 1997, and includes four one-year renewal options.
ITEM 3. LEGAL PROCEEDINGS
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None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
None.
PART II.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
- -----------------------------------------------------------
Market and Price Information
- ----------------------------
The Company's common stock, $1.00 par value (the "Common Stock"),
is traded in the over-the-counter market. The following table provides
the high and low bid quotations with respect to shares of the Common
Stock for the periods indicated, as reported by the Dow Jones Historical
Stock Quote Reporter Service.
First Quarter Second Quarter
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High Low High Low
----- ----- ----- -----
1994 4-1/4 3-1/2 4-1/4 3-1/2
1995 4-1/4 4-1/4 4-1/2 3-1/2
Third Quarter Fourth Quarter
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High Low High Low
----- ----- ----- -----
1994 4-3/4 3-1/2 4-1/2 4
1995 4-1/2 3-1/2 4-3/8 3-3/8
The foregoing quotations of high and low bid prices represent
prices between dealers and do not include retail mark-up, mark-down, or
commissions. They do not necessarily represent actual transactions.
The highest bid on each day is reported.
Number of Stockholders
- ----------------------
As of March 14, 1996, there were 291 record holders of the Common
Stock.
Dividends
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The cash dividends declared per common share by quarter for the two
most recent fiscal years are summarized below.
1995 1994
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First Quarter $ .04 $ .04
Second Quarter .04 .04
Third Quarter .04 .04
Fourth Quarter .04 .04
----- -----
Total $ .16 $ .16
----- -----
----- -----
Management presently expects to continue declaring quarterly cash
dividends if it proves possible to do so.
NOTE: The aggregate market value of voting stock held by
- ----- non-affiliates of the registrant as of March 14, 1996, shown
on the cover page was calculated as follows. The number of
shares beneficially owned by the officers and directors of the
Company as a group or by members of the Doughtie family was
subtracted from 1,000,627, the total number of shares
outstanding on that date. The resulting figure was then
multiplied by $3-3/4, the average of the bid and asked prices
of the Company's stock in the over-the-counter market on that
date. The Foregoing calculation should not be deemed an
admission that any of the officers and directors of the Company
or any of the members of The Doughtie family are "affiliates."
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
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<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 76,585,835 $ 73,368,742 $ 70,771,064 $ 70,732,054 $ 72,175,584
Income (loss) before
cumulative effect of
change in accounting
for income taxes $ (1,212,284) $ 364,073 $ 141,109 $ (90,403) $ 288,088
Cumulative effect of
change in accounting
for income taxes $ - $ - $ 134,000 $ - $ -
Net income (loss) $ (1,212,284) $ 364,073 $ 275,109 $ (90,403) $ 288,088
Weighted average number
of shares outstanding 1,007,768 1,011,230 1,014,815 1,017,125 1,019,666
Earnings (loss) per share
before cumulative effect
of change in accounting
for income taxes $ (1.20) $ .36 $ .14 $ (.09) $ .28
Cumulative effect per
share of change in
accounting for income
taxes $ - $ - $ .13 $ - $ -
Net earnings (loss) per
share $ (1.20) $ .36 $ .27 $ (.09) $ .28
Cash dividends per
share $ .16 $ .16 $ .16 $ .16 $ .16
Total assets $ 16,086,077 $ 16,797,863 $ 14,838,266 $ 15,832,924 $ 17,306,198
Long-term debt, less
current portion $ 6,688,334 $ 5,031,667 $ 4,390,000 $ 5,353,334 $ 5,966,667
Total stockholders'
equity $ 7,303,060 $ 8,700,431 $ 8,519,329 $ 8,416,702 $ 8,682,661
Stockholders' equity
per share $ 7.28 $ 8.63 $ 8.40 $ 8.28 $ 8.52
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------------------------------
Results of Operations
- ---------------------
Net sales of the Company increased 4.4% in 1995. For the 1995
fiscal year, the Company reported net sales of $76.6 million compared to
net sales of $73.4 million in 1994. Net sales in 1994 were 3.7% ahead
of the 1993 sales of $70.8 million. The 1995 sales increase is
primarily attributable to an increase in the unit volume of sales.
The sales increase was not experienced uniformly throughout the
Company. In 1995, the Company's commercial distribution and
manufacturing business made steady improvements, while the consumer
business conducted by the Company's Home Food Service operation
continued the negative sales trend experienced over the last several
years. In September 1995, the Company sold substantially all of the
assets of the Home Food Service 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 $1,154,000 with a $115,000 cash down payment and
the balance of $1,039,000 in the form of a secured note, which is
included in the Other Assets section of the Company's consolidated
balance sheet at December 30, 1995. 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 ten
percent. The net pretax loss on the sale, including abandoned assets
and other write-offs, was $96,000.
The Company's gross profit margin (gross profit as a percentage of
net sales) decreased from 19.5% in 1994 to 17.7% in 1995. The overhead
costs associated with the start-up of the gourmet food operation were
the major cause of the decline in gross profit margin. Increased
manufacturing costs associated with a new product line also contributed
to this decline.
The Company's gross profit margin increased from 19.1% in 1993 to
19.5% in 1994. In 1994 the Company joined a new food distribution
affiliation which resulted in a one-time increase in patronage dividends
of approximately $200,000 over 1993 and a 0.3% increase in gross profit
margin.
The Company's selling, general and administrative expenses,
expressed as a percentage of net sales increased to 18.6% in 1995 from
18.2% in 1994 and 18.3% in 1993. During the fourth quarter of 1995, the
Company incurred a $763,000 pretax charge, which is included in selling,
general and administrative expenses, primarily to reduce the carrying
value of fixed assets and inventories of the Company's gourmet foods
operation, TWB Gourmet Foods, Inc. ("TWB"), to estimated net realizable
value and to provide for other costs to exit the gourmet foods business.
TWB has incurred substantial net operating losses since its inception in
1994.
The increase in selling, general and administrative expenses was
partially offset by a $130,000 gain from the sale in July 1995 of
certain real property located in Carrol County, Maryland.
Interest expense was $462,000 in 1995 compared to $276,000 in 1994
and $289,000 in 1993. Higher average interest rates during 1995
together with increased borrowing levels were the causes of the
increased expense. 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 $97,000 for 1995 compared to an income tax
expense of $322,599 for 1994. The higher 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 a net loss of $1,212,300 or $1.20 per share
for 1995 compared to net income of $364,000 or $.36 per share in 1994.
Losses incurred by TWB were $1,390,000, or $1.38 per share, which
included an operating loss of $627,000 and the previously described
$763,000 pretax charge.
Effects of Inflation
- --------------------
Over the past three years, the effects of inflation on the
Company's operations have been negligible, averaging less than 4% per
year.
Liquidity
- ---------
The Company uses a number of liquidity indicators for internal
evaluation purposes. Certain of these indicators are set forth below as
of the close of the past three fiscal years:
1995 1994 1993
---- ---- ----
Total debt to total debt plus
stockholders' equity .48 .37 .35
Current assets to current
liabilities 5.66 4.11 5.73
Inventory turnover
(cost of goods sold
to ending inventory) 12.99 13.06 15.33
The ratio of current assets to current liabilities increased to
5.66 at December 30, 1995 from 4.11 at December 31, 1994, primarily due
to a decrease in accounts payable and income taxes payable, along with
an increase in long-term debt. The increase in long-term debt is
primarily due to the funding of working capital and other start-up
expenses of TWB.
The inventory turnover rate remained relatively unchanged from 1994
to 1995. The rate decreased from 15.33 in 1993 to 13.06 in 1994. This
decrease was attributable to increased inventory purchases by the
Company's manufacturing operation in the latter part of 1994 in order to
take advantage of special pricing.
The Company supplements its cash requirements by borrowing against
existing credit lines. As of December 30, 1995, the Company had
$1,545,000 of additional borrowing capacity under its credit line.
The Company's business is characterized by high unit volume sales
and rapid turnover of inventories and accounts receivable. Because of
the rapid turnover rate, the Company considers its inventories and
accounts receivable highly liquid and readily convertible into cash.
The Company is aware of no demands, commitments, events, or
uncertainties that are reasonably likely to result in a material
increase or decrease in its liquidity in the foreseeable future.
In April 1994, the Company entered into an agreement to sell
certain properties in Carrol County, Maryland. The net book values of
these properties total approximately $250,000. In December 1995, this
agreement was terminated when the purchaser was unable to fulfill
certain conditions. The Company is actively seeking another purchaser
for this property.
Capital Resources
- -----------------
The Company's debt financing at December 30, 1995, consisted of the
following:
A $7,500,000 revolving bank note at prime. The prime rate at
December 30, 1995 was 8.50%. The note is due three years after the
annual renewal date, currently July, 1997, subject to annual renewal.
As of December 30, 1995, the Company had borrowed $5,955,000 against
this credit line and had $1,545,000 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 December
30, 1995, the Company had fully utilized the Industrial Revenue Bond and
the outstanding balance was $867,000.
In January 1996, the Company was awarded a $19 million one-year
contract for the year 1996 by the United States Department of Defense to
furnish food items to various military installations. The contract
contains three yearly renewal options. The Company anticipates an
increase in its capital requirements and is currently negotiating to
obtain $1.75 million of additional long-term debt to finance the
increased inventory and accounts receivable to service this government
contract.
While the Company does not anticipate any other 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.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
----
Financial Statements
Report of Independent Accountants 16
Consolidated Statements of Income for the three
years ended December 30, 1995 17
Consolidated Balance Sheets at December 30, 1995
and December 31, 1994 18
Consolidated Statements of Stockholders' Equity
for the three years ended December 30, 1995 20
Consolidated Statements of Cash Flows for the
three years ended December 30, 1995 21
Notes to Consolidated Financial Statements 23 - 30
Financial Statement Schedule
II - Consolidated Valuation and Qualifying Accounts 37
All other schedules are omitted as the required information is either
immaterial, inapplicable or is presented in the consolidated financial
statements and related notes thereto.
Separate financial statements and supplemental schedules of the
registrant are omitted because there are no restricted net assets of
subsidiaries as defined in Rules 4-08 and 12-04 of Regulation S-X.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders of
Doughtie's Foods, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Doughtie's Foods, Inc. and its subsidiaries at December 30,
1995 and December 31, 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 30,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes as of December
27, 1992.
PRICE WATERHOUSE LLP
(Signature)
Norfolk, Virginia
February 16, 1996, except for the
last sentence of Note 5, which is
as of March 25, 1996
<PAGE>
DOUGHTIE'S FOODS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 30, December 31, December 25,
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ 76,585,835 $ 73,368,742 $ 70,771,064
Cost of sales 63,012,874 59,075,114 57,291,944
------------- ------------- -------------
Gross profit 13,572,961 14,293,628 13,479,120
------------- ------------- -------------
Selling, general and administrative
expenses 14,225,899 13,331,347 12,972,789
Interest expense 462,231 275,609 288,862
------------- ------------- -------------
14,688,130 13,606,956 13,261,651
------------- ------------- -------------
Income (loss) before income taxes (1,115,169) 686,672 217,469
Income tax expense 97,115 322,599 76,360
------------- ------------- -------------
Income (loss) before cumulative
effect of change in accounting for
income taxes (1,212,284) 364,073 141,109
Cumulative effect of change in
accounting for income taxes - - 134,000
------------- ------------- -------------
Net income (loss) $ (1,212,284) $ 364,073 $ 275,109
------------- ------------- -------------
------------- ------------- -------------
Earnings (loss) per share:
Before cumulative effect of
accounting change $ (1.20) $ .36 $ .14
Cumulative effect of accounting
change - - .13
------------- ------------- -------------
Net earnings (loss) per share $ (1.20) $ .36 $ .27
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
DOUGHTIE'S FOODS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 513,319 $ 1,361,207
Accounts receivable, net:
Trade 5,758,536 4,839,764
Finance - 1,279,467
Officers and employees 3,323 16,289
Inventories 4,849,104 4,521,753
Deferred income taxes 193,339 248,296
Prepaid expenses and other current assets 246,679 139,886
------------- --------------
Total current assets 11,564,300 12,406,662
------------- --------------
Property, plant and equipment - at cost:
Land 280,827 283,304
Buildings 4,290,986 4,320,960
Delivery equipment 375,408 495,767
Plant and refrigeration equipment 3,869,561 4,057,168
Office equipment 695,034 951,842
Leasehold improvements - 217,680
------------- --------------
9,511,816 10,326,721
Less - accumulated depreciation 5,823,208 6,071,055
------------- --------------
3,688,608 4,255,666
------------- --------------
Other assets 833,169 135,535
------------- --------------
$ 16,086,077 $ 16,797,863
------------- --------------
------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 133,333 $ 133,333
Accounts payable 1,547,107 2,095,099
Income taxes payable - 399,504
Accrued salaries, commissions and bonuses 76,706 127,917
Accrued employee group insurance 174,026 215,409
Other accrued liabilities 113,580 45,603
------------- --------------
Total current liabilities 2,044,752 3,016,865
Long-term debt - less current portion 6,688,334 5,031,667
Deferred income taxes 49,931 48,900
------------- --------------
Total liabilities 8,783,017 8,097,432
------------- --------------
Stockholders' equity:
Common stock - $1 par value; authorized
2,000,000 shares,issued and outstanding
1,002,527 shares at December 30,1995 and
1,008,518 shares at December 31, 1994 1,002,527 1,008,518
Additional paid-in capital 2,823,597 2,841,570
Retained earnings 3,476,936 4,850,343
------------- --------------
Total stockholders' equity 7,303,060 8,700,431
------------- --------------
$ 16,086,077 $ 16,797,863
------------- --------------
------------- --------------
Commitments (Note 8)
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DOUGHTIE'S FOODS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Balances at December 26, 1992 $ 1,016,393 $ 2,865,061 $ 4,535,248 $ 8,416,702
Cash dividends ($.16 per share) - - (162,318) (162,318)
Net income for the year ended
December 25, 1993 - - 275,109 275,109
Acquisition of treasury stock,
at cost - 2,541 shares (2,541) (7,623) - (10,164)
----------- ----------- ----------- -----------
Balances at December 25, 1993 1,013,852 2,857,438 4,648,039 8,519,329
Cash dividends ($.16 per share) - - (161,769) (161,769)
Net income for the year ended
December 31, 1994 - - 364,073 364,073
Acquisition of treasury stock,
at cost - 5,334 shares (5,334) (15,868) - (21,202)
----------- ----------- ----------- -----------
Balances at December 31, 1994 1,008,518 2,841,570 4,850,343 8,700,431
Cash dividends ($.16 per share) - - (161,123) (161,123)
Net loss for the year ended
December 30, 1995 - - (1,212,284) (1,212,284)
Acquisition of treasury stock,
at cost - 5,991 shares (5,991) (17,973) - (23,964)
----------- ----------- ----------- -----------
Balances at December 30, 1995 $ 1,002,527 $ 2,823,597 $ 3,476,936 $ 7,303,060
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DOUGHTIE'S FOODS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 30, December 31, December 25,
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,212,284) $ 364,073 $ 275,109
Adjustments to reconcile net income
(loss) to net cash provided by
used for) operations:
Depreciation 675,681 587,871 532,172
Loss (gain) on sale of property,
plant and equipment 300,644 (12,689) (13,458)
(Increase) decrease in assets:
Accounts receivable, net 373,661 248,819 692,964
Inventories (327,351) (783,347) 116,706
Deferred income taxes 54,957 (30,283) (141,078)
Prepaid expenses and other current
assets (106,793) 84,373 (33,355)
Other assets (697,634) (71,456) 43,165
Increase (decrease) in liabilities:
Accounts payable (547,992) 783,597 (152,952)
Income taxes payable (399,504) 269,125 63,234
Accrued salaries, commissions
and bonuses (51,211) 104,550 (49,329)
Accrued employee group insurance (41,383) 36,346 49,718
Other accrued liabilities 67,977 (61,141) (54,045)
Deferred income taxes, long-term 1,031 4,351 9,423
------------ ----------- -----------
(1,910,201) 1,524,189 1,338,274
------------ ----------- -----------
Cash flows from investing activities:
Additions to property, plant and
equipment (599,763) (873,915) (240,826)
Proceeds from sale of property, plant
and equipment 190,496 13,951 56,541
------------ ----------- -----------
(409,267) (859,964) (184,285)
------------ ----------- -----------
<PAGE>
Cash flows from financing activities:
Long-term borrowings 1,790,000 775,000 -
Reductions of long-term debt (133,333) (133,333) (963,334)
Cash dividends (161,123) (161,769) (162,318)
Acquisition of treasury stock (23,964) (21,202) (10,164)
------------ ----------- -----------
1,471,580 458,696 (1,135,816)
------------ ----------- -----------
Net increase (decrease) in cash (847,888) 1,122,921 18,173
Cash at beginning of year 1,361,207 238,286 220,113
------------ ----------- -----------
Cash at end of year $ 513,319 $ 1,361,207 $ 238,286
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Doughtie's
Foods, Inc. (the Company) and its two majority-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation. The consolidated group is engaged in the processing,
manufacturing and wholesaling of a broad line of meat products and other
food items.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Allowances for Doubtful Accounts
- --------------------------------
The Company and its subsidiaries maintain allowances for doubtful accounts
based on an analysis of previous loss experience and current conditions.
Inventories
- -----------
Inventories, consisting principally of raw materials and finished food
products, are stated at the lower of last-in, first-out (LIFO) cost, or
market value.
Property, Plant and Equipment
- -----------------------------
Accelerated methods are used to provide for depreciation on all assets
other than buildings. The straight-line method is used for buildings.
The estimated useful asset lives used in computing depreciation are as
follows:
Buildings 8 to 40 years
Delivery equipment 3 to 7 years
Plant and refrigeration equipment 3 to 7 years
Office equipment 3 to 7 years
Income taxes
- ------------
The Company and one subsidiary are considered a controlled group for
purposes of filing a consolidated federal income tax return. The second
subsidiary files a separate return.
Effective December 27, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes" on
a prospective basis. The adoption of FAS 109 changes the method of
accounting for income taxes from the deferred method to an asset and
liability approach. This approach requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets and
liabilities and their respective tax bases. The provision for income
taxes is based on taxes currently payable and the change in such deferred
tax assets and liabilities.
Earnings Per Share
- ------------------
Earnings per share are based on the weighted average number of shares
outstanding.
NOTE 2 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the results of operations by quarters:
<TABLE>
<CAPTION>
Gross Net Earnings
Quarter Net Sales Profit Income Per Share
- ------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1995:
First $ 16,401,046 $ 3,054,242 $ (258,151) $ (.26)
Second 21,022,912 3,643,087 (41,708) (.04)
Third 21,273,919 3,406,450 (121,848) (.12)
Fourth 17,887,958 3,469,182 (790,577) (.78)
------------ ------------ ------------ ------------
$ 76,585,835 $ 13,572,961 $ (1,212,284) $ (1.20)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
1994:
First $ 15,810,183 $ 2,883,722 $ (112,043) $ (.11)
Second 19,538,624 3,809,885 237,477 .23
Third 19,462,662 3,614,557 157,142 .16
Fourth 18,557,273 3,985,464 81,497 .08
------------ ------------ ------------ ------------
$ 73,368,742 $ 14,293,628 $ 364,073 $ .36
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Unusual items affecting 1995 net income in the above quarterly data are
discussed in Note 9.
<PAGE>
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable are net of allowances for doubtful accounts and
unearned finance charges as follows:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
------------------- --------------------
<S> <C> <C>
Trade accounts receivable $ 6,091,844 $ 5,101,710
Allowance for doubtful accounts (333,308) (261,946)
------------------- --------------------
$ 5,758,536 $ 4,839,764
------------------- --------------------
------------------- --------------------
Finance accounts receivable $ - $ 1,580,614
Allowance for doubtful accounts - (178,893)
Unearned finance charges - (122,254)
------------------- --------------------
$ - $ 1,279,467
------------------- --------------------
------------------- --------------------
</TABLE>
NOTE 4 - INVENTORIES
Inventories used in determining cost of sales are as follows:
<TABLE>
<CAPTION>
Raw Finished
Total materials products
------------- ------------- -------------
<S> <C> <C> <C>
December 26, 1992 $ 3,855,112 $ 989,581 $ 2,865,531
December 25, 1993 $ 3,738,406 $ 833,562 $ 2,904,844
December 31, 1994 $ 4,521,753 $ 1,497,222 $ 3,024,531
December 30, 1995 $ 4,849,104 $ 1,163,240 $ 3,685,864
</TABLE>
<PAGE>
The differences between FIFO and LIFO inventories are as follows:
<TABLE>
<CAPTION>
December 30, December 31, December 25, December 26,
1995 1994 1993 1992
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FIFO cost $ 5,680,063 $ 5,197,592 $ 4,509,306 $ 4,526,658
LIFO reserves (830,959) (675,839) (770,900) (671,546)
------------- ------------- ------------- -------------
LIFO cost $ 4,849,104 $ 4,521,753 $ 3,738,406 $ 3,855,112
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The $155,120 change in LIFO reserves in 1995 decreased net income and
earnings per share by approximately $100,000 and $.10, respectively. The
$95,061 change in LIFO reserves in 1994 increased net income and earnings
per share by approximately $59,000 and $.06, respectively. The $99,354
change in LIFO reserves in 1993 decreased net income and earnings per
share by approximately $64,500 and $.06, respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
December 30, December 31,
1995 1994
------------- -------------
Long-term revolving bank note $ 5,955,000 $ 4,165,000
Industrial Revenue Bond 866,667 1,000,000
------------- -------------
6,821,667 5,165,000
Less - current portion 133,333 133,333
------------- -------------
Noncurrent portion $ 6,688,334 $ 5,031,667
------------- -------------
------------- -------------
Principal payments are due as follows: 1996 - $133,333; 1997 -
$6,088,333; 1998 - $133,333; 1999 - $133,333; 2000 - $133,333; thereafter
- - $200,002.
The Company has a $7,500,000 revolving bank note at prime. The prime rate
at December 30, 1995 was 8.5%. The note is due three years after the
annual renewal date, currently July 1997, subject to annual renewal. The
amount available under this line is limited to the sum of 85% of
outstanding accounts and notes receivable and 50% of inventory on hand.
The Company had $1,545,000 of additional borrowing capacity available on
this credit line at December 30, 1995.
The Company obtained an Industrial Revenue Bond from a bank for the
purpose of expanding its plant and office facilities in Portsmouth,
Virginia, at an interest rate of 91.5% of prime. The bond is payable in
monthly installments of $11,111 plus interest through July 1, 2001.
Cash paid for interest totaled $462,231, $292,104 and $296,325 in 1995,
1994 and 1993, respectively.
The revolving bank note is secured by all accounts and notes receivable,
inventories and contract rights of the consolidated group. The Industrial
Revenue Bond is secured by certain property, plant and equipment with a
carrying value of approximately $3,400,000. These loan agreements contain
restrictive covenants including minimum tangible net worth and working
capital ratios, and maximum amounts of debt and capital expenditures. All
requirements were either met or waived for 1995, and certain covenants
affecting future periods were amended on March 25, 1996.
NOTE 6 - RETIREMENT PLANS
The Company and one of its subsidiaries terminated their defined benefit
pension plans in 1992 and replaced them with a retirement savings and
401(k) plan. No additional liability was incurred since the assets of the
pension plans were sufficient to cover all benefit obligations.
The retirement savings and 401(k) plan covers virtually all full-time
employees except those covered by a collective bargaining agreement. The
Company and its subsidiaries make contributions to the plan based on 50%
of the participants' contributions, which can range from 1% to 6% of their
total compensation; in addition to the matched contribution, participants
may make additional unmatched contributions of up to 9% of their
compensation. The Company and its subsidiaries may also make
discretionary contributions to the plan. Contributions to the retirement
savings and 401(k) plan for 1995, 1994 and 1993 were $107,365, $128,007
and $121,272, respectively.
NOTE 7 - INCOME TAX EXPENSE
As discussed in Note 1, effective December 27, 1992, the Company changed
its method of accounting for income taxes from the deferred method to an
asset and liability method required by FAS 109. As permitted by FAS 109,
prior years' financial statements were not restated. The cumulative
effect of this change increased earnings and earnings per share by
$134,000 and $.13, respectively. The change from the deferred method to
the liability method of accounting for income taxes did not have a
significant impact on the provision for income taxes for the years ended
December 30, 1995, December 31, 1994 and December 25, 1993.
<PAGE>The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Current federal $ 27,169 $ 293,793 $ 57,157
Current state 13,958 54,738 17,055
Deferred federal 45,443 (21,896) 1,862
Deferred state 10,545 (4,036) 286
------------- ------------- -------------
$ 97,115 $ 322,599 $ 76,360
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The effective income tax rates vary from the statutory U.S. federal income
tax rate as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- -------------------- --------------------
Percent Percent Percent
of of of
Dollar pretax Dollar pretax Dollar pretax
amount income amount income amount income
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Income taxes computed
at statutory rates $ (379,157) (34.0)% $ 233,469 34.0% $ 73,940 34.0%
State income taxes, net
of federal income tax
benefit 16,172 1.5 33,463 4.9 11,445 5.3
Fuel tax credit (16,975) (1.5) (16,975) (2.5) (16,615) (7.6)
Nonrecognition of
subsidiary net
operating loss 472,546 42.3 52,798 7.7 - -
Other 4,529 .4 19,844 2.9 7,590 3.4
---------- ----- ---------- ------ ---------- ------
$ 97,115 8.7% $ 322,599 47.0% $ 76,360 35.1%
---------- ----- ---------- ------ ---------- ------
---------- ----- ---------- ------ ---------- ------
</TABLE>
<PAGE>
Significant components of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
--------------- ---------------
<S> <C> <C>
Simplified LIFO differences $ 63,636 $ 51,756
Capitalized inventory cost 22,390 21,242
Allowances for doubtful accounts 104,063 168,798
Sales leaseback 3,250 9,751
Net operating loss of subsidiary 525,344 52,798
------------- -------------
Gross deferred tax asset 718,683 304,345
Deferred tax asset valuation allowance (525,344) (52,798)
Involuntary conversion (49,931) (52,151)
------------- -------------
Net deferred tax asset $ 143,408 $ 199,396
------------- -------------
------------- -------------
</TABLE>
A valuation allowance was established during 1995 and 1994 for the net
operating losses of a subsidiary that is not a member of the controlled
group for income tax purposes. The allowance was established at 100% of
the deferred tax asset due to the uncertainty with regard to its
realization.
The changes in the net deferred tax asset charged to income tax expense in
1995, 1994 and 1993 were $55,988, $(25,932) and $2,148, respectively.
Cash paid for income taxes totaled $574,876, $55,705 and $10,171 in 1995,
1994 and 1993, respectively.
NOTE 8 - OPERATING LEASES
In July 1989, the Company sold a group of its trucks and trailers to a
leasing company for $362,250. It also entered into a seven year full
service operating lease covering a portion of the trucks sold as well as
twenty-four additional new trucks and ten new trailers. The gain on the
sale of the trucks and trailers amounting to $118,844 is being prorated and
recognized over the life of the lease. A new seven-year full service
operating lease was entered into after December 30, 1995. It will become
effective at the conclusion of the old lease. These leases provide for
increases in rentals based on increases in the Consumer Price Index. One
subsidiary also leases office, processing and storage facilities. This
lease contains a purchase option.
<PAGE>
Minimum annual rentals under the aforementioned leases are set forth in the
table below. These minimum rental commitments do not include contingent
rentals which are based on usage.
<TABLE>
<CAPTION>
Trucks
and
Trailers Buildings Total
------------- -------------- -------------
<S> <C> <C> <C>
1996 $ 536,114 $ 14,625 $ 550,739
1997 549,564 - 549,564
1998 527,724 - 527,724
1999 527,724 - 527,724
2000 527,724 - 527,724
2001-2003 1,319,310 - 1,319,310
------------- ------------- -------------
$ 3,988,160 $ 14,625 $ 4,002,785
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Total rental expense charged to consolidated operations in 1995, 1994 and
1993 was $1,004,855, $1,050,118 and $1,057,681, respectively. Rental
expense in 1995, 1994 and 1993 included contingent rentals of
approximately $360,005, $332,912 and $323,615, respectively.
NOTE 9 - UNUSUAL ITEMS
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 downpayment 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 writeoffs, was $96,498.
During the fourth quarter of 1995, the Company incurred a $763,000 pretax
charge, which is included in selling, general and administrative expenses
in the consolidated statement of income, 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.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- --------------------------------------------------------------
None.
PART III.
- ---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Information as to the Company's Board of Directors is
incorporated by reference to material contained under the heading
"Nominees" in the Company's proxy statement for its annual meeting of
stockholders scheduled for May 23, 1996.
With respect to information concerning the Company's executive
officers, see PART I, ITEM 1, BUSINESS: Executive Officers.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
Information as to executive compensation is incorporated by
reference to material contained under the headings "Executive
Compensation" and "Directors' Compensation" in the Company's proxy
statement for its annual meeting of stockholders scheduled for May 23,
1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
- -------------------------------------------------------------
Information as to security ownership of certain beneficial owners
and management is incorporated by reference to material contained
under the heading "Voting Securities and Principal Stockholders" in
the Company's proxy statement for its annual meeting of stockholders
scheduled for May 23, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Information as to certain relationships and related transactions
is incorporated by reference to material contained under the heading
"Certain Transactions" in the Company's proxy statement for its annual
meeting of stockholders scheduled for May 23, 1996.
<PAGE>
PART IV.
- --------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
- -----------------------------------------------------------------
(a)(1)
Financial Statements (Included in Part II):
-------------------------------------------
See Item 8 in Part II.
(a)(2)
Financial Statement Schedules (Included in Part IV):
----------------------------------------------------
See Item 8 in Part II
(a)(3)
List of Exhibits:
-----------------
Exhibit
Number Description
--------- --------------------------------------------------
3(a) ARTICLES OF INCORPORATION OF THE COMPANY (incorporated
by reference to Exhibit 3(a) to the Company's Annual
Report on Form 10-K for the year ended December 29,
1984)
3(b) BYLAWS OF THE COMPANY
4(a) AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED
AS OF NOVEMBER 15, 1994, BETWEEN THE COMPANY AND
CRESTAR BANK RELATING TO A $7,500,000 REVOLVING
CREDIT COMMITMENT (incorporated by reference to
Exhibit 4(a) to the Company's Annual Report on Form
10-K for the year ended December 31, 1994)
4(b) AMENDED AND RESTATED PROMISSORY NOTE DATED NOVEMBER
15, 1994, MADE BY THE COMPANY IN FAVOR OF CRESTAR
BANK IN THE PRINCIPAL AMOUNT OF $7,500,000
(incorporated by reference to Exhibit 4(a) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994)
4(c) FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
BETWEEN THE COMPANY AND CRESTAR BANK DATED
SEPTEMBER 13, 1995
9 VOTING TRUST AGREEMENT DATED JUNE 17, 1986, AMONG
MARY H. DOUGHTIE, MARY D. HOUFEK, BARBARA D. HORTON
AND ELSIE D. WADDELL, AS AMENDED (incorporated by
reference to Exhibit 9 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994)
10(a)(1) AGREEMENT DATED OCTOBER 24, 1992 BETWEEN THE COMPANY
AND THE BAKERY, CONFECTIONERY AND TOBACCO WORKERS'
INTERNATIONAL UNION, LOCAL NO. 66 (incorporated by
reference to Exhibit 10(a)(1) to the Company's
Annual Report on Form 10-K for the year ended
December 26, 1992)
10(b)(1) LEASE DATED JUNE 9, 1989 BETWEEN THE COMPANY AND
CARDON ASSOCIATES RELATING TO PREMISES LOCATED AT
800-840 FLORIDA AVENUE, PORTSMOUTH, VIRGINIA
(incorporated by reference to Exhibit 10(b)(1) to
the Company's Annual Report on Form 10-K for the
year ended December 30, 1989)
10(b)(2) LEASE DATED JUNE 19, 1989 BETWEEN KEEN LEASING, INC.
OF CARLISLE, PENNSYLVANIA AND DOUGHTIE'S FOODS, INC.
AND RELATED AGREEMENTS RELATING TO THE SALE AND
LEASE BACK OF THE COMPANY'S EXISTING FLEET OF TRUCKS
(incorporated by reference to Exhibit 10(b)(8) to
the Company's Annual Report on Form 10-K for the
year ended December 30, 1989)
10(b)(3) LEASE AGREEMENT DATED JANUARY 26, 1996, BETWEEN KEEN
LEASING, INC., LESSOR, AND THE COMPANY, LESSEE,
RELATING TO THE LEASING OF CERTAIN TRUCKS
10(b)(4) TRUCK LEASE AND SERVICE AGREEMENT DATED MAY 2, 1991
BETWEEN LEND LEASE TRUCKS, INC. AND DUTTERER'S OF
MANCHESTER CORPORATION AND CERTAIN AMENDMENTS
THERETO RELATING TO THE LEASING OF CERTAIN TRUCKS
(incorporated by reference to Exhibit 10(b)(10) to
the Company's Annual Report on Form 10-K for the
year ended December 28, 1991)
10(b)(5) INDUSTRIAL LEASE AGREEMENT DATED AS OF AUGUST 17,
1994, BETWEEN WENDELL'S MACHINE & WELDING, INC.,
LESSOR, TWB GOURMET FOODS, INC., LESSEE, AND RIDDLE
ASSOCIATES,INC., AGENT, RELATING TO PREMISES LOCATED
AT 2620 ELMHURST LANE, PORTSMOUTH, VIRGINIA
(incorporated by reference to Exhibit 10(b)(7) to
the Company's Annual Report on Form 10-K for the
year ended December 31, 1994)
10(b)(6) AGREEMENT TO SUBLEASE DATED AS OF FEBRUARY 22,
1996 BETWEEN THE COMPANY, LESSEE, AND GROVES
FAISON, LESSOR, RELATING TO PREMISES LOCATED AT 902
COOKE AVENUE, NORFOLK, VIRGINIA
10(b)(7) GENERAL COMMERCIAL LEASE DATED AS OF FEBRUARY 21,
1996, BETWEEN THE COMPANY, LESSEE, AND STARCH
REALTY, INC., LESSOR, RELATING TO PREMISES LOCATED
AT 902 COOKE AVENUE, NORFOLK, VIRGINIA
10(c)(1) AMENDED AND RESTATED SECURITY AGREEMENT DATED AS OF
NOVEMBER 15, 1994 MADE BY THE COMPANY TO CRESTAR
BANK GRANTING A SECURITY INTEREST IN INVENTORY AND
CERTAIN INTANGIBLES (incorporated by reference to
Exhibit 10(c)(1) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994)
10(c)(2) SUBSIDIARY SECURITY AGREEMENT DATED AS OF SEPTEMBER
13, 1995, BETWEEN TWB GOURMET FOODS, INC., GRANTOR,
AND THE COMPANY, SECURED PARTY
10(d)(1) CRESTAR BANK DEFINED CONTRIBUTION MASTER PLAN AND
TRUST AGREEMENT, BASIC PLAN DOCUMENT #01, AN
EMPLOYEE BENEFIT PLAN UNDER WHICH THE COMPANY BECAME
A PARTICIPATING EMPLOYER ON JANUARY 1, 1992
(incorporated by reference to Exhibit 10(d)(1) to
the Company's Annual Report on Form 10-K for the
year ended December 26, 1992)
10(d)(2) CRESTAR BANK ADOPTION AGREEMENT #005, NON STANDARDIZED
CODE 401(k) PROFIT SHARING PLAN, AN AGREEMENT BY
WHICH THE COMPANY BECAME A PARTICIPATING EMPLOYER IN
THE CRESTAR BANK DEFINED CONTRIBUTION MASTER PLAN
AND TRUST AGREEMENT DATED JUNE 5, 1992 (incorporated
by reference to Exhibit 10(d)(2) to the Company's
Annual Report on Form 10-K for the year ended
December 26, 1992).
10(e)(1) STOCKHOLDERS' AGREEMENT DATED AS OF AUGUST 5, 1994,
BETWEEN TWB GOURMET FOODS, INC., THE COMPANY, AND
LOETITIA ADAM-ST. JAMES AND CHRIS L. ST. JAMES
(incorporated by reference to Exhibit 10(e)(1) to
the Company's Annual Report on Form 10-K for the
year ended December 31, 1994)
10(e)(2) LICENSE AGREEMENT DATED AS OF AUGUST 5, 1994, BETWEEN
CHRIS L. JAMES AND LOETITIA ADAM-ST. JAMES,
LICENSORS, AND TWB GOURMET FOODS, INC., LICENSEE
(incorporated by reference to Exhibit 10(e)(2) to
the Company's Annual Report on Form 10-K for the
year ended December 31, 1994)
10(e)(3) AGREEMENT DATED AS OF AUGUST 5, 1994, BETWEEN THE
COMPANY AND TWB GOURMET FOODS, INC., ESTABLISHING A
$600,000 LINE OF CREDIT (incorporated by reference
to Exhibit 10(e)(3) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994)
10(e)(4) SECURITY AGREEMENT DATED AS OF AUGUST 5, 1994, MADE BY
TWB GOURMET FOODS, INC. TO THE COMPANY GRANTING THE
COMPANY A SECURITY INTEREST IN ACCOUNTS, EQUIPMENT,
INVENTORY, AND GENERAL INTANGIBLES (incorporated by
reference to Exhibit 10(e)(4)to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994)
10(e)(5) LINE OF CREDIT NOTE DATED AUGUST 5, 1994, MADE BY TWB
GOURMET FOODS, INC. IN FAVOR OF THE COMPANY IN THE
PRINCIPAL AMOUNT OF $600,000 (incorporated by
reference to Exhibit 10(e)(5)to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994)
10(f)(1) CLOSING AGREEMENT DATED AS OF SEPTEMBER 3, 1995, AMONG
DUTTERER'S OF MANCHESTER CORPORATION, DOUGHTIE'S
FOODS, INC., VALUE ADDED FOOD SERVICES, INC., VERNON
W. MULES, AND KATHRYN M. MULES (incorporated by
reference to Exhibit 10(g)(1) to the Company's
Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995)
10(f)(2) TERM NOTE OF VALUE ADDED FOOD SERVICES, INC. DATED AS
OF SEPTEMBER 3, 1995, IN THE ORIGINAL PRINCIPAL
AMOUNT OF $1,077,821.00 (incorporated by reference
to Exhibit 10(g)(2) to the Company's Quarterly
Report on Form 10-Q for the nine months ended
September 30, 1995)
10(f)(3) AMENDMENT TO TERM NOTE DATED AS OF OCTOBER 1, 1995,
BETWEEN VALUE ADDED FOOD SERVICES, INC. AND
DUTTERER'S OF MANCHESTER CORPORATION (incorporated
by reference to Exhibit 10(g)(3) to the Company's
Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995)
10(f)(4) ASSUMPTION OF LIABILITIES AND OBLIGATIONS DATED AS OF
SEPTEMBER 3, 1995, BY VALUE ADDED FOOD SERVICES,
INC. AND VERNON W. MULES AND KATHRYN M. MULES FOR
THE BENEFIT OF DUTTERER'S OF MANCHESTER CORPORATION
AND DOUGHTIE'S FOODS, INC. (incorporated by
reference to Exhibit 10(g)(4) to the Company's
Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995)
10(f)(5) BILL OF SALE DATED AS OF SEPTEMBER 3, 1995 BY
DOUGHTIE'S FOODS, INC. AND DUTTERER'S OF MANCHESTER
CORPORATION TO VALUE ADDED FOOD SERVICES, INC.
(incorporated by reference to Exhibit 10(g)(5) to
the Company's Quarterly Report on Form 10-Q for the
nine months ended September 30, 1995)
10(f)(6) GUARANTY DATED AS OF SEPTEMBER 3, 1995, BY KATHRYN M.
MULES, IN FAVOR OF DUTTERER'S OF MANCHESTER
CORPORATION (incorporated by reference to Exhibit
10(g)(6) to the Company's Quarterly Report on
Form 10-Q for the nine months ended September 30,
1995)
10(f)(7) GUARANTY DATED AS OF SEPTEMBER 3, 1995, BY VERNON W.
MULES, IN FAVOR OF DUTTERER'S OF MANCHESTER
CORPORATION (incorporated by reference to Exhibit
10(g)(7) to the Company's Quarterly Report on
Form 10-Q for the nine months ended September 30,
1995)
10(f)(8) SECURITY AGREEMENT DATED AS OF SEPTEMBER 3, 1995,
BETWEEN VALUE ADDED FOOD SERVICES, INC. AND
DUTTERER'S OF MANCHESTER CORPORATION (incorporated
by reference to Exhibit 10(g)(8) to the Company's
Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995)
11 SCHEDULE OF SHARES USED IN COMPUTING EARNINGS PER
SHARE
21 LIST OF SUBSIDIARIES
27 FINANCIAL DATA SCHEDULE
(b)
Reports on Form 8-K:
--------------------
No reports on Form 8-K were filed during the last quarter of the
Company's fiscal year ended December 30, 1995.
<PAGE> DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------
Balance at Charged to Balance at
beginning costs and end of
Description of period expenses Deductions(A) period
- ----------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Valuation account deducted from
asset to which it applies -
for doubtful trade receivables:
Year ended December 25, 1993 $ 164,803 $ 172,000 $ 176,496 $ 160,307
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 31, 1994 $ 160,307 $ 192,000 $ 90,361 $ 261,946
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 30, 1995 $ 261,946 $ 183,531 $ 112,169 $ 333,308
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Valuation account deducted from
asset to which it applies -
for doubtful finance receivables:
Year ended December 25, 1993 $ 185,971 $ 243,000 $ 243,538 $ 185,433
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 31, 1994 $ 185,433 $ (15,000) $ (8,460) $ 178,893
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 30, 1995 $ 178,893 $ (25,885) $ 153,008 $ -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Valuation account deducted from
asset to which it applies -
for deferred tax asset:
Year ended December 31, 1994 $ - $ 52,798 $ - $ 52,798
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 30, 1995 $ 52,798 $ 472,546 $ - $ 525,344
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
(A) Accounts written off during the year net of recoveries.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DOUGHTIE'S FOODS, INC.
Dated: March 25, 1996 STEVEN C. HOUFEK
(Signature)
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Dated: March 25, 1996 STEVEN C. HOUFEK
(Signature)
President, Chief Executive
Officer and Director
Dated: March 25, 1996 MARION S. WHITFIELD, JR.
(Signature)
Senior Vice President and
Director (Principal
Financial and Accounting
Officer)
Dated: March 28, 1996 VERNON W. MULES
(Signature)
Director
Dated: March 25, 1996 DANIEL W. DUNCAN
(Signature)
Director
Dated: March 25, 1996 ADOLPHUS W. HAWKINS, JR.
(Signature)
Director
Dated: March 26, 1996 DONALD B. RATCLIFFE
(Signature)
Director
Dated: March 25, 1996 JAMES F. CERZA, JR.
(Signature)
Director
<PAGE>
BY LAWS
OF
DOUGHTIE'S FOODS, INC.
ARTICLE I - OFFICES
The office of the Corporation shall be located in the City, County and
State designated in the Certificate of Incorporation. The Corporation may
also maintain offices at such other places within or without the United
States as the Board of Directors may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings:
The annual meeting of the shareholders of the Corporation shall be held
within five months after the close of the fiscal year of the Corporation,
for the purpose of electing directors, and transacting such other business
as may properly come before the meeting.
Section 2 - Special Meeting:
Special meetings of the shareholders may be called at any time by the Board
of Directors or by the President, and shall be called by the President or
the Secretary at the written request of the holders of twenty-five percent
(25%) of the shares then outstanding and entitled to vote thereat, or as
otherwise required by law.
Section 3 - Place of Meeting:
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices
or waivers of notice of such meetings.
Section 4 - Notice of Meetings:
(a) Except as otherwise provided by Statute, written notice of each
meeting of shareholders, whether annual or special, stating the time when
and place where it is to be held, shall be served either personally or by
mail, not less than ten or more than fifty days before the meeting, upon
each shareholder of record entitled to vote at such meeting, and to any
other shareholder to whom the giving of notice may be required by law.
Notice of a special meeting shall also state, the purpose or purposes for
which the meeting is called, and shall indicate that it is being issued by,
or at the direction of, the person or persons calling the meeting. If, at
any meeting, action is proposed to be taken that would, if taken, entitle
shareholders to receive payment for their share pursuant to Statute, the
notice of such meeting shall include a statement of that purpose and to
that effect. If mailed, such notice shall be directed to each such
shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously filed with
the Secretary of the Corporation a written request that notices intended
for him be mailed to some other address, in which case, it shall be mailed
to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become
a shareholder of record after the mailing of such notice and prior to the
meeting, or to any shareholder who attends such meeting, in person or by
proxy, or to any waiver of notice either before or after such meeting.
Notice of any adjourned meeting of shareholders need not be given, unless
otherwise required by statute.
Section 5 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in the
Certificate of Incorporation (such Certificate and any amendments thereof
being hereinafter collectively referred to as the "Certificate of
Incorporation"), at all meetings of shareholders of the Corporation, the
presence at the commencement of such meetings in person or by proxy of
shareholders holding of record a majority of the total number of shares of
the Corporation then issued and outstanding and entitled to vote, shall be
necessary and sufficient to constitute a quorum for the transaction of any
business. The withdrawal of any shareholder after the commencement of a
meeting shall have no effect on the existence of a quorum, after a quorum
has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes case by the
holders of shares entitled to vote thereon, may adjourn the meeting. At
any such adjourned meeting at which a quorum is present, any business may
be transacted at the meeting as originally called if a quorum had been
present.
Section 6 - Voting:
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors,
to be taken by vote of the shareholders, shall be authorized by a majority
of votes cast at a meeting of shareholders by the holders of shares
entitled to vote thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of
stock of the Corporation entitled to vote thereat, shall be entitled to one
vote for each share of stock registered in his name on the books of the
Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent
without a meeting, may do so by proxy; provided; however, that the
instrument authorizing such proxy to act shall have been executed in
writing by the shareholder himself, or by his attorney-in-fact thereunto
duly authorized in writing. No proxy shall be valid after the expiration
of eleven months from the date of its execution, unless the person
executing it shall have specified therein the length of time it is to
continue in force. Such instrument shall be exhibited to the Secretary at
the meeting and shall be filed with the records of the Corporation.
(d) Any resolution in writing, signed by all of the shareholders entitled
to vote thereon, shall be and constitute action by such shareholders to the
effect therein expressed, with the same force and effect as if the same had
been duly passed by unanimous vote at a duly called meeting of shareholders
and such resolution so signed shall be inserted in the Minute Book of the
Corporation under its proper date.
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall be seven (7),
unless and until otherwise determined by vote of a majority of the entire
Board of Directors. The number of Directors shall not be less than three,
unless all of the outstanding shares are owned beneficially and of record
by less than three shareholders, in which even the number of directors
shall not be less than the number of shareholders permitted by statute.
(b) Except as may otherwise, be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation,
who need not be shareholders, shall be elected by a majority of the votes
cast at a meeting of shareholders, by the holders of shares, present or by
proxy, entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of the
shareholders next succeeding his election, and until his successor is
elected and qualified, or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
The Board of Directors shall be responsible for the control and management
of the affairs, property and interests of the Corporation, and may exercise
all powers of the Corporation, except as are in the Certificate of
Incorporation or by statute expressly conferred upon or reserved to the
shareholders.
Section 3 - Annual and Regular Meetings Notice:
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders, at the place
of such annual meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by resolution
for the holding of other regular meetings of the Board of Directors, and
may fix the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the
meeting; provided, however, that in case the Board of Directors shall fix
or change the time or place of any regular meeting, notice of such action
shall be given to each director who shall not have been present at the
meeting at which such action was taken within the time limited, and in the
manner set forth in paragraph (b) Section 4 of this Article III, with
respect to special meeting, unless such notice shall be waived in the
manner set forth in paragraph (c) of such Section 4.
Section 4 - Special Meetings; Notice:
(a) Special meetings of the Board of Directors shall be held whenever
called by the President or by one of the directors, at such time and place
as may be specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meetings
shall be mailed directly to each director, addressed to him at his
residence or usual place of business, at least two (2) days before the day
on which the meeting is to be held, or shall be sent to him at such place
by telegram, radio or cable, or shall be delivered to him personally or
given to him orally, not later than the day before the day on which the
meeting is to be held. A notice, or waiver of notice, except as required
by Section 8 of this Article III, need not specify the purpose of the
meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or
at its commencement, the lack of notice to him, or who submits a signed
waiver of notice, whether before or after the meeting. Notice of any
adjourned meeting shall not be required to be given.
Section 5 - Chairman:
At all meetings of the Board of Directors, the Chairman of the Board, if
any and if present, shall preside. If there shall be no Chairman, or he
shall be absent, then the President shall preside, and in his absence, a
Chairman chosen by the directors shall preside.
Section 6 - Quorum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of a majority
of the entire Board shall be necessary and sufficient to constitute a
quorum for the transaction of business, except as otherwise provided by
law, by the Certificate of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the
same from time to time without notice, until a quorum shall be present.
Section 7 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director present shall
have one vote, irrespective of the number of shares of stock, if any, which
he may hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action of a majority of the
directors present at any meeting at which a quorum is present shall be the
act of the Board of Directors. Any action authorized, in writing, by all
off the directors entitled to vote thereon and filed with the minutes of
the Corporation shall be the act of the Board of Directors with the same
force and effect as if the same had been passed by unanimous vote at a duly
called meeting of the Board.
Section 8 - Vacancies:
Any vacancy in the Board of Directors occurring by reason of an increase in
the number of directors, or by reason of the death, resignation,
disqualification, removal (unless a vacancy created by the removal of a
director by the shareholders shall be filled by the shareholders at the
meeting at which the removal was effected) or inability to act of any
director, or otherwise, shall be filled for the unexpired portion of the
term by a majority vote of the remaining directors, though less than a
quorum, at any regular meeting or special meeting of the Board of Directors
called for that purpose.
Section 9 - Resignation:
Any director may resign at any time by giving written notice to the Board
of Directors, the president or the Secretary of the Corporation. Unless
otherwise specified in such written notice, such resignation shall take
effect upon receipt thereof by the Board of Directors or such officer, and
the acceptance of such resignation shall not be necessary to make it
effective.
Section 10 - Removal:
Any director may be removed with or without cause at any time by the
affirmative vote of shareholders holding of record in the aggregate at
least a majority of the outstanding shares of the Corporation at a special
meeting of the shareholders called for that purpose, and may be removed for
cause by action of the Board.
Section 11 - Salary:
No stated salary shall be paid to directors, as such, for their services,
but by resolution of the Board of Directors a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board; provided, however, that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 12 - Contracts:
(a) Any contract or other transaction between this Corporation and any
other Corporation shall be impaired, affected or invalidated, nor shall any
director be liable in any way by reason of the fact that any one or more of
the directors of this Corporation is or are interested in, or is a director
or officer, or are directors or officers of such other Corporation,
provided that such facts are disclosed or made known to the Board of
Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no
director shall be liable in any way by reason of such interest, provided
that the fact of such interest be disclosed or made known to the Board of
Directors, and provided that the board of Directors shall authorize,
approve or ratify such contract or transaction by the vote (not counting
the vote of any such director) of a majority of a quorum, notwithstanding
the presence of any such director at the meeting at which such action is
taken. Such director or directors may be counted in determining the
presence of a quorum at such meeting. This Section shall not be construed
to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law (common, statutory
or otherwise) applicable thereto.
Section 13 - Committees:
An Executive Committee consisting of at least three (3) or more directors
may be designated by a resolution adopted by a majority of the number of
directors fixed by these Bylaws. To the extent provided in such
resolution, such Executive Committee shall have and may exercise all of the
authority of the Board of Directors except to approve an amendment to the
Articles of Incorporation or a plan of merger or consolidation.
Other committees with limited authority may be designated by resolution
adopted by a majority of the directors present at a meeting at which a
quorum is present.
Regular meetings of any committee may be held without notice at such time
and place as shall be fixed by a majority of the committee. Special
meetings of any committee may be called at the request of the President or
any member of the committee. Notice of such special meetings shall be
given by the President or any member of any such committee and shall be
deemed duly given, or may be waived, as provided in Sections III and IV of
Article III. A majority of those present at any meeting at which a quorum
is present shall be the act of the committee, unless otherwise provided by
the Board of Directors.
ARTICLE IV - OFFICERS
Section 1 - Number, Qualifications, Election
and Term of Office:
(a) The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, and such other officers, including a Chairman of
the Board of Directors, and one or more Vice Presidents, as the Board of
Directors may from time to time deem advisable. Any officer other than the
Chairman of the Board of Directors may be, but is not required to be, a
director of the Corporation. Any two or more offices may be held by the
same person.
(b) The officers of the Corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of shareholders.
(c) Such officer shall hold office until the annual meeting of the Board
of Directors next succeeding his election, and until his successor shall
have been elected and qualified, or until his death, resignation or
removal.
Section 2 - Resignation:
Any officer may resign at any time by giving written notice of such
resignation to the Board of Directors, or to the President or the Secretary
of the Corporation. Unless otherwise specified in such written notice,
such resignation shall take effect upon receipt thereof by the Board of
Directors or by such officer, and the acceptance of such resignation shall
not be necessary to make it effective.
Section 3 - Removal:
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
Section 5 - Duties of Officers:
Officers of the Corporation shall, unless otherwise provided by the Board
of Directors, each have such powers and duties as generally pertain to
their respective offices as well as such powers and duties as may be sent
forth in these by-laws, or may from time to time be specifically conferred
or imposed by the Board of Directors. The President shall be the chief
executive officer of the Corporation.
Section 6 - Sureties and Bonds:
In case the Board of Directors shall require, any officer, employee or
agent of the Corporation shall execute to the Corporation a bond in such
sum, and with such surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his duties to the Corporation,
including responsibility for negligence and for the accounting for al
property, funds or securities of the Corporation which may come into his
hands.
Section 7 - Shares of Other Corporations:
Whenever the Corporation is the holder of shares of any other Corporation,
any right or power of the Corporation as such shareholder (including the
attendance, acting and voting at shareholders' meetings and execution of
waivers, consents, proxies or other instruments) may be exercised on behalf
of the Corporation by the President, any Vice President, or such other
person as the Board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock:
(a) The certificates representing shares of the Corporation shall be in
such form as shall be adopted by the Board of Directors, and shall be
numbered and registered in the order issued. They shall bear the holder's
name and the number of shares, and shall be signed by (i) the Chairman of
the Board or the President or a Vice President, and (ii) the Secretary or
Treasurer, or any Assistant Secretary or Assistant Treasurer, an shall bear
the corporate seal.
(b) No certificate representing shares shall be issued until the full
amount of consideration therefor has been paid, except as otherwise
permitted by law.
(c) To the extent permitted by law, the Board of Directors may authorize
the issuance of certificates for fractions of a share which shall entitle
the holder to exercise voting rights, receive dividends and participate in
liquidating distributions, in proportion to the fractional holdings; or it
may authorize the payment in cash of the fair value of fractions of a share
as of the time when those entitled to receive such fractions are
determined: or it may authorize the issuance, subject to such conditions as
may be permitted by law, of scrip in registered or bearer form over the
signature of an officer or agent of the Corporation, exchangeable as
therein provided for full shares, but such scrip shall not entitle the
holder to any rights of shareholder, except as therein provided.
Section 2 - Lost or Destroyed Certificates:
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the
certificate representing the same. The Corporation may issue a new
certificate in the place of any certificate theretofore issued by it,
alleged to have been lost or destroyed. On production of such evidence of
loss or destruction as the Board of Directors in its discretion may
require, the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board
may direct, and with such surety or sureties as may be satisfactory to the
Board, to indemnify the Corporation against any claims, loss, liability or
damage it may suffer on account of the issuance of the new certificate. A
new certificate may be issued without requiring any such evidence or bond
when, in the judgment of the Board of Directors, it is proper so to do.
Section 3 - Transfer of Shares:
(a) Transfers of shares of the Corporation shall be made on the share
records of the Corporation only by the holder of record thereof, in person
or by his duly authorized attorney, upon surrender for cancellation of the
certificate or certificates representing such shares, with an assignment or
power of transfer endorsed thereon or delivered therewith, duly executed,
with such proof of the authenticity of the signature an of authority to
transfer and of payment of the transfer taxes as the Corporation or its
agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize, any legal, equitable or other
claim to, or interest in, such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof,
except as otherwise expressly provided by law.
Section 4 - Record Date:
In lieu of closing the share records of the Corporation, the Board of
Directors may fix, in advance, a date not exceeding fifty days, nor less
than ten days, as the record date for the determination of shareholders
entitled to receive notice, of, or to vote at, any meeting of shareholders,
or to consent to any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividends, or
allotment of any rights, or for the purpose of any other action. If no
record ate is fixed, the record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders shall be a
the close of business on the day next preceding the day on which notice is
given, or, if no notice is given, the day on which the meeting is held; the
record date for determining shareholders for any other purpose shall be at
the close of business on the day on which the resolution of the directors
relating thereto is adopted. When a determination of shareholders of
record entitled to notice of or to vote at any meeting of shareholders has
been made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any
funds available therefor, as often, in such amounts, and at such time or
times as the Board of directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of Directors
from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from
time to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
Section 1 - By Shareholders:
All by-laws of the Corporation shall be subject to alteration or repeal,
and new by-laws may be made, by the affirmative vote of shareholders
holding of record in the aggregate at least a majority of the outstanding
shares entitled to vote in the election of directors at any annual or
special meeting of shareholders, provided that the notice or waiver of
notice of such meeting shall have summarized or set forth in full therein,
the proposed amendment.
Section 2 - By Directors:
The Board of Directors shall have power to make, adopt, alter, amend and
repeal, from time to time, by-laws of the Corporation; provided, however,
that the shareholders entitled to vote with respect thereto as in the
Article IX above provided may alter, amend or repeal by-laws made by the
Board of Directors, except that the Board of Directors shall have no power
to change the quorum for meetings of shareholders or of the Board of
Directors, or to change any provisions of the by-laws with respect to the
removal of directors or the filling of vacancies in the Board resulting
from the removal by the shareholders. If any by-law regulating any
impending election of directors is adopted, amended or repeals by the Board
of Directors, there shall be set forth in the notice of the next meeting of
shareholders for the elections directors, the by-laws so adopted, amended
or repealed, together with a concise statement of the changes made.
ARTICLE X - INDEMNITY
(a) Any person made a party to any action, suit or proceeding, by reason
of the fact that he, his testator or intestate representative is or was a
director, officer or employee of the Corporation, or of any Corporation,
shall be indemnified by the Corporation against the reasonable expenses,
including attorney's fees, actually and necessarily incurred by him in
connection with any appeal therein, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding, or in
connection with any appeal therein that such officer, director or employee
is liable for negligence or misconduct in the performance of his duties.
(b) The foregoing right of indemnification shall not be deemed exclusive
of any other rights to which any officer or director or employee may be
entitled apart from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be
entitled shall be fixed by the Board of Directors, except that in any case
where there is no disinterested majority of the Board available, the amount
shall be fixed by arbitration pursuant to the then existing rules of the
American Arbitration Association.
<PAGE>
FIRST AMENDMENT
TO
REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT, made as of the
13th day of September, 1995 (the "Amendment"), by and between DOUGHTIE'S
FOODS, INC., a Virginia corporation (the "Borrower") and CRESTAR BANK, a
Virginia banking corporation (the "Bank"), provides as follows:
1. Recitals. (a) The Borrower and the Bank are parties to that
certain Amended and Restated Revolving Credit Agreement (the "Agreement")
dated as of November 15, 1994. All capitalized terms used herein shall
have the respective meanings specified in the Agreement unless otherwise
defined herein.
(b) In connection with the sale by Dutterer's of certain of
its assets, including the Dutterer's Inventory and Receivables, the
Borrower has requested and the Bank has agreed, subject to the terms and
conditions of the Amendment, to terminate the Dutterer's Security Agreement
and release the Dutterer's Inventory and Receivables from the security
interest created thereby.
(c) TWB Gourmet Foods, Inc., a Virginia corporation
("TWB"), has become a subsidiary of the Borrower, and the Borrower desires
that the Inventory and Receivables of TWB qualify as Eligible Subsidiary
Inventory and Eligible Subsidiary Receivables, respectively.
(d) The Borrower and the Bank desire to amend the Agreement
as hereinafter set forth.
2. Amendment of Agreement. (a) Annex I of the Agreement is hereby
amended as follows:
(i) The definition of "Dutterer's Security Agreement" is
deleted.
(ii) Clause (ii) of the definition of "Subsidiary" is
amended to read as follows: "(ii) with respect to Eligible Subsidiary
Inventory and Eligible Subsidiary Receivables, any Subsidiary other than a
Subsidiary which has a Collateral Value of less than $50,000 at any one
time during the Commitment Period."
(b) Section 7.1 of the Agreement is hereby amended by the
addition, following the phrase "or any other property of the Borrower," the
following parenthetical phrase: "(including, without limitation, any
promissory note or other evidence of indebtedness received by the Borrower
or Dutterer's in connection with the disposition of the assets of
Dutterer's)".
3. Release of Security Interest in Dutterer's Inventory and
Receivables. The Bank hereby terminates and releases the security
interests granted to it pursuant to the Dutterer's Security Agreement and
shall, at the request of the Borrower and/or Dutterer's, duly execute and
deliver appropriate Uniform Commercial Code termination statements
evidencing such termination and release.
4. TWB Subsidiary Security Agreement. Contemporaneously with the
execution and delivery of the Amendment, the Borrower shall deliver or
cause to be delivered to the Bank the duly executed Subsidiary Security
Agreement of TWB in the form attached hereto as Exhibit A, together with
appropriate duly executed Uniform Commercial Code financing statements
showing TWB as debtor, the Borrower as secured party and the Bank as
assignee.
5. No Default; Representations and Warranties True and Correct;
Etc. The Borrower hereby represents and warrants to the Bank that, as of
the date hereof, (a) no Event of Default has occurred and is continuing;
(b) except for representations and warranties relating expressly to an
earlier date, the representations and warranties made by the Borrower in
the Agreement (including, without limitation, representations and
warranties with respect to Subsidiaries as the same apply to TWB) are true
and correct on the date hereof as if made on the date hereof; (c) the true
and correct addresses of the Borrower's chief executive office and that of
each Subsidiary is listed on Exhibit B, attached, which offices are the
places where the Borrower and each Subsidiary, respectively, (i) are
"located" for the purpose of Section 9-103(3)(d) of the Uniform Commercial
Code, and (ii) keep their records concerning the Collateral; and (d) the
locations of all Inventory of the Borrower and each Subsidiary are as
specified on Exhibit C, attached.
6. Pocahontas Foods Letter of Credit. Notwithstanding any other
provision of the Agreement to the contrary, the $7,500,000 upper limit of
the Commitment shall be reduced by the amount of $100,000 so long as a
letter of credit in such amount, issued for the account of the Borrower by
the Bank for the benefit of Pocahontas Foods, shall remain outstanding.
7. Expenses. The Borrower shall pay all reasonable out-of-pocket
costs and expenses incurred by the Bank in connection with the preparation,
execution and delivery of the Amendment and the transactions contemplated
hereby, including, without limitation, the reasonable fees of counsel for
the Bank.
8. Ratification. Except as expressly amended hereby, the Loan
Documents are hereby ratified and confirmed as in full force and effect.
WITNESS the following signatures:
DOUGHTIE'S FOODS, INC.
By: MARION S. WHITFIELD, JR.
(Signature)
Senior Vice President
CRESTAR BANK
By: BRUCE W. NAVE
(Signature)
Vice President
<PAGE>
Exhibit A Subsidiary Security Agreement
(filed as Exhibit 10(c)(2) to this Report)
- ------------------------------------------------------
Exhibit B Chief Executive Offices
- -----------------------------------
A. The Borrower:
Doughtie's Foods, Inc.
2410 Wesley Street
Portsmouth, Virginia 23707
B. Subsidiaries:
TWB Gourmet Foods, Inc.
2620 Elmhurst Lane
Portsmouth, Virginia 23701
Exhibit C Inventory Locations
- -------------------------------
A. The Borrower:
2415 Wesley Street
City of Portsmouth, VA
800-840 Florida Avenue
City of Portsmouth, VA
Merchants' Terminal
Jessup (Howard County), MD
2410 Wesley Street
City of Portsmouth, VA
Denver Cold Storage
Denver (Lancaster County), PA
Richmond Cold Storage
Smithfield (Isle of Wight), VA
Burris Refrigeration
City of Chesapeake, VA
Timberline Cold Storage
Pitman (Gloucester County), NJ
B. Subsidiaries:
TWB Gourmet Foods, Inc.
2620 Elmhurst Lane
City of Portsmouth, VA
800-840 Florida Avenue
City of Portsmouth, VA
<PAGE>
LEASING AGREEMENT NO. 010396
Lease made as of this January 26, 1996, by and between KEEN LEASING, INC.
OF CARLISLE, PA, HEREINAFTER REFERRED TO AS LESSOR, AND Doughtie's Foods,
Inc. A Virginia Corporation hereinafter referred to as "Lessee".
TABLE OF CONTENTS
(Omitted)
In consideration of the mutual promises herein contained and
intending to be legally bound hereby, the parties hereto agree as follows:
Article I
Lease
The Lessor hereby leases to the Lessee and the Lessee hereby leases
and hires from the Lessor, all vehicles, and other property described in:
(A) The schedule or schedules executed by the parties concurrently
herewith and made part hereof by reference to this agreement; and
(B) Any schedule or schedules hereafter executed by the parties
hereto and made a part hereof by reference to this agreement.
All said vehicles and other property described in all said schedules
are hereinafter called "the leased vehicles" and all said schedules are
hereinafter collectively referred to as "Schedule A".
Article II
Term
The term of this lease respecting each leased vehicle commences on
the date the leased vehicle is delivered to the Lessee and ends at the
expiration of the initial lease term as set forth In Schedule A unless
extended or sooner terminated as hereinafter provided or as provided in the
appropriate Schedule A. All terms and conditions of this agreement shall
continue in full force and effect until termination with respect to all
leased vehicles shall have taken place as provided herein.
Article III
Renewal
Renewal of this lease shall be accomplished by the execution of a
Schedule A upon such conditions with respect to term and rental payments as
may be agreed by the parties. In the event renewal conditions cannot be
agreed upon by the parties, then termination of this lease shall occur as
provided in Article II.
Article IV
Option to Terminate
(A) Subject to the other provisions of this Agreement, Lessee may
at any time after twenty-four calender months following date of delivery as
listed on Schedule "A" upon ninety (90) days prior written notice to the
Lessor, terminate this lease, in accordance with the terms of this lease.
Lessor agrees not to terminate this lease unless Lessee is in violation of
this lease. For purposes of this agreement, the date of termination shall
be the date so specified in the notice or the date when the vehicle is
permanently returned to Lessor's place of business, whichever is later.
(B) In the event Lessee exercises its right of termination, Lessee
shall reimburse Lessor on the date of termination or as soon thereafter as
the amount can be determined, the amount of all insurance premiums, if any,
license, registration, permit, or federal, state or local use charges,
whether designated as fees, taxes or otherwise, and personal property taxes
on or with respect to terminated vehicles to be paid by Lessor, allocable
to the unexpired portion of the term or terms designated in Schedule A for
which such premiums, charges and taxes may have been paid or may thereafter
be payable by Lessor.
(C) Termination as to any leased vehicle by either party under this
agreement shall not effect this lease as to my other leased vehicle.
(D) In the event of loss or damage to any leased vehicle, where the
cost of repairs to such vehicle is greater then the fair market value of
such vehicle after repair, Lessee shall be deemed to have exercised its
option to terminate, which termination shall be deemed effective as of the
date and time of said loss or damage. Lessor will be deemed to have
elected not to sell such vehicle after termination and shall only be
entitled to receive the insurance proceeds plus Lessee deductible
applicable to such vehicle. In the event that the parties cannot agree as
to whether a leased vehicle has suffered loss or damage where the cost of
repairs to such vehicle is greater than the fair market value of such
vehicle after repair, the parties agree to accept the determination with
respect to same as made by the insurance company referred to in Article XII
hereof. Lessor agrees to accept fair market value vs Schedule A value
where referred to in this paragraph (D) only.
Article V
Option of Purchase
(A) At any time prior to the exercise of its option to terminate
this lease with respect to any leased vehicle, Lessee shall have the option
to purchase such vehicle for cash or upon terms suitable to Lessor, for an
amount computed as follows: The adjusted original value as hereinafter
defined on Schedule A, plus all amounts then owed to Lessor with respect to
the leased vehicle, less depreciation for the amount set forth in Schedule
A.
(B) If Lessee exercises its right of termination but does not or
cannot exercise its option to purchase, then Lessor has the option within
thirty (30) days following the date of termination to sell, publicly or
privately, any vehicle so terminated. After sale of such vehicle by
Lessor, the difference, if any between the sale price (after deducting all
costs and expenses of sales and adding any insurance proceeds received by
Lessor) and Lessee's purchase price as computed in accordance with the
provisions of paragraph (A) of this Article, shall be paid to Lessor by
Lessee upon demand. In the event Lessor elects not to sell vehicles which
have been terminated by Lessee, then Lessee shall not owe any amounts to
Lessor under this Section (B).
Article VI
Rental
(A) Lessee shall pay as rental for each vehicle during the term
hereof a sum which shall consist of a fixed rental charge plus mileage
charge and, in the case of refrigerated trailers or trucks, an hourly
charge as designated in the appropriate Schedule A. Lessee shall pay said
fixed rental charge in advance, in the amounts set forth in the appropriate
Schedule A, on the first day of each month to Lessor at its address herein
set forth or to such other person or organization as Lessor shall designate
in writing.
(B) Rental for the first month of this lease term shall be prorated
from the date of delivery. Rental for the final month shall be prorated to
the date of termination. The date of termination with respect to a vehicle
purchased by Lessee is the date on which payment of full purchase price as
computed in accordance with Article V is received by Lessor.
Notwithstanding any other provision of this Agreement rental for each
leased vehicle as provided in this Article VI shall continue to accrue and
be payable until the date of termination.
(C) The mileage charge shall be paid monthly on or before the last
day of the month and shall be computed with respect to all miles driven in
the preceding calendar month. The mileage charge for miles driven for the
calender month in which this lease term expires shall be due within ten
(10) days following the last day of said lease term. Any vehicle
substituted for another pursuant to Article IX and the vehicle for which it
was substituted shall be considered one vehicle for the purpose of
computing mileage charges. If the mileage gauge for any vehicle shall fail
to function the mileage for the period of failure shall be determined by
computing the mileage over the routes normally traveled.
(D) The hourly charge shall be paid monthly on or before the last
day of the month and shall be computed with respect to hours of use in the
preceding calender month. This hourly charge for use in the calender month
in which this lease term expires shall be due within ten (10) days
following the last day of said lease term.
(E) All rental payments shall be considered timely paid if received
by Lessor on the 30th day of the month. If Lessee fails to make payments
as specified above. Lessee agrees to pay interest on the amount past due at
a rate of one and one half percent (1.5%) per month or the maximum legal
rate allowed, whichever is lower.
(F) The parties hereto recognize that the fixed rental charge is
based, in part, upon costs for licenses, taxes and other fees as
established by the responsible governments or regulatory bodies having
jurisdiction over the operation of the leased vehicles. In the event that
costs of such items as herein set forth to be payable by Lessor shall
increase, or decrease, fixed rental rates will be adjusted to compensate
therefore as hereinafter provided.
(G) Lessor and Lessee agree that this lease rates are based on
Lessor's current costs and labor conditions, and that such costs may
change. Therefore, Lessee agrees that for each rise or fall of 1% In the
Revised Consumer Price Index For Urban Wage Earners and Clerical Workers
(1967 Base Period, published by the U.S. Bureau of Labor Statistics), above
or below the best figure on the Schedule A, charges for each vehicle will
be adjusted upward or downward as follows:
1%of 50%%of the fixed charge.
1% of 60% of the mileage charge.
1% of 100% of the hourly charge on the refrigeration
equipment.
There will be no adjustments until July 1, 1999 and will be limited to a 3%
cap. Thereafter adjustments shall be done annually and will be limited to
a 3% cap.
All adjustments shall be made using the most recently available CPI.
If the CPI is no longer published, the Lessor may designate a successor or
substitute index. If information for 1967 as a base year is not longer
published, the Lessor may select another base year for which information is
readily available.
(H) Additional vehicles will be supplied upon Lessee's request
subject to availability at the location which services the Lessee. All
subsequent rented vehicles of the same type as currently being leased will
be supplied at the highest rate being paid by Lessee at the time for a like
vehicle plus fifteen (15%) percent. All vehicles of a type not currently
being leased will be supplied at the prevailing retail rental rates posted
by Lessor less twenty (20%) percent. All additional vehicles shall be
subject to all the terms and conditions of this lease.
(I) In addition to any leased vehicles listed on this Schedule A
and any rented vehicles which may be added to the fleet pursuant to Article
VI(H), Lessor agrees that it will:
1. keep two additional reefer straight trucks as captive
subs, available for use by Lessee when leased vehicles are being serviced
or repaired, at no additional fixed cost to Lessee, mileage and hourly
charges apply only. When these units are used as extra units, only mileage
and hourly rates equal to the highest rate being paid by Lessee at the time
for a like vehicle shall apply.
2. upon Lessee's request, rent to Lessee up to two
additional reefer straight trucks and two additional tractors of a type
like those already leased. These additional vehicles will be charged for
actual days used. The rates for these additional vehicles will be
calculated by multiplying the highest prevailing like lease unit monthly
rate by 12, dividing that annualized total by 365 and then multiplying by
1.15. The mileage and hourly rates will also be multiplied by 1.15.
3. upon 30 days notice from Lessee, lease to Lessee up to
four additional reefer straight trucks of a type like those already leased,
at the same rates currently applicable under this lease for such vehicles.
(J) Whether or not Lessee rents an additional vehicle when a unit
is inoperable due to physical damage, charges on the unit shall continue
until 30 days after Lessee's insurance company adjuster approves repairs,
provided all parts are reasonably available to Lessor.
Article VII
Ownership
(A) Except as specifically provided herein, each leased vehicle is,
and shall at all times be and remain, the sole and exclusive property of
Lessor, Lessee shall have no right title, or interest therein except as
expressly set forth in this lease.
(B) Without the prior written consent of Lessor, (which consent
will not be unreasonably withheld) Lessee shall not:
(1) Assign transfer, pledge or hypothecate this lease,
any leased vehicle or part of equipment hereof, or any interest therein; or
(2) Sublet or lend any leased vehicle or any part or
equipment thereof, or permit the leased vehicle or any part of equipment
thereof to be used by anyone other then Lessee or Lessee's employees.
(3) Create or suffer or permit to be created any lien or
security Interest of any kind upon any leased vehicle and will forthwith
remove and procure the release of any such lien or security interest.
Consent to any of these prohibited acts applies only in the given instance,
and is not a consent to any subsequent like act by the Lessee or any other
person.
(C) All rights of the Lessor under this lease may be assigned,
pledged, mortgaged, transferred, or otherwise disposed of, either in whole
or in part, provided, however that this lease shall not be thereby impaired
or affected.
(D) Lessor shall at any reasonable time have the right to enter
Into and on the premises where any leased vehicle may be located for the
purpose of inspecting the same or observing its use. Lessee shall give
Lessor immediate notice of any attachment of other judicial process
affecting any leased vehicle and shall, whenever requested by Lessor,
advise Lessor of the exact location of any leased vehicle.
Article VIII
Warranties
(A) THE LESSOR MAKES NO WARRANTIES, EITHER EXPRESS OR IMPLIED, AS
TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF
ANY LEASED VEHICLE, ITS MERCHANTABILITY, OR ITS FITNESS FOR ANY PARTICULAR
PURPOSE.
(B) Lessee shall inspect each leased vehicle within one week after
receipt thereof. Unless Lessee within said period of time gives written
notice to Lessor, specifying any defect in or other proper objection to
this lease vehicle, it shall be conclusively presumed, as between Lessor
and Lessee, that Lessee has fully inspected and acknowledge that the
equipment is in good condition and repair, and that Lessee is satisfied
with and has accepted the leased vehicle in such good condition and repair.
Lessor shall ensure that all leased vehicles substantially comply with the
specifications specified by Lessee. It is understood that occasionally
substitute components of a like kind and quality will be substituted for
those originally specified, provided that the operation of the vehicle is
not affected thereby.
Article IX
Maintenance and Repairs
(A) Lessor and Lessee agree to work together to minimize the effect
of any maintenance or repairs on Leases's operation. Lessor agrees not to
take a vehicle out of serve during normal working hours without furnishing
a substitute vehicle as provided in Section (C) hereof.
(B) Lessor shall perform all maintenance and repairs as may be
required or deemed necessary by Lessor, in Lessor's complete discretion.
If Lessor deems it advisable, any such maintenance or repairs may be
performed at such location as described on Schedule A and by such persons
as Lessor shall designate. Lessee agrees to make each leased vehicle
available for purposes of performing maintenance and repairs. Lessee
agrees to require each driver to make all complaints or suggestions
relative to any faulty operation or other trouble with any leased vehicle
in writing, or on such forms as may from time to time be supplied by
Lessor, whenever such vehicle is delivered for maintenance or repair
service as aforesaid. Lessor agrees to respond reasonably to any such
complaints or suggestions.
(C) Lessor agrees to fulfill maintenance and repair obligations
within a reasonable time following delivery of any leased vehicle. If it
is impractical In Lessor's opinion to repair any leased vehicle with
reasonable promptness, Lessor shall temporarily substitute another vehicle.
If it is determined that repeated mechanical problems make a vehicle
uneconomical to continue to repair, then Lessor will permanently substitute
another vehicle of like kind and quality. If Lessor permanently replaces
a leased vehicle prior to the last year of this lease term the replacement
vehicle will be redecaled and the cost will be shared equally between the
parties. A vehicle shall not be construed to be out of service due to
disablement during periods when normal maintenance or nominal repair is
being performed. Lessor shall incur no liability to Lessee for failure to
repair any disable vehicle if prevented by causes reasonably beyond the
control of Lessor.
(D) In the event that emergency service or repair is required which
service or repair would be Lessor's responsibility pursuant to this lease,
and if it would not be feasible for Lessor to perform such work, Lessee
will arrange with the person or establishment performing such emergency
service or repairs and to forward the bill directly to Lessor for
reimbursement. Lessor shall be under no obligation to pay for any such
work exceeding a cost limit of $100 unless its prior consent was first
requested and obtained.
(E) Lessor shall provide the following services for each leased
vehicle:
(1) Oil changes and lubrications, antifreeze, tire
change, tires and tubes, and other necessary supplies used in the normal,
safe and efficient operation of the vehicles;
(2) All repairs and maintenance including parts and labor
which may be needed to maintain vehicles in a safe operating condition;
(3) Original painting at time of delivery according to
Lessee's specifications.
(F) Washing of vehicles shall be the responsibility of Lessor and
shall be performed every two weeks, exterior only. Current costs to wash
vehicles are indicated on side two of the Schedule A. Additional costs
Incurred will be the responsibility of the Lessee.
(G) Lessor shall reimburse Lessee's drivers for income loss due to
vehicle breakdown after the first four (4) hours providing all of the
following conditions are met:
(1) The breakdown was caused by mechanical malfunction
or tire failure;
(2) The breakdown was not caused in whole or in part by
driver negligence or abuse;
(3) Lessor is immediately notified of such breakdown;
(4) Lessee instructs driver to go "off duty" whenever
feasible and whenever possible; and
(5) Lessee presents Lessor with a written notice with
accompanying documentation concerning all of the above conditions within
thirty (30) days following the date of breakdown.
(H) Lessee is responsible for all fuel costs relating to the
operation of all leased vehicles. Lessor will endeavor to provide, at its
facilities, fuel available for purchase by Lessee for the leased vehicles
at a price to be agreed upon by the parties. Lessee shall at all times
keep the oil in the crankcase at the proper level.
(I) Lessor shall be responsible for maintaining oil and water
levels in the refrigeration units.
(J) Lessee agrees to pay a $25 processing fee for windshield or
other minor outside repairs that are handled and billed by Lessor.
Article X
Damage to Vehicle
(A) ln case of accident, Lessee will be responsible for any towing,
wrecker service, cargo transfer, and/or any additional charges incurred by
Lessor who shall act as agent for Lessee and incur expenses only as
approved by Lessee.
(B) Any repairs of damage to a leased vehicle must be approved by
Lessor, in advance.
(C) Repairs to damaged vehicles performed by Lessor shall be done
in a commercially reasonable manner as to quality and timeliness. Lessor
shall use due diligence in completing all repair work so as to minimize the
down time of the vehicle.
(D) Lessee agrees to notify Lessor immediately of any accidents or
collisions in which any leased vehicle has been involved, and to cooperate
fully with Lessor to prevent loss through accidents, and to aid in every
way possible in the defense of suits or other proceedings brought as a
result of the operation of any leased vehicle.
Article XI
Alteration
Without the prior written consent of the Lessor, the Lessee shall
not make any alterations, additions, or improvements to any leased vehicle.
All additions and improvements or whatsoever kind of nature made to a
leased vehicle belong to and become the property of Lessor. Lessor agrees
to grant permission for Lessee to install on-board computers in the leased
vehicles with the understanding that they shall remain the property of
Lessee.
Article XII
Insurance
(A) Lessee, at its sole cost and expense, shall obtain and maintain
the following insurance coverage with one or more insurance companies
qualified to do business in the state in which the vehicle is licensed
protecting the interest of Lessor and Lessee:
(1) Bodily injury liability coverage of not less than
$2,000,000.
(2) Property damage liability coverage of not less than
$500,000.
(3) Comprehensive and collision coverage of not less than
the actual cash value to each leased vehicle, subject to the deductible
amount if any, set forth in Schedule A with loss payable to Lessor, and
others as may be designated by Lessor.
(B) Such insurance shall include Lessor and or any other party
having interest in the equipment as additional insured and loss payee and
Lessee shall furnish Lessor satisfactory evidence of such coverage by an
insurance company approved by Lessor (however such approval shall not be
unreasonably withheld) and authorized to transact business in the state in
which the leased vehicle is registered.
(C) In the event Lessee shall fall to obtain, maintain or pay for
any insurance specified as the responsibility of Lessee, Lessor, at its
option, may provide for such insurance and add the amount paid therefore to
the next monthly rental payment due from Lessee.
(D) For purposes of insurance coverage only, a leased vehicle which
is in the custody or control of Lessor or one of Lessor's employees for the
purposes of maintenance or repairs shall not be considered as leased from
the time it is picked up until the time it is delivered to Lessee, but
shall be deemed to be in the custody and control of Lessor in connection
with Lessor's garage business for service and/or repair.
(E) If at any point Lessee desires to partially self insure prior
written permission of the Lessor is required. Such permission shall not be
unreasonably withheld.
Article XIII
Cargo
(A) Any leased vehicle, when returned to Lessor for any purpose,
shall be empty, or if loaded with cargo, Lessor shall not be responsible
for any such cargo, Lessor shall not be responsible for any such cargo or
other personal property in or on such vehicle. It is understood that
Lessee shall at all times and under all circumstances bear the risk of loss
of any cargo, unless such loss or damage is solely due to the negligence of
Lessor.
(B) Lessee shall indemnify, defend and hold Lessor, its agents and
employees, harmless from and against all claims based on or arising out of
any loss or damage to cargo, unless such loss or damage is solely due to
the negligence of Lessor.
Article XIV
Title, Licenses, Taxes and Inspections
(A) Each leased vehicle shall bear license plates supplied by
Lessor and the titles thereto shall be registered in the name of Lessor.
The annual registration or license fees for a base state shall be paid by
Lessor subject to the amounts listed on Schedule & Local registration or
registration in other states shall be at the option and expense of Lessee
unless included on said Schedule A.
(B) Federal highway use tax and personal property tax for any
leased vehicle will be the responsibility of Lessor subject to the amounts
listed on Schedule A.
(C) Periodic safety inspections and the expenses related thereto
will be the responsibility of Lessor.
(D) Lessor will provide whenever possible at Lessee's expense
additional licensing, prorates, or other reciprocities that may be
requested by Lessee. When such services are requested by Leases, a charge
to be agreed upon by Lessee and Lessor shall be paid by Lessee.
(E) All other taxes, including fuel tax and the reporting same,
will be the responsibility of Leases. Lessor shall, where allowed by law
and upon Lessee's request, apply for fuel tax permits and, unless otherwise
specified on the appropriate Schedule A, shall rebill their cost to Lessee.
Lessor, when providing such permits, shall also file fuel tax returns,
provided the Lessee submits weekly to Lessor all driver trip records,
original fuel receipts or invoices, and any other information necessary for
the preparation of such fuel tax returns. Lessee shall reimburse Lessor
for any additional charges, assessment, tax, penalty, or credit disallowed
as a result of the untimely or improper submission of such information by
Lessee. Leases shall reimburse Lessor for any increase in the cost of
obtaining fuel tax permits. If Lessee provides the fuel, fuel tax permits
must be in Lessee's name and unless otherwise identified on the Schedule 4
Lessee shall be responsible for the fuel tax permits, file the fuel tax
returns, and keep and maintain any and all records required to perform such
acts. In the event of any failure by Lessee to perform its duties in
accordance with the paragraph, it shall agree to defend, indemnity, and
hold harmless Lessor from and on account of any and all financial loss,
including claims against it and expenses including penalty and interest
which results from any such failure of the Lessee, and Lessee shall further
be responsible to pay all such taxes.
Article XV
Driver Qualifications
(A) Lessee shall furnish to Lessor a complete list of all its
agents or employers authorized to receive and drive the leased vehicles and
shall update said list in writing should any changes occur. Lessor is
authorized to deliver any lease vehicle to any person whose name appears on
said list.
(B) Lessor has the right to approve all drivers and to disqualify
and remove from the list of authorized drivers any individual who, in
Lessor's opinion, is not qualified to fully and competently operate a
leased vehicle. Lessor may require road tests or periodic road tests of
any Lessee's drivers. Lessee agrees to furnish complete driver's records
to Lessor upon demand. Lessor, as a condition of approval, may require
further training or instruction of any driver.
(C) Leases shall cause the teased vehicles to be operated in a
careful and proper manner and in full compliance with all laws, ordinances,
and regulations relating to the possession, use, or maintenance of motor
vehicles. Lessee shall insure that each leased vehicle is operated within
the load limits set forth in its Schedule A and only by safe, careful and
qualified drivers in its employ having a proper license. Leases shall be
responsible for all acts or omissions of its drivers. Lessee shall not
cause or permit anyone to make any repairs or adjustments except
substituting mounted spare tires and removing and mounting chains unless
specifically authorized by Lessor.
(D) All drivers are conclusively presumed to be the employers of
Leases only. Said drivers shall be selected, employed, controlled and paid
by Lessee. Lessee shall insure that its drivers comply with all reasonable
regulations now or hereafter made by Lessor insofar as said regulations
shall relates to the proper use, care and operation of the leased vehicles.
Article XVI
Indemnification
(A) Lessee shall indemnity, defend and save harmless Lessor, its
officer, agents, servants and employers, from and against all losses,
claims demands, suits, decrees, judgements and awards for damages, losses,
liabilities, coats and expenses of whatever nature for any and all damage
or damages to property of others and injuries, including but not limited to
death to any person or persons, arising out of or in any way connected with
the operation of any leased vehicle, unless due to the negligence or fault
of Lessor, its employers or agents.
(B) Lessee shall indemnity Lessor for any loss or damage to any
leased vehicle caused by negligence, carelessness or abuse by Lessee, its
agents or drivers. Lessee further agrees to pay all costs and expenses
resulting from any leased vehicle becoming mired, unless due to malfunction
of the leased vehicle.
(C) Each party hereto shall promptly notify the other of any such
loss, damage, theft destruction, injury, claim demand, cost or expense of
which said party has actual knowledge.
(D) Lessor shall indemnify, defend and save harmless Lessee, its
officers, agents, servants and employees, from and against all losses,
claims, demands, suits, decrees, judgments and awards for damages, losses,
liabilities, costs and expenses of whatever nature for any and all damage
or damages to property of others and injuries, including but not limited to
death to any person or persons, arising out of or in any way connected with
the Lessor's failure to perform its obligations under this lease or
maintain the leased vehicles in a safe operating condition.
(E) Lessee's obligation to indemnity as provided in the Article
shall not Extend to any portion of any such ions, damage, injury, claim,
demand, cost or expense that is within the coverage of any insurance
provided pursuant to Article XII hereof.
Article XVII
Return of Leased Vehicles
(A) Upon termination of this lease, in whole or as to any leased
vehicle, Lessee shall, on the effective date of any termination, return to
Lessor such vehicle or vehicles in as good condition and running order as
they were received by Lessee, ordinary wear and tear only excepted.
(B) If Lessee fails or refuses to return said vehicle to Lessor,
Lessor shall have the right to take possession of said vehicles and to
remove said vehicles, For that purpose Lessor shall be permitted to enter
any premises where any of said vehicles shall be, without being liable to
any suit, action, defense, or other proceedings by Lessee.
(C) The return or repossession of vehicles pursuant the this
Article shall not affect in any way the rights and obligations of the
parties hereto eat forth in Article XIII hereof.
Article XVIII
Remedies on Default
(A) Except as eat forth in Article XI, the parties agree that the
liability of either party for any breach or default of this Agreement shall
be limited to the enforcement of the obligations assumed by this Agreement
and enforcement of this provisions. It is specifically agreed that neither
party shall be liable for consequential damages of any kind whatsoever.
(B) Time is of the essence of this Agreement in the event Lessee
fails to make any payment required by the terms of the Agreement at the
time the same falls due and prior to delinquency thereof, including the
rental payments to Lessor provided for herein, taxes, fees, and insurance
premiums, or if Lessee is in default of any other obligation under this
Agreement and it such default or nonpayment continues seven (7) days
following notice by Lessor of such default or nonpayment Lessor, at its
option, may (1) consider and treat such default or nonpayment as an
immediate termination of this Agreement by Lessee, in which event the
rights and obligations provided in this Agreement with respect to
termination shall apply, or (2) accelerate and confess judgment for all
remaining lease payments as wall as all other payments due hereunder but
not yet paid, provided, however, that in the event Lessee elects such
acceleration credit will be Given for resale by Lessor of any defaulted
vehicles or payments received by Lessor for the release of such vehicles to
another customer, it any.
(C) Failure by Lessor to perform any term or condition of this
Agreement shall not be deemed as a default when such failure is due to
causes reasonably beyond the control of Lessor.
Article XIX
Miscellaneous
(A) Notices. Any notice or demand on either party hereunder may
be mailed or personally delivered to such party at the address first above
given or such subsequent address as may hereafter be furnished in writing
to the other party. Notice or demand so Given shall be sufficient for any
purpose under the Agreement.
(B) Waiver. Failure of either party in any one or more instances
to insist on the performance of any of the terms of this Agreement, or to
exercise any right or privileges conferred herein, or the waiver of any
breach of any terms of this Agreement shall not thereafter be construed as
a waiver of such terms, which shall continue in force as it no such waiver
had occurred.
(C) Amendment. No amendment to or modification of this Agreement
shall be valid unless in writing and sighed by both parties.
(D) Captions. Captions and headings are strictly for the purpose
of convenience and general reference only and shall not affect the meaning
or interpretation of any of the provisions of this Agreement.
(E) Entire Agreement. This document and all Schedule or Schedules
herewith or hereafter executed by the parties hereto and made apart hereof
by reference to this Agreement constitutes the entre Agreement between the
parties and supersedes any prior written or oral agreements between them
respecting the within subject matter. There are no representations,
agreements, arrangements or understandings, oral or written, between and
among the parties hereto relating to the subject matter of this Agreement
which are not fully expressed herein.
(F) Binding Effect. This Agreement shall be binding upon, and
insure to the benefit of, the parties hereto and their res-We successors
and assignees where permitted by this lease.
(G) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original for all purposes,
and all of which together shall constitute one and the same instrument.
(H) Legal Construction. If any one or more of the provisions
contained in this lease shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions thereof and this
lease shall be contrued as if such invalid, illegal, or unenforceable
provision held never been contained herein.
(I) Time. Time is of the essence of the Agreement in each and all
of its provision.
(J) Nonwaiver. No covenant or condition of this lease may be
waived except by the written consent of the Lessor. Forbearance or
indulgence by the Lessor in any regard whatsoever shall not constitute a
waiver of the covenant or condition to be performed by the Lessee to which
the same may apply, and, until complete performance by the Lessee of any
covenant or condition, the Lessor shall be "wed to revoke any remedy
available to the Lessor under this lease or by law or in equity despite
said forbearance or indulgence.
(K) General. This Agreement will not be binding on Lessor until
executed by a person duly authorized and will then constitute the entire
agreement and understanding between the parties concerning the Vehicles,
notwithstanding any previous writing or oral undertakings, and its terms
will not be altered by any oral agreement or informal writing, nor by
failure to insist upon performance, or failure to exercise any rights or
privileges, but alterations, additions, or changes in the Agreement will
only be accomplished by written endorsements, amendments, or additional
Schedules A to the agreement executed by both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by a duly authorized officer, and have caused to be affixed
hereto their common or corporate seals, attested by their secretaries or
assistant secretaries, the day and year first above written.
LESSOR: KEEN LEASING, INC. LESSEE: DOUGHTIE'S FOOD, INC.
By: JEFF KEEN By: STEVEN C. HOUFEK
(Signature) (Signature)
Title: President Title: President
Date: 1/26/96 Date: 1/26/96
Attest: PAUL STHOLE Attest: PAUL STHOLE
(Signature) (Signature)
<PAGE>
Schedule A of Leasing Agreement
- -------------------------------
(Schedule has been omitted)
Exhibit to Lease
- ----------------
KEEN TRUCK RENTAL & LEASING
P.O. BOX 710
1951 HARRISBURG PIKE 717) 243-6885
CARLISLE, PA 17013 FAX (717) 243-9493
January 10, 1996
Mr. Greg Ratliff, Project Manager
Doughtie's Foods, Inc.
2410 Wesley Street
P. O. Box 7229
Portsmouth, Virginia 23707
Dear Greg:
This will serve as a letter of understanding concerning issues
related to Doughtie's Foods, Inc., replacing its current fleet of Keen
lease vehicles with new equipment, also to be leased from Keen Leasing,
Inc.
1. GARAGE LEASE:
a) The current Garage Lease dated June 19, 1989 shall remain in
effect with the term to be extended so it is the same as the new Lease
Agreement No. 010396.
b) Keen agrees that upon sixty (60) days notice from
Doughtie's, Keen will vacate the premises described by the Garage Lease.
2. RELEASE FROM LEASE AGREEMENT NO.22489:
a) Keen agrees to release Doughtie's from Lease Agreement No.
22489 and make the new Lease Agreement No. 010396 effective upon the
inservice of the new equipment.
b) It is understood that Doughtie's will replace its existing
lease vehicles with new Keen lease vehicles prior to the existing vehicles
and of terms. As of the inservice of the new vehicles, Doughtie's will be
released from its original term commitment on the existing lease vehicles.
3. FORGIVENESS OF DAMAGE REPAIRS:
a) As an incentive to replace the existing Keen lease fleet
with new Keen lease vehicles, and contingent upon that action, Keen agrees
to forgive the repair of damage to existing equipment described on the
repair estimate dated December 17, 1995.
b) It is understood that Doughtie's will be responsible for
repairing damage done alter the December 17, 1995 vehicle inspection.
4. RE-DECALING OF (2) captive SUB TRUCKS:
a) Keen agrees to replace, at their expense, the two units that
will be kept as captive subs using the new graphics to be designed by
Doughtie's.
We hope this letter of understanding will clarify your concerns and allow
you to proceed with the new lease agreement.
Sincerely,
KEEN LEASING, INC.
BRIAN DONMOYER
(Signature)
Director of Sales & Marketing
BD/db
AGREED TO: KEEN LEASING, INC.
By: JEFF KEEN
(Signature)
Title: President
AGREED TO: DOUGHTIE'S FOODS, INC.
By: STEVEN C. HOUFEK
(Signature)
Title: President
<PAGE>
AGREEMENT TO SUB-LEASE
THIS SUB-LEASE, made this 22nd day of February, 1996, by and between
Groves Faison (herein called "Landlord") and Doughtie's Foods (herein
called "Tenant").
WITNESSETH:
1. PREMISES. Landlord sub-leases to Tenant and Tenant takes and
leases from Landlord the following building (hereinafter called "demised
premises"): Approximately 3,000 square feet of freezer space at the north
end of the approximately 5,000 square foot freezer located within the
warehouse building located at 902 Cooke Avenue, Norfolk, Virginia.
Landlord (Groves Faison) has received permission from Starch Realty
("original Landlord") to sub-lease these demised premises to Doughtie's
Foods and approval to all terms of this agreement has been received.
2. TERM. The initial term of this agreement shall be for one year
and shall commence on February 22, 1996 and end on February 28, 1997. (See
agreement paragraph #11 - Renewal Option).
3. PURPOSE. The demised premises shall be used for the purpose of
warehousing and distributing institutional food products and related
services and activities, and for no other purpose whatsoever.
4. RENT. Landlord reserves, and Tenant covenants to pay to
Landlord, in advance on the first day of each month during the term,
without demand therefor being made and without offset, rent as follows:
$3,000.00 per month.
5. UTILITY BILLS. Tenant covenants to pay promptly for a
proportionate amount of the electrical bill. This amount will be
approximately 30% of the total electrical bill charged to Landlord by
"Original Landlord", but both parties shall agree to the division of cost
as provided by Jimmy Webb.
6. LANDLORD'S REPAIRS. Landlord covenants that it will be
responsible for all repairs set forth in this lease agreement. However,
Tenant shall be responsible for any repairs which are required as a result
of a casualty resulting from the negligence or willful act of Tenant, or
any of his agents, employees or contractors.
7. CONDITION ON TERMINATION. Upon the termination of this
agreement, Tenant covenants to deliver to Landlord the demised premises and
all appurtenances thereto, peacefully and quietly, in as good order and
condition as same now are or may hereafter be put by Landlord or Tenant,
ordinary wear and tear and damage from fire or other casualty not
occasioned by the fault or negligence of Tenant, Tenant's agents,
employees, and independent contractors, excepted.
8. DAMAGE BY FIRE. It is agreed that if the demised premises, or
the building of which the demised premises are a part, or any portion
thereof, or any improvements now or hereafter constructed thereon or added
thereto, shall be damaged by fire or other casualty, so as to render same
or any portion thereof, in the opinion of Landlord, untenantable, Landlord
or Tenant shall have the right, at any time within ninety (90) days after
said fire, to cancel and terminate this agreement, by giving to the other
party, within said ninety (90) day period written notice of its intention
so to do. If this agreement is so terminated, rent shall abate from the
time of such casualty. If the agreement is not so terminated, the rent due
hereunder shall be proportionately abated, according to the loss of use,
until the demised premises are substantially restored.
9. QUIET ENJOYMENT. Landlord hereby covenants that Tenant, upon
fully complying with and promptly performing all the terms, covenants and
conditions of this agreement, on its part to be performed, and further,
upon the prompt and timely payment of rent hereunder, shall have and
quietly enjoy the Premises of the Agreement Term set forth herein,
including all renewal options.
10. ALTERATIONS. Landlord agrees, and has received permission from
"Original Landlord" as evidenced by its signature on his sub-lease, that
Doughtie's Foods may complete the following alterations to the demised
premises; at Tenants expense:
(A) Install an opening with a functional freezer door to enable
Tenant to access the demised premises from the 12,147 square foot "dry"
space that Tenant is leasing within the same building.
(B) Install a fence within the freezer to segregate the demised
premises herein from the remaining portion of the freezer.
11. AGREEMENT RENEWAL OPTION. If Tenant has promptly and
completely fulfilled all of its obligations under this Agreement, and is in
possession of the demised premises, it shall be granted the option to renew
this Agreement for four (4) one-year renewal option terms immediately
following the initial Agreement term, under the same terms and conditions
as during the initial Agreement term, except that the rent shall be:
3/1/97 - 2/28/98 - $3,120.00 per month
3/1/98 - 2/28/99 - $3,245.00 per month
3/1/99 - 2/28/00 - $3,375.00 per month
3/1/00 - 2/28/01 - $3,510.00 per month
Tenant shall give Written notice to Landlord of its intention to renew not
later than sixty (60) days prior to the end of the then-current Agreement
term; otherwise, this option to renew shall automatically terminate.
Tenant has the right to terminate this Agreement, without cost or penalty,
upon sixty (60) days written notice to Landlord, at any time during any
renewal option year. Landlord has the option to terminate this agreement
if his lease with Starch Realty is terminated for any reason.
12. TENANT'S CONTRIBUTION TO REAL ESTATE TAXES AND LANDLORD'S
INSURANCE. In addition to the rent specified in this Agreement
herein, Tenant agrees to pay $125.00 per month toward real estate taxes and
Landlord's insurance.
13. NO RESPONSIBILITY FOR DAMAGE. Landlord shall not be liable for
any property damage or injury to Tenant's employees, agents, or contractors
unless caused solely by the intentional act of Landlord. Tenant agrees to
the extent possible to name the Landlord as a co-insured and to waive
subrogation against Landlord under its insurance policies.
14. EQUIPMENT SERVICE CONTRACT. Doughtie's Foods, Inc. agrees to
pay $100.00 per month of Landlords service contract for maintaining the
freezer and related equipment.
IN WITNESS WHEREOF each corporate party hereto has caused this
Agreement to be executed in its name and behalf by its President, or one of
its Vice Presidents; each individual party hereto has hereunto set his hand
and seal; and each partnership party hereto has caused this Agreement to be
executed in its name and behalf by at least one of its general partners,
and in a manner authorized by the partnership agreement.
LANDLORD:
GROVES FAISON COMPANY, INC.
By: B. L. REEVE
(Signature)
President
TENANT:
DOUGHTIE'S FOODS INC.
By: W. G. RATLIFF
(Signature)
Vice President - Operations
<PAGE>
GENERAL COMMERCIAL LEASE
5. L. NUSBAUM REALTY CO
NATIONSBANK CENTER
P. O. BOX 2491
NORFOLK, VIRGINIA 23501-2491
THIS LEASE, Made this 21st day of February, 1996, by and between
Starch Realty, Inc. (herein called "Landlord"), and Doughtie's Foods, Inc.
(herein called "Tenant"), and 5. L Nusbaum Realty Co. (herein called
"Agent")
W I T N E S S E T H:
1. PREMISES. Landlord leases and demises to Tenant and Tenant
takes and leases from Landlord the following building (hereinafter called
"demised premises"): Approximately 12,147 square feet of "dry" warehouse
space, approximately 4,450 square feet of refrigerated space, and minimal
office space and access to restrooms at the north end of the approximately
68,060 square foot warehouse building located at 902 Cooke Avenue, Norfolk,
Virginia 23504. The demised premises is highlighted in yellow ink on a
floor plan of the entire subject building, which is labeled Exhibit A and
is attached hereto and made part of this General Commercial Lease.
2. TERM. The initial term of this lease shall be for one year
and shall commence on February 22, 1996 and end on February 28, 1997. (See
lease paragraph #46 - Lease Renewal Option).
3. PURPOSE. The demised premises shall be used for the purpose
of a warehousing and distribution of dry, refrigerated and frozen
institutional food products and related services and activities, and for no
other purpose whatsoever.
4. RENT REAL ESTATE TAXES, AND WAIVER OF HOMESTEAD EXEMPTION.
(a) Landlord reserves, and Tenant covenants to pay to Landlord, in advance
on the first day of each month during the term, without demand therefor
being made and without offset, rent as follows:
$5,600.00 per month. (See paragraphs #46 and 447 herein).
(b) Landlord covenants that it will pay, when due, all real estate taxes
and assessments imposed against the demised premises. (See lease paragraph
#47 herein).
(c) Tenant waives his homestead exemption as to his obligations arising
under this lease.
5. PAYMENT OF RENT. Tenant covenants to pay said rent to
Landlord's Agent, made payable to S. L. Nusbaum Realty Co. in the manner
above appointed, at the office Agent, P.O. Drawer 2491 Norfolk, Virginia
23501, or at such other place as Landlord or Agent may from time to time
designate in writing.
6. LATE PAYMENTS. Tenant agrees to pay to agent a late charge
of $150 for any monthly installment paid after the tenth day of the
applicable month ($500 if after the fifteenth day)and Tenant is also to pay
interest at the rate of 12% per annum payable monthly, on all rents due
Landlord under this lease from the time said rents accrue or become due
Landlord; Landlord expressly reserving all other rights and remedies
provided herein and/or by law in respect thereto. Tenant further agrees to
pay (or to reimburse Landlord promptly if Landlord elects to pay) any and
all attorney's fees and court costs incurred in connection with the
collection of delinquent rent due Landlord under this lease. The late
charge and interest accrual will apply ten (10) days after written
notification of late payment has been made to the Tenant by the Landlord
unless payment is received within that ten (10) days.
7. ASSIGNMENT. Tenant covenants that the demised premises
shall be used only for the purpose above mentioned, and that Tenant will
not assign this lease or sublet the demised premises or any part thereof;
nor permit any other person to occupy same, without the prior written
consent of Landlord. Landlord shall have the option of terminating this
lease, or of considering such person, firm or Corporation in possession as
the assignee of tenant and, therefore, obligated to observe and perform all
the covenants, provisions and conditions herein contained binding upon
Tenant.
8. REMEDIES FOR DEFAULT. Tenant covenants that if the demised
premises at any time are deserted, abandoned or closed, or if Tenant
defaults for a period often (10) days in paying any installment of rent
when due or in performing any covenant, provision or condition herein
contained binding upon Tenant, Landlord shall have, in addition to all
other rights and remedies provided by law, the right, after ten (10) days
written notice to Tenant, to enter and take possession of the demised
premises, peaceably or by force, and to terminate this lease; and Landlord
may relet the demised premises, in whole or in part, in one or more leases,
for the unexpired portion of the term, or any part thereof, and receive the
rent therefor and apply it on the rent and other charges due hereunder, the
rate and term of such reletting to be such as Landlord deems expedient, and
Landlord's action shall be final and binding upon Tenant, and Tenant agrees
to pay promptly to Landlord on demand, at one time or from time to time,
any difference between the rent and other charges payable hereunder and any
small amounts collected by Landlord from the tenant or tenants to whom the
demised premises may be relet as aforesaid. If Tenant goes into bankruptcy,
voluntary or involuntary, or into receivership, or makes a general
assignment for the benefit of creditors. Landlord shall have the right to
terminate this lease at such time thereafter as Landlord may elect and in
any such event and/or election Landlord shall have all the rights and/or
remedies provided by law and/or by this lease.
9. TENANT'S FURNITURE AND FIXTURES. [deleted]
10. INSURANCE. Landlord shall obtain and keep in force during
the term of this lease a policy or policies of insurance covering loss or
damage to the premises (other than improvements made by Tenant), providing
protection against all perils included within the classification of fire
End extended coverage. (See lease paragraph #47 herein).
11. UTILITY BILLS. Tenant covenants to pay promptly for all
gas, water, electricity, sewage disposal, Storm water management program,
and other utilities used in the demised premises during the terms of this
lease. Tenant shall be solely responsible for its telephone service at the
demised premises and shall pay 1 5% of all other utilities (stated above)
at the building that the demised premises is part of. This payment is
subject to the attached letter between Starch Realty, Inc. and Doughtie's
Foods, Inc., which will be attached hereto as Exhibit B.
12. LANDLORD'S REPAIRS AND) RIGHT OF ENTRY. Landlord covenants
that it will, at its own cost and expense and with reasonable dispatch
after being notified in writing by Tenant of the need therefor, make such
repairs to the demised premises (including the roof; gutters, downspout,
walls, parking lot, pipes, conduit, wires and other appurtenances of the
building including all water, gas, and waste pipes and fixtures appurtenant
thereto, fire protection system and the refrigeration system supporting the
coolers and freezers), as may be necessary to keep the same in good
condition of repair; provided, however, that (i) if the need for such
repair is occasioned by a casualty resulting from the negligence or wilful
act of Tenant, or any of his agents, employees or contractors, and (ii) if
such casualty shall not be within the coverage of a standard fire insurance
policy with extended coverage, then such repairs shall likewise be made by
Landlord but shall be charged to and be paid for by Tenant. Anything in the
foregoing to the contrary notwithstanding, Landlord shall have no liability
whatsoever for damage or injury to person or property occasioned by its
failure to make any such repair (e.g., injury or damage to property
resulting from leaks caused by a defect in the roof, outside walls, gutters
and/or downspout) unless, within a reasonable time after being notified in
writing by Tenant of the need therefor, Landlord shall have failed to make
such repair and such failure shall not have been due to any cause beyond
Landlord's control, including, without limitation, strikes and/or inability
to obtain material and/or equipment. Landlord, its agents, employees and
contractors, shall have the unobstructed right, from time to time, to enter
the demised premises for the purpose of making any of the aforesaid
repairs. Tenant shall not be entitled to any reduction in rent or to any
claim for damages by reason of any inconvenience, annoyance, and/or injury
to business arising out of any repairs made by Landlord pursuant to this
paragraph.
13. REPAIRS BY TENANT. During the term of this lease Tenant
covenants, at Tenant's cost and expense: (i) to unstop promptly all choked
waste pipes and toilets, (iii) to keep all flues clean, (iv) to replace all
broken glass and doors (both interior an exterior) promptly, (v) to
[deleted] (vi) to keep all other parts of the demised premises (excepting
those which Landlord has agreed herein to repair) in good order and
condition, ordinary wear and tear excepted.
14. INSECTS AND) RODENTS. Tenant covenants to do and to pay for
those things reasonably necessary, or required by law, to keep the demised
premises free of roaches, rodents, insects and other pests, and Tenant
agrees that Landlord shall not be liable for any damage caused by termites,
which treatment if termites are found, shall be the expense of the
Landlord. Repairs needed as a result of structural damage as a result of
termite infestation shall be the responsibility of Landlord.
15. DAMAGE BY VANDALS. Tenant covenants that if the exterior
and/or the interior of the building in which the demised premises are
located are damaged by persons breaking, or attempting to break, into the
demised premises, or by vandals, the cost of repairing any and all damage
to the demised premises and said building caused thereby over and above any
insurance proceeds received by Landlord in respect thereto will be borne by
Tenant and promptly paid by Tenant to Landlord.
16. SIGNS. Tenant covenants not to paint or place (nor permit
to be painted or placed) any sign or other advertising device, bill or
billboard upon or about the demised premises (or the exterior of the
building in which the demised premises are located), or any part thereof;
without the prior written permission of Landlord. Tenant is granted
permission, at Tenant's sole cost, to place "Doughtie's Foods" signage on
the outside of the demised premises over the receiving overhead doors. At
Landlord's option, said signage shall be removed by Tenant at the end of
the lease term.
17. NUISANCE. Tenant covenants not to allow the demised
premises to be used for any illegal or immoral purpose, and not to do (or
suffer to be done) in or about the demised premises any act or thing which
may be a nuisance, annoyance, inconvenience or damage to Landlord,
Landlord's other tenants, the occupants of adjoining property, or the
neighborhood
18. NO ALTERATIONS. Tenant covenants not to paint the demised
premises or any part thereof; nor to make (or suffer to be made) any waste
thereof or alternations or improvements therein or thereto, not to place
any covering over any wooden floor, without prior written permission of
Landlord.
19. CARE OF ROOF. Tenant covenants: (i) not to place (or suffer
to be placed) any debris on the roof of the building in which the demised
premises are located, (ii) not to cut into or drive nails into or otherwise
mutilate said roof, (iii) to keep the gutters and downspout free to trash
leaves and gravel, and to make no use of the roof without Landlord's prior
written consent. Tenant is granted access to the roof of the demised
premises for the servicing of mechanical equipment.
20. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Tenant agrees
that Tenant has received and will keep, at Tenant's expense, the demised
premises and all appurtenances, thereto, including all yards, alleys and
sidewalks, in good, safe, tenantable and sanitary condition; that Tenant
will, at Tenant's expense, promptly remove all snow and/or debris whether
same is left on the property by Tenant or others (Landlord and Agent
excepted); that Tenant will, at Tenant's expense, promptly comply with the
carry out all laws, ordinances, rules, regulations and requirements
(including zoning) of the federal, state, municipal and county governments,
relating to the demised premises and/or the business conducted therein; and
that Tenant will indemnify Landlord against any and an liability for damage
to person and property caused by the breach of any covenant or agreement of
Tenant contained in this lease. Tenant recognizes that neither Landlord nor
Agency makes any representation, express or implied, that the demised
premises are zoned for the use(s) contemplated by Tenant and expressed in
paragraph 3 of this lease. Tenant being satisfied before executing and
delivering this lease that the demised premises can be used for such
purpose(s), and Tenant shall not have the right to terminate this lease,
nor shall Tenant be entitled to any abatement of rent payable under the
provisions of this lease or any claim for damages, in the event Tenant
cannot use the demise premises, in whole or in part, for the purpose(s) for
which Tenant intends to use same unless the demised premises are re-zoned
during the effective period of this lease. In this case, the Tenant is
entitled to the right to terminate this lease and the Tenant shall be
entitled to any abatement of rent payable under the provisions of this
lease.
21. FAILURE TO REPAIR. Tenant agrees that if Tenant fails to
make any repair or to remove any debris as required in this lease, within
five (5) days after the receipt of written notice from Landlord in respect
thereto, such may be undertaken by Landlord, and Tenant agrees to reimburse
Landlord promptly for the cost thereof.
22. CONDITION ON TERMINATION. Upon the termination of this
lease, Tenant covenants to deliver to Landlord the demised premises and all
appurtenances thereto, peaceably and quietly, in as good order and
condition as same now are or may hereafter be put by Landlord or Tenant,
ordinary wear and tear and damage from fire or other casualty not
occasioned by the fault or negligence of Tenant, Tenant's agents,
employees, and independent contractors, excepted. The parties agree to
perform a condition survey of the premises within 30 days of Tenant's
occupancy of the property.
23. IMPROVEMENTS BECOME LANDLORD'S PROPERTY. Tenant agrees that
all additions and improvements and attached equipment installed in or on
the demised premises by Tenant, including but not being limited to electric
wiring, electric fixture, show window reflectors, screens, screen doors,
awnings, awning frames, floor coverings, furnaces and air-conditioning
machinery and equipment, shall immediately become the property of Landlord
and shall not be removed by Tenant at the termination of this lease, unless
requested so to do by Landlord, iii which event Tenant agrees to do so and
to repair promptly any damage caused by such removal. It is agreed that any
racking installed iii the premises by the Tenant can be removed by the
Tenant at any time during or at termination of this lease.
24. DAMAGE BY FIRE. It is agreed that if the demised premises,
or the building or buildings of which the demised premises are a part, or
any portion thereof, or any improvements now or hereafter constructed
thereon or added thereto, shall be damaged by fire or other casualty, so as
to render same or any portion thereof; in the opinion of Landlord,
untenantable, Landlord or Tenant shall have the right, at any time within
ninety (90) days after said fire, to cancel and terminate this lease, by
giving to the other party, within said ninety (90) day period written
notice of its intention 50 to do. If this lease is so terminated, rent
shall abate from the time of such casualty. If the lease is not so
terminated, the demised premises shall be restored, with reasonable
dispatch, by and at the expense of Landlord, and the rent due hereunder
shall be proportionately abated, according to the loss of use, until the
demised premises are substantially restored.
25. CONDEMNATION. If any portion of the demise premises shall
be taken by the exercise of the power of eminent domain (or sold to the
holder of such power pursuant to a threatened taking) this lease shall
terminate upon such taking or when such sale is completed. Tenant shall
not be entitled to any part of the condemnation award or purchase price and
Tenant expressly waives any and all rights thereto.
26. LIABILITY OF LANDLORD. It is agreed that any way for any
damage to person or property sustained term of this lease, howsoever the
same may be caused, unless Landlord fails to make repair which he has
agreed notified in Writing by Tenant of the need therefor.
27. INSURANCE BY TENANT. Tenant agrees to hold Landlord and
Agent harmless from any and all injury or damage to person or property in,
on or al:'out the demised walks, driveways, parking area and delivery areas
as adjoin the demised premises, including, without limitation, all costs,
expenses, claims or suits arising in connection therewith. To that end
Tenant will, at all times during the term, at Tenant's own cost and
expense, carry with a company or companies satisfactory to Landlord, public
liability insurance on the demised premises (including said entry ways,
sidewalks, driveways, parking, and delivery areas) with limits of not less
than $1,000,000 each occurrence and $2,000,000 aggregate and $50,000 fire
damage legal liability, which insurance shall be written or endorsed so as
to name Landlord, Agent and Tenant. Said policy or policies shall contain
a provision insuring Tenant against all liability which Tenant might have
under this hold-harmless provision. Certificates of all such insurance
policies shall be delivered to Landlord promptly after their issuance. In
the event of Tenant's failure to provide such insurance, Landlord may, but
shall not be required to, obtain such insurance and collect the cost
thereof as a part of the rent herein reserved. Starch Realty, Inc. shall be
named as additional insured. Flammable cleaning products shall bo stored in
accordance with OSHA guidelines.
28. NO SUBROGATION. All fire insurance, extended coverage, and
policies relating to other casualties, carded by any party to this lease
covering the demised premises and/or the contents thereof; shall expressly
waive any right on the part of the insurer against any other party to this
lease, which right, to the extent not prohibited or violative of any such
policy, is hereby expressly waived. The parties to this lease agree that
their policies will include such waiver clause or endorsement so long as
the same shall be obtainable without extra cost, or if extra cost shall be
charged therefor, so long as the party or parties in whose favor such
waiver clause or endorsement runs pays such extra cost. If extra cost shall
be chargeable therefor, each party shall advise the others of the amount of
the extra cost, and the other party or parties, at its or their election,
may pay the same, but shall not be obligated so to do.
29. OCCUPANCY. If Tenant is unable to obtain possession of the
demised premises at the beginning of the term hereof due to any act or
condition beyond Landlord's control, such as the failure of the prior
tenant to vacate the demised premises, Landlord shall not be liable for any
loss or damage resulting therefrom and this lease shall not be affected
thereby in any way, but the rent payable hereunder shall be proportionately
abated until the premises are available for occupancy by Tenant; provided,
however, that if the demised premises are not available for Tenant's
occupancy within sixty (60) days after the beginning of the term, Tenant
may terminate this lease by giving Landlord written notice thereof within
ten (10) days after the lapse of said sixty (60) day period.
30. NO LIABILITY OF AGENT Tenant agrees that Agent shall not be
personally liable to Tenant in any way hereunder, including lack of
authority to act as Landlord's agent, any and all such liability being
hereby quit-claimed and waived by Tenant, except for Agent's wilful
misfeasance.
31. NO WAIVERS. Tenant agrees that any failure of Landlord to
insist upon strict observance of any covenant, provision or condition of
this lease in any one or more instances shall not constitute or be deemed
a waiver, at that time or thereafter, of such or any other covenant,
provision or condition of this lease.
32. ENTRY BY LANDLORD. Tenant agrees that Landlord may, from
time to time, enter to view the demised premises and to show the same to
prospective buyers or tenants. Landlord may also make repairs, alterations
and improvements in and to the demised premises and in and to any portion
of property of which the demised premises are a part of which adjoin the
same, and for that purpose Landlord, and Landlord's employees, agents, and
independent contractors, may enter the demised premises, and move
furniture, showcases, floor coverings and fixtures as may be necessary,
without liability for damages resulting therefrom; but nothing herein
contained shall be construed to require Landlord to make any repairs,
alterations or improvements.
33. NO PAROL REPRESENTATION. Tenant hereby declares that: (i)
no representation has been made to Tenant concerning the condition of the
demised premises, (ii) Tenant has been afforded full access to and has
inspected and examined the demised premises and is renting the same in
reliance upon Tenant's own knowledge and information, and (iii) Tenant has
been informed that Landlord is not obligated to make any repairs to the
demised premises during the term, except such, if any, as are specified in
this lease, and (iv) no negotiations respecting repairs, such as talking
about repairs or securing estimates for such repairs, shall in any way
obligate Landlord to make the repairs or obligate Landlord for any damage
for failure to make the same.
34. NO PAROL CHANGES. It is agreed that no change shall be made
in this lease, except in writing signed by the parties hereto, setting
forth the terms of the agreed modification.
35. FOR RENT AND FOR SALE SIGNS. It is agreed that Landlord
and/or Agent shall have the right to put and maintain "FOR RENT" and "FOR
SALE" signs in the display windows and on other portions of the demised
premises, in conspicuous places, during the period of three (3) months next
preceding the end of the term.
36. NOTICE. Any notice to be given to Landlord as herein
provided shall be deemed to be given when duly posted in t. S. registered
or certified mail addressed to Landlord, in care of Agent, P. 0. Box 2491,
Norfolk, Virginia 23501, with a copy to Landlord at 448 Viking Drive, Suite
220, Virginia Beach, Virginia 23452, Attention: Nathan Benson and any
notice to be given when duly posted in U 5. registered or certified mail
addressed to Tenant at 2410 Wesley Street, Portsmouth, VA 23707, Attention:
Mr. Greg Ratliff Either Landlord or Tenant may change the place designated
for the giving of such notice by written notice duly and timely given to
the other.
37. CONTRACT OF LANDLORD WITH AGENT-MANAGEMENT AND SALE TO
Tenant. (a) for the services rendered by Agent in procuring this lease,
Landlord agrees to pay Agent commissions equal to 7% of the rent during the
initial term and on all renewals or extensions, and on increased leased
area or options, payable as and when said rents are collected, but said
commissions shall not be less that $25 per month. in the event Tenant fails
to exercise option and lease terminates, Landlord shall not renegotiate
this lease without Agent participating in negotiations and being paid a
commission on the renegotiated lease and on the extensions, renewals, and
additional options as may be renegotiated. If Landlord releases Tenant from
this lease without the prior written consent of Agent, Landlord will
forthwith pay to Agent a sum equal to 7% of the fixed rents which would
thereafter be due and payable to Landlord if this lease were to remain in
effect. For purposes of the preceding sentence, if any part of the demise
premises is acquired pursuant to the power of eminent domain or by purchase
under threat thereof, such acquisition shall be deemed to be a release, pro
tanto, by Landlord, of Tenant, from this lease. It is further understood
and agreed that no sale or other disposition of the demised premises, or
any interest therein, shall be made by Landlord or any party claiming
through Landlord, except subject to Agent's rights hereunder, and any
purchaser or transferee of the demised premises, or of any interest
therein, shall be deemed 10 have assumed all of Landlord's obligations
under this paragraph and expressly required by Landlord to so do. The
obligations of Landlord set forth in this paragraph shall be deemed a
continuing lien or charge upon the interest of Landlord (and any transferee
of such interest) in the demised premises and upon any and all funds of
Landlord (or any party claiming through Landlord) held by Agent.
(b) Landlord agrees that if; during or within 365 days after the
termination of the term, Landlord sells the demised premises, or any part
thereof, to Tenant, or to any member of Tenant's family, or to any person,
firm or corporation in which Tenant is interested as a stockholder,
director, officer, partner, owner or employee, Landlord will treat said
sale as if Agent had been the exclusive agent in making said sale and will
pay to Agent a commission equal to 5% of the selling price.
38. LIMITED EXCLUSIVE TO SELL. [deleted]
39. HEIRS AND EXECUTORS BOUND. All the provisions, conditions
and agreements of this lease shall be binding upon an inure to the benefit
of the heirs, executors, administrators, successors and assigns of Landlord
and Tenant.
40. MARGINAL HEADINGS. The headings appearing on the margin of
this lease are intended only for convenience of reference, and are not to
be considered in construing this instrument.
41. EXECUTION. This lease is not binding on Landlord until it
is signed, and delivered by or on behalf of Landlord.
42. ENVIRONMENTAL RESPONSIBILITIES Tenant agrees to prevent
environmental pollution of the demised premises and adjoining property, and
to take full legal and financial responsibility for any such pollution (and
its clean up) caused by Tenant, or Tenant's use of the property. Tenant
further agrees to:
A. Establish, enforce and maintain environmental cleanliness
policies to be observed by Tenant and Tenant's employees, associates,
subcontractors, etc.
B. Prevent the disposal of any toxic wastes into the city sewer
systems.
C. Allow Landlord, from time to time, to enter the premises
during normal business hours to observe Tenant's compliance with the above
language.
43. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon
execution hereof; Five Thousand Six Hundred Dollars ($5,600.00) as security
for the faithful performance of Tenant's obligations hereunder. Tenant
hereby agrees that his security deposit will not be applied to rent due
under this lease or to the last month's rent and that the conditions under
which Landlord will hold (and be obligated subsequently to return within 30
days of the end of the lease term) the security deposit are as follows:
A. Full term of lease has expired.
B. Tenant does vacate the premises at the termination of lease
and return keys thereto.
C. Premises, inside and out, are left in "broom dean" condition
and undamaged (except ordinary wear and tear).
D. That there are no unpaid late charges, delinquent rent,
court costs or attorneys' fees or other monies owed by Tenant to Landlord.
44. QUIET ENJOYMENT. Landlord hereby covenants that Tenant,
upon fully complying with and promptly performing all the terms, covenants
and conditions of this lease, on its part to be performed, and further,
upon the prompt and timely payment of all rental sums due hereinunder,
shall have and quietly enjoy the Premises of the Lease Term set forth
herein, including all renewal options.
45. LANDLORD'S CONSENT TO TENANT'S ALTERATIONS. Landlord
agrees, that Doughtie's Foods, The. may complete the following alterations
to the demised premises; at Tenant's expense:
A. Seal the opening between the 12,147 square foot "dry" space
within the demised premises and the adjacent 6,765 square foot "dry" space
by constructing a cinder block wall in the existing opening, or by
installing fencing to prevent access between the two spaces. At Landlord's
option, said block wall or fencing shall be removed by Tenant at the end of
the lease term.
B. Install a door in the north wall of the freezer, giving
Tenant access to the freezer. The freezer door shall be locked at all times
Tenant has no employees in the building. At Landlord's option, said door
shall be removed and the opening in the freezer wall sealed at the end of
the lease term.
C. Have a fence installed within the freezer, separating
Tenant's freezer space from the remainder of the freezer. At Landlord's
option, said fence shall be removed by Tenant at the end of the lease term.
46. LEASE RENEWAL OPTION. If Tenant has promptly and completely
fulfilled all of its obligations under this Lease, is not in default in any
way under this Lease, and is in possession of the Leased Property, it shall
be granted the option to renew this Lease for four one-year renewal option
terms immediately following the initial Lease term, under the same terms
and conditions as during the initial Lease term, except that the rent shall
be:
1/97 - 2/28/92 - $5,824.00 per month.
3/1/98 - 2/28/99 - $6,056.96 per month.
3/1/99 - 2/29/00 . $6,299.24 per month.
3/1/00 - 2/28/01 $6,551.21 per month.
Tenant shall give written notice to Landlord and Agent of its
intention to renew not later than 90 days prior to the end of the
then-current Lease term; otherwise, this option to renew shall
automatically terminate. Tenant has the right to terminate this lease,
without cost or penalty, upon 90 days written notice to Landlord, at any
time during any renewal option year.
47. TENANT'S CONTRIBUTION TO REAL ESTATE TAXES AND LANDLORD'S
INSURANCE. In addition to the (base) rents specified in lease paragraphs
#4 and #46 herein, Tenant agrees to pay $400 per month toward real estate
taxes and Landlord's insurance, during lease year one. Tenant's
contribution toward real estate taxes and Landlord's insurance shall be
increased in each subsequent lease year by the percentage increase in said
taxes or insurance that Landlord incurs.
IN WITNESS WHEREOF each corporate party hereto has caused this lease
to be executed in its name and behalf by its President, or one of its Vice
President; each individual party hereto has hereunto set his hand and seal;
and each partnership party hereto has caused this lease to be executed in
its name and behalf by at least one of its general partners, and in a
manner authorized by the partnership agreement.
LANDLORD: STARCH REALTY, INC.
By: SAM SANDLER
(Signature)
Authorized Agent
TENANT: DOUGHTIE'S FOODS, INC.
By: STEVEN C. HOUFEK
(Signature)
President
AGENT: S.L. NUSBAUM REALTY CO.
By: MICHAEL MYERS
Authorized Agent
Exhibit A
Floor Plan
- -----------
Omitted.
Exhibit B
Letter Re Utility Charges
- -------------------------
STARCH REALTY, INC
21 February 1996
Mr. Greg Ratliff
Doughtie's Foods
P.O. Box 7229
Portsmouth, VA 23706
Dear Greg,
As to your share of the electric bill, we have asked Timmy Webb to settle
the division of the cost between you and Groves-Faison.
He will need the bills for several months to adequately judge the division,
maybe up until July, 1996. In the meanwhile you will pay 15% of the cost.
Sincerely,
Sam Sandler
<PAGE>
SUBSIDIARY SECURITY AGREEMENT
SECURITY AGREEMENT dated as of September 13, 1995, made by TWB
GOURMET FOODS, INC., a Virginia corporation with its chief executive office
at 2620 Elmhurst Lane, Portsmouth, Virginia 23701 (the "Grantor"), to
DOUGHTIE'S FOODS, INC., with an office at 2410 Wesley Street, Portsmouth,
Virginia 23707, together with its successors and assigns (the "Secured
Party").
SECTION 1. Grant of Security. The Grantor hereby assigns and
pledges to the Secured Party, and hereby grants to the Secured Party a
security interest in, all of the Grantor's right, title and interest in and
to the following (the "Collateral"):
(a) All inventory in all of its forms, wherever located,
now or hereafter existing (including, but not limited to, (i) all inventory
and raw materials and work in process therefor, finished goods thereof, and
materials used or consumed in the manufacture or production thereof (ii)
goods in which the Grantor has an interest in mass or a joint or other
interest or right of any kind, and (iii) goods which are returned to or
repossessed by the Grantor), and all accessions thereto and products
thereof and documents therefor (any and all such inventory, accessions,
products and documents being the "Inventory");
(b) All accounts, contract rights, chattel paper,
instruments, general intangibles and other obligations of any kind now or
hereafter existing arising out of or in connection with the sale or lease
of goods or the rendering of services and all rights now or hereafter
existing in and to all security agreements, leases, and other contracts
securing or otherwise relating to any such accounts, contract rights,
chattel paper, instruments, general intangibles or obligations (any and all
such accounts, contract rights, chattel paper, instruments, general
intangibles and obligations being the "Receivables"); and
(c) All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance
(whether or not the Secured Party is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
SECTION 2. Security for Obligation. This Agreement secures the
payment of all obligations of the Grantor to the Secured Party now or
hereafter existing, howsoever evidenced, matured or unmatured, direct or
indirect, absolute or contingent, including any extensions or renewals
thereof (all such obligations of the Grantor being the "Obligations").
SECTION 3. Grantor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the contracts
and agreements included in the Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent
as if this Agreement had not been executed, (b) the exercise by the Secured
Party of any of its rights hereunder shall not release the Grantor from
any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) the Secured Party shall not have any
obligations or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall the Secured Party be
obligated to perform any of the obligations or duties of the Grantor
thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. Representations and Warranties. The Grantor represents
and warrants as follows:
(a) Receivables are and shall be genuine and in all
respects what they purport to be, and that said Receivables are and will be
valid and subsisting and have arisen and will arise out of the bona fide
sale of goods, wares and merchandise, or other property sold and delivered
to and accepted by the customers of Grantor, or by reason of services
rendered by Grantor to its customers, in full compliance with the
specifications of such customers and that the amount of such receivable
represented as owing by each customer is the correct amount actually owing
by such customer, is not disputed, is not subject to any defense, setoff,
credit, deduction or contra-charge, and the payment thereof is not
contingent or conditioned on the fulfillment of any contract, condition, or
warranty, past or future, express or implied; that proper entries have been
made and will be made on the books of Grantor disclosing the absolute and
unconditional sale of said accounts and the pledge of other collateral to
the Secured Party, and that Grantor has and will have absolute and good
title to each such account and such other pledged collateral and good right
to sell and transfer the same, and has no knowledge of any fact which would
impair the validity thereof, that there is and will be owing (after
allowing all charges, setoffs and counterclaims) on each Receivable the
total amount represented by Grantor as owing thereon; at the request of the
Bank, that Grantor will promptly repurchase from the Secured Party each and
every such account, and repay in full each and every loan or advance made
directly upon the security of collateral other than receivables as to which
there may be a breach of Grantor's warranties in respect of the matters
herein above set forth; that all moneys, checks, notes, drafts or other
things of value collected or received by Grantor with reference to said
Receivable or pledged materials, work in process or finished goods shall
belong to the Secured Party and shall be accounted for and transmitted by
Grantor to the Secured Party, in the original form in which the same were
received, immediately upon receipt, but in no event later than the day
following receipt thereof by Grantor and that Grantor shall not use any of
the proceeds of such collections or commingle the same with its own funds.
(b) all of the Inventory is located at the places specified
in the Schedule hereto. The chief place of business and chief office of
the Grantor and the office where the Grantor keeps its records concerning
the Receivables, and all originals of all chattel paper which evidence
Receivables, is located at the address first specified above for the
Grantor. All originals of all chattel paper which evidence Receivables
requested by the Bank have been delivered to the Secured Party. None of
the Receivables is evidenced by a promissory note or other instrument.
(c) The Grantor owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for the security
interest created by this Agreement. No effective financing statement or
other instrument similar in effect covering all or any part of the
Collateral is on file in any recording office, except such as may have been
filed in favor of the Secured Party relating to this Agreement. The
Grantor has the following trade names:
Thunder Bay
(d) The Grantor has exclusive possession and control of the
Inventory.
(e) This Agreement creates a valid and perfected first
priority security interest in the Collateral, securing the payment of the
Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken.
(f) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required either (i) for the grant by the Grantor of the security interest
granted hereby or for the execution, delivery or performance of this
Agreement by the Grantor or (ii) for the perfection of or the exercise by
the Secured Party of its rights and remedies hereunder.
SECTION 5. Further Assurances.
(a) The Grantor agrees that from time to time, at the
expense of the Grantor, the Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Secured Party may request, in order to
perfect and protect any security interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, the Grantor will: (i) at the
request of the Bank, mark conspicuously each document included in the
Inventory and each chattel paper included in the Receivables and, at the
request of the Secured Party, each of its records pertaining to the
Collateral with a legend, in form and substance satisfactory to the Secured
Party, indicating that such document, chattel paper or Collateral is
subject to the security interest granted hereby; (ii) if any Receivable
shall be evidenced by a promissory note or other instrument or chattel
paper, deliver and pledge to the Secured Party hereunder such note,
instrument or chattel paper duly indorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance
satisfactory to the Secured Party; and (iii) execute and file such other
instruments or notices, as may be necessary or desirable, or as the Secured
Party may request, in order to perfect and preserve the security interest
granted or purported to be granted hereby.
(b) The Secured Party shall have the right at any time and
from time to time, without notice to, or assent by, the undersigned, and
without affecting the obligation of the undersigned to the Secured Party,
in the name of the undersigned or in the name of the Secured Party, or
otherwise; to ask, demand, collect, receive, compound and give acquittance
for the Receivables or any part thereof, to extend the time of payment of,
compromise or settle for cash, credit or otherwise, and upon any terms and
conditions, any of the Receivables; to indorse checks, drafts or other
orders or instruments for the payment of moneys payable to the undersigned
which shall be issued in respect of any Receivable; to notify, and the
undersigned upon request will notify, the person, or persons liable for the
payment of any Receivable or any part thereof to make all payments direct
to the Secured Party; to file any claims, commence, maintain or discontinue
any actions, suits or other proceedings deemed by the Secured Party
advisable for the purpose of collecting or enforcing payment of any
Receivable to make test verifications of the Receivables or any portion
thereof, and to execute any instruments and to do all things necessary and
proper to protect and preserve and realize upon the Receivables and other
rights contemplated hereby. The Grantor hereby irrevocably constitutes and
appoints the Secured Party and any of its officers and duly authorized
agents as the Grantor's true and lawful attorney-in-fact for the foregoing
purposes. The Secured Party shall not be obligated to do any of the acts
hereinabove authorized but in the event that it elects to do such act, it
shall not be responsible to the undersigned except for willful misconduct
in the premises.
(c) At the request of the Secured Party, the Grantor will
not, without first obtaining the written consent of the Secured Party,
renew or extend the time of payment of any Receivable. At the request of
the Secured Party, the Grantor will promptly notify the Secured Party in
writing of any compromise, settlement or adjustment with respect to a
Receivable and will forthwith account therefor to the Secured Party in cash
for the amount thereof without demand or notice.
(d) The Grantor will maintain accurate and complete records
of the Receivables and will make the same available to the Secured Party at
any time upon demand. At the request of the Secured Party, the Grantor
will stamp, in form and manner satisfactory to the Secured Party, its
accounts receivable ledger and other books and records pertaining to the
Receivables, with an appropriate reference to the security interest of the
Secured Party in the Receivables. Upon request, the Grantor will furnish
the Secured Party original and other documents relating to the sale of
merchandise or the performance of labor or services which created any
Receivables.
(e) The Grantor hereby authorizes the Secured Party to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of the
Grantor where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(f) The Grantor will furnish to the Secured Party from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Secured Party may reasonably request, all in reasonable detail.
(g) The Secured Party shall at all times have full and free
access during normal business hours to all the books, correspondence and
records of the Grantor, and the Secured Party or its representatives may
examine the same, take extracts therefrom and make photocopies thereof, and
the Grantor agrees to render to the Secured Party, at the Grantor's cost
and expense, such clerical or other assistance as may be reasonably
requested with regard thereto. The Secured Party and its representatives
shall at all times have the right to enter into and upon any premises where
any of the Inventory is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein. The
Secured Party shall have the right to make test verifications of the
Receivables in any manner and through any medium that it considers
advisable, and the Grantor agrees to furnish all such assistance and
information as the Secured Party may require in connection therewith. The
Grantor at its cost and expense will certify (or cause to be certified by
independent public accountants satisfactory to the Secured Party) and
furnish to the Secured Party at any time and from time to time, in form and
substance satisfactory to the Secured Party, (i) reconciliations of all
Receivables, (ii) aging of all Receivables, (iii) trial balances, (iv) test
verifications of Receivables, and (v) such other reports as the Secured
Party may reasonably request.
SECTION 6. As to Inventory. The Grantor shall:
(a) Keep the Inventory (other than Inventory sold in the
ordinary course of business) at the places therefor specified in Section
4(a) or, upon 30 days' prior written notice to the Secured Party, at such
other places in jurisdictions where all action required by Section 5 shall
have been taken with respect to the Inventory.
(b) Pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the
Inventory, except to the extent the validity thereof is being contested in
good faith.
SECTION 7. Insurance.
(a) The Grantor shall, at its own expense, maintain
insurance with respect to the Inventory in such amounts, against such
risks, in such form and with such insurers, as shall be satisfactory to the
Secured Party from time to time. Each policy for (i) paid on behalf of the
Secured Party and the Grantor as their respective interests may appear and
(ii) property damage insurance shall provide for all losses (except for
losses of less than $250,000 per occurrence) to be paid directly to the
Secured Party. Each such policy shall in addition a. name the Grantor and
the Secured Party as insured parties thereunder (without any representation
or warranty by or obligation upon the Secured Party) as their interests may
appear, b. contain the agreement by the insurer that any loss thereunder
shall be payable to the Secured Party notwithstanding any action, inaction
or breach of representation or warranty by the Grantor, c. provide that
there shall be no recourse against the Secured Party for payment of
premiums or other amounts with respect thereto and d. provide that at least
ten days' prior written notice of cancellation or of lapse shall be given
to the Secured Party by the insurer. The Grantor shall, if so requested by
the Secured Party, deliver to the Secured Party original or duplicate
policies of such insurance and, as often as the Secured Party may
reasonably request, a report of a reputable insurance broker with respect
to such insurance. Further, the Grantor shall, at the request of the
Secured Party, duly execute and deliver instruments of assignment of such
insurance policies to comply with the requirements of Section 5 and cause
the respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained
by the Grantor pursuant to this Section 7 may be paid directly to the
person who shall have incurred liability covered by such insurance. In
case of any loss involving damage to Inventory when subsection (c) of this
Section 7 is not applicable, the Grantor shall make or cause to he made the
necessary repairs to or replacements of such Inventory, and any proceeds of
insurance maintained by the Grantor pursuant to this Section 7 shall be
paid to the Grantor as reimbursement for the costs of such repairs or
replacements.
(c) Upon (i) the occurrence and during the continuance of
any Event of Default, or (ii) the actual or constructive total loss (in
excess of $250,000 per occurrence) of any Inventory, all insurance payments
in respect of such Inventory shall be paid to and applied by the Secured
Party as specified in Section 14(b).
SECTION 8. As to Receivables.
(a) The Grantor shall keep its chief place of business and
chief executive office and the office where it keeps its records concerning
the Receivables, and all originals of all chattel paper which evidence
Receivables, at the location therefor specified in Section 4(b) or, upon 30
days' prior written notice to the Secured Party, at such other locations in
a jurisdiction where all action required by Section 5 shall have been taken
with respect to the Receivables. The Grantor will hold and preserve such
records and chattel paper and will permit representatives of the Secured
Party at any time during normal business hours to inspect and make
abstracts from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b),
the Grantor shall continue to collect, at its own expense, all amounts due
or to become due the Grantor under the Receivables. In connection with
such collections, the Grantor may take (and, at the Secured Party's
direction, shall take) such action as the Grantor or the Secured Party may
deem necessary or advisable to enforce collection of the Receivables;
provided, however, that the Secured Party shall have the right at any time,
upon written notice to the Grantor of its intention to notify the account
debtors or obligors under any receivables of the assignment of such
Receivables to the Secured Party and to direct such account debtors or
obligors to make payment of all amounts due or to become due to the Grantor
thereunder directly to the Secured Party and, upon such notification and at
the expense of the Grantor, to enforce collection of any such Receivables,
and to adjust, settle or compromise the amount or payment thereof, in the
same manner and to the same extent as the Grantor might have done. After
receipt by the Grantor of the notice from the Secured Party referred to in
the proviso to the preceding sentence, (i) all amounts and proceeds
(including instruments) received by the Grantor in respect of the
Receivables shall be received in trust for the benefit of the Secured Party
hereunder, shall be segregated from other funds of the Grantor and shall be
forthwith paid over to the Secured Party in the same form as so received
(with any necessary endorsement) to be held as cash collateral and either
(1) released to the Grantor so long as no Event of Default shall have
occurred and be continuing or (2) if any Event of Default shall have
occurred and be continuing, applied as provided by Section 13(b), and (ii)
the Grantor shall not adjust, settle or compromise the amount or payment of
any Receivable, or release wholly or partly any account debtor or obligor
thereof, or allow any credit or discount thereon.
SECTION 9. Transfers and Other Liens. The Grantor shall not:
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business.
(b) Create or suffer encumbrance upon or with respect to
entity, except for the security interest to exist any lien, security
interest or other charge or any of the Collateral to secure Debt of any
person or created by this Agreement.
SECTION 10. Secured Party Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Secured Party the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor
and in the name of the Grantor, the Secured Party or otherwise, from time
to time in the Secured Party's discretion, to take any action and to
execute any instrument which the Secured Party may deem necessary or
advisable to accomplish the purposes of the Agreement (subject to the
rights of the Grantor under Section 8), including, without limitation:
(i) to obtain and adjust insurance required to be
paid to the Secured Party pursuant to Section 7,
(ii) to ask, demand, collect, sue for recover,
compound, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral,
(iii) to receive, indorse, and collect any drafts
or other instruments, documents and chattel paper, in connection with
clause (i) and (ii) above, and
(iv) to file any claims or take any action or
institute any proceedings which the Secured Party may deem necessary or
desirable for the collection of any of the collateral or otherwise to
enforce the rights of the Secured Party with respect to any of the
Collateral.
SECTION 11. Secured Party May Perform. If the Grantor fails to
perform any agreement contained herein, the Secured Party may itself
perform, or cause performance of, such agreement, and the expenses of the
Secured Party incurred in connection therewith shall be payable by the
Grantor under Section 14(b).
SECTION 12. The Secured Party's Duties. The powers conferred on
the Secured Party hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, the
Secured Party shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.
SECTION 13. Event of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
13.1 Principal and Interest. The Grantor shall default in
the due and punctual payment of any Obligations owing to Secured Party; or
13.2 Other Covenants. The Grantor shall default in the due
performance or observance of any term, covenant or agreement on its part to
be performed or observed pursuant to any of the provisions of this
Agreement (other than those referred to in Section 13.1) and such default
(which shall be capable of cure) shall continue unremedied for a period of
30 days after the earlier of the date on which the Secured Party gives the
Grantor notice of such default; or
13.3 Insolvency. The Grantor shall dissolve or suspend or
discontinue its business, or shall make an assignment for the benefit of
creditors or a composition with creditors, shall be unable or admit in
writing its inability to pay its debts as they mature, shall file a
petition in bankruptcy, shall become insolvent (howsoever such insolvency
may be evidenced), shall be adjudicated insolvent or bankruptcy, shall
petition or apply to any tribunal for the appointment of any receiver,
liquidator or trustee of or for it or any substantial part of its property
or assets, shall commence any proceedings relating to it under any
bankruptcy, reorganization, arrangement, readjustment of debt,
receivership, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or there shall be
commenced against the Grantor, any such proceeding which shall remain
undismissed for a period of 60 days or more, or any order, judgment or
decree approving the petition in any such proceeding shall be entered; or
the Grantor, shall by any act or failure to act indicate its consent to,
approval of or acquiescence in, any such proceeding or in the appointment
of any receiver, liquidator or trustee of or for it or any substantial part
of its property or assets, or shall suffer any such appointment to continue
undischarged or unstayed for a period of 60 days or more; or the Grantor
shall take any action for the purpose of effecting any of the foregoing; or
any court of competent jurisdiction shall assume jurisdiction with respect
to any such proceeding or a receiver or trustee or other officer or
representative of a court or of creditors, or any court, governmental
officer or agency, shall under color of legal authority, take and hold
possession of any substantial part of the property or assets of the
Grantor; or
13.4 Other Documents. The instruments and documents shall
fail to grant to the Secured Party the Lien and security interest intended
to be created thereby;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing the Secured Party shall, by written notice
to the Grantor: (i) declare the Obligations to be, whereupon the same shall
forthwith become, due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Grantor;
provided that if any Event of Default described in Section 13.3 shall occur
with respect to the Grantor, the result which would otherwise occur only
upon the giving of written notice by the Secured Party to the Grantor as
herein described shall occur automatically, without the giving of any such
notice, (ii) exercise the rights and remedies in respect of the Collateral
set forth in Section 14.
SECTION 14. Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code (the "Code") (whether or not the Code
applies to the affected collateral) and also may (i) require the Grantor
to, and the Grantor hereby agrees that it will at its expense and upon
request of the Secured Party forthwith, assemble all or part of the
Collateral as directed by the Secured Party and make it available to the
Secured Party at a place to be designated by the Secured Party which is
reasonably convenient to both parties and (ii) without notice except as
specified below, sell the collateral or any part thereof in one or more
parcels at public or private sale, at any of the Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Secured Party may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to the Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) All cash proceeds received by the Secured Party in
respect of any sale of, collection from, or other realization upon all or
any part of the Collateral may, in the discretion of the Secured Party, be
held by the Secured Party as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Secured
Party pursuant to Section 15) in whole or in part by the Secured Party
against, all or any part of the Obligations in such order as the Secured
Party shall elect. Any surplus of such cash or cash proceeds held by the
Secured Party and remaining after payment in full of all the Obligations
shall be paid over to the Grantor or to whomsoever may be lawfully entitled
to receive such surplus.
SECTION 15. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Secured Party from
and against any and all claims, losses and liabilities growing out of or
resulting from this Agreement (including, without limitation, enforcement
of this Agreement), except claims, losses or liabilities resulting from the
Secured Party's gross negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Secured Party
the amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel and of any experts and agents, which
the Secured Party may incur in connection with (i) the administration of
this Agreement, (ii) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise of enforcement of any of the rights of the Secured Party
hereunder or (iv) the failure by the Grantor to perform or observe any of
the provisions hereof.
SECTION 16. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Grantor
herefrom shall in any event be effective unless the same shall be in
writing and signed by the Secured Party, and then such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 17. Notices, Requests, Demands, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands or other
communications to or upon the respective parties hereto shall be deemed to
have been duly given or made when deposited in the mails (by registered or
certified mail, return receipt requested), postage prepaid, or in the case
of telex, telegraphic, telecopier or cable company, or in the case of telex
or telecopier notice sent over a telex or telecopier owned or operated by
a party hereto, when sent, addressed as follows, (i) if to the Secured
Party, at 2410 Wesley Street, Portsmouth, Virginia 23707, and (ii) if to
the Grantor, at its address specified with its signature below (Attention:
President) or to such other addresses as any of the parties hereto may
hereafter specify to the to a change of address shall be deemed to be
effective when actually received.
SECTION 18. Continuing Security Interest; Transfer of Obligations.
This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until payment in
full of the Obligations, (ii) be binding upon the Grantor, its successors
and assigns and (iii) inure to the benefit of the Secured Party and its
successors, transferees and assigns. Without limiting the generality of
the foregoing clause (iii), the Secured Party may assign or otherwise
transfer the Obligations held by it to any other person or entity, and such
other person or entity shall thereupon become vested with all the benefits
in respect thereof granted to the Secured Party herein or otherwise. Upon
the payment in full of the Obligations, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Grantor. Upon any such termination, the Secured Party will, at the
Grantor's expense, execute and deliver to the Grantor such documents as the
Grantor shall reasonably request to evidence such termination.
SECTION 19. Governing Law; Terms. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Virginia, except to the extent that the validity or perfection of the
security interest hereunder, or remedies hereunder, in respect of any
particular Collateral are governed by the laws of a jurisdiction other than
the Commonwealth of Virginia. Unless otherwise defined herein or in the
Loan Agreement, terms used in Article 9 of the Uniform Commercial Code in
the Commonwealth of Virginia are used herein as therein defined.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunder duly authorized as of the
date first above written.
TWB GOURMET FOODS, INC.
By: CHRIS L. ST. JAMES
(Signature)
President
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Description of Capital Transaction Years ended
- ----------------------------------------------------------------------------------------------------------
December 30, December 31, December 25, December 26, December 28,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Shares issued and outstanding
December 29, 1990 1,019,781 1,019,781 1,019,781 1,019,781 1,019,781
Acquisition of treasury stock (462) (462) (462) (462) (115)
Acquisition of treasury stock (2,926) (2,926) (2,926) (2,194) -
Acquisition of treasury stock (2,541) (2,541) (1,578) - -
Acquisition of treasury stock (5,334) (2,622) - - -
Acquisition of treasury stock (750) - - - -
--------- --------- --------- --------- ---------
Weighted average number of
shares outstanding 1,007,768 1,011,230 1,014,815 1,017,125 1,019,666
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Note:
The effects of the treasury stock transactions on the weighted average
number of shares outstanding are Clculated as follows:
1991
- ----
462 shares times 91 days divided by 364 days equals 115.
1992
- ----
2,926 shares times 273 days divided by 364 days equals 2,194.
1993
- ----
2,541 shares times 226 days divided by 364 days equals 1,578.
1994
- ----
2,934 shares times 280 days divided by 371 days equals 2,215.
2,400 shares times 63 days divided by 371 days equals 407.
1995
- ----
3,000 shares times 91 days divided by 364 days equals 750.
2,991 shares times 0 days divided by 364 days equals 0.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
- ------------------------------
Name of Corporation State of Incorporation
------------------- ----------------------
Dutterer's of Manchester Corporation Maryland
TWB Gourmet Foods, Inc. Virginia
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DOUGHTIE'S FOODS, INC.
AND ITS SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-30-1995
<CASH> 513
<SECURITIES> 0
<RECEIVABLES> 5,762
<ALLOWANCES> 333
<INVENTORY> 4,849
<CURRENT-ASSETS> 11,564
<PP&E> 9,512
<DEPRECIATION> 5,823
<TOTAL-ASSETS> 16,086
<CURRENT-LIABILITIES> 2,045
<BONDS> 6,822
<COMMON> 1,003
0
0
<OTHER-SE> 6,300
<TOTAL-LIABILITY-AND-EQUITY> 16,086
<SALES> 76,586
<TOTAL-REVENUES> 76,586
<CGS> 63,013
<TOTAL-COSTS> 77,239
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 462
<INCOME-PRETAX> (1,115)
<INCOME-TAX> 97
<INCOME-CONTINUING> (1,212)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,212)
<EPS-PRIMARY> (1.20)
<EPS-DILUTED> (1.20)
</TABLE>
