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
For the fiscal year ended December 28, 1996
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-----------------
------------------
Commission file number 0-7166
DOUGHTIE'S FOODS, INC.
(Exact name of Registrant as specified in its charter)
<PAGE>
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: (757) 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
------- -------
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.
-------
Aggregate market value of voting stock held by non-affiliates of the registrant
as of March 24, 1997 (See Note, Item 5, for explanation of calculation):
$ 1,681,321
----------------
Indicate the number of shares of Common Stock outstanding as of March 24, 1997:
998,052
-----------------
DOCUMENTS INCORPORATED BY REFERENCE
<PAGE>
Part III incorporates by reference information from the registrant's proxy
statement for its annual meeting of stockholders scheduled for May 22, 1997.
<PAGE>
PART I.
- -------
ITEM 1. BUSINESS
- ------------------
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 have been historically 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
sale in February 1997 of certain assets related to the Company's manufacture of
barbecue and chili products (see below), reflects the Company's determination to
divest itself of nonprofitable operations so that it can concentrate on its
primary business of distributing food products 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 remaining manufactured products,
consisting of a variety of delicatessenstyle meats, are currently sold through
brokers and marketed in approximately 30 states. These products and related
manufacturing equipment are subject to being sold pursuant to an Asset Purchase
Agreement entered into by the Company as of March 18, 1997. Upon the closing of
this transaction, scheduled for the end of March or early April 1997, the
Company will no longer be engaged in the manufacture of food products, but will
continue to distribute its traditional "Doughtie's" label products pursuant to
product supply agreements with the respective buyers of the manufacturing
business.
In February 1997, the Company sold to The Smithfield Ham and Products
Company, Incorporated ("Smithfield") certain assets related to the manufacture
of barbecue and chili products. The agreement with Smithfield provides that the
Company will continue to purchase barbecue and chili products from Smithfield
for a period of five years for distribution to its commercial and institutional
customers. Smithfield has been given a limited license to use the Doughtie's
trademark in connection with retail sales of the barbecue and chili products.
The total sale price was approximately $840,000 in cash. The Company anticipates
a small gain from the transaction.
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. The note was paid in full in November 1996. The
assets were sold primarily at net book value, except for finance receivables
which were discounted by ten percent. The net loss
1
<PAGE>
on the sale, including abandoned assets and other write-offs, was approximately
$96,000.
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.
Until September 1996, the Company owned seventy percent of the outstanding
capital stock of TWB, and the remaining thirty percent of TWB was owned by the
St. James, who managed the business. During the fourth quarter of 1995, the
Company determined to exit the gourmet foods business as TWB had 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. On September 6, 1996, the
Company sold certain assets of TWB and discontinued manufacturing of the
associated gourmet food products. The terms of the sale were a $30,000 cash down
payment, $20,000 assigned accounts receivable and $137,000 of free trade credit
from the buyer for a total sale price of $187,000. No gain or loss was
recognized as a result of this sales transaction. In conjunction with the
transaction, the St. James surrendered their stock in TWB and are no longer
affiliated with TWB, which is now wholly owned by the Company.
On August 28, 1996, the Company merged its Dutterer's of Manchester
Corporation subsidiary into TWB Gourmet Foods, Inc. The purpose of the merger
was to simplify corporate structure.
Products
- --------
The Company has operated processing and manufacturing facilities in
Portsmouth, Virginia. Prior to the sale to Smithfield in February 1997, these
facilities were primarily involved in the manufacture of pork and beef barbecue,
hot dog sauce, meat loaf, chili and other cooked meat products. Since the sale
to Smithfield, the only products being manufactured are delicatessen-style
meats. The Company's subsidiary, TWB, also manufactured and sold a line of
specialty gourmet food products until that portion of the business was sold in
September 1996. See ITEM I, PART 1, BUSINESS:
General.
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 offers to its institutional and commercial customers a broad
range of food items including meat products, 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
2
<PAGE>
amount of cooking and processing equipment. Availability of such items is
generally good. The Company has no material long-term contract with respect to
the supply of 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 or 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. 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
- ---------
With the exception of the United States Department of Defense, whose total
purchases were $9.3 million or 11.6% of revenue, none of the Company's customers
accounted for 10% or more of the Company's consolidated revenue in fiscal year
1996.
Competition
- -----------
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 in its commercial and institutional food distribution operations.
However, meeting competition has become increasingly difficult with respect to
manufacturing and food processing, and that difficulty has driven the Company's
focus away from manufacturing and toward distribution.
3
<PAGE>
Research and Development
- ------------------------
Due to the sale of the barbecue and chili business in February 1997, the
Company is discontinuing research and development.
Backlog
- -------
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 28, 1996, the Company had approximately 240 employees.
Approximately 58 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 expires in October, 1998.
Following the sale of certain manufacturing assets to The Smithfield Ham and
Products Company, Incorporated in February 1997, the number of employees was
reduced to approximately 203, of which approximately 38 are members of the
referenced union.
Executive Officers
- ------------------
STEVEN C. HOUFEK, 48, is the Company's President and Chief Executive
Officer. Mr. Houfek has been President of the Company since August 1992 and was
named Chief
4
<PAGE>
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, 67, 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., 51, 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, 33, 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, 53, has served as Vice President - Purchasing since
February 1994. Prior to that time, he was Director of Purchasing.
WILLIAM E. MOODY, JR., 47, has been Vice President - Sales since February
1994. Prior to that time, he was Sales Manager.
JERRY D. NIXON, 40, was elected Vice President - Government Contract
Operations, in February 1996. Mr. Nixon served as Vice President - Operations
from February 1994 until February 1996. Prior to that time, Mr. Nixon was
Operations Manager.
WILLIAM G. RATLIFF, 41, was elected Vice President - Operations 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, 29, was elected Vice President -Business Development in
February 1996. Mr. Horton has served as a district sales manager since October
1995. Prior to that time, he was Program Accounts Manager.
---------------------------
Forward-Looking Information
---------------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This Form 10-K, the Company's Annual
Report to Shareholders, any Form 10-Q or any Form 8-K of the Company or any
other written or oral statements made by or on behalf of the Company may include
forward-looking statements which reflect the Company's current views with
respect to future events and financial performance. Forward-looking statements
are inherently subject to the uncertainties of future events, so that actual
results could differ materially from expectations which are stated or implied
in, or could be inferred from such forwardlooking statements. Among the kinds of
uncertainties that can affect and should be considered in evaluating the
Company's forward-looking statements are uncertainties related to economic
conditions, government and regulatory policies, customer plans and commitments,
changes in the capital markets affecting the Company's capital structure and
cost of capital, and the Company's competitive environment. Readers are
therefore cautioned not to place undue reliance on any forward-looking
5
<PAGE>
statement, which speaks only as of the date such statement is made.
ITEM 2. PROPERTIES
- --------------------
The principal facilities of the Company and its subsidiary 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 three loans are secured by a lien on this property.
(b) The Company's wholly-owned subsidiary, TWB Gourmet Foods, Inc., 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 also owned by the Subsidiary. In December, 1991, the Company
transferred the operations of its Manchester facility to its Portsmouth,
Virginia plant. The Company's three loans are secured by a lien on this
property.
(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 $2,275.
(d) The Company leases approximately 35,600 square feet of freezer, cooler,
warehouse and office space in a warehouse building in Norfolk, Virginia, under a
lease which calls for monthly rental payments of $19,000. This lease expires in
February 1998, and includes three one-year renewal options.
ITEM 3. LEGAL PROCEEDINGS
- ---------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
None.
PART II.
- --------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
- -----------------------------------------------------------
6
<PAGE>
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
and NASDAQ.
First Quarter Second Quarter
-------------- --------------
High Low High Low
----- ----- ----- -----
1995 4-1/4 4-1/4 4-1/2 3-1/2
1996 4-1/4 3-1/4 4-1/4 3-1/4
Third Quarter Fourth Quarter
-------------- --------------
High Low High Low
----- ----- ----- -----
1995 4-1/2 3-1/2 4-3/8 3-3/8
1996 4-3/4 3 5 4
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 24, 1997, there were 265 record holders of the Common Stock.
Dividends
- ---------
The cash dividends declared per common share by quarter for the two most
recent fiscal years are summarized below.
1996 1995
----- -----
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 256 non-affiliates of
the registrant as of March 24, 1997, 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 and by members of the Doughtie family was subtracted
from 998,052, the total number of shares outstanding on that date. The resulting
figure was then multiplied by $4.375, 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."
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- ---------------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 80,632,688 $ 76,585,835 $ 73,368,742 $70,771,064 $ 70,732,054
Income (loss) before
cumulative effect of
change in accounting
for income taxes $ 927,820 $ (1,212,284) $ 364,073 $ 141,109 $ (90,403)
Cumulative effect of
change in accounting
for income taxes $ - $ - $ - $ 134,000 $ -
Net income (loss) $ 927,820 $ (1,212,284) $ 364,073 $ 275,109 $ (90,403)
Weighted average number
of shares outstanding 1,000,312 1,007,768 1,011,230 1,014,815 1,017,125
Earnings (loss) per share
before cumulative effect
of change in accounting
for income taxes $ .93 $ (1.20) $ .36 $ .14 $ (.09)
Cumulative effect per
share of change in
accounting for income
taxes $ - $ - $ - $ .13 $ -
Net earnings (loss) per
share $ .93 $ (1.20) $ .36 $ .27 $ (.09)
Cash dividends per
share $ .16 $ .16 $ .16 $ .16 $ .16
Total assets $ 15,932,286 $ 16,086,077 $ 16,797,863 $14,838,266 $ 15,832,924
Long-term debt, less
current portion $ 5,065,000 $ 6,688,334 $ 5,031,667 $ 4,390,000 $ 5,353,334
Total stockholders'
equity $ 8,054,907 $ 7,303,060 $ 8,700,431 $ 8,519,329 $ 8,416,702
Stockholders' equity
per share $ 8.07 $ 7.28 $ 8.63 $ 8.40 $ 8.28
</TABLE>
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------------------------------
Results of Operations
- ---------------------
Net sales of the Company increased 5.3% in 1996. For the 1996 fiscal year,
the Company reported net sales of $80.6 million compared to net sales of $76.6
million in 1995. Net sales in 1995 were 4.4% ahead of the 1994 sales of $73.4
million. Sales under a contract with the United States Department of Defense of
$9.3 million more than offset a decrease in sales of $2.0 million resulting from
the sale of the consumer operation in the third quarter of 1995 and $0.8 million
from the sale of the gourmet food operation in the third quarter 1996. The sales
increase was not experienced uniformly throughout the Company as the
manufacturing business continued the negative sales trend experienced over the
last several years.
The Company's gross profit margin (gross profit as a percentage of net
sales) decreased from 17.7% in 1995 to 16.3% in 1996. The elimination of the
consumer division with its higher mark-up was the primary cause of this decline.
The Company's gross profit margin decreased from 19.5% in 1994 to 17.7% in 1995.
The overhead costs associated with the start-up of the gourmet food operation
and increased manufacturing costs associated with a new product line held down
the gross profit margin in 1995.
The Company's selling, general and administrative expenses, expressed as a
percentage of net sales decreased to 14.8% in 1996 from 18.6% in 1995. The
expenses for 1995 increased from 18.2% in 1994. The sale of the consumer
operation was the primary cause of the decline, along with a $400,000 decrease
in health and commercial insurance. The remainder of the decline was due to a
$763,000 pretax charge the Company recorded during the fourth quarter of 1995 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 incurred substantial net operating losses since its inception in
1994.
The increase in selling, general and administrative expenses in 1995 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 $469,000 in 1996 compared to $462,000 in 1995 and
$276,000 in 1994. An increased borrowing level was the cause 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 benefit was $202,000 for 1996 compared to income tax expense of
$97,000 for 1995 and $323,000 for 1994. During the fiscal year ended December
28, 1996, the Company eliminated the valuation allowance related to the net
operating losses of a subsidiary as a result of utilization of the net operating
loss carryforward becoming more likely than not.
9
<PAGE>
The Company reported net income of $928,000 or $0.93 per share for 1996
compared to a net loss of $1,212,000 or $1.20 per share for 1995 and net income
of $364,000 or $.36 per share in 1994. Losses incurred by TWB in 1995 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:
1996 1995 1994
---- ---- ----
Total debt to total debt plus
stockholders' equity .41 .48 .37
Current assets to current
liabilities 4.36 5.66 4.11
Inventory turnover
(cost of goods sold
to ending inventory) 15.00 12.99 13.06
The ratio of debt to total debt plus stockholders' equity decreased from
.48 at December 30, 1995 to .41 at December 28, 1996 due to improved financial
results which enabled the Company to reduce its long-term debt. The ratio of
current assets to current liabilities decreased to 4.36 at December 28, 1996
from 5.66 at December 30, 1995, primarily due to increases in the current
portion of long-term debt and income taxes payable.
The inventory turnover rate increased from 12.99 in 1995 to 15.00 in 1996,
as a result of increased management focus on reducing inventory levels, due
primarily to warehouse constraints.
The Company supplements its cash requirements by borrowing against existing
credit lines. As of December 28, 1996, the Company had $4,185,000 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.
10
<PAGE>
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.
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 was paid in November 1996. 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.
Capital Resources
- -----------------
The Company's debt financing at December 28, 1996, consisted of the
following:
1. A $7,500,000 revolving bank note at prime. The prime rate at December 28,
1996 was 8.25%. The note is due three years after the annual renewal date,
currently July, 1998, subject to annual renewal. As of December 28, 1996, the
Company had borrowed $3,315,000 against this credit line and had $4,185,000 of
additional borrowing capacity.
2. 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 28, 1996, the Company had fully
utilized the Industrial Revenue Bond and the outstanding balance was $733,333.
3. A $1,750,000 bank term loan at prime plus 0.50%. The loan is to be repaid in
quarterly installments of $100,000. As of December 28, 1996, the outstanding
balance was $1,550,000. The funds were used to finance the increased inventory
and accounts receivable required to service a one-year contract awarded to the
Company in January 1996 by the United States Department of Defense to furnish
food items to various military installations. The contract contains three yearly
renewal options and was renewed for 1997. The United States Department of
Defense had estimated annual sales volume to be approximately $19 million.
Actual sales volume for fiscal 1996 was $9.3 million.
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.
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
----
Financial Statements
Report of Independent Accountants 13
Consolidated Statements of Income for the three
years ended December 28, 1996 14
Consolidated Balance Sheets at December 28, 1996
and December 30, 1995 15
Consolidated Statements of Stockholders' Equity
for the three years ended December 28, 1996 16
Consolidated Statements of Cash Flows for the
three years ended December 28, 1996 17
Notes to Consolidated Financial Statements 18
Financial Statement Schedule
II - Consolidated Valuation and Qualifying Accounts 32
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.
12
<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 28, 1996 and December
30, 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 28, 1996, 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.
PRICE WATERHOUSE LLP
(Signature)
Norfolk, Virginia
February 24, 1997, except
for Note 10, which is as of
February 28, 1997
13
<PAGE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 28, December 30, December 31,
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ 80,632,688 $ 76,585,835 $ 73,368,742
Cost of sales 67,481,372 63,012,874 59,075,114
------------- ------------- -------------
Gross profit 13,151,316 13,572,961 14,293,628
------------- ------------- -------------
Selling, general and administrative
expenses 11,956,604 14,225,899 13,331,347
Interest expense 468,652 462,231 275,609
------------- ------------- -------------
12,425,256 14,688,130 13,606,956
------------- ------------- -------------
Income (loss) before income taxes 726,060 (1,115,169) 686,672
Income tax expense (benefit) (201,760) 97,115 322,599
------------- ------------- -------------
Net income (loss) $ 927,820 $ (1,212,284) $ 364,073
------------- ------------- -------------
------------- ------------- -------------
Earnings (loss) per share $ .93 $ (1.20) $ .36
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to consolidated financial statements.
14
<PAGE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 372,687 $ 513,319
Accounts receivable, net:
Trade 6,924,656 5,758,536
Officers and employees - 3,323
Inventories 4,497,699 4,849,104
Deferred income taxes 386,271 193,339
Prepaid expenses and other current assets 91,042 246,679
------------- --------------
Total current assets 12,272,355 11,564,300
------------- --------------
Property, plant and equipment - at cost:
Land 280,827 280,827
Buildings 4,112,608 4,290,986
Delivery equipment 347,242 375,408
Plant and refrigeration equipment 4,170,355 3,869,561
Office equipment 699,019 695,034
Leasehold improvements 6,062 -
-------------- ---------------
9,616,113 9,511,816
Less - accumulated depreciation 6,047,739 5,823,208
------------- --------------
3,568,374 3,688,608
------------- --------------
Other assets 91,557 833,169
------------- --------------
$ 15,932,286 $ 16,086,077
------------- --------------
------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 533,333 $ 133,333
Accounts payable 1,631,114 1,547,107
Income taxes payable 446,775 -
Accrued salaries, commissions and bonuses 140,617 76,706
Accrued employee group insurance - 174,026
Other accrued liabilities 60,540 113,580
------------- --------------
Total current liabilities 2,812,379 2,044,752
Long-term debt - less current portion 5,065,000 6,688,334
Deferred income taxes - 49,931
------------- --------------
Total liabilities 7,877,379 8,783,017
------------- --------------
Stockholders' equity:
Common stock - $1 par value; authorized
2,000,000 shares, issued and outstanding
998,052 shares at December 28, 1996 and
1,002,527 shares at December 30, 1995 998,052 1,002,527
Additional paid-in capital 2,812,171 2,823,597
Retained earnings 4,244,684 3,476,936
------------- --------------
Total stockholders' equity 8,054,907 7,303,060
------------- --------------
$ 15,932,286 $ 16,086,077
------------- --------------
------------- --------------
Commitments (Note 7)
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
DOUGHTIE'S FOODS, INC. 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 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
Cash dividends ($.16 per share) - - (160,072) (160,072)
Net income for the year ended
December 28, 1996 - - 927,820 927,820
Acquisition of treasury stock,
at cost - 4,475 shares (4,475) (11,426) - (15,901)
----------- ----------- ----------- -----------
Balances at December 28, 1996 $ 998,052 $ 2,812,171 $ 4,244,684 $ 8,054,907
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 28, December 30, December 31,
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 927,820 $(1,212,284) $ 364,073
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operations:
Depreciation 469,445 675,681 587,871
Loss (gain) on sale of property,
plant and equipment (99,129) 300,644 (12,689)
(Increase) decrease in assets:
Accounts receivable, net (1,162,797) 373,661 248,819
Inventories 351,405 (327,351) (783,347)
Deferred income taxes (192,932) 54,957 (30,283)
Prepaid expenses and other current
assets 155,637 (106,793) 84,373
Other assets 741,612 (697,634) (71,456)
Increase (decrease) in liabilities:
Current portion of long-term debt 400,000 - -
Accounts payable 84,007 (547,992) 783,597
Income taxes payable 446,775 (399,504) 269,125
Accrued salaries, commissions
and bonuses 63,911 (51,211) 104,550
Accrued employee group insurance (174,026) (41,383) 36,346
Other accrued liabilities (53,040) 67,977 (61,141)
Deferred income taxes, long-term (49,931) 1,031 4,351
------------ ----------- -----------
1,908,757 (1,910,201) 1,524,189
------------ ----------- -----------
Cash flows from investing activities:
Additions to property, plant and
equipment (250,782) (599,763) (873,915)
Proceeds from sale of property, plant
and equipment 700 190,496 13,951
------------ ----------- -----------
(250,082) (409,267) (859,964)
------------ ----------- -----------
Cash flows from financing activities:
Long-term borrowings 1,750,000 1,790,000 775,000
Reductions of long-term debt (3,373,334) (133,333) (133,333)
Cash dividends (160,072) (161,123) (161,769)
Acquisition of treasury stock (15,901) (23,964) (21,202)
------------ ----------- -----------
(1,799,307) 1,471,580 458,696
------------ ----------- -----------
Net increase (decrease) in cash (140,632) (847,888) 1,122,921
Cash at beginning of year 513,319 1,361,207 238,286
------------ ----------- -----------
Cash at end of year $ 372,687 $ 513,319 $ 1,361,207
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See notes to consolidated financial statements.
17
<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 wholly-owned subsidiary in 1996 (and its
majority-owned and wholly-owned subsidiaries in 1995 and 1994). 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 and disclosure of
contingent 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
Leasehold improvements 1 to 7 years
18
<PAGE>
Income taxes
- ------------
The Company files a consolidated federal income tax return. Prior to the
acquisition of the minority interest during 1996, one subsidiary was required to
file a separate return.
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes," which
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 changes in deferred tax assets
and liabilities.
Earnings Per Share
- ------------------
Earnings per share are based on the weighted average number of shares
outstanding.
19
<PAGE>
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable are net of allowances for doubtful accounts as follows:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
------------------- --------------------
<S> <C> <C>
Trade accounts receivable $ 7,266,134 $ 6,091,844
Allowances for doubtful accounts (341,478) (333,308)
------------------- --------------------
$ 6,924,656 $ 5,758,536
------------------- --------------------
------------------- --------------------
</TABLE>
NOTE 3 - INVENTORIES
Inventories used in determining cost of sales are as follows:
<TABLE>
<CAPTION>
Raw Finished
Total materials products
------------- ------------- -------------
<S> <C> <C> <C>
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
December 28, 1996 $ 4,497,699 $ 549,161 $ 3,948,538
</TABLE>
20
<PAGE>
The differences between FIFO and LIFO inventories are as follows:
<TABLE>
<CAPTION>
December 28, December 30, December 31, December 25,
1996 1995 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FIFO cost $ 5,517,080 $ 5,680,063 $ 5,197,592 $ 4,509,306
LIFO reserves (1,019,381) (830,959) (675,839) (770,900)
------------- ------------- ------------- -------------
LIFO cost $ 4,497,699 $ 4,849,104 $ 4,521,753 $ 3,738,406
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The $188,422 change in LIFO reserves in 1996 decreased net income and earnings
per share by approximately $121,000 and $.12, respectively. 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.
21
<PAGE>
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
December 28, December 30,
1996 1995
------------- ------------
Long-term revolving bank note $ 3,315,000 $ 5,955,000
Bank term loan 1,550,000 -
Industrial Revenue Bond 733,333 866,667
------------ ------------
5,598,333 6,821,667
Less - current portion 533,333 133,333
------------- ------------
Noncurrent portion $ 5,065,000 $ 6,688,334
------------- ------------
------------- ------------
Principal payments are due as follows: 1997 - $533,333; 1998 - $3,848,333; 1999
- - $533,333; 2000 - $483,333; 2001 - $133,333; thereafter - $66,668.
The Company has a $7,500,000 revolving bank note at prime. The prime rate at
December 28, 1996 was 8.25%. The note is due three years after the annual
renewal date, currently July 1998, subject to annual renewal. The amount
available under this line is limited to the sum of 85% of qualifying accounts
and notes receivable and 20% of qualifying inventory on hand. The Company had
$4,185,000 of additional borrowing capacity available on this credit line at
December 28, 1996.
The Company has a $1,750,000 bank term loan with an outstanding balance of
$1,550,000 at prime plus .50%. The loan is payable in quarterly installments of
$100,000 plus interest through January 1, 2001.
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 $468,652, $462,231, and $292,104 in 1996, 1995
and 1994, respectively.
The three loans are secured by all accounts and notes receivable, inventories,
contract rights and property, plant and equipment of the consolidated group.
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 met for 1996.
NOTE 5 - 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
22
<PAGE>
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 substantially 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 1996, 1995 and
1994 were $91,517, $107,365 and $128,007, respectively.
NOTE 6 - INCOME TAX EXPENSE
The provision for income taxes is based on taxes currently payable and the
changes in deferred tax assets and liabilities.
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Current federal $ 52,109 $ 27,169 $ 293,793
Current state (11,006) 13,958 54,738
Deferred federal (201,635) 45,443 (21,896)
Deferred state (41,228) 10,545 (4,036)
------------- ------------- -------------
$ (201,760) $ 97,115 $ 322,599
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
23
<PAGE>
The effective income tax rates vary from the statutory U.S. federal income tax
rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------------- --------------------
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 $ 246,860 34.0% $(379,157) (34.0)% $ 233,469 34.0%
State income taxes, net
of federal income tax
benefit 31,148 4.3 16,172 1.5 33,463 4.9
Fuel tax credit (15,278) (2.1) (16,975) (1.5) (16,975) (2.5)
Nonrecognition
(recognition) of
subsidiary net
operating loss (467,954) (64.5) 472,546 42.3 52,798 7.7
Other 3,464 .5 4,529 .4 19,844 2.9
---------- ----- --------- ----- --------- ------
$ (201,760) (27.8)% $ 97,115 8.7% $ 322,599 47.0%
---------- ----- --------- ----- --------- ------
---------- ----- --------- ----- --------- ------
</TABLE>
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Simplified LIFO differences $ 78,065 $ 63,636
Capitalized inventory cost 23,539 22,390
Allowances for doubtful accounts 130,752 104,063
Sales leaseback - 3,250
Net operating loss of subsidiary 201,627 525,344
------------- -------------
Gross deferred tax asset 433,983 718,683
Deferred tax asset valuation allowance - (525,344)
Involuntary conversion (47,712) (49,931)
------------- -------------
Net deferred tax asset $ 386,271 $ 143,408
------------- -------------
------------- -------------
</TABLE>
24
<PAGE>
During the fiscal year ended December 28, 1996, the Company eliminated the
valuation allowance related to the net operating losses of a subsidiary as a
result of utilization of the net operating loss carryforward of the subsidiary
becoming more likely than not. The net operating losses begin expiring in the
year 2009.
Cash paid (refunded) for income taxes totaled $(185,033), $574,876 and $55,705
in 1996, 1995 and 1994, respectively.
NOTE 7 - 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 has been prorated and recognized over the life of the
lease. A new seven-year full service operating lease covering thirty-six new
trucks and ten new trailers was entered into in January 1996. It became
effective at the conclusion of the old lease. The new lease provides for
increases in rentals based on increases in the Consumer Price Index.
Minimum annual rentals under the aforementioned lease are set forth in the table
below. These minimum rental commitments do not include contingent rentals which
are based on usage.
Trucks
and
Trailers
-------------
1997 $ 549,564
1998 527,724
1999 527,724
2000 527,724
2001 527,724
2002-2003 791,586
-------------
$ 3,452,046
-------------
-------------
Total rental expense charged to consolidated operations in 1996, 1995 and 1994
was $1,043,642, $1,004,855 and $1,050,118, respectively. Rental expense in 1996,
1995 and 1994 included contingent rentals of approximately $396,191, $360,005
and $332,912, respectively.
25
<PAGE>
NOTE 8 - SALE OF ASSETS
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 of $130,055 was included in selling, general and administrative
expenses.
On September 3, 1995, the Company sold substantially all of the assets of the
Home Food Service operation to Value Added Food Services, Inc., a Maryland
corporation ("VAFS"), and ceased operations in the consumer portion of its
business due to unprofitability. Vernon W. Mules, Chairman of the Board of the
Company, and his wife, are the principal stockholders of VAFS. All finance
receivables, inventory, delivery equipment, processing equipment and office
equipment were sold. The total sale price was $1,154,173 with a $115,417 cash
down payment and the balance of $1,038,756 in the form of a note secured by the
assets sold and personal guarantee of the Chairman. The note was paid in full in
1996, including all accrued interest at prime. 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. (TWB) 70% joint
venture to estimated net realizable value and to provide for other costs to exit
the business. TWB incurred net operating losses since inception in the fourth
quarter of 1994; the 1995 net operating loss approximated $1,390,000 including
the $763,000 charge.
On August 28, 1996, the Company merged its Dutterer's of Manchester Corporation
subsidiary into TWB Gourmet Foods, Inc. in order to streamline operations.
Simultaneously, the Company acquired the remaining interest in TWB from the
minority stockholder.
On September 6, 1996, the Company sold certain assets of TWB and discontinued
manufacturing of the associated gourmet food products. The terms of the sale
were a $30,000 cash down payment, $20,000 assigned accounts receivable and
$136,829 of free trade credit from the buyer for a total sale price of $186,829.
No gain or loss was recognized as a result of this sales transaction.
26
<PAGE>
NOTE 9 - 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>
1996:
First $ 15,979,850 $ 2,664,741 $ 6,966 $ .01
Second 22,457,784 3,920,723 413,453 .41
Third 22,017,932 3,428,855 61,906 .06
Fourth 20,177,122 3,136,997 445,495 .45
------------ ------------ ------------ ------------
$ 80,632,688 $ 13,151,316 $ 927,820 $ .93
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
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)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Unusual items affecting 1996 and 1995 net income in the above quarterly data are
discussed in Notes 6 and 8.
27
<PAGE>
NOTE 10 - SUBSEQUENT EVENT
On February 28, 1997, the Company sold the assets of its manufacturing
division's barbecue and chili business for approximately $840,000 in cash.
Barbecue and chili sales accounted for less than 5% of consolidated 1996 sales
volume. The Company expects to realize a small pretax gain from this
transaction.
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 22,
1997.
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 22, 1997.
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 22, 1997.
27
<PAGE>
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 22, 1997.
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
2(a)(1). Articles of Merger (with attached Plan of Merger) Merging Dutterer's
of Manchester Corporation (a Maryland corporation) and TWB Gourmet
Foods, Inc. (a Virginia corporation), filed with the Virginia State
Corporation Commission on August 28, 1996.
2(a)(2). Articles of Merger Merging Dutterer's of Manchester Corporation Into
TWB Gourmet Foods, Inc., filed with the Maryland State Department of
Assessments and Taxation on August 27, 1996.
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 (incorporated by reference to Exhibit 3(b) to
the Company's Annual Report on Form 10-K for the year ended December
30, 1995).
4(a). Amended and Restated Credit Agreement dated as of June 14, 1996,
between the Company and Crestar Bank relating to a $7,500,000
revolving credit commitment and a $1,750,000 term loan.
28
<PAGE>
4(b)(1). Commercial Note dated June 14, 1996, made by the Company in favor of
Crestar Bank in the principal amount of $7,500,000.
4(b)(2). Commercial Note dated June 14, 1996, made by the Company in favor of
Crestar Bank in the principal amount of $1,750,000.
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 11, 1996 between the Company and the Bakery,
Confectionery and Tobacco Workers' International Union, Local No. 66.
10(b)(1). Lease Agreement Dated January 26, 1996, Between Keen Leasing, Inc.,
Lessor, and the Company, Lessee, relating to the leasing of certain
trucks (incorporated by reference to Exhibit 10(b)(3) to the Company's
Annual Report on Form 10-K for the year ended December 30, 1995).
10(c)(1). Security Agreement dated as of June 14, 1996, made by the Company to
Crestar Bank granting a security interest in accounts, inventory,
equipment, and general intangibles.
10(c)(2). Security Agreement dated as of June 14, 1996, made by Dutterer's of
Manchester Corporation to Crestar Bank granting a security interest in
a promissory note dated September 3, 1995, made by Value Added Food
Services, Inc., payable to the order of the holder in the original
principal amount of $1,038,756.
10(c)(3). Guaranty Agreement dated as of June 14, 1996, made by Dutterer's of
Manchester Corporation for the benefit of Crestar Bank.
10(c)(4). Assignment dated as of June 14, 1996, made by the Company to Crestar
Bank assigning as a security interest the Company's rights to receive
all monies under Contract No.SP0300-967-D-2900 dated January 26, 1996
between the Company and the United States Department of Defense.
10(c)(5). Credit Line Deed of Trust dated as of June 14, 1996, made by the
Company for the benefit of Crestar Bank relating to certain property
located at 2410 and 2415 Wesley Street and 149 Chautauqua Avenue,
Portsmouth, Virginia, securing the
maximum principal amount of $3,025,000.
10(c)(6). Indemnity Deed of Trust dated as of June 12, 1996, made by Dutterer's
of Manchester Corporation for the benefit of Crestar Bank relating to
certain property located in Carroll County, Maryland, securing the
maximum principal amount of $1,200,000.
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
29
<PAGE>
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). Asset Purchase Agreement dated as of January 30, 1997, among the
Company, The Smithfield Ham and Products Company, Incorporated (the
"Buyer"), The Smithfield Companies, Inc., Vernon W. Mules, and Steve
Houfek, pursuant to which the Company agreed to sell the assets
connected with the manufacture of the Company's barbecue and chili
products.
10(e)(2). Product Supply Agreement dated as of February 28, 1997, between the
Company and The Smithfield Ham and Products Company, Incorporated
("Smithfield"), pursuant to which the Company agreed to purchase its
requirements of barbecue and chili products for a period of five
years.
10(e)(3). Trademark License Agreement dated as of February 28, 1997, between the
Company and The Smithfield Ham and Products Company, Incorporated
("Smithfield"), pursuant to which the Company granted a license to
Smithfield to use the Company's registered Doughtie's trademark in
connection with the manufacture and sale of certain barbecue, chili,
and related products.
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(f)(1) to the Company's Annual Report on Form
10-K for the year ended December 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(f)(2) to the Company's Annual Report on
Form 10-K for the year ended December 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(f)(3) to the Company's Annual
Report on Form 10-K for the year ended December 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(f)(4)to the Company's Annual Report on Form 10-K for the
year ended December 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(f)(5)to the Company's
Annual Report on Form 10-K for the year ended December 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(f)(6) to the Company's Annual Report on Form 10-K for the
year ended December 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(f)(7) to the Company's Annual Report on Form 10-K for the
year ended December 30, 1995).
30
<PAGE>
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(f)(8)to the Company's Annual
Report on Form 10-K for the year ended December 30, 1995).
10(g). Asset Purchase Agreement dated as of September 6, 1996 by and among
Loetitia Adam St. James and Chris L. St. James, TWB Gourmet Foods,
Inc. (TWB), CP Specialty Foods, Inc. (CP), and Doughtie's Foods, Inc.,
pursuant to which TWB sold certain assets to CP.
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 28, 1996.
31
<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 31, 1994 $ 160,307 $ 192,000 $ 90,361 $ 261,946
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 30, 1995 $ 261,946 $ 183,531 $ 112,169 $ 333,308
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 28, 1996 $ 333,308 $ 206,413 $ 198,243 $ 341,478
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Valuation account deducted from
asset to which it applies -
for doubtful finance receivables:
Year ended December 31, 1994 $ 185,433 $ (15,000) $ (8,460) $ 178,893
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 30, 1995 $ 178,893 $ (25,885) $ 153,008 $ -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 28, 1996 $ - $ - $ - $ -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
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
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 28, 1996 $ 525,344 $ (525,344) $ - $ -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
(A) Accounts written off during the year net of recoveries.
32
<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 27, 1997 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 27, 1997 STEVEN C. HOUFEK
(Signature)
President, Chief Executive
Officer and Director
Dated: March 27, 1997 MARION S. WHITFIELD, JR.
(Signature)
Senior Vice President and
Director (Principal
Financial and Accounting
Officer)
Dated: March 26, 1997 VERNON W. MULES
(Signature)
Director
Dated: March 26, 1997 JAMES F. CERZA, JR.
(Signature)
Director
Dated: March 26, 1997 WILLIAM R. WADDELL
(Signature)
Director
33
EXHIBIT 2 (a)(1)
ARTICLES OF MERGER
merging
DUTTERER'S OF MANCHESTER CORPORATION
(a Maryland corporation)
and
TWB GOURMET FOODS, INC.
(a Virginia corporation)
1. The Plan and Agreement of Merger (the "Plan") is attached hereto as
Exhibit A. The Board of Directors of each corporation which is a party to the
merger adopted the Plan and recommended its approval to its shareholders.
2. Subsequent to its adoption by each party's Board
of Directors:
a. The Plan was adopted by the unanimous
written consent of the shareholders of Dutterer's of Manchester
Corporation, a Maryland corporation.
b. The Plan was adopted by the unanimous
written consent of the shareholders of TWB Gourmet Foods, Inc., a
Virginia corporation.
3. The surviving corporation is TWB Gourmet Foods,
Inc., a Virginia corporation.
DATED: August 23, 1996
---------------
DUTTERER'S OF MANCHESTER CORPORATION
By: /s/ Vernon W. Mules
---------------------
Its: President
--------------------
TWB GOURMET FOODS, INC.
By: /s/ Chris L. St. James
---------------------
Its: President
--------------------
PLAN OF MERGER
<PAGE>
Merging
DUTTERER'S OF MANCHESTER CORPORATION, a Maryland Corporation
Into
TWB GOURMET FOODS, INC., a Virginia Corporation
1. Parties to the Merger; Effective Date. Pursuant to the provision of
the Virginia Stock Corporation Act, Dutterer's of Manchester Corporation
("Dutterer's"), a Maryland corporation shall be merged into TWB Gourmet Foods,
Inc. ("TWB"), a Virginia corporation. TWB will be the surviving corporation. The
merger (the "Merger") shall become effective on the date (the "Effective Date")
that the State Corporation Commission of Virginia issues a certificate of merger
(the "Certificate of Merger").
2. Capitalization of Merging Corporations. a. The authorized capital
stock of Dutterer's is 100,000 shares of common stock ("Dutterer's Common
Stock"), par value $1.00, 25,000 of which shares are validly issued and
outstanding, fully paid and non-assessable and all of which are owned by
Doughtie's Foods, Inc., a Virginia corporation ("Doughties").
b. The authorized capital stock of TWB is 23,500 shares of Class A
common stock and 1500 shares of Class B Common Stock, with no par value ("TWB's
Common Stock"), of which 3,500 shares of the Class A Common Stock and 1,500
shares of the Class B Common Stock are validly issued and outstanding, fully
paid and non-assessable.
3. Effect of the Merger. From and after the Effective Date i. TWB
shall continue its corporate existence as a Virginia corporation and the
separate existence of Dutterer's shall cease; ii. the Articles of Incorporation
and Bylaws of TWB in effect immediately prior to the Effective Date shall
continue to be its Articles of Incorporation and Bylaws until amended or
repealed in a manner provided by law; iii. each of the officers and directors of
TWB in office immediately prior to the Effective Date shall remain its officers
and directors, if they have not resigned as of the Effective Date, until their
respective successors are duly elected or appointed; iv. the former holders of
the shares of TWB's Common Stock and Dutterer's Common Stock shall only be
entitled to the rights provided in this Plan of Merger; and, v. TWB shall
succeed to all of Dutterer's assets and liabilities.
4. Conversion of Securities; Fractional Shares. Each share of
Dutterer's Common Stock issued and outstanding immediately prior to the
Effective Date, as a result of the Merger and without any action on the part of
the holder thereof, shall be cancelled and converted into 4/5 of a share of
Class A Common Stock in TWB.
5. Exchange of Shares. a. Immediately prior to the Effective Date, TWB
will make available to McGuire, Woods, Battle
<PAGE>
& Boothe, LLP (the "Exchange Agent"), for exchange pursuant to this Plan of
Merger, certificates representing the number of shares of TWB's Common Stock
which the holders of shares of Dutterer's Common Stock will be entitled to
receive as a result of the Merger.
b. As soon as practicable after the Effective Date the Exchange Agent
shall mail to each holder of record of Dutterer's Common Stock immediately prior
to the Effective Date a letter of transmittal which shall contain instructions
for exchanging shares of Dutterer's Common Stock for shares of TWB's Common
Stock. The letter of transmittal shall specify that title to any certificate
which formerly represented a share or shares of Dutterer's Common Stock
("Dutterer Stock Certificate") being submitted for exchange shall pass only upon
delivery of such certificate to, and receipt of such certificate by, the
Exchange Agent. Upon receipt by the Exchange Agent of a Dutterer Stock
Certificate, together with a duly executed letter of transmittal, the Dutterer
Stock Certificate shall be cancelled and the Exchange Agent shall deliver to the
former holder of such Dutterer Stock Certificate a certificate representing the
number of shares of TWB Common Stock to which such shareholder is entitled as a
result of the Merger.
c. Dutterer and TWB are empowered to adopt further rules and
regulations, not inconsistent with the provisions of this Plan of Merger,
regarding the surrender and exchange of the shares of Dutterer's Common Stock
outstanding immediately prior to the Effective Date including, without
limitation, rules and regulations for the exchange of shares issued without
certificates.
6. Transfer of Shares. a. If any shares of TWB's Common Stock are to
be issued in a name other than that in which the Dutterer's Common Stock
surrendered in exchange therefor was registered, it shall be a condition of the
issuance that the certificate or certificates representing such Dutterer's
Common Stock be in proper form for transfer, and that the person requesting the
exchange shall i. pay to the Exchange Agent any transfer or other taxes required
by reason of the issuance of shares of TWB's Common Stock in a name other than
that of the registered holder of the Dutterer's Common Stock surrendered or ii.
establish to the satisfaction of the Exchange Agent that such tax has been paid
or that no such tax is payable.
b. After the Effective Date there shall be no transfers on the stock
transfer books of Dutterer of the shares of Dutterer's Common Stock which were
issued and outstanding immediately prior to the Effective Date.
7. Post Merger Matters. After the Effective Date the former holders of
shares of Dutterer's Common Stock shall not be entitled to receive dividends or
other distributions or to vote or to exercise any rights as shareholders of TWB,
unless the
<PAGE>
shareholder owned TWB shares prior to the Effective Date until their shares of
Dutterer's Common Stock are surrendered for exchange pursuant to this Plan of
Merger, but, upon surrender of their shares of Dutterer's Common Stock, all
dividends and other distributions not paid to them because of this provision
shall be paid, without interest. All dividends or other distributions declared
after the Effective Date with respect to TWB's Common Stock, and payable to the
holders of record thereof after the Effective Date, which are payable to former
holders of Dutterer's Common Stock who have not surrendered such stock for
exchange pursuant to this Plan of Merger, shall be paid or delivered by TWB to
the Exchange Agent, in trust for the benefit of such holders.
8. Termination of Duties of Exchange Agent. All amounts held by the
Exchange Agent for the payment of dividends or other distributions to the
holders of unexchanged shares of Dutterer's Common Stock at the end of one year
from the Effective Date shall be delivered to TWB by the Exchange Agent, after
which time any former holders of Dutterer's Common Stock who have not exchanged
their shares shall, subject to applicable law, look only to TWB, as a general
creditor, for payment of such dividends or distributions, without interest.
9. Termination of Merger. The Boards of Directors of TWB and Dutterer
may terminate and abandon the Merger at any time prior to the issuance of the
Certificate of Merger, subject to any contractual rights, without further
shareholder action, in such manner as shall be agreed upon by such Boards of
Directors.
TWB GOURMET FOODS, INC.
By: /s/ Chris L. St. James
--------------------
Its: President
-------------------
DUTTERER'S OF MANCHESTER CORPORATION
By: /s/ Vernon W. Mules
---------------------
Its: President
--------------------
EXHIBIT (a)(2)
ARTICLES OF MERGER
MERGING DUTTERER'S OF MANCHESTER CORPORATION
INTO
TWB GOURMET FOODS, INC.
THESE ARTICLES OF MERGER, dated the 23rd day of August, 1996, pursuant to
Section 3-109 of the Corporations and Associations Article of the Annotated Code
of Maryland, as amended (hereinafter referred to as the "Code"), are entered
into by and between the corporations named in Article THIRD below, which are
hereinafter collectively referred to as the "Constituent Corporations".
FIRST: Each of the Constituent Corporations has agreed to effect a merger,
and the terms and conditions of the merger, the manner of carrying the same into
effect, and the manner and basis of converting or exchanging the shares of
issued stock of each of the Constituent Corporations into different stock or
other consideration pursuant to Section 3-103 of the Code shall be as set forth
herein.
SECOND: TWB Gourmet Foods, Inc., a Virginia corporation, shall be the
surviving corporation (hereinafter sometimes referred to as the "Surviving
Corporation") in the merger.
THIRD: The parties to these Articles of Merger are TWB Gourmet Foods, Inc.
, a corporation organized under the general corporation law of the Commonwealth
of Virginia on August 3, 1994 and Dutterer's of Manchester Corporation, a
Maryland corporation (hereinafter referred to as "Dutterer's"). The Surviving
Corporation is not qualified or registered to do business in Maryland.
FOURTH: As part of the merger, the Charter of the Surviving Corporation
shall be amended to increase the authorized capitalization of the Surviving
Corporation from 5,000 shares of common stock divided into 3,500 shares of Class
A Common Stock, with no par value, and 1,500 shares of Class B Common Stock,
also with no par value, to 25,000 shares of common stock divided into 23,500
shares of Class A Common Stock, with no par value, and 1,500 shares of Class B
Common Stock, also with no par value. Other than the amendment described in the
previous sentence, there shall be no amendment to the Charter of the Surviving
Corporation effected as part of the merger.
<PAGE>
FIFTH: Dutterer's has an authorized capitalization of 100,000 shares of a
single class of common stock, par value of One Dollar ($1.00) per share, of
which shares 25,000 are issued and outstanding; the aggregate par value of all
shares of all classes which Dutterer's has authority to issue being One Hundred
Thousand Dollars ($100,000).
The Surviving Corporation has an authorized capitalization of 5,000
shares of common stock divided into 3,500 shares of Class A Common Stock, with
no par value, and 1,500 shares of Class B Common Stock, also with no par value;
3,500 of Class A Common Stock and 1,500 shares of Class B Common Stock are
issued and outstanding.
SIXTH: The manner and basis of converting or exchanging the issued stock of
each of the Constituent Corporations into different stock or other consideration
pursuant to Section 3-103 of the Code shall be as follows:
(a) Each share of capital stock of the Surviving Corporation which is
issued and outstanding on the Effective Date (as defined in Article ELEVENTH
herein) shall remain outstanding as one share of capital stock of the Surviving
Corporation.
(b) Each share of the capital stock of Dutterer's issued and
outstanding immediately prior to the Effective Date, as a result of the merger
and without any action on the part of the holder thereof, shall be canceled and
converted into 4/5ths of a share of Class A Common Stock in the Surviving
Corporation.
(c) After the merger transaction described above shall have become
effective, each holder of an outstanding certificate or certificates theretofore
representing capital stock of Dutterer's shall surrender the same to the
Surviving Corporation and each such holder thereupon shall be entitled to
receive in exchange therefor a certificate or certificates representing the
number of shares of Class A Common Stock of the Surviving Corporation into which
the capital stock of Dutterer's represented by the certificate or certificates
so surrendered shall have been converted or exchanged by the provisions hereof.
Until such surrender, capital stock of Dutterer's shall be deemed for all
corporate purposes, other than the payment of dividends, to evidence ownership
of the number of full shares of Class A Common Stock of the Surviving
Corporation to be delivered with respect to such shares of such capital stock.
SEVENTH: The principal office of Dutterer's in the State of Maryland is
located in Baltimore City. Dutterer's owns an interest in land in located
Carroll County, Maryland.
EIGHTH: The principal office of the Surviving Corporation in its state of
organization is 2410 Wesley Street, Portsmouth, Virginia 23707. The name and
address in Maryland of the Resident Agent of the Surviving Corporation is
Michael L. Jennings, One North Charles Street, Suite 1300, Baltimore, Maryland
21201.
<PAGE>
NINTH: The board of directors of Dutterer's, by unanimous written consent
of the entire Board of Directors dated August __, 1996, duly adopted a
resolution declaring that a merger substantially upon the terms and conditions
set forth in these Articles of Merger was advisable and directing that the
Articles of Merger be submitted to Dutterer's sole stockholder for its approval.
The Articles of Merger were duly submitted to and approved by the unanimous
written consent of Dutterer's sole stockholder.
The board of directors of the Surviving Corporation, by unanimous
written consent dated August __, 1996, duly adopted a resolution declaring that
a merger substantially upon the terms and conditions set forth in these Articles
of Merger was advisable and directing that a Plan and Agreement of Merger (the
"Plan") setting forth such terms and conditions be submitted to the Surviving
Corporation's stockholders for their approval. The Plan was duly submitted to
and approved by the unanimous written consent of the Surviving Corporation's
stockholders.
TENTH: These Articles of Merger were duly advised, authorized and approved
in the manner and by the vote required by the Charter of the Surviving
Corporation and by the laws of the Commonwealth of Virginia and by the Charter
of Dutterer's and the laws of the State of Maryland.
ELEVENTH: Upon the Effective Date:
(a) the assets and liabilities of Dutterer's shall be taken up on the
books of the Surviving Corporation at the amount at which they shall at that
time be carried on the books of Dutterer's, subject to such adjustments, if any,
as may be necessary to conform to the Surviving Corporation's accounting
procedures; and
(b) all of the rights, privileges, immunities, powers, purposes and
franchises of Dutterer's and all property, real, personal and mixed, and all
debts due to Dutterer's on whichever account shall be vested in the Surviving
Corporation, and all property rights, privileges, immunities, powers, purposes
and franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of
Dutterer's, and all debts, liabilities, obligations and duties of Dutterer's
shall thenceforth attach to the Surviving Corporation and may be enforced
against it to the same extent as if said debts, liabilities, obligations and
duties had been incurred or contracted by it.
The merger provided for by these Articles of Merger shall become effective
(the "Effective Date") and the separate existence of Dutterer's, except insofar
as continued by statute, shall cease on the date which Articles of Merger are
approved, executed and acknowledged by Dutterer's and the Surviving Corporation,
as required by the laws of the Commonwealth of
<PAGE>
Virginia, and are filed with the State Corporation Commission of Virginia, and
these Articles of Merger, duly advised, approved, signed, acknowledged, sealed
and verified by Dutterer's and the Surviving Corporation, as required by the
laws of the State of Maryland, are filed for record with the State Department of
Assessments and Taxation of Maryland, as required by the laws of the State of
Maryland.
IN WITNESS WHEREOF, Dutterer's of Manchester Corporation and TWB Gourmet
Foods, Inc., have caused these Articles of Merger to be signed in their
respective corporate names and on their behalf by the respective Presidents and
witnessed or attested by their respective Secretaries or Assistant Secretaries
as of the 23rd day of August, 1996.
ATTEST: DUTTERER'S OF MANCHESTER
CORPORATION
/s/ George D. Spicer, III By: /s/ Vernon W. Mules
- -------------------------- --------------------------
George D. Spicer, III, Vernon W. Mules, President
Asst. Secretary
ATTEST: TWB GOURMET FOODS, INC.
/s/ Loetitia Adam St. James By: /s/ Chris L. St. James
- --------------------------- ---------------------------
Loetitia Adam St. James, Chris L. St. James, President
Secretary
THE UNDERSIGNED, President of DUTTERER'S OF MANCHESTER CORPORATION, who
executed on behalf of said corporation the foregoing Articles of Merger, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Articles of Merger, to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, tile matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/ Vernon W. Mules
----------------------------
Vernon W. Mules
THE UNDERSIGNED, President of TWB GOURMET FOODS, INC., who executed on
behalf of said corporation the foregoing Articles of
<PAGE>
Merger, of which this certificate is made a part, hereby acknowledges, in the
name and on behalf of said corporation, the foregoing Articles of Merger to be
the corporate act of said corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/ Chris L. St. James
-----------------------------
Chris L. St. James
EXHIBIT (a)
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, made as of the 14th
day of June, 1996, by and between DOUGHTIE'S FOODS, INC. , a Virginia
corporation (the "Borrower), and CRESTAR BANK, a Virginia banking corporation
formerly known as United Virginia Bank (the "Bank"), provides as follows:
The Borrower and the Bank are parties to that certain Amended and Restated
Revolving Credit Agreement dated as of November 15, 1994, as amended by a First
Amendment to Revolving Credit Agreement dated as of September 13, 1995 and
letter agreements dated March 25 and March 29, 1996 (collectively, the
"Agreement"). The parties desire to amend and restate the Agreement as
hereinafter set forth.
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings specified
in Annex I hereto (unless otherwise defined herein).
SECTION 2. CREDIT COMMITMENTS.
2.1 Revolving Credit Loans. The Bank has made and, subject to the terms and
conditions herein set forth, shall make revolving credit loans (the "Revolving
Credit Loans") to the Borrower, from time to time during the Commitment Period
in amounts not to exceed, in the aggregate outstanding at any one time, the
lesser of (i) the Borrowing Base, or (ii) $7,500,000 (the "Revolving Credit
Commitment"). The Revolving Credit Loans shall be evidenced by a promissory note
in the form attached hereto as Exhibit A (the "Revolving Credit Note"). During
the Commitment Period, the Borrower may use the Commitment by borrowing,
prepaying the Revolving Credit Loans in whole or in part without premium or
penalty, and reborrowing, all in accordance with the terms and conditions
hereof.
2.2 Term Loan. Subject to and upon the terms and conditions herein set
forth, the Bank shall make a term loan (the "Term Loan" and, collectively with
the Revolving Credit Loans,
<PAGE>
the "Loans") to the Borrower on the Closing Date in the principal amount of
$1,750,000. The Term Loan shall be evidenced by a promissory note in the form
attached hereto as Exhibit B (the "Term Loan Note" and, collectively with the
Revolving Credit Note, the "Notes").
SECTION 3. REPRESENTATIONS AND WARRANTIES.
In order to induce the Bank to enter into this Agreement and to make the
Loans, the Borrower makes the following representations, covenants and
warranties which shall survive the execution and delivery of this Agreement and
the other documents and instruments referred to herein:
3.1 Status. Each of the Borrower and the Subsidiaries is a duly organized
and validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and authority to
own or hold under lease its property and assets, to transact the business in
which it is engaged, to enter into and perform this Agreement and the other Loan
Documents to which it is party, and, with respect to the Borrower, to borrow
hereunder; and each of the Borrower and the Subsidiaries is duly qualified or
licensed as a foreign corporation in good standing in each jurisdiction where
failure to so qualify would have a material adverse effect on the business or
assets of the Borrower and the Subsidiaries, taken as a whole.
3.2 Compliance with Other Instruments. Neither the Borrower nor any
Subsidiary is in material default under any Material Agreement to which it is a
party, and neither the execution, delivery or performance of this Agreement and
the other Loan Documents, nor the consummation of the transactions herein or
therein contemplated, nor compliance with the terms and provisions hereof or
thereof, will contravene any provision of law, statute, rule or regulation to
which the Borrower or the Subsidiaries is subject or any judgment, decree,
franchise, order or permit applicable to the Borrower or the Subsidiaries or
will conflict or will be inconsistent with or will result in any breach of, any
of the terms, covenants, conditions or provisions of, or constitute a default
under, or, except as provided by the Security Documents, result in the creation
or imposition of (or the obligation to create or impose) any Lien upon any of
the property or assets of the Borrower or the Subsidiaries (other than Permitted
Encumbrances) pursuant to, the terms of any indenture, mortgage, deed of trust
or Material Agreement to which the Borrower or a Subsidiary is a signatory or by
which it is bound or to which it may be subject or violate any provision the
certificate of incorporation or bylaws of the Borrower or a Subsidiary.
3.3 Litigation. There are no actions, suits or proceedings pending or, to
the knowledge of the Borrower, threatened, against
<PAGE>
or affecting the Borrower or the Subsidiaries before any court or before any
governmental or administrative body or agency, which, if adversely determined,
would have a material adverse effect on the business or assets of the Borrower
and the Subsidiaries, taken as a whole.
3.4 Compliance with Law. Except for (i) matters which do not exceed a sum
in question in excess of $75,000 individually, or in the aggregate exceed the
sum in question of $250,000 or (ii) matters which exceed a sum in question in
excess of $75,000 individually, or in the aggregate exceed the sum in question
of $250,000, but which will not materially adversely affect the business or
operation of the Borrower and the Subsidiaries, taken as a whole: (a) all
business and operations of the Borrower and the Subsidiaries have been and are
being conducted in accordance with all applicable laws, rules and regulations of
all Federal, state, local and other governmental authorities including all laws,
rules and regulations relating to environmental protection; (b) the Borrower and
the Subsidiaries have obtained all permits, licenses and authorizations, or
consents which are otherwise necessary, for the Borrower and the Subsidiaries to
conduct its business as it is presently being conducted; and (c) the Borrower
and the Subsidiaries are not parties to, have not been threatened with, and
there are no facts existing as a basis for, any governmental or other proceeding
which might result in a suspension, limitation or revocation of any such permit,
license or authorization.
3.5 Capitalization of Subsidiaries. All of the issued and outstanding
capital stock of the Subsidiaries (the "Subsidiary Stock") has been duly and
validly issued and is fully paid and nonassessable. All of the Subsidiary Stock
is owned by the Borrower or a Subsidiary, free and clear of any and all Liens.
3.6 Governmental Approvals. No order, permission, consent, approval,
license, authorization, registration or validation of, or filing with, or
exemption by, any governmental agency, commission, board or public authority is
required to authorize, or is required in connection with the execution, delivery
and performance of, this Agreement or the other Loan Documents.
3.7 Federal Reserve Margin Regulations; Proceeds. The Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System). No part of the proceeds of the Loans will be used to purchase
or carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock.
<PAGE>
3.8 Taxes.
(a) All tax returns of any nature whatsoever, including, but not
limited to, all Federal income, payroll, stock transfer and excise tax returns
and all appropriate state and local income, sales, excise, payroll, franchise
and real and personal property tax returns, and corresponding returns under the
laws of any jurisdiction, which are required to be filed by the Borrower and the
Subsidiaries or on their behalf, have been or will be filed by the due date or
extended due date of such returns.
(b) Except for amounts which in the aggregate do not exceed $250,000,
(i) all tax amounts as shown on the applicable returns and notices described in
Section 3.8(a) reflect all taxes due and payable with respect to the periods
covered thereby, (ii) there are no other tax liabilities, interest or penalties
payable by the Borrower and the Subsidiaries with respect to such periods, and
(iii) no other tax liabilities, disallowances or assessments have been assessed
or proposed which remain unpaid.
3.9 Investment Company Act. Neither the Borrower nor the entering into of
the Loan Documents nor the issuance of the Notes is subject to any of the
provision of the Investment Company Act of 1940, as amended.
3.10 Material Agreements. All patents, Material Agreements or similar
commitments of the Borrower and the Subsidiaries are in full force, none of the
parties thereunder are in material default thereunder and no written notice of
default has been given or received.
3.11 Financial Condition.
(a) The Financial Statements of the Borrower and the Subsidiaries for
the year ended December 30, 1995, audited by Price Waterhouse and the unaudited
Financial Statements for the three-month period ended March 30, 1996, previously
delivered to the Bank, have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the financial
condition and the results of operations of the Borrower. There are no material
liabilities or any material unrealized or anticipated losses from unfavorable
commitments which are not disclosed in such Financial Statements. There has been
no material adverse change in the operations, business, or assets of, or in the
condition (financial or otherwise) of, the Borrower and the Subsidiaries from
that set forth in such Financial Statements.
(b) At the time of, and after giving effect to, the making of each
Loan, each of the Borrower and Dutterer's (i) is Solvent, and (ii) possesses, in
the opinion of the Borrower, sufficient capital to conduct the business in which
it is engaged or presently proposes to engage.
3.12 Disclosure. Neither this Agreement nor any of the Security Documents
nor any statement, list, certificate or other
<PAGE>
document or information, or any Schedules to this Agreement, delivered or to be
delivered to the Bank contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
statements contained herein, in light of the circumstances in which they are
made, not misleading.
3.13 The Security Documents. The Security Documents, when executed and
delivered and, to the extent appropriate, filed or recorded in locations where
required by law in connection with the execution and delivery hereof, will grant
to the Bank a valid and perfected Lien in an on the property described therein
(the "Collateral"), and no Person will have any right, title or interest in or
to the Collateral which is, or which shall be, prior, paramount, superior or
equal to the right, title and interest of the Bank therein, except for Permitted
Encumbrances.
SECTION 4. CONDITIONS PRECEDENT TO TERM LOAN.
The Bank shall not be obligated to make the Term Loan or any additional
Revolving Credit Loans unless on the Closing Date (unless otherwise specifically
indicated) the following conditions have been satisfied to the satisfaction of
the Bank:
4.1 Notes. The Bank shall have received the Notes, duly executed and
completed by the Borrower.
4.2 Supporting Documents of the Borrower. There shall have been delivered
to the Bank such opinions, information and copies of documents, approvals and
records (certified where appropriate) of corporate and legal proceedings as the
Bank may have reasonably requested relating to the Borrower's and Dutterer's
entering into and performance of this Agreement and the other Loan Documents to
which each is a party. Such documents shall, in any event, include:
(a) certified copies of the corporate charter and bylaws of the
Borrower and Dutterer's;
(b) certificates of authorized officers of the Borrower and Dutterer's
certifying the corporate resolutions of the Borrower and Dutterer's relating to
the entering into and performance of the aforesaid documents and the
transactions contemplated thereby; and
(c) certificates of authorized officers of the Borrower and Dutterer's
with respect to the incumbency and specimen signatures of their respective
officers or representatives authorized to execute such documents and any other
documents and papers, and to take any other action, in connection therewith; and
<PAGE>
(d) an opinion of McGuire, Woods, Battle, & Boothe, L.L.P., counsel to
the Borrower and Dutterer's.
4.3 Security Documents. There shall have been delivered to the Bank:
(a) a deed of trust from the Borrower on the Virginia Real Property in
the form attached hereto as Exhibit C (the "Virginia Deed of Trust") and a deed
of trust from Dutterer's on the Maryland Real Property in the form attached
hereto as Exhibit D (the "Maryland Deed of Trust" and, collectively with the
Virginia Deed of Trust, the "Deeds of Trust");
(b) a security agreement from the Borrower, in the form attached
hereto as Exhibit E (the "Security Agreement"), granting to the Bank, as
security for the Loans, a security interest in all accounts, inventory,
furniture, fixtures and equipment, general intangibles, instruments, documents
and chattel paper of the Borrower;
(c) a security agreement from Dutterer's in the form attached hereto
as Exhibit F (the "Dutterer's Security Agreement"), granting to the Bank, as
security for the Loans, a security interest in that certain promissory note
dated September 3, 1995, payable to Dutterer's, by Value Added Food Services,
Inc. in the original principal amount of $1,038,756 (the "VAFSI Note");
(d) the assignment by the Borrower to the Bank of monies due and to
become due from the U.S. Defense Logistics Agency for the supply of foods to
military facilities in southern Virginia in the form attached hereto as Exhibit
G (the "Assignment");
(e) appropriate financing statements on forms UCC-1;
(f) the "VAFSI Note";
(g) a guaranty from Dutterer's, in the form attached hereto as Exhibit
H, guaranteeing the payment of the Loan (the "Dutterer's Guaranty"); and
(h) evidence satisfactory to the Bank that each of the Borrower and
Dutterer's has sufficient right, title and interest in and to the Collateral
owned by it to grant to the Bank the Liens contemplated hereby and by the Deeds
of Trust and the Security Agreements and that all Security Documents necessary
to provide the Bank with perfected Liens in the Collateral (subject only to
Permitted Encumbrances) have been filed or recorded or delivered to the Bank (or
to the duly authorized agent of the title insurance company issuing the loan
insurance policies in favor of the Bank, in which case the Bank shall have
received written or telefax confirmation from such agent that such agent has
received and will record the Deeds of Trust) in form satisfactory to the Bank.
<PAGE>
4.4 Representations and Warranties. All representations and warranties made
by the Borrower herein or otherwise by the Borrower in writing in connection
therewith shall be true and correct in all material respects with the same
effect as though such representations and warranties have been made at and as of
such time.
4.5 Insurance. The Borrower shall have furnished to the Bank evidence
acceptable to the Bank that the insurance policies required by the Deeds of
Trust and Section 6.4 hereof have been obtained and are in full force and
effect.
4.6 Title Insurance. The Bank shall have received (i) copies of all title
insurance policies, title searches, abstracts of titles or other title work
requested by the Bank with regard to the Real Property, (ii) legal, valid and
binding commitments from Lawyers Title Insurance Company, or such other title
insurance company as shall be acceptable to the Bank, to issue loan title
insurance policies or updates to existing policies in form and substance
satisfactory to the Bank in respect of the Deeds of Trust showing that the Deeds
of Trust are valid first Liens subject only to Permitted Encumbrances and that
the Virginia Real Property and the Maryland Real Property is owned in fee simple
by the Borrower and Dutterer's, respectively, free of encumbrances other than
Permitted Encumbrances. Such commitment(s) shall include such affirmative
coverage and other endorsements as the Bank shall require and shall in all
respects be acceptable to the Bank in its sole discretion. The Bank shall also
have received evidence on or prior to the execution and delivery thereof that
the Borrower has arranged for the payment of the premium for such title
insurance policies or updates to existing policies.
4.7 Surveys. The Bank shall have received current physical surveys of the
Virginia Real Property and improvements, prepared and certified by a certified
land surveyor in accordance with the Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys meeting the accuracy requirements of a Class A
survey, and otherwise acceptable to the Lender, which surveys shall designate,
without limitation, (i) the dimensions of the Real Property, (ii) the dimensions
and location of the buildings and other improvements constructed thereon, (iii)
the dimensions of the parking areas as well as the total number of on-site
parking spaces, (iv) the location of all easements of record affecting the Real
Property, specifying the holder of each such easement and the pertinent
recordation information, (v) any and all buildings restriction and/or setback
lines and (vi) means of ingress and egress. In addition to the foregoing
requirements, such surveys shall (i) be prepared in accordance with the Survey
Instructions of Lawyers Title Insurance Corporation Surveyor's report, (ii)
contain a metes and bounds description of the Real Property, (iii) show
appurtenant easements and rights of way on adjoining property benefiting the
Real Property, and (iv) be specifically certified to the Bank as well as to the
Borrower and
<PAGE>
Lawyers Title Insurance Corporation or such other applicable title insurance
company.
4.8 Appraisal. The Bank shall have received an appraisal, by an appraiser
selected by the Bank, of the fair market value of the Virginia Real Property,
which appraisal shall be satisfactory to the Bank in all respects.
4.9 Environmental Audit Report. The Bank shall have received an
environmental site assessment or environmental audit report on the Virginia Real
Property from an engineer or other qualified environmental expert selected by
the Bank, which appraisal shall be satisfactory to the Bank in all respects.
SECTION 5. CONDITIONS PRECEDENT TO EACH LOAN.
The Bank shall not be obligated to make any Loan hereunder unless on the
date of such Loan the following conditions have been satisfied to the
satisfaction of the Bank (and each borrowing by the Borrower hereunder shall
constitute a representation and warranty by the Borrower as of the date of such
borrowing that such conditions have been so satisfied):
5.1 Default. On the date of the Loan (and after giving effect thereto)
there shall exist no Event of Default and no condition, event or act which, with
the giving of notice or lapse of time, or both, as specified in Section 8
hereof, would constitute an Event of Default.
5.2 Maximum Amount of Revolving Credit Loans. The unpaid principal balance
of the Revolving Credit Note, after giving effect to such Revolving Credit Loan,
shall not exceed the lesser of (i) the Borrowing Base, or (ii) $7,500,000.
SECTION 6. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, so long as the Commitment is in
effect, and until the Notes, together with interest and all other obligations
incurred hereunder, are paid in full, the Borrower will, unless having procured
the written consent of the Bank otherwise:
6.1 Financial Statements. Furnish to the Bank:
(a) As soon as practicable and in any event within 45 days after the
close of each quarter of each fiscal year of the Borrower and its Subsidiaries,
as at the end of and for the period commencing at the end of the previous fiscal
year and ending with such quarter, as the case may be, an unaudited
consolidating and consolidated balance sheet(s) of the Borrower and its
Subsidiaries, and a consolidating and consolidated statement(s) of income and
surplus account of the Borrower and
<PAGE>
its Subsidiaries; all in reasonable detail and certified by the chief accounting
officer of the Borrower subject to year-end audit and adjustments and setting
forth in comparative form the corresponding figures as of one year prior thereto
or for the appropriate periods of the preceding fiscal year, as the case may be;
(b) As soon as practicable and in any event within 120 days after the
close of each fiscal year of the Borrower and its Subsidiaries, as at the end of
and for the fiscal year just closed, as the case may be, a consolidating and
consolidated balance sheet(s) of the Borrower and its Subsidiaries, and a
consolidating and consolidated statement(s) of income and surplus account of the
Borrower and its Subsidiaries for such fiscal year setting forth, in the case of
consolidating and consolidated balance sheets and statements, the corresponding
figures of the previous annual audit in comparative form, all in reasonable
detail and certified by Price Waterhouse or other independent public accountants
of recognized standing selected by the Borrower and satisfactory to the Bank;
(c) Promptly upon receipt thereof, copies of all detailed financial
reports, if any, submitted to the Borrower or any of its Subsidiaries by its
independent auditors, in connection with each annual or interim audit of their
respective books by such auditors;
(d) As soon as practicable and in any event within 10 days after the
close of each month of each fiscal year of the Borrower and its Subsidiaries,
detailed information in form satisfactory to the Bank concerning the Inventory
and Receivables of the Borrower (including but not limited to, aging information
(in 30-day increments) with respect thereto).
(e) As soon as practicable and in any event within 120 days after the
close of each fiscal year, a copy of the Borrower's annual report on Form 10-K
to the Securities and Exchange Commission;
(f) As soon as practicable and in any event within 60 days after the
close of each fiscal quarter, a copy of the Borrower's quarterly report on Form
10-Q to the Securities and Exchange Commission;
(g) At any time and from time to time, as the Bank, in its sole and
absolute discretion, deems necessary and appropriate, a commercial finance audit
of Inventory and Receivables, such audit to be conducted by the Bank or its
agents at the expense of the Borrower; provided, however, that such expense
shall be consistent with the expense of other commercial finance audits
performed by the Bank for other, similarly situated customers of the Bank; and
<PAGE>
(h) With reasonable promptness, such other information respecting the
business, operations and financial conditions of the Borrower or any Subsidiary
as any Bank may, from time to time, reasonably request.
6.2 Notice of Litigation. Promptly give written notice to the Bank of (i)
any action or proceeding, or to the extent the Borrower may have any notice
thereof, any claim, which may reasonably be expected to be commenced or asserted
against the Borrower or any of its Subsidiaries in which the amount involved is
$250,000 or more and not covered by insurance, and (ii) any dispute which may
exist between the Borrower or any of its Subsidiaries and any governmental
regulatory body (including any audit by the Internal Revenue Service), which may
substantially affect the normal business operations of the Borrower or any of
its Subsidiaries or any of their respective properties and assets.
6.3 Payment of Charges. Duly pay and discharge, and cause each of its
Subsidiaries to duly pay and discharge (i) all taxes, assessments and
governmental charges or levies imposed upon or against it or its property or
assets, or upon any property leased by it, prior to the date on which penalties
attach thereto, unless and to the extent only that such taxes, assessments and
governmental charges or levies are being contested in good faith and by
appropriate proceedings, (ii) all lawful claims, whether for labor, materials,
supplies, services or anything else, which might or could, if unpaid, become a
lien or charge upon such property or assets, unless and to the extent only that
the validity thereof is being contested in trade bills when due in accordance
with their original terms, including any applicable grace periods, unless and to
the extent only that such trade bills are being contested in good faith and by
appropriate proceedings.
6.4 Insurance. Keep, and cause each of its Subsidiaries to keep, (i) all of
its insurable property insured at all times with financially sound and
responsible insurance carriers against loss or damage by fire and other risks,
casualties and contingencies as required by the Security Documents and in such
manner and to the extent that like properties are customarily so insured by
other corporations engaged in the same or similar business similarly situated,
(ii) adequate insurance at all times with financially sound and responsible
insurance carriers against liability on account of damage to persons and
properties and under all applicable workmen's compensation laws, and (iii)
adequate insurance covering such other risks as the Bank may reasonably request.
6.5 Maintenance of Records. Keep, and cause each of its Subsidiaries to
keep, at all times books of record and accounts in which full, true and correct
entries will be made of all dealings or transactions in relation to its business
and affairs, and the Borrower will provide, and will cause each of its
Subsidiaries to provide, adequate protection against loss or damage to such
books of record and account.
<PAGE>
6.6 Preservation of Corporate Existence. Maintain and preserve its
corporate existence and right to carry on its business and duly procure all
necessary renewals and extensions thereof, use its best efforts to maintain,
preserve and renew all rights, powers, privileges and franchises which in the
opinion of the Board of Directors of the Borrower continue to be advantageous to
it and comply in all material respects with all applicable laws, statutes and
regulations of the United States of America and of any State or municipality,
and of any agency thereof, in respect of the conduct of its business, and in
each such case, cause each of its Subsidiaries so to do.
6.7 Preservation of Assets. Keep, and cause each of its Subsidiaries so to
keep, its property in good repair, working order and condition and from time to
time make all needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, so that the business carried on
by it may be properly and advantageously conducted at all times in accordance
with prudent business management.
6.8 Inspection of Books and Assets. Allow any representative, officer or
accountant of the Bank to visit and inspect any of its property, to examine its
books of record and account and to discuss its affairs, finances and accounts
with its officers, and at such reasonable time and as often as the Bank may
request and, in each such case, cause each of its Subsidiaries so to do.
6.9 Payment of Indebtedness. Duly and punctually pay, or cause to be paid,
the principal of and the interest on all Indebtedness for Borrowed Money
heretofore or hereafter incurred or assumed by it, or in respect of which it
shall otherwise be liable, when and as the same shall become due and payable,
unless such Indebtedness for Borrowed Money be renewed or extended, and
faithfully observe, perform and discharge all the covenants, conditions and
obligations which are imposed on it by any and all indentures and other
agreements securing, relating to, or evidencing such Indebtedness or pursuant to
which such Indebtedness for Borrowed Money is incurred, and not permit any act
or omission to occur or exist which is or may be declared to be a default
thereunder.
6.10 Further Assurances. Make, execute or endorse, and acknowledge and
deliver or file, all such vouchers, invoices, notices, and certifications and
additional agreements, undertakings, conveyances, transfers, assignments, or
further assurances, and take any and all such other actions, as the Bank may,
from time to time, deem necessary or proper in connection with this Agreement,
the obligations of the Borrower hereunder or under the other Loan Documents, or
for the better assuring and confirming unto the Bank all or any part of the
security for the Notes.
<PAGE>
6.11 Notice of Default. Forthwith upon any officer of the Borrower
obtaining knowledge of the existence of an Event of Default, deliver to the Bank
a certificate signed by an officer of the Borrower specifying the nature
thereof, the period of existence thereof, and what action the Borrower proposes
to take with respect thereto.
6.12 Arms-length Transactions. Conduct and cause each of its Subsidiaries
to conduct all transactions with any of its respective Affiliates on an
arms-length basis.
6.13 Solvency. Continue to be Solvent and ensure each Subsidiary will
continue to be Solvent.
6.14 Lock Box. At the request of the Bank, in its sole and absolute
discretion, enter into a lock-box arrangement, for the collection of
Receivables, such arrangement to be satisfactory in form and substance to the
Bank.
6.15 Collateralization of Outstanding Letters of Credit. At the request of
the Bank, in its sole and absolute discretion, provide liquid collateral
acceptable to the Bank as security for any outstanding letters of credit issued
by the Bank at the request of and for the account of the Borrower.
6.16 Assignment of Claims Act. Deliver or cause to be delivered to the
Bank, within 60 days following the Closing Date, copies of Notices to the
contracting and disbursing officers for the contract which is the subject of the
Assignment, such notices having been duly acknowledged by such officers and
sufficient to perfect the Assignment in favor of the Bank.
SECTION 7. NEGATIVE COVENANTS.
The Borrower covenants and agrees that so long as the Commitment is in
effect and until the Notes, together with interest and all other obligations
incurred hereunder, are paid in full, the Borrower will not, without first
having procured the written consent of the Bank:
7.1 Liens. Contract, create, incur, assume or suffer to exist any Lien upon
or with respect to, or by transfer or otherwise subject to the prior payment of
any indebtedness (other than the Notes), any of the Collateral or any other
property of the Borrower, whether now owned or hereafter acquired, or permit
Dutterer's so to do; except (i) liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, (ii) other liens, charges,
and encumbrances incidental to the conduct of its business or the ownership of
the Collateral or such other property which were not incurred in connection with
the borrowings of money or the obtaining of advances or credit and which do not
materially detract from the value of the Collateral or such other property or
materially impair the use thereof in the operation of its business; and (iii)
Liens in favor of the Bank;
<PAGE>
7.2 Other Indebtedness. Contract, create, incur, assume or suffer to exist
any Indebtedness for Borrowed Money (other than indebtedness to the Bank or
trade debt incurred in the ordinary course of business) or permit Dutterer's so
to do.
7.3 Consolidation and Merger. Wind up, liquidate or dissolve its affairs or
enter into any transaction of merger or consolidation or permit Dutterer's so to
do (or agree to do any of the foregoing at any future time) except that (i)
Dutterer's may merge into the Borrower provided that the Borrower shall at all
times be the continuing corporation, and (ii) Dutterer's may merge into or
consolidate with any other Subsidiary.
7.4 Sale of Assets. Convey, sell, lease or otherwise dispose of (or agree
to do any of the foregoing at any future time or permit Dutterer's so to do),
(i) all or a substantial part of its property or assets or any part of such
property or assets essential to the conduct of its business substantially as now
conducted, or (ii) any of its assets, except in the ordinary course of business
(excluding the sale of obsolete equipment) or with the consent of the Bank,
which consent shall not be unreasonably withheld. The Bank acknowledges that the
Borrower intends to cause Dutterer's to sell the Maryland Real Property and
agrees that it will not unreasonably withhold its consent to such a sale and the
release of the Bank's lien on the Maryland Real Property; provided, however,
that the Bank's consent and release may be conditioned upon the application of
the net proceeds of any such sale to the Loans as determined by the Bank in its
sole discretion.
7.5 Borrowing Base. Permit the aggregate unpaid principal amount of the
Revolving Credit Note at any time outstanding to exceed the Borrowing Base.
7.6 Related Transactions. Enter into any transaction with any Person which
is an Affiliate of the Borrower or Dutterer's, or in which any officer or
director of the Borrower or a Subsidiary has a financial interest, on more
favorable terms than if such Person was totally unrelated, or permit Dutterer's
to so do.
7.7 Engage in Same Type of Business. Enter into, or permit Dutterer's to
enter into, any business which is substantially different from and/or not
connected with the business in which the Borrower or Dutterer's is presently
engaged.
7.8 Sale of Accounts Receivable. Sell, discount, transfer, assign or
otherwise dispose of any of its accounts receivable, notes receivable,
installment or conditional sales agreements or any other of its rights to
receive income or monies howsoever evidenced or permit Dutterer's so to do
except pursuant to the Security Documents.
<PAGE>
7.9 Tangible Net Worth. Permit Tangible Net Worth to be at any time less
than $7,000,000; provided, however, that on December 31, 1996, and on each
December 31 thereafter, such amount shall increase by the greater of (i) 75% of
the Borrower's net income for the fiscal year then ended, or (ii) $500,000.
7.10 Debt; Equity Ratio. Permit the ratio of Long-Term Debt to Tangible Net
Worth to exceed at any time 1.75:1.0.
7.11 Current Ratio. Permit the ratio of current assets to current
labilities at any time to be less than 1.25:1.0.
7.12 Capital Expenditures. In any fiscal year make or commit to make any
direct or indirect capital expenditures in excess of $300,000.
7.13 Debt Service Coverage Ratio. Permit the ratio (determined at the end
of each fiscal year and for such year) of EBITD to Debt Service to be less than
1.25:1.0.
7.14 Real Estate. Directly or indirectly, make any investment in, or engage
in any development of, real estate, other than in the ordinary course of the
Borrower's regular business.
7.15 Dividends. During any fiscal year, declare or pay, directly or
indirectly, any dividends on any class of its capital stock, or make any
distribution to any shareholder or shareholders as such, in excess of $163,000.
SECTION 8. EVENTS OF DEFAULT.
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
8.1 Principal and Interest. The Borrower shall default in the due and
punctual payment of (i) any principal due on the Notes; or (ii) for a period of
15 days, any interest on the Notes or in the due and punctual payment of other
amounts due hereunder; or
8.2 Representations and Warranties. Any representation, warranty or
statement made by the Borrower herein or otherwise in writing by the Borrower or
Dutterer's in connection herewith or therewith, or in any certificate or
statement furnished pursuant to or in connection herewith or therewith, shall be
breached or shall prove to be untrue in any material respect on the date as of
which made; or
8.3 Negative Covenants. The Borrower shall default in the due performance
or observance of any term, covenant or agreement on its part to be performed or
observed pursuant to Sections 7.3, 7.4, 7.7 or 7.8 of this Agreement; or
<PAGE>
8.4 Other Covenants. The Borrower 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 Sections 8.1, 8.2 and 8.3) 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 Bank gives the Borrower notice of such default
or on the date an officer of the Borrower becomes aware thereof; or
8.5 Other Obligations. Any indebtedness of the Borrower (i) shall be duly
declared to be or shall become due and payable prior to the stated maturity
thereof, or (ii) shall not be paid as and when the same becomes due and payable
including any applicable grace period, or there shall occur and be continuing
any event which constitutes an event of default under any instrument, agreement
or evidence of indebtedness relating to any indebtedness of the Borrower, the
effect of which is to permit the holder or holders to cause the indebtedness
evidenced thereby to become due prior to its stated maturity; or
8.6 Insolvency. The Borrower or Dutterer's 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 bankrupt, shall petition or apply to any
tribunal for the appointment of any receiver, liquidator, custodian 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 Borrower or Dutterer's 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
Borrower or Dutterer's 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, custodian 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 Borrower or
Dutterer's 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 custodian 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 Borrower or
Dutterer's; or
<PAGE>
8.7 Other Documents. Any of the Security Documents shall fail to grant to
the Bank the Lien intended to be created thereby (provided, however, that the
Borrower shall cause the Lien of the Assignment to be perfected not later than
90 days after the date hereof);
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing the Bank may, by written notice to the Borrower: (i)
declare the principal of an accrued interest on the Notes 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
Borrower; and/or (ii) declare the Revolving Credit Commitment terminated,
whereupon the Revolving Credit Commitment shall forthwith terminate immediately;
provided that if any Event of Default described in Section 8.6 shall occur with
respect to the Borrower or Dutterer's, the result which would otherwise occur
only upon the giving of written notice by the Bank to the Borrower as herein
described shall occur automatically, without the giving of any such notice.
SECTION 9. MISCELLANEOUS.
9.1 Calculations and Financial Data. Calculations hereunder shall be made
and financial data required hereby shall be prepared both as to classification
of items and as to amount in accordance with generally accepted accounting
principles, consistent with the Financial Statements.
9.2 Amendment and Waiver. Except as otherwise provided, no provision of any
of the Loan Documents may be changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought. Any such
change, waiver, discharge or termination shall be effective only in the specific
instance and for the specific purposes for which made or given.
9.3 Expenses.
(a) Whether or not the transactions hereby contemplated shall be
consummated, the Borrower shall pay all reasonable out-of-pocket costs and
expenses of the Bank incurred in connection with the preparation, execution,
delivery, filing and recording and amendment (including any waiver or consent),
modification, and enforcement of the Loan Documents and the making and repayment
of the Loans, and the payment of all interest and fees, including, without
limitation, the reasonable fees and expenses of Kaufman & Canoles, special
counsel for the Bank, and any local counsel retained by the Bank.
<PAGE>
(b) The Borrower agrees to pay, and to save the Bank harmless from all
damages, liability and expenses for, any stamp and similar taxes (including
interest and penalties, if any), which may be payable in connection with the
Loan Documents or the issuance of the Notes or any modification of any of the
foregoing.
(c) All obligations provided for in this Section 9.3 and Section 6.10
shall survive any termination of this Agreement and the payment in full of the
Notes.
9.4 Successors and Assigns; Descriptive Headings.
(a) This Agreement shall bind, and the benefits hereof shall inure to,
the Borrower and the Bank and their respective successors and assigns provided
that the Borrower may not transfer or assign any or all of its rights and
obligations hereunder, without the prior written consent of the Bank.
(b) The descriptive headings of the various provisions of this
Agreement are inserted for convenience of reference only and shall not be deemed
to affect the meaning or construction of any of the provisions hereof.
9.5 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 notice, when delivered to the telex, telegraph, 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 Bank, at the Bank's Office, and (ii) if to the Borrower, at its
address specified with its signature below, or to such other addresses as either
of the parties hereto may hereafter specify to the other in writing, provided
that communication with respect to a change of address shall be deemed to be
effective when actually received.
9.6 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed and interpreted in
accordance with the internal laws of the Commonwealth of Virginia (without
regard to principles of conflicts of law).
9.7 Counterparts. This Agreement may be executed in any number of
counterparts, and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
<PAGE>
9.8 Waiver. No failure or delay on the part of the Bank in exercising any
right, power or privilege under this Agreement or any other Loan Document, and
no course of dealing between the Borrower and the Bank shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or remedies
which the Bank would otherwise have pursuant to such documents or at law or
equity. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of the Bank to any other or
further action in any circumstances without notice or demand.
9.9 Severability. If any provision of this Agreement shall be held or
deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the
same shall not affect any other provision or provisions herein contained or
render the same invalid, inoperative or unenforceable to any extent whatever.
9.10 Right of Set-off. In addition to any rights now or hereafter granted
under applicable law or otherwise and not by way of limitation of any such
rights, upon the occurrence of an Event of Default the Bank is hereby authorized
at any time or from time to time, without notice to the Borrower or to any other
Person, any such notice being hereby expressly waived, to set-off and to
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final) and any other indebtedness at any time held or owing by
the Bank to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank now or
hereafter existing under any of the Loan Documents irrespective of whether or
not the Bank shall have made any demand hereunder or thereunder and although
said obligations, liabilities or claims, or any of them, shall be contingent or
unmatured. The Bank exercising any rights granted under this Section 9.10 shall
thereafter notify the Borrower of such action; provided that the failure to give
such notice shall not affect the validity of such set-off and application.
9.11 No Third Party Beneficiaries. This Agreement is solely for the benefit
of the Bank and the Borrower and their respective successors and assigns (except
as otherwise expressly provided herein) and nothing contained herein shall be
deemed to confer upon anyone other than the Borrower and the Bank and their
respective successors and assigns any right to insist on or to enforce the
performance or observance of any of the obligations contained herein. All
conditions to the obligations of the Bank to make the Loans hereunder are
imposed solely and exclusively for the benefit of the Bank and its successors
and assigns and no other Person shall have standing to require satisfaction of
such conditions in accordance with their terms and no other Person shall under
any circumstances be deemed to be beneficiary of such conditions.
<PAGE>
9.12 Survival. Each of the representations, warranties, terms, covenants,
agreements and conditions contained in this Agreement shall specifically survive
the execution and delivery of this Agreement and the other Loan Documents and
the making of the Loans and shall, unless otherwise expressly provided, continue
in full force and effect until the Loans together with interest thereon, the
commitment fees, and all other sums payable hereunder or thereunder have been
indefeasibly paid in full.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
2410 Wesley Street DOUGHTIE'S FOODS, INC.
Portsmouth, VA 23707
By: Marion S. Whitfield, Jr.
------------------------
(Signature)
Senior Vice President
CRESTAR BANK
By: Bruce W. Nave
------------------------
(Signature)
Vice President
<PAGE>
<PAGE>
ANNEX I
DEFINITIONS
As used in the Amended and Restated Credit Agreement to which this Annex I
is annexed, the following terms shall have the meanings herein specified or as
specified in the Section of such Credit Agreement or in such other document
herein referenced:
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under common control with, the Borrower.
"Agreement" shall mean the Amended and Restated Credit Agreement to which
this Annex I is attached as it may from time to time be amended, extended,
supplemented or otherwise modified.
"Assignment" - Section 4.3(d).
"Bank" - introductory paragraph.
"Bank's Office" shall mean 500 East Main Street, Norfolk, Virginia 23510,
Attention: Commercial Division.
"Borrower" - introductory paragraph.
"Borrowing Base" shall mean at a particular time, the sum of (x) the Net
Security Value of Eligible Inventory plus (y) the Net Security Value of Eligible
Receivables.
"Business Day" shall mean any day excluding Saturday, Sunday and any day on
which banks in Norfolk, Virginia are authorized by law or governmental action to
close.
"Capitalized Lease Obligation" shall mean any obligation to pay rent or
other amounts under any lease (or other arrangement conveying the right to use)
real and/or personal property, which obligation is, or is required to be,
classified and accounted for as a capital lease on a balance sheet prepared in
accordance with generally accepted accounting principles.
"Collateral" - Section 3.13.
"Commitment Period" shall mean, for the Revolving Credit Commitment, the
period from and including the date hereof to and including the Termination Date.
"Debt Service" shall mean, for any period, the aggregate of all principal
and interest payments required, scheduled or made during such period.
"Deeds of Trust" - Section 4.3(a).
"Default" shall mean any event which with notice or lapse of time, or both,
would become an Event of Default.
<PAGE>
"Dollars", "U.S. $", "$", and "U.S. dollars" shall mean the lawful currency
of the United States of America.
"Dutterer's" shall mean Dutterer's of Manchester Corp., a Maryland
corporation and a Subsidiary.
"Dutterer's Guaranty" - Section 4.3(g).
"Dutterer's Security Agreement" - Section 4.3(c).
"EBITD" shall mean, for any period, the sum for such period of (i) net
income, (ii) taxes accrued to any government or governmental instrumentality
(other than real estate taxes, sales taxes or use taxes), (iii) interest
expense, and (iv) to the extent earnings have been reduced thereby, depreciation
expense, amortization expense and other non-cash expenses, minus dividends.
Eligible Inventory" or "Inventory Value" shall mean, at the time of any
determination thereof, all Inventory of the Borrower as to which the following
requirements have been fulfilled to the satisfaction of the Bank: (a) the
Borrower has lawful and absolute title to such Inventory; (b) the Borrower has
the full and unqualified right to assign and grant a security interest in such
Inventory to the Bank as security for the Loans; (c) except as otherwise
permitted hereunder, all of such Inventory is subject to a fully perfected first
security interest in favor of the Bank pursuant to the Security Documents, prior
to the rights of, and enforceable as such against, any other Person; (d) none of
such Inventory is subject to any security interest or other Lien in favor of any
person other than the Lien of the Bank pursuant to the Security Documents and
other Liens permitted hereunder; and (e) none of such Inventory is obsolete,
unsalable, damaged or otherwise unfit for sale or further processing.
"Eligible Receivables" shall mean, at the time of any determination
thereof, all Receivables of the Borrower as to which the following requirements
have been fulfilled to the satisfaction of the Bank: (a) the Borrower has lawful
and absolute title to each of such Receivables; (b) each of such Receivables is
a valid, legally enforceable obligation of the Person who is obligated under
such Receivables (the "account debtor"); (c) none of such Receivables is subject
to any dispute, off-set, counterclaim or other claim or defense on the part of
the account debtor or to any claim on the part of the account debtor denying
liability under such Receivable in whole or in part; (d) the Borrower has the
full and unqualified right to assign and grant a security interest in such
Receivables to the Bank as security for the Loans; (e) all of such Receivables
are subject to a fully perfected first security interest in favor of the Bank
pursuant to the Security Documents, prior to the rights of, and enforceable as
such against, any other Person; (f) none
<PAGE>
of such Receivables is subject to any security interest or Lien in favor of any
Person other than the lien of the Bank pursuant to the Security Documents and
other Liens permitted hereunder; (g) each of such Receivables is evidenced by an
invoice rendered to the account debtor and is not evidenced by an instrument or
chattel paper; (h) each of such Receivables has arisen from the sale (on an
absolute and not a consignment or approval basis) of goods by the Borrower in
the ordinary course of the Borrower's business, which goods have been shipped or
delivered to the account debtor for such Receivables or otherwise identified to
the contract of sale to such account debtor if title has passed; (i) no account
debtor in respect of any of the Receivables is (A) incorporated in or primarily
conducting business in any jurisdiction located outside the United States of
America or Puerto Rico, (B) an Affiliate of the Borrower, or (C) any foreign
government or any agency, department or instrumentality therefor; (j) the
Borrower is not aware and has no reason to be aware of any reorganization,
bankruptcy, receivership, custodianship, insolvency or other like condition in
respect of any account debtor for any of the Receivables; (k) none of such
Receivables has been outstanding more than 90 days from their respective invoice
dates; (l) none of such Receivables are due from an account debtor with respect
to which 25% or more, in amount, of Receivables due therefrom have been
outstanding more than 90 days from their respective invoice dates; and (m) the
Borrower is not in default in any obligation to the account debtor in respect to
any goods provided or services rendered by such account debtor or otherwise.
"Event of Default" shall mean each of the Events of Default defined in
Section 8.
"Financial Statements" shall mean, with respect to any Person, the
statement of financial position (balance sheet) and the statement of earnings
and stockholders' equity of such person.
"Guarantee" shall mean, by any Person, any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
for Borrowed Money or other obligation of any other Person and, without limiting
the generality of the foregoing, any obligation, direct or indirect, contingent
or otherwise, of such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness for Borrowed Money or other
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
for Borrowed Money or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part), provided that the
term "Guarantee" shall not include endorsements for collection of deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
<PAGE>
"Indebtedness for Borrowed Money" shall mean all indebtedness of
(including, without limitation, all indebtedness assumed by) a Person (i) in
respect of money borrowed (including, without limitation, the unpaid amount of
the purchase price of any property, incurred for such purpose in lieu of
borrowing money or using available funds to pay said amount, and not
constituting an account payable or expense accrual incurred or assumed in the
ordinary course of business), or evidenced by a promissory note, bond,
debenture, or other like obligation to pay money, or (ii) constituting a
Capitalized Lease Obligation of such Person, or (iii) constituting a Guarantee
by such Person.
"Inventory" shall have the meaning assigned thereto in the Security
Agreement.
"Lien" shall mean any mortgage, deed of trust, security deed, pledge,
security interest, encumbrance, lien or other charge of any kind (including any
agreement to give any of the foregoing, any lease in the nature thereof, and any
conditional sale or other title retention agreement), any lien arising by
operation of law and the filing of or agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction.
"Loans" - Section 2.2.
"Loan Documents" shall mean, collectively, the Agreement, the Notes and the
Security Documents and any other instruments or documents delivered by or on
behalf of the Borrower or Dutterer's hereunder.
"Long-Term Debt" shall mean all Indebtedness for Borrowed Money as
determined in accordance with generally accepted accounting principles.
"Material Agreement" shall mean all outstanding contracts, agreements,
leases and other understandings to which the Borrower and/or its Subsidiaries is
a party, or by or under which it has any rights or obligations, except for (i)
those (other than orders for the purchase and sale of merchandise) involving an
income to or expenditure by the Borrower or a Subsidiary of less than $250,000
or expiring no later than one (1) year from the date hereof, and (ii) those
contracts or orders for the purchase and sale of merchandise involving a
commitment for less than one (1) year or involving a commitment for less than
$250,000.
"Maryland Deed of Trust" - Section 4.3(a).
"Maryland Real Property" shall mean the real property of Dutterer's in
Manchester, Maryland described in the Maryland Deed of Trust.
<PAGE>
"Net Security Value" shall mean, in respect to (i) Eligible Receivables, an
amount equal to 85% (or such other greater or lesser percentage as the Bank
shall from time to time determine in its sole and absolute discretion) of the
book value of Eligible Receivables as reflected on the books of the Borrower in
accordance with generally-accepted accounting principles on any date of
determination thereof, less a reserve for discounts and allowances; and (ii)
Eligible Inventory, an amount equal to 20% (or such other greater or lesser
percentage as the Bank shall from time to time determine in its sole and
absolute discretion) of the value of the Eligible Inventory as reflected on the
books of the Borrower as at the date of any determination thereof, valued in
accordance with generally-accepted accounting principles based on FIFO.
"Notes" - Section 2.2.
"Permitted Encumbrances" shall mean the Liens listed on Schedule I attached
hereto.
"Person" shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock company, a trust, an unincorporated
association, a joint venture or other entity or a government or an agency or
political subdivision thereof.
"Real Property" shall mean the Maryland Real Property and the Virginia Real
Property.
"Receivables" shall mean Accounts and General Intangibles, as defined in
the Security Agreement.
"Revolving Credit Commitment" - Section 2.1.
"Revolving Credit Loans" - Section 2.1.
"Revolving Credit Note" - Section 2.1.
"Security Agreement" - Section 4.3(b).
"Security Documents" shall mean the collective reference to each of the
instruments or documents referred to in Section 4.3 pursuant to which a Lien or
security interest in the Collateral is intended to be granted to the Bank,
including all supplements or amendments thereto or replacements thereof.
"Solvent" shall mean, with respect to any Person, that the fair value of
the property of such Person is, on the date of determination, greater than the
total amount of liabilities (including contingent liabilities) of such Person as
of such date and that, as of such date, such Person is able to pay all
Indebtedness for Borrowed Money of such Person as such Indebtedness for Borrowed
Money matures.
<PAGE>
"Subsidiary" shall mean Dutterer's and any other firm, corporation, trust
or other unincorporated organization or association or other enterprise more
than 50% of the indicia of equity rights (whether capital stock or otherwise) of
which is at the time owned, directly or indirectly, by the Borrower and/or by
one or more of its Subsidiaries.
"Subsidiary Stock" - Section 3.5.
"Tangible Net Worth" shall mean, as at any date at which the amount thereof
shall be determined, the amount by which the sum of (a) the par value (or value
stated on the books of the corporation) of the capital stock of all classes of
the Borrower, and (b) the amount of the consolidated surplus, capital or earned,
of the Borrower and its Subsidiaries, exceeds the aggregate of all amounts
appearing on the asset side of the balance sheet for goodwill, patents, patent
right, trademarks, trade names, copyrights, franchises, treasury stock,
organizational expenses and other similar items, if any, all determined in
accordance with generally accepted accounting principles consistent with the
Financial Statements.
"Term Loan" - Section 2.2.
"Term Loan Note" - Section 2.2.
"Termination Date" shall mean July 31, 1997, or such earlier date as the
Commitment shall terminate as provided herein or such later date as may
hereafter be agreed to by the Bank, in writing.
"UCC" - Section 3.13.
"VAFSI Note" - Section 4.3(c).
"Virginia Deed of Trust" - Section 4.3(a).
"Virginia Real Property" shall mean the real property of the Borrower in
Portsmouth, Virginia described in the Virginia Deed of Trust.
"Written" or "in writing" shall mean any form of written communication or a
communication by means of telex, telecopier device, telegraph or cable.
<PAGE>
<PAGE>
SCHEDULE I
PERMITTED ENCUMBRANCES
A.1. With respect to the Real Property, all those matters shown in Schedule
B, Section 2 of the Lawyers Title Insurance Corporation Commitment Case Nos.
1960353 and C965185N issued to the Bank.
A.2. With respect to property other than Real Property:
(a) Such minor defects, irregularities, encumbrances and clouds on
title as do not, in the aggregate, materially impair the value of such property
or its use for the purpose for which it is held;
(b) Deposits under worker's compensation, unemployment insurance and
social security laws or to secure statutory obligations or surety or appeal
bonds or performance of other similar bonds in the ordinary course of business,
or statutory liens of landlords, carriers, warehousemen, mechanics and
materialmen and other similar liens, in respect of liabilities which are not yet
due or which are being contested in good faith, liens for taxes not yet due and
payable, and liens for taxes due and payable, the validity or amount of which is
currently being contested in good faith by appropriate proceedings;
(c) Purchase money Liens granted to the seller or Person financing the
seller on assets if (i) limited to the specific assets acquired; and (ii) the
debt secured by the Lien is the unpaid balance of the acquisition cost of the
specific assets on which the Lien is granted;
(d) Liens granted to the Bank in connection with the transactions
contemplated hereby or otherwise; and
(e) Liens upon real and/or tangible personal property acquired after
the date of this Agreement (by purchase, construction or otherwise) by the
Borrower or any Subsidiary, each of which Liens existed on such property before
the time of its acquisition and was not created in anticipation thereof;
provided, however, that no such Lien shall extend to or cover any property of
the Borrower or such Subsidiary other than the respective property so acquired
and improvements thereon.
<PAGE>
EXHIBIT (b)(1)
Commercial Note - Crestar Bank CRESTAR DOUGHTIE'S FOODS, INC.
June 14, 1996 Borrower
Date
Seven Million Five Hundred Thousand------------------------------
- ----------------------------Dollars Loan Amount
($7,500,000.00) Bruce W. Nave
---------------
Officer
__ Original _x_ Renewal Loan
For Value Received, the undersigned (whether one or more) jointly and severally
promise to pay to the order of Crestar Bank (the "Bank") at any of its offices,
or at such place as the Bank may in writing designate, without offset and in
immediately available funds, the Loan Amount shown above, including or plus
interest, and any other amounts due, upon the terms specified below.
IMPORTANT NOTICE
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO
OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
Repayment Terms
Master Borrowing Note
This is an open and revolving line of credit; you may borrow an aggregate
principal amount up to the Loan Amount outstanding at any one time.
* Principal on demand, plus interest, but the undersigned shall be liable
for only so much of the Loan Amount shown above as shall be equal to the total
advanced to or for the undersigned, or any of them, by the Bank from time to
time, less all payments made by or for the undersigned and applied by the Bank
to principal, plus interest on each such advance, and any other amounts due all
as shown on the Bank's books and records, which shall be prima facie evidence of
the amount owed. *SEE ADDENDUM.
<PAGE>
This Master Borrowing arrangement will terminate upon written notice from
the Bank to the undersigned, or if such notice is not sooner given,
_________________ from the date of this Note, unless an alternative termination
date is indicated in the Agreement, as defined below.
Additional Terms And Conditions
This Note is governed by additional terms and conditions contained in an Amended
and Restated Credit Agreement between the undersigned and the Bank dated June
14, 1996, and any modifications, renewals, extensions or replacements thereof
(the "Agreement"), which is incorporated herein by reference. In the event of a
conflict between any term or condition contained in this Note and in the
Agreement, such term or condition of the Agreement shall control.
If this Note is payable on demand, the Bank shall have the right to demand
payment at any time even if an event of default (as identified herein) has not
occurred.
Interest
Accrued interest will be payable on the last day of each month, beginning on
July 1, 1996. Interest on a Term-Fixed Payment Loan with a fixed interest rate
or an Instalment-Simple Interest Loan will accrue on a 30/360 basis. On all
other loan types, interest will accrue daily on an actual/360 basis (that is, on
the actual number of days elapsed over a year of 360 days) unless otherwise
stated here: _________________________ Each scheduled payment made on this Note
shall be applied to accrued interest before it is applied to principal. Interest
shall accrue from the date of this Note on the unpaid balance and shall continue
to accrue after maturity, whether by acceleration or otherwise, until this Note
is paid in full. If the stated Rate (as defined below) is based on the Prime
Rate of Crestar Bank, the interest rate is subject to increase or decrease at
the sole option of the Bank.
Subject to the above, interest per annum payable on this Note (the "Rate") shall
be Prime Rate.
The "Prime Rate" shall be the rate established from time to time by Crestar
Bank. as a reference for fixing the lending rate for commercial loans. The Prime
Rate is a reference rate only and does not necessarily represent the lowest rate
of interest charged for commercial borrowings.
Adjustments to interest rates subject to change shall be effective as of the
date the Prime Rate changes.
<PAGE>
Collateral
Any collateral pledged to the Bank to secure any of the undersigned's existing
or future liabilities to the Bank shall secure this Note. To the extent
permitted by law, each of the undersigned grants to the Bank a security interest
in and a lien upon all deposits or investments maintained by the undersigned
with, and all indebtedness owed to the undersigned by, the Bank or any of its
affiliates.
This Note is also secured by the following collateral and
proceeds thereof: SEE SCHEDULE A, ATTACHED.
All of the foregoing security is referred to collectively as the "Collateral".
The Collateral is security for the payment of this Note and any other liability
(including overdrafts and future advances) of the undersigned to the Bank,
however evidenced, now existing or hereafter incurred, matured or unmatured,
direct or indirect, absolute or contingent, several, joint, or joint and
several, including any extensions, modifications or renewals. The proceeds of
any Collateral may be applied against the liabilities of the undersigned to the
Bank in such order as the Bank deems proper.
Loan Purpose And Updated Financial Information Required
The undersigned warrant and represent
that the loan evidenced by this Note is being made solely for the purpose of
acquiring or carrying on a business, professional or commercial activity or
acquiring real or personal property as an investment (other than a personal
investment) or for carrying on an investment activity (other than a personal
investment activity). The undersigned agree to provide to the Bank updated
financial information, including, but not limited to, tax returns, current
financial statements in form satisfactory to the Bank, as well as additional
information, reports or schedules (financial or otherwise), all as the Bank may
from time to time request.
Default, Acceleration And Setoff
*Any one of the
following shall constitute an event of default under the terms of this Note: (1)
the failure to make when due any instalment or other payment, whether of
principal, interest, late charges or other authorized charges due under this
Note, or the failure to pay the amount demanded by the Bank if this Note is
payable on demand; (2) the death, dissolution, merger, acquisition,
consolidation or termination of existence of the undersigned, any guarantor of
the indebtedness of any of the undersigned to the Bank, any endorser, or any
other party to this Note (collectively called a "Party"); (3) the insolvency or
inability to pay debts as they mature of any Party, or the application for the
appointment of a receiver for any Party or the filing of a petition under any
provision of the Bankruptcy Code or other insolvency law, statute or proceeding
by or against any Party or any assignment for the benefit of creditors by or
against any Party; (4) the entry of a judgment against any Party or the
<PAGE>
issuance or service of any attachment, levy or garnishment against any Party or
the property of any Party, or the repossession or seizure of property of any
Party; (5) a determination by the Bank that it deems itself insecure or that a
material adverse change in the financial condition of any Party or decline or
depreciation in the value or market value of any Collateral has occurred since
the date of this Note or is reasonably anticipated; (6) the failure of any Party
to perform any other obligation to the Bank under this Note or under any other
agreement with the Bank; (7) the occurrence of an event of default with respect
to any existing or future indebtedness of any Party to the Bank or any other
creditor of the Party; (8) a material change in the ownership, control or
management of any Party that is an entity, unless such change is approved by the
Bank in its sole discretion; (9) if any Party gives notice to the Bank
purporting to terminate such Party's obligations under or with respect to this
Note; (10) the sale or transfer by a Party of all or substantially all of such
Party's assets other than in the ordinary course of business; or (11) any Party
commits fraud or makes a material misrepresentation at any time in connection
with this Note. If an event of default occurs, or in the event of non-payment of
this Note in full at maturity, the entire unpaid balance of this Note shall, at
the option of the Bank, become immediately due and payable, without notice or
demand. Upon the occurrence of an event of default, the Bank shall be entitled
to interest on the unpaid balance at the stated Rate plus 2.00% (the "Default
Rate"), unless otherwise required by law, until paid in full. To the extent
permitted by law, upon default, the Bank will have the right, in addition to all
other remedies permitted by law, to set off the amount due under this Note or
due under any other obligation to the Bank against any and all accounts, whether
checking or savings or otherwise, credits, money, stocks, bonds or other
security or property of any nature whatsoever on deposit with, held by, owed by,
or in the possession of, the Bank or any of its affiliates to the credit of or
for the account of any Party, without notice to or consent by any Party. The
remedies provided in this Note and any other agreement between the Bank and any
Party are cumulative and not exclusive of any remedies provided by law. *SEE
ADDENDUM.
Capital Adequacy
Should the Bank, after the date hereof, determine that the adoption of any law
or regulation regarding capital adequacy, or any change in the interpretation or
administration thereof, has or would have the effect of reducing the Bank's rate
of return hereunder to a level below that which the Bank could have achieved but
for such adoption or change, by an amount which the Bank considers to be
material, then, from time to time, 30 days after written demand by the Bank, the
undersigned shall pay to the Bank such additional amounts as will compensate the
Bank for such reduction. Each demand by the Bank shall be made in good faith and
shall be accompanied by a certificate claiming
<PAGE>
compensation under this paragraph and stating the amounts to be paid to it
hereunder and the basis therefor.
Late Charges And Other Authorized Charges
*If this is an Instalment-Simple
Interest loan, if any portion of a payment is at least seven (7) days past due,
the undersigned agree to pay a late charge of 5% of the amount which is past
due. On all other loan types, the undersigned agree to pay such late charge if
any portion of a payment is at least ten (10) days past due. Unless prohibited
by applicable law, the undersigned agree to pay the fee established by the Bank
from time to time for returned checks if a payment is made on this Note with a
check and the check is dishonored for any reason after the second presentment.
In addition, as permitted by applicable law, the undersigned agree to pay the
following: (1) all expenses, including, without limitation, any and all court or
collection costs, and attorneys' fees of 25% of the unpaid balance of this Note,
or actual attorneys' fees if in excess of such amount, whether suit be brought
or not, incurred in collecting this Note; (2) all costs incurred in evaluating,
preserving or disposing of any Collateral granted as security for the payment of
this Note, including the cost of any audits, appraisals, appraisal updates,
reappraisals or environmental inspections which the Bank from time to time in
its sole discretion may deem necessary; (3) any premiums for property insurance
purchased on behalf of the undersigned or on behalf of the owner(s) of the
Collateral pursuant to any security instrument relating to the Collateral; (4)
any expenses or costs incurred in defending any claim arising out of the
execution of this Note or the obligation which it evidences, or otherwise
involving the employment by the Bank of attorneys with respect to this Note and
the obligations it evidences; and (5) any other charges permitted by applicable
law. The undersigned agree to pay such authorized charges on demand or, at the
Bank's option, such charges may be added to the unpaid balance of the Note and
shall accrue interest at the stated Rate. Upon the occurrence of an event of
default, interest shall accrue at the Default Rate.
*SEE ADDENDUM.
Waivers
The undersigned and each other Party waive presentment, demand, protest, notice
of protest and notice of dishonor and waive all exemptions, whether homestead or
otherwise, as to the obligations evidenced by this Note. The undersigned and
each other Party waive any rights to require the Bank to proceed against any
other Party or person or any Collateral before proceeding against the
undersigned or any of them, or any other Party, and agree that without notice to
any Party and without affecting any Party's liability, the Bank, at any time or
times, may grant extensions of the time for payment or other indulgences to any
Party or permit the renewal or modification of this Note, or permit the
substitution, exchange or release of any Collateral for this Note
<PAGE>
and may add or release any Party primarily or secondarily liable. The
undersigned and each other Party agree that the Bank may apply all monies made
available to it from any part of the proceeds of the disposition of any
Collateral or by exercise of the right of setoff either to the obligations under
this Note or to any other obligations of any Party to the Bank, as the Bank may
elect from time to time. The undersigned also waive any rights afforded to them
by Sections 49-25 and 49-26 of the Code of Virginia of 1950 as amended.
TO THE EXTENT LEGALLY PERMISSIBLE, THE UNDERSIGNED WAIVE ANY RIGHT TO TRIAL BY
JURY IN ANY LITIGATION RELATING TO TRANSACTIONS UNDER THIS NOTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE.
Severability, Amendments And No Waiver By Bank
Any provision of this Note which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Note. No amendment, modification, termination or waiver of any provision of
this Note, nor consent to any departure by the undersigned from any term of this
Note, shall in any event be effective unless it is in writing and signed by an
authorized employee of the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. If the interest Rate is tied to an external index and the index becomes
unavailable during the term of this loan, the Bank may designate a substitute
index with notice to the Borrower. No failure or delay on the part of the Bank
to exercise any right, power or remedy under this Note shall be construed as a
waiver of the right to exercise the same or any other right at any time.
Liability, Successors And Assigns And Governing Law
Each of the undersigned shall be
jointly and severally obligated and liable on this Note. This Note shall apply
to and bind each of the undersigned's heirs, personal representatives,
successors and assigns and shall inure to the benefit of the Bank, its
successors and assigns. This Note shall be governed by the internal laws of the
Commonwealth of Virginia and applicable federal law.
By signing below, the undersigned agree to the terms of this Note and
acknowledge receipt of a loan in the Loan Amount shown above.
DOUGHTIE'S FOODS, INC.
By: Marion S. Whitfield, Jr.
------------------------
(Signature)
Senior Vice President
<PAGE>
<PAGE>
SCHEDULE A
TO COMMERCIAL NOTE
DATED JUNE 14, 1996,
MADE BY DOUGHTIE'S FOODS, INC.
1. Credit line deed of trust dated of even date, from Doughtie's Foods, Inc.
("Borrower") to David A. Durham and David Singleton, trustees ("Trustees"),
on real estate and improvements located in Portsmouth, Virginia.
2. Guaranty of even date, from Dutterer's of Manchester Corp. ("Dutterer").
3. Credit line deed of trust dated of even date, from Dutterer's to Trustees,
on real estate and improvements located in Manchester, Maryland.
4. Security Agreement from Borrower dated of even date, on Accounts,
Inventory, Equipment and General Intangibles.
5. Security Agreement from Dutterer's dated of even date, on a promissory note
dated September 3, 1995, made by Value Added Food Services, Inc., and
payable to Dutterer's in the original principal amount of $1,038.756.
6. Borrower's Assignment dated of even date pursuant to the Assignment of
Claims Act, of its rights to receive monies due and to become due to
Borrower pursuant to its contract with the United States of America
(Defense Logistics Agency) for the supply of foods to military facilities
in southern Virginia.
DOUGHTIE'S FOODS, INC.,
a Virginia corporation
By: Marion S. Whitfield, Jr.
(Signature)
Its: Senior Vice President
<PAGE>
ADDENDUM
TO COMMERCIAL NOTE
DATED JUNE 14, 1996,
MADE BY DOUGHTIE'S FOODS, INC.
1. Notwithstanding the provisions of this Note under the heading,
"Repayment Terms," principal shall be payable on the Termination Date, as
defined in the Agreement (as hereinafter defined in this Note).
2. Notwithstanding the provisions of this Note under the heading, "Default,
Acceleration and Setoff," the only event of default under this Note shall be an
Event of Default as defined in the Agreement.
3. Notwithstanding the provisions of this Note under the heading, "Late
Charges And Other Authorized Charges," attorneys' fees payable to the Bank shall
be limited to reasonable fees and expenses of counsel to the Bank.
DOUGHTIE'S FOODS, INC.,
a Virginia corporation
By: Marion S. Whitfield, Jr.
------------------------
(Signature)
Its: Senior Vice President
Exhibit (b)(2)
Commercial Note - Crestar Bank
DOUGHTIE'S FOODS, INC. June 14, 1996
Borrower Date
One Million Seven Hundred Fifty Thousand-------------------------
- --------------------Dollars Loan Amount
($1,750,000.00) Bruce W. Nave
---------------
Loan Officer _xOriginal __ Renewal Loan
For Value Received, the undersigned (whether one or more) jointly and severally
promise to pay to the order of Crestar Bank (the "Bank") at any of its offices,
or at such place as the Bank may in writing designate, without offset and in
immediately available funds, the Loan Amount shown above, including or plus
interest, and any other amounts due, upon the terms specified below.
Repayment Terms
Term--Variable Payment.
In 17 consecutive quarterly instalments of principal of $100,000 each, plus
interest, payable on the first day of each calendar quarter, beginning October
1, 1996, and a final payment of $50,000 plus interest and any other amounts
owned due on January 1, 2001.
Additional Terms And Conditions
This Note is governed by additional terms and conditions contained in an Amended
and Restated Credit Agreement between the undersigned and the Bank dated June
14, 1996, and any modifications, renewals, extensions or replacements thereof
(the "Agreement"), which is incorporated herein by reference. In the event of a
conflict between any term or condition contained in this Note and in the
Agreement, such term or condition of the Agreement shall control.
If this Note is payable on demand, the Bank shall have the right to demand
payment at any time even if an event of default (as identified herein) has not
occurred.
<PAGE>
Interest
Accrued interest will be payable on the first day of each month,
beginning on July 1, 1996. Interest on a Term-Fixed Payment Loan with a fixed
interest rate or an Instalment-Simple Interest Loan will accrue on a 30/360
basis. On all other loan types, interest will accrue daily on an actual/360
basis (that is, on the actual number of days elapsed over a year of 360 days)
unless otherwise stated here: _________________________ Each scheduled payment
made on this Note shall be applied to accrued interest before it is applied to
principal. Interest shall accrue from the date of this Note on the unpaid
balance and shall continue to accrue after maturity, whether by acceleration or
otherwise, until this Note is paid in full. If the stated Rate (as defined
below) is based on the Prime Rate of Crestar Bank, the interest rate is subject
to increase or decrease at the sole option of the Bank.
Subject to the above, interest per annum payable on this Note (the "Rate") shall
be Prime Rate plus 1/2%.
The "Prime Rate" shall be the rate established from time to time by Crestar
Bank as a reference for fixing the lending rate for commercial loans. The Prime
Rate is a reference rate only and does not necessarily represent the lowest rate
of interest charged for commercial borrowings.
Adjustments to interest rates subject to change shall be effective as of the
date the Prime Rate changes.
*SEE ADDENDUM
Collateral
Any collateral pledged to the
Bank to secure any of the undersigned's existing or future liabilities to the
Bank shall secure this Note. To the extent permitted by law, each of the
undersigned grants to the Bank a security interest in and a lien upon all
deposits or investments maintained by the undersigned with, and all indebtedness
owed to the undersigned by, the Bank or any of its affiliates.
This Note is also secured by the following collateral and
proceeds thereof: SEE SCHEDULE A, ATTACHED.
All of the foregoing security is referred to collectively as the "Collateral".
The Collateral is security for the payment of this Note and any other liability
(including overdrafts and future advances) of the undersigned to the Bank,
however evidenced, now existing or hereafter incurred, matured or unmatured,
direct or indirect, absolute or contingent, several, joint, or joint and
several, including any extensions, modifications or renewals. The proceeds of
any Collateral may be applied against the liabilities of the undersigned to the
Bank in such order as the Bank deems proper.
Loan Purpose And Updated Financial Information Required
<PAGE>
The undersigned warrant and represent that the loan evidenced by this Note is
being made solely for the purpose of acquiring or carrying on a business,
professional or commercial activity or acquiring real or personal property as an
investment (other than a personal investment) or for carrying on an investment
activity (other than a personal investment activity). The undersigned agree to
provide to the Bank updated financial information, including, but not limited
to, tax returns, current financial statements in form satisfactory to the Bank,
as well as additional information, reports or schedules (financial or
otherwise), all as the Bank may from time to time request.
Default, Acceleration And Setoff
*Any one of the following shall constitute an event of default under
the terms of this Note: (1) the failure to make when due any instalment or other
payment, whether of principal, interest, late charges or other authorized
charges due under this Note, or the failure to pay the amount demanded by the
Bank if this Note is payable on demand; (2) the death, dissolution, merger,
acquisition, consolidation or termination of existence of the undersigned, any
guarantor of the indebtedness of any of the undersigned to the Bank, any
endorser, or any other party to this Note (collectively called a "Party"); (3)
the insolvency or inability to pay debts as they mature of any Party, or the
application for the appointment of a receiver for any Party or the filing of a
petition under any provision of the Bankruptcy Code or other insolvency law,
statute or proceeding by or against any Party or any assignment for the benefit
of creditors by or against any Party; (4) the entry of a judgment against any
Party or the issuance or service of any attachment, levy or garnishment against
any Party or the property of any Party, or the repossession or seizure of
property of any Party; (5) a determination by the Bank that it deems itself
insecure or that a material adverse change in the financial condition of any
Party or decline or depreciation in the value or market value of any Collateral
has occurred since the date of this Note or is reasonably anticipated; (6) the
failure of any Party to perform any other obligation to the Bank under this Note
or under any other agreement with the Bank; (7) the occurrence of an event of
default with respect to any existing or future indebtedness of any Party to the
Bank or any other creditor of the Party; (8) a material change in the ownership,
control or management of any Party that is an entity, unless such change is
approved by the Bank in its sole discretion; (9) if any Party gives notice to
the Bank purporting to terminate such Party's obligations under or with respect
to this Note; (10) the sale or transfer by a Party of all or substantially all
of such Party's assets other than in the ordinary course of business; or (11)
any Party commits fraud or makes a material misrepresentation at any time in
connection with this Note. If an event of default occurs, or in the event of
non-payment of this Note in full at maturity, the entire unpaid balance of this
Note shall, at the option of the Bank, become immediately due and payable,
without notice or demand.
<PAGE>
Upon the occurrence of an event of default, the Bank shall be entitled to
interest on the unpaid balance at the stated Rate plus 2.00% (the "Default
Rate"), unless otherwise required by law, until paid in full. To the extent
permitted by law, upon default, the Bank will have the right, in addition to all
other remedies permitted by law, to set off the amount due under this Note or
due under any other obligation to the Bank against any and all accounts, whether
checking or savings or otherwise, credits, money, stocks, bonds or other
security or property of any nature whatsoever on deposit with, held by, owed by,
or in the possession of, the Bank or any of its affiliates to the credit of or
for the account of any Party, without notice to or consent by any Party. The
remedies provided in this Note and any other agreement between the Bank and any
Party are cumulative and not exclusive of any remedies provided by law. *SEE
ADDENDUM.
Capital Adequacy
Should the Bank, after the date hereof,
determine that the adoption of any law or regulation regarding capital adequacy,
or any change in the interpretation or administration thereof, has or would have
the effect of reducing the Bank's rate of return hereunder to a level below that
which the Bank could have achieved but for such adoption or change, by an amount
which the Bank considers to be material, then, from time to time, 30 days after
written demand by the Bank, the undersigned shall pay to the Bank such
additional amounts as will compensate the Bank for such reduction. Each demand
by the Bank shall be made in good faith and shall be accompanied by a
certificate claiming compensation under this paragraph and stating the amounts
to be paid to it hereunder and the basis therefor.
Late Charges And Other Authorized Charges
*If this is an Instalment-Simple Interest loan, if any portion of a payment is
at least seven (7) days past due, the undersigned agree to pay a late charge of
5% of the amount which is past due. On all other loan types, the undersigned
agree to pay such late charge if any portion of a payment is at least ten (10)
days past due. Unless prohibited by applicable law, the undersigned agree to pay
the fee established by the Bank from time to time for returned checks if a
payment is made on this Note with a check and the check is dishonored for any
reason after the second presentment. In addition, as permitted by applicable
law, the undersigned agree to pay the following: (1) all expenses, including,
without limitation, any and all court or collection costs, and attorneys' fees
of 25% of the unpaid balance of this Note, or actual attorneys' fees if in
excess of such amount, whether suit be brought or not, incurred in collecting
this Note; (2) all costs incurred in evaluating, preserving or disposing of any
Collateral granted as security for the payment of this Note, including the cost
of any audits, appraisals, appraisal updates, reappraisals or environmental
inspections which the Bank from
<PAGE>
time to time in its sole discretion may deem necessary; (3) any premiums for
property insurance purchased on behalf of the undersigned or on behalf of the
owner(s) of the Collateral pursuant to any security instrument relating to the
Collateral; (4) any expenses or costs incurred in defending any claim arising
out of the execution of this Note or the obligation which it evidences, or
otherwise involving the employment by the Bank of attorneys with respect to this
Note and the obligations it evidences; and (5) any other charges permitted by
applicable law. The undersigned agree to pay such authorized charges on demand
or, at the Bank's option, such charges may be added to the unpaid balance of the
Note and shall accrue interest at the stated Rate. Upon the occurrence of an
event of default, interest shall accrue at the Default Rate. *SEE ADDENDUM.
Waivers
The undersigned and each
other Party waive presentment, demand, protest, notice of protest and notice of
dishonor and waive all exemptions, whether homestead or otherwise, as to the
obligations evidenced by this Note. The undersigned and each other Party waive
any rights to require the Bank to proceed against any other Party or person or
any Collateral before proceeding against the undersigned or any of them, or any
other Party, and agree that without notice to any Party and without affecting
any Party's liability, the Bank, at any time or times, may grant extensions of
the time for payment or other indulgences to any Party or permit the renewal or
modification of this Note, or permit the substitution, exchange or release of
any Collateral for this Note and may add or release any Party primarily or
secondarily liable. The undersigned and each other Party agree that the Bank may
apply all monies made available to it from any part of the proceeds of the
disposition of any Collateral or by exercise of the right of Setoff either to
the obligations under this Note or to any other obligations of any Party to the
Bank, as the Bank may elect from time to time. The undersigned also waive any
rights afforded to them by Sections 49-25 and 49-26 of the Code of Virginia of
1950 as amended.
TO THE EXTENT LEGALLY PERMISSIBLE, THE UNDERSIGNED WAIVE ANY RIGHT TO TRIAL BY
JURY IN ANY LITIGATION RELATING TO TRANSACTIONS UNDER THIS NOTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE.
Severability, Amendments And No Waiver By Bank
Any provision of this Note which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Note. No amendment, modification,
termination or waiver of any provision of this Note, nor consent to any
departure by the undersigned from any term of this Note, shall in any event be
effective unless it is in writing and signed by an authorized
<PAGE>
employee of the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. If the
interest Rate is tied to an external index and the index becomes unavailable
during the term of this loan, the Bank may designate a substitute index with
notice to the Borrower. No failure or delay on the part of the Bank to exercise
any right, power or remedy under this Note shall be construed as a waiver of the
right to exercise the same or any other right at any time.
Liability, Successors And Assigns And Governing Law
Each of the undersigned shall be jointly and severally obligated and liable on
this Note. This Note shall apply to and bind each of the undersigned's heirs,
personal representatives, successors and assigns and shall inure to the benefit
of the Bank, its successors and assigns. This Note shall be governed by the
internal laws of the Commonwealth of Virginia and applicable federal law.
By signing below, the undersigned agree to the terms of this Note and
acknowledge receipt of a loan in the Loan Amount shown above.
DOUGHTIE'S FOODS, INC.
By: Marion S. Whitfield, Jr.
-------------------------
(Signature)
Senior Vice President
<PAGE>
SCHEDULE A
TO COMMERCIAL NOTE
DATED JUNE 14, 1996,
MADE BY DOUGHTIE'S FOODS, INC.
1. Credit line deed of trust dated of even date, from Doughtie's Foods, Inc.
("Borrower") to David A. Durham and David Singleton, trustees ("Trustees"),
on real estate and improvements located in Portsmouth, Virginia.
2. Guaranty of even date, from Dutterer's of Manchester Corp. ("Dutterer").
3. Credit line deed of trust dated of even date, from Dutterer's to Trustees,
on real estate and improvements located in Manchester, Maryland.
4. Security Agreement from Borrower dated of even date, on Accounts,
Inventory, Equipment and General Intangibles.
5. Security Agreement from Dutterer's dated of even date, on a promissory note
dated September 3, 1995, made by Value Added Food Services, Inc., and
payable to Dutterer's in the original principal amount of $1,038.756.
6. Borrower's Assignment dated of even date pursuant to the Assignment of
Claims Act, of its rights to receive monies due and to become due to
Borrower pursuant to its contract with the United States of America
(Defense Logistics Agency) for the supply of foods to military facilities
in southern Virginia.
DOUGHTIE'S FOODS, INC.,
a Virginia corporation
By: Marion S. Whitfield, Jr.
--------------------------
(Signature)
Its: Senior Vice President
<PAGE>
ADDENDUM
TO COMMERCIAL NOTE
DATED JUNE 14, 1996,
MADE BY DOUGHTIE'S FOODS, INC.
1. The maker of this Note shall have the right, upon written notice to the
Bank, so long as no Event of Default (as defined in the Agreement) shall have
occurred and be continuing, to elect to have the interest rate on this Note
converted, on a prospective basis, from the floating rate specified in this Note
to a fixed rate of interest (the "Conversion"), such fixed rate of interest to
be specified by the Bank on the effective date of the conversion.
2. Notwithstanding the provisions of this Note under the heading, "Default,
Acceleration and Setoff," the only event of default under this Note shall be an
Event of Default as defined in the Agreement.
3. Notwithstanding the provisions of this Note under the heading, "Late
Charges And Other Authorized Charges," attorneys' fees payable to the Bank shall
be limited to reasonable fees and expenses of counsel to the Bank.
DOUGHTIE'S FOODS, INC.,
a Virginia corporation
By: Marion S. Whitfield, Jr.
------------------------
(Signature)
Its: Senior Vice President
EXHIBIT (a)(1)
AGREEMENT
THIS AGREEMENT is made this ____ day of _________________, 1996, by and between
DOUGHTIE'S FOODS, INC., hereinafter referred to as "COMPANY" and the BAKERY,
CONFECTIONERY, AND TOBACCO WORKER'S INTERNATIONAL UNION, Local No. 66,
affiliated with the BAKERY, CONFECTIONERY AND TOBACCO WORKER'S INTERNATIONAL
UNION, AFL-CIO hereinafter referred to as "UNION".
WITNESSETH
That for the purpose of mutual understanding and in order that a harmonious
relationship may exist between the Company and the Union to the end that
continuous and efficient service will be rendered to and by both parties for the
benefit of both, it is hereby agreed that:
Article I. RECOGNITIONS & UNION SECURITY
Section 1. - Recognition
The Company recognizes the Union as the exclusive representative for the
purpose of collective bargaining with respect to rates of pay, hours of
employment of the employees and other conditions of employment in the
classifications listed in Appendix A, attached hereto, located in its
Portsmouth, Virginia plant.
Section 2. - Discrimination
Both of the parties to this Agreement agree that they will not discriminate
against any employee or prospective employee because of his/her age, sex,
religion, national origin or Union affiliation.
Section 3. - Plant Visitations
The business representative of the Union, bearing credentials from the
Union, shall be allowed in the plant for the purpose of conducting Union
business during working hours at such reasonable times as are determined by the
plant superintendent provided that there shall be no interference with work.
Section 4. - Union Initiation Fees and Dues
The Company will deduct from the pay of the employees covered by this
agreement, who authorize it to do so, Union initiation fees and monthly dues
during the time of this agreement, and any extension thereof, unless and until
any such authority is revoked, in writing, by the employee who has authorized
such deduction. It is further agreed that, in the event Union ceases to be the
representative of the employees, all authorization for the said deductions shall
be considered revoked, canceled and ineffective for any and all purposes. The
Company shall be required to deduct Union fees and dues which it is authorized
to deduct, as hereinabove
<PAGE>
provided, only on the first pay day of each month and the company shall not be
required to deduct dues in excess of the current monthly dues and delinquent
dues for two months. The Company agrees to remit once each month the total
amount of fees and dues collected as hereinabove provided to such official as
Union may designate. The Company shall not be required to accept any
authorization for such deductions unless such authorization is in the following
form:
"ASSIGNMENT OF UNION DUES"
Date
I, _________________________, an employee of __________________________
hereby authorize said Company to deduct from my wages the sum of $____________
for initiation fee and each month thereafter my Union membership dues in
accordance with the by-laws of the Bakery, Confectionery, and Tobacco Worker's
International Union, Local No. 66, AFL-CIO, of which I am a member. I further
authorize the amount so deducted to be turned over each month to the Financial
Secretary of said Union.
This authorization and assignment shall be effective until the anniversary
date of the current Labor Agreement between the Company and the Union, or for
one year from the date hereof, whichever period shall be shorter. Upon failure
to give the Bakery, Confectionery and Tobacco Worker's International Union,
Local No. 66, and my employer written notice within ten (10) days before the
anniversary date, that I do not want to renew this assignment, then this
agreement shall continue in force and effect and automatically renew itself for
a period of one year and from year to year thereafter, until such notice is
given.
Given under my hand and seal this ____ day of _______________, ________.
(SEAL)
Section 5. - Shop Steward
The union may appoint or elect members of this local to act as shop
stewards, whose duty it shall be to see that this agreement is not broken by
either the Company or the Union.
The shop steward or business representative of the Union will at all times,
upon request, have the right to take up any questions with management, with or
without the employee involved. This will be done at a time mutually agreed by
both parties.
Section 6. - Joint Literacy Clause
The Company and the Union shall appoint a joint committee, which shall meet
over the life of the agreement to develop joint approaches to promoting "work
place literacy." The committee shall attempt to determine the extent to which
the employees need to improve their reading and written communication skills and
the extent to which instruction in the English language is needed. The committee
shall also compile an estimate of what resources are needed to establish this
program which will meet the needs of the employees and the company.
<PAGE>
If the parties agree to establish such programs it is understood that the
program will be funded by the company, and will include union participation in
course design and content.
If an employee is taken off the job to participate in planning meetings, it
is further agreed that the Company will pay the union members of the joint
committee at their regular straight time spent at the meeting.
Section 7. - Technology Clause
The Company agrees to provide the training and retraining necessary for
present employees to acquire the necessary skills to perform work on new
equipment, including any newly created jobs, or to perform other work to which
they might be reassigned or transferred. The Company will notify the department
shop steward of these changes or job openings as they occur.
Section 8. - Orientation Clause
Upon hiring new employees, the Company agrees to introduce new employee to
department union steward.
Article II. MANAGEMENT RIGHTS
Union recognizes that, subject to the express provisions of this agreement,
the supervision, management and control of the Company's business operations,
working forces and premises are exclusively vested in the Company. Without
limiting the generality of the foregoing, Union recognizes that, subject to the
express provisions of this Agreement, the following rights are vested
exclusively in management: to plan, direct and control the Company's business,
operation location, methods and working force; to hire, suspend, assign,
promote, demote, transfer or lay-off employees and to discipline or discharge
employees for just cause; to determine reasonable standards of performance; to
introduce or discontinue any operation; and to require employees to observe the
Company's rules and regulations not inconsistent with this Agreement.
Article III. SENIORITY
Section 1. - Probationary Period
During the first forty-five (45) days of employment, a new employee shall
be on a trial basis, shall not acquire seniority rights, and may be discharged
at the discretion of the Company. Probationary employees will be supplied with
temporary foot covering during this period in processing areas only.
Section 2. - Application of Seniority
In the matter of filling a job vacancy or in making lay-offs, and recalls,
the ordinary rules of seniority and fitness for the work shall apply.
All employees have seniority rights in all departments.
Any employee's seniority shall be broken if he:
1. Quits.
2. Is discharged.
3. Is absent on any three (3) days without notice or excuse mutually
<PAGE>
agreeable to employer and employee.
4. Fails to report after a lay-off within seven (7) calendar days after
the Company sends to the last address known to the Company a written
notification to return to work.
5. Has been out of employment by the Company for a period of six (6)
months.
6. Has been out of bargaining unit for 91 days.
7. When two (2) or more employees are hired on the same day, the Company
shall determine their relative seniority.
Section 3. - Job Vacancies
When new jobs are created or vacancies occur, notice of the availability of
such job shall be posted for a period of seventy-two (72) hours (excluding
Saturday and Sunday hours) for bids. In the event that an eligible bidder is on
vacation during such seventy-two (72) hour period and the job is awarded to
another employee, the vacationing employee shall have the right to bid on such
jobs within forty-eight (48) hours of his/her returning from vacation. If the
employee returning from vacation is the ultimately successful candidate, the
previously selected employee shall be returned to his/her previous position at
his/her prior rate of pay for such previous position.
The Company will move the transferred employee to the new position within
30 calendar days with the exception of special circumstances. Under no
circumstances will the move not be made within 90 days without mutual agreement
between the Company and the employee. The employee chosen for the job shall be
given a fifteen (15) working day training period at the end of which if he/she
has not done the work satisfactorily, which determination shall be made solely
by the Company, he shall be returned to his/her old job at his/her former rate
of pay. If the training employee's job performance jeopardizes safety,
equipment, or business the employee shall be immediately removed from the new
position and returned to their old job.
In the event of a vacancy occurring for a truck driver job, the successful
bidder must have a Department of Motor Vehicle driving record acceptable by the
Company, must pass a written examination for drivers, and also successfully be
certified in a road test as possessing sufficient driving skill to operate
safely the type of commercial motor vehicle used by the Company. (No unqualified
employees will be required to operate a motor vehicle.). All other provisions
set forth in the previous paragraph shall be applicable. Truck drivers must have
a Department of Motor Vehicles driving record acceptable by the Company, and
have a Commercial Drivers License.
Section 4. - Job Transfers
Job transfers between any classification will be authorized. Employees may
not transfer into another department until after they have been employed one
year. Employees with a disciplinary suspension on file within the last 180 days
on the job will not be permitted to transfer. When an employee does transfer
from one department to another, they will not be permitted to transfer again for
one year unless management initiates the transfer. If the senior person that has
signed the job posting is disqualified for reasons above, the next senior person
will be selected. If none of the employees signing the job posting is qualified,
the position will be posted one additional time before the Company hires from
outside the Company.
<PAGE>
Section 5. - Extra Work (Does not apply to the continuation of regular shift
work).
Extra work shall go to the employee with the most seniority in the
employee's respective division (manufacturing or distribution) as long as this
employee is qualified to perform the necessary job (which qualification will be
determined by management). If no senior employee desires the extra work, the
least senior employee is required to work. This does not apply to the
continuation of regular shift work.
Section 6. - Lay-off
Lay-offs; with the exception of drivers, will be accomplished by seniority.
Probationary employees shall be laid off first. If further layoffs are
necessary, the last person hired shall be the first laid off. In the event of
recall, employees shall be recalled in the reverse order of layoff subject to
the same condition.
Truck Driver lay-offs; The driver with the least seniority will be the
driver who will be laid off. If this driver has the lowest seniority in the
Division, he will be on lay-off status. If this driver is not the lowest senior
employee, this driver will be transferred to the lowest senior employee's job in
their division. At that point the lowest senior person will go on lay-off
status.
Article IV. HOURS OF WORK & OVERTIME
Section 1. - Workweek
A. The regular workweek shall begin at 12:01 a.m. on Sunday and conclude at
12:00 p.m. midnight Friday and employees must report to work at any time
requested by the Company and any employee required to work in excess of eight
(8) hours in any day or forty (40) hours in any workweek shall be paid overtime
as provided in this Agreement. All work performed on Saturday shall be paid at
the rate of time and one- half (1 1/2).
B. It is agreed that six (6) minutes per day is a reasonable time for clocking
in before and after work which is to be paid to each employee in the
manufacturing plant at their regular hourly rate and that such time is to be
considered as work time for all purposes under this agreement.
Section 2. - Posting of Work Schedule
Schedules should be posted on Wednesday of each week and in no case later
than Thursday, showing the work days and hours of each employee for the workweek
Sunday through Saturday. Every effort shall be made to adhere to this schedule
as closely as possible but both parties should understand that some variable may
occur due to the nature of the business.
Section 3. - Daily Guarantee and Call In
A. Each regular employee who reports for work upon request by management, shall
be guaranteed not less than thirty-six (36) hours per week, provided they do
whatever work is assigned to him or her. When a holiday occurs in a workweek,
each employee shall be guaranteed not less than twenty-eight (28) hours work per
week.
<PAGE>
Such guarantee is contingent upon there being no emergency condition beyond
the Company's control, which prevents or interferes with the normal operation of
the business.
B. Whenever any truck driver is scheduled to report to work and does report at
the time specified, such employee shall be guaranteed two (2) hours pay,
provided that said employee remains on the job until released by the dispatcher.
This two (2) hour pay will include the time while waiting for the dispatcher's
release.
Drivers with higher seniority who come to work and find their route has
been cut, can bump the driver with less seniority, only if the senior driver can
perform the route within 1 1/2 hours of Roadnet time.
Section 4. - Overtime
A. Rate of Pay. Each employee shall be paid for all work performed in excess of
eight (8) hours a day or forty (40) hours in a regular workweek at the rate of
one and one-half (1 1/2) times his regular straight time hourly rate, whichever
is greater but not both.
B. No Pyramiding of Overtime. Time and one-half (1 1/2) shall be paid on the
weekly or daily basis, whichever is greater, but in no case both. In other
words, any hours for which overtime is payable on a daily basis shall be set
aside or excluded in determining the amount of overtime on a weekly basis.
C. Rest Period Overtime. Each employee is entitled to an unbroken rest period of
at least twelve (12) hours between shifts, and any employee, except for truck
drivers, requested to work during his/her twelve (12) hour rest period shall be
paid for such work at the rate of one and one- half (1 1/2) times his/her
regular straight time hourly rate provided they do whatever work is assigned to
them. Truck drivers should have at least an eight (8) hour rest period between
shifts. No disciplinary action may be taken against a truck driver unless he/she
has had his or her eight (8) hours rest period.
D. Offsetting of Overtime. No employee shall be given time off for the purpose
of offsetting overtime.
Section 5. - Incentive Programs
The Union has agreed to allow the Company to initiate, install and operate
incentive programs which will allow employees to earn extra dollars over their
regular pay.
Article V. REST AND LUNCH PERIODS
Section 1. - Rest Periods
A. Each employee shall be given a fifteen (15) minute paid rest period during
the third (3rd) hour of work and a fifteen (15) minute paid rest period during
the seventh (7th) hour of work. An unpaid lunch period of thirty (30) minutes
shall be given after the fourth (4th) hour of work and be completed by the end
of five and one-half (5 1/2) hours of work. If any
<PAGE>
employee is required to work ten (10) or more hours in one day, an additional
fifteen (15) minute period of rest shall be given such employee at the end of
the tenth (10th) hour.
B. When a driver is required to work in excess of ten (10) hours in any one day,
the Company shall provide a $3.75 supper allowance to said employee. In the
event of an emergency arising due to mechanical or tire failure beyond the
driver's control which necessitates a delay beyond twelve (12) hours, the driver
affected shall receive an additional $1.25 supper allowance.
Section 2. - Physical Relief
Necessary physical relief will be granted within reason without
discrimination of any source. Physical relief is defined as bladder, or
intestinal relief. Freezer and Seafood Department workers will be permitted to
come out of the freezer/cooler to get warm.
Section 3. - Drinking Water
Cool drinking water is to be available at all times for the employees in
their working areas.
Section 4. - Lunch Periods
A thirty (30) minute period shall be allowed for lunch each day, and such
lunch period shall be excluded from the working hours. In an emergency, which
shall be determined solely by the Company, the Company may schedule a sixty (60)
minute lunch period all of which time shall be excluded from working hours.
All employees, with the exception of drivers on the road, will be required
to punch out and in for their lunch period.
Article VI. WAGES & CLASSIFICATIONS
The classifications and rate of pay are set forth in Appendix A, which is
attached hereto and made a part hereof.
Article VII. HOLIDAY
Section 1. - Holidays
Each employee shall receive the following holidays with eight (8) hours pay:
New Years Day Thanksgiving Day
Memorial Day Christmas Eve *
July 4th Christmas Day
Labor Day Martin Luther King's Birthday
Those employees who work on a holiday shall observe a work holiday within
ninety (90) days of such holiday. The exact day shall be mutually agreed upon by
the Company and employee. If an employee is denied the day off that is requested
to be taken as a result of having worked a holiday, they will be given an
additional 30 day period to take the day off. The employee must complete and
turn in to their supervisor a written extension request form which will be
provided by Management.
<PAGE>
* All hours worked Christmas Eve shall be paid at the regular straight time
rates pursuant to Paragraph A, Section 4, Article IV.
In addition to the above holidays an employee shall receive one personal
holiday of his/her choosing as long as fourteen (14) days notice is given to
management. This holiday cannot conflict with another employee's personal
holiday or the three holiday weeks set aside as "no vacation weeks" by
management.
The company reserves the right to declare by department (Manufacturing
Department, or Distribution Department) a holiday and close the department to
celebrate the "personal holiday."
Section 2. - Qualifications of Holiday Pay
A. In order to receive pay for any such holiday, the employee must have been in
the employ of the Company for at least thirty (30) days and worked his/her
regular scheduled work day preceding and his her regular scheduled work day next
following such holiday. In the event that an employee is unable to complete
his/her regular scheduled work day preceding, immediately following, or the day
of the holiday, he/she shall receive a pro-rata amount of holiday pay in direct
proportion to the hours worked on either day, provided that such employee is
excused by his/her supervisor.
B. If an employee is required to work on a holiday, except Christmas Eve Day,
he/she shall receive one and one-half (1 1/2) times his/her regular straight
time hourly rate for all hours worked on such holiday in addition to his/her
holiday pay. An employee who is scheduled to work on any holiday and does not
work shall receive no pay for such holiday.
C. If an employee is absent on any such regular scheduled work day due to a
bona-fide excuse or sickness that can be legitimately documented prior to or
after a holiday, or on the actual holiday that said employee is scheduled to
work, they shall receive their holiday pay provided they have performed work
within the two (2) week period prior to the holiday week or during the holiday
work week itself. In the event that a dispute arises over the legitimacy of
documentation, the Company and the Union agree that it shall be resolved by use
of the first two (2) steps of the grievance procedures.
D. If an employee works on a holiday, the hourly rate of the holiday shall
equal the pay of the job the employee is doing on that day.
Article VIII. VACATIONS
Section 1.
Regular employees who work not less than 1600 hours in their anniversary
year shall be entitled to vacation with pay, as follows:
One week................................ after one year of employment
Two weeks............................... after three years of employment
Three weeks............................. after eight years of employment
<PAGE>
Four weeks.............................. after twelve years of employment
Five weeks.............................. after eighteen years of employment
Regular part-time employees are employees regularly scheduled to work at
least three (3) six (6) hour work days a week. The yearly minimum work
requirement of a part-time employee for vacation shall be 750 hours and after
one (1) year of employment, part-time employees who qualify shall be given a
pro-rated vacation based on the above schedule for regular employees.
No employee, either regular or part-time, shall be entitled to a vacation
until he/she has been on the active payroll for period of one (1) year.
A regular employee or a regular part-time employee, who due to illness,
injury, or pregnancy leave, works less than the time above required for a
vacation, shall be entitled to a pro-rated vacation and pay therefore, based
upon actual number of hours worked during the above required length of service
for a vacation.
Section 2.
Vacation pay for regular employees shall be forty (40) times the employee's
regular straight time hourly rate for each week of vacation.
In order to receive such vacation pay, an employee must leave work for the
applicable vacation period.
Section 3.
If an employee has earned a two (2) or more weeks vacation, he/she may take
his/her weeks consecutively. The vacation period shall be between January 1st
and December 31st. The vacation schedule for the ensuing year shall be posted
during the entire month of January and each employee shall select his/her
vacation time therefrom for the ensuing year in accordance with their seniority.
The highest seniority employees must select during the first fifteen days so as
to allow the lesser seniority employee ample opportunity to plan their vacation
schedules. When the vacation list has been approved by the Company, no changes
will be made, except by mutual agreement and under no circumstances may a
seniority employee "bump" a lesser senior employee.
Whenever a holiday listed in Article VIII, Section 1, falls within an
employee's vacation period, the employee shall receive an extra day's pay in
addition to his/her vacation pay if its is mutually agreeable to both the
Company and the Union.
Because of peak demand in our business, the week before each of the
following holidays will not be available to employees who work in the
Distribution positions. These holiday weeks are Memorial Day, 4th of July and
Labor Day. The week that the holiday is celebrated will be availabe.
Section 4.
Each employee shall receive his/her vacation pay immediately before his/her
vacation starts.
<PAGE>
Section 5.
Any employee whose service is terminated after his/her first service
anniversary shall, unless he/she was discharged for dishonesty, be entitled to
vacation pay in accordance with the following schedule:
Completed Months of Service
Since Last Service Anniversary Vacation Pay
Less than six (6) months.............................................None
Six (6) months...................................................... 6/12
Seven (7) months.................................................... 7/12
Eight (8) months.................................................... 8/12
Nine (9) months..................................................... 9/12
Ten (10) months.................................................... 10/12
Twelve (12)months...................................................11/12
If an employee has been granted a vacation prior to the end of the
anniversary year which entitled him to such vacation and fails to complete the
year of service required for such vacation, he/she shall refund the Company the
difference between the vacation pay he/she received and the pro-rated amount
he/she would have been paid by reason of his/her service having terminated prior
to the end of his/her anniversary year.
Article IX. LEAVES OF ABSENCE
Section 1. - Military Leaves
Company and Union agree to abide by the terms of the Selective Service and
Training Acts, as amended from time to time, or any other applicable law.
Section 2. - Family and Medical Leave
The Company agrees to comply with all federal regulations pertaining to the
1978 Amendments to the Civil Rights Act of 1964 with reference to pregnancy
discrimination and as well as the Family and Medical Leave Act.
Section 3. - Union Business Leave
The Company agrees, if reasonably possible, to give time off without pay,
to any official of the Union who may have any Union business to which he/she has
to attend at that time. Additionally, in the event that Union shall select an
employee as Business Representative, the Company agrees to let him/her leave its
employ with the understanding that he/she may return to work at any time with
standing and seniority comparable to that which he/she enjoyed at the time
he/she left.
Section 4. - Funeral Leave
It is agreed, in the event of a death in the immediate family, the employee
shall be granted three (3) days to attend the funeral. If any of these three (3)
days are working days, the employee shall suffer no loss in pay. The
requirements for the funeral leave period shall begin on the first full day of
absence following death and end on the day of the funeral. If in the opinion of
management, travel considerations in attending a funeral are involved, up to two
(2) calendar days
<PAGE>
immediately following the funeral may be considered as part the funeral leave
period. The term "immediate family" shall mean: Father, Mother, Son, Daughter,
Brother, Sister, Husband, Wife, Father-in-law, Mother-in-law, Daughter-in-law,
Sonin-law, Grandparents, and Grandchildren. Proof of death and relationship of
deceased is necessary before funeral leave will be paid.
Section 5. - Jury Duty
Any full time employee who has been in the continuous employee of the
Company for three (3) months or more, and who is required to serve as a juror
shall be paid eight (8) hours daily at his or her regular straight time hourly
rate (excluding premiums or overtime) less such amount of compensation allowed
by the courts for his or her service, subject to the following conditions:
A. If on the day the employees serve on the jury they also work for the Company,
they shall receive no extra compensation: if they work their regular gang time.
In no event shall such difference payments exceed fifteen (15) work days in one
(1) year because of required jury duty.
B. No difference payments for jury duty shall be paid to employees who fail to
report for work and work the hours on any scheduled work day on which their
service is not required in court.
C. Employees who have received an official summons to serve as jurors shall give
notice and proof of such summons to their foreman a reasonable time in advance
of the date on which they are to serve.
D. At the end of the employee's service as juror, the employee shall obtain from
the Clerk of the Court statements showing the time served and the amount paid to
them as compensation for their services as jurors and shall promptly submit such
statements to the Time Office.
Article X. HEALTH AND WELFARE
Section 1. - General
The Company agrees to maintain the following Group Insurance Plan during
the term of this agreement. This does not cover any work related accidents that
are covered by Workers Compensation.
Schedule of Benefits:
A. Death Benefit...................................................$5,000.00
Accidental Death and Dismemberment..............................$5,000.00
Weekly Accident and Sickness Benefit........................up to $150.00
(Maximum of thirteen (13) weeks)
a. Equal to 66 2/3 percent of an employees straight time hourly wages
with maximum of $150.00 per week.
b. Benefits shall begin on the first day of an accident and the fourth
day of an illness.
B. Hospital/medical, dental and prescription drug coverage shall be available to
employees at their option as provided under the terms and conditions stated in
Trigon Group Policy Number 41436A. Premiums for employee and dependent coverage
shall be paid by employees as provided in the attached Schedule A. Premiums for
dependent and employee coverage shall be increased to cover the increased cost
over and above the present coverage.
<PAGE>
Section 2. - Employee Compliance
Employees shall comply with all regulations of the Company insurance
carrier in regard to all benefits provided in this article.
Section 3. - Employee Qualification
The Company agrees to reopen negotiations if a new hospitalization program
is adopted by the Company.
Any new employee shall qualify for such benefits upon the completion of
ninety (90) days continuous full-time service.
Article XI. GENERAL PROVISIONS
Section 1. - Bulletin Boards
Enclosed bulletin boards shall be provided by the Company for official
business. Other bulletin boards will be available for social notices. A signed
copy of this agreement shall be posted on such.
Section 2. - Medical Examinations
The Company agrees to pay for any doctor's examination which may be
necessary obtain employment in the plant.
Section 3. - Uniforms
The Company agrees to furnish all uniforms, coats, aprons, hats and hair
nets necessary for the employee's use, without charge. It is specifically agreed
that the Company will launder all uniforms, coats, and aprons used in the
Manufacturing Plant. It is understood that the truck drivers shall contribute
$2.50 per week to the laundering fee for the uniforms provided by the Company.
The Company further agrees to furnish boots to production employees whose jobs
necessitate wearing them.
Section 4. - Back Safety Support
The union has requested that back safety belts be worn by union employees
when performing tasks that involve lifting. The company has agreed to purchase
safety belts and split cost 50% with any employee wishing to wear such belt. The
employee will initiate such request to obtain a belt with their supervisor.
The employee who receives such belt must adhere to the following procedures:
a. The belt must be brought to work daily.
b. The belt must be worn during the lifting portion of the job.
c. Employees who fail to wear the safety belt will be written a "warning
letter." On the third such "warning letter" the belt will become the sole
property of the employee and 50% of the cost of the belt will be deducted from
employee's payroll. The employee will at that time be released from the
mandatory wearing of the belt.
d. The manufacturers's warranty will determine the frequency of Company
participation.
e. Management may deny continued participation in the program if it
<PAGE>
determines that the belts create a health or safety problem.
Section 5. - Work by Supervisory Employees
No Supervisor shall perform any of the duties of any employee coming under
the jurisdiction of this Agreement except in the case of an emergency. It is
agreed that without limitation to other emergencies that may occur the following
conditions shall be deemed to be emergencies when:
1) A scheduled employee fails to report to, or perform his/her work.
2) It is necessary for the supervisor to instruct an employee in how to
perform his/her work.
3) During his/her scheduled work hours an employee becomes unable to
perform his/her work by reason of physical disability.
Section 6. - Sickness
When an employee is sick, they must call in daily as soon as possible or at
least by 30 minutes prior to the scheduled work hour. Any employee who is out
sick for a period not exceeding two (2) days may return to work without a
doctor's permit. If such em-ployee is out sick three (3) days or more a doctor's
permit will be required before he/she can return to work.
Section 7. - Rules and Regulations
Both the Company and Union agree to the necessity of Rules and Regulation
governing the day-to-day operations of the business. Such rules and regulations
have been in effect since May 28, 1973. A Copy of these rules and regulations
are attached to this Agreement and are so noted as Exhibit A.
Article XII. NO STRIKE, NO LOCKOUT
Section 1. - General
The Company and the Union agree on the need of their service to the public
with out interruption. Both recognize the objective as necessary to the security
of the Company and its people. Both, therefore, specifically pledge themselves
to help assure that security by using the procedures agreed upon between them
for the adjustment of disputes and grievances in all cases where there is any
difference of opinion concerning the rights of either party under this contract,
or the interpretation or application of any provision of it.
Section 2. - No Strike, No Lockout
The Union agrees that there will be no strike, slow down, or other
interference with work by any or all of the employees during the life of this
Agreement. The company agrees that no lockout against any or all of the
employees shall take place during the life of this Agreement.
Section 3. - Discipline and Union Duties.
In the event of a walkout in violation of the above provision, any employee
found guilty of instigating, fomenting, actively supporting or condoning such
illegitimate strike shall be subject to discipline, including discharge. Union
<PAGE>
agrees that all possible steps will be taken to preclude or to terminate as soon
as possible all strikes or contemplated strikes in violation of this Agreement.
Article XIII. GRIEVANCE AND ARBITRATION
Section 1.
In the event that a dispute arises at any time over wages, hours, working
conditions or any other aspect of this Agreement, such dispute shall be handled
first by the employee with the complaint and the shop steward presenting the
grievance to the shift supervisor within five (5) working days of the occurrence
upon which the grievance is based, and they shall attempt to settle the
grievance within five (5) working days of its presentation.
Section 2.
In the event that the grievance is not settled within five (5) working days
of its presentation in Step One, within five (5) working days following such
five (5) day period of Step One, the employee and the shop steward shall present
the grievance to the shift supervisor and a member of management and they shall
attempt to settle the grievance within five (5) working days of its
presentation.
Section 3.
If the grievance is not settled within five (5) working days of its
presentation in Step Two, within five (5) working days following such five (5)
day period in Step Two, the Union shall reduce the grievance to writing and the
local union business agent shall present the same to the plant manager who shall
meet and attempt to settle the grievance within fifteen (15) working days of its
presentation.
Section 4.
If the parties in Step Three are unable to arrive at a settlement of a
grievance within fifteen (15) working days of its presentation, either party
thereto may, as a final resort, submit the matters to an arbitrator selected
pursuant to the rules of the Federal Mediation and Conciliation Service,
provided notice of such intention is given in writing by the initiating party
within fifteen (15) working days after receiving the answer in Step Three.
Section 5.
If the parties are unable to agree upon the selection of an arbitrator
within ten (10) days of the notice required in Step Four above, then the party
shall alternately strike two (2) names from such list, with the complaining
party having the privilege to make the first strike, and the remaining name
shall be the arbitrator.
Section 6.
It is expressly agreed and understood that no employee shall have the right
to compel the arbitration of his grievance without the written consent of the
Union.
<PAGE>
Section 7.
The decision or award for the arbitrator shall be final and binding of both
parties.
Section 8.
The Company and the Union shall each pay their own costs incurred in
connection with the arbitration. The expense of the neutral arbitration shall be
shared equally between them.
Article XIV. SCOPE & APPLICATION OF THIS AGREEMENT
Section 1. - General
This agreement incorporates the full and complete understanding of the
parties pertaining to the regulation of minimum wages and hours of employment of
all the production and maintenance employees of the Company who come within its
terms and are not excluded from its operation. This Agreement shall constitute a
complete accord and adjustment of all matters between the parties hereto and no
complaint shall be filed or considered on account of anything which has occurred
prior to the execution hereof.
Section 2. - Severability
Any provision of this Agreement which may be in violation of State or
Federal Acts, statutes, regulations or orders, or revision thereof, now
effective or which become effective during the term of this Agreement, shall be
considered void. In the event that any provision of this Agreement is thus void,
the balance of the Agreement and its provisions shall remain in effect for the
term of this Agreement.
Article XV. PENSION
It is hereby agreed to provide pension and retirement benefits as follows:
A. The Company hereby agrees to be bound as a party by all the terms and
provisions of the Agreement and Declaration of Trust dated September 11, 1955,
as amended, established the Bakery and Tobacco Workers Unions and Industry
International Pension Fund (hereby called the Fund) and said Agreement is made
part hereof by reference.
B. Commencing with the last day of June 1977, the Company agrees to make
payments to the Fund for each employee working in job classifications covered by
the said Collective Bargaining Agreements.
Effective October 24, 1997, for each hour or portion thereof, for which an
employee subject to the Collective Bargaining Agreements, receives pay, the
Company shall make a contribution of sixty (60) cents to the above named pension
fund, up to a maximum of forty (40) hours in any week.
For the purpose of this Article, it is understood that contributions shall
be payable on behalf of employees from the first day of employment, whether said
employees are permanent, temporary or seasonal, full-time or part-time
employees, and regardless of whether or not they are members of the union.
<PAGE>
C. The payment made in accordance with "B" above shall be allocated as follows:
sixty (60) cents per hour to provide for a normal, reduced early retirement and
disability pension (Plan A).
D. It is agreed that the pension plan adopted by the Trustees of the said
pension fund shall be such as will qualify for approval by the Internal Revenue
Service of the United States Treasury Department, so as to enable the Company to
treat contributions to the pension fund as a deduction for income purposes.
E. It is hereby agreed to provide pension and retirement benefits as
follows:
1. The Company hereby agrees to be bound as a party by all the terms and
provisions of the Agreement and Declaration of Trust dated September 11, 1995,
as amended, establishing the Bakery and Confectionery Unions and Industry
International Pension Fund (herein after called the Fund) and said Agreement is
made part hereof by reference.
2. Commencing with the 1st day of ____________________ 19___, the Company
agrees to make payments to the Bakery and Confectionery Union and International
Pension Fund for each employee working in job classifications covered by the
said Collective Bargaining Agreement as follows:
a. For each day or portion thereof, for which an employee subject to the
Collective Bargaining Agreement, receives pay, the Company shall make a
contribution of $ __________ to the above named Pension Fund, up to a maximum of
forty (40) hours in any week. For the purpose of this Article, it is understood
that contributions shall be payable on behalf of employees from the first day of
employment, whether said employees are permanent, temporary, or seasonal, or
full-time or part-time employees, and regardless of whether or not they are
members of the Union. The term "Employee" does not include a self-employed
person, corporate officer, owner or partner.
3. The payment made in accordance with "2" above shall be allocated as
follows:
_______ per (day) (hour) to provide coverage for a Normal, Reduced, early
Retirement and Disability Pension (Plan A)
_______ per (day) (hour) to provide coverage for Vested Deferred Pension
(Plan B)
_______ per (day) (hour) to provide coverage for an Age and Service Pension
(Golden Ninety Plan C)
_______ per (day) (hour) to provide coverage for an Age and Service
Pension in the event of loss of covered employment due to a
permanent reduction in force (Plan CC)
_______ per (day) (hour) to provide coverage for an Age and Service Pension
(Golden Plan G)
_______ per (day) (hour) to provide coverage for Supplemental Pension
(Plan D______)
_______ per (day) (hour) to provide Health Benefits for Pensioners in
accordance with Plan W ______ of said Fund
_______ per (day) (hour) to provide Health Benefits for Pensioners in
accordance with Plan P _______ of said Fund
<PAGE>
4. It is agreed that the Pension Plan adopted by the Trustees of said
Pension Fund shall be such as will qualify for approval by the Internal Revenue
Service of the United States Treasury Department, so as to enable the Company to
treat contributions to the Pension Fund as a deduction for income tax purposes.
5. Contributions provided for herein shall be paid monthly and shall be
accompanied by a completed remittance report. Both payment and report are due on
the tenth (10th) day of the month following the month covered by the report. In
the event the Company fails promptly to pay the amounts owed, the Company shall
pay such collection costs, including court costs, and reasonable attorneys fees,
as the Pension Fund shall incur, and shall pay interest at such a rate as the
Trustees shall fix from time to time.
6. The payments so made to the Fund shall be used by it to provide
retirement benefits for eligible employees in accordance with the Pension Plan
for said Fund, as determined by the Trustees of said Fund, to be applied to the
eligible employees based on the amount of employer contribution.
7. This clause encompasses the sole and total agreement between the Company
and the Union with respect to pensions or retirement.
8. This clause is subject in all respects to the provisions of the Labor
Management Relations Act of 1947, as amended and to any other applicable laws.
Company _______________________ Bakery, Confectionery and Tobacco
Workers International Local Union
No. _____
By_____________________________ By________________________________
Date___________________________ Date______________________________
F. Notwithstanding any provisions, if any, to the contrary contained in the
Collectible Bargaining Agreement between the Company and the Union, the Union
shall have the right to strikes by giving the Company written notice of its
intention to do so not less than forty-eight (48) hours in advance if the
Company shall fail to make payment of the contribution due to the Fund for any
month on or before the 10th day of the third calendar month following the month
for which such be taken by the Union unless and until the Administrative
Director of the Fund shall have certified in writing, to the Company and to the
Union, that the Company has so failed to pay such contribution. Any strike
pursuant to this provision shall be terminated as soon as the Company shall pay
the delinquent contribution or shall make arrangements for the payment of it
which meets with the approval of the Administrative Director of the Fund.
G. The payments so made the Fund shall be used by it to provide retirement
benefits for eligible employees in accordance with the Pension Plan of said
Fund, as determined by the Trustees of said Fund, applied to the eligible
employees based on the amount of employer contribution. The Company hereby
affirms that he/she has no arrangement for the compulsory retirement of his/her
employees except set forth herein.
<PAGE>
H. This clause encompasses the sole and total agreement between the Company
and the Union with respect to pensions or retirement.
I. This clause is subject in all respects to the provisions of the Labor
Management Relations Act of 1947, as amended and to any other applicable
laws.
Article XVI. SUCCESSOR CLAUSE
This Agreement shall be binding upon the parties hereto, their successors,
administrators, executors and assigns.
Article XVII. EFFECTIVE DATE & DURATION FOR AGREEMENT
This Agreement shall become effective as of 12:01 a.m. on April 28, 1996,
and shall continue to be in full force and effect until October 23, 1998 at
midnight and thereafter from year to year, unless either party hereto shall
notify the other by registered letter or certified letter, mailed not less than
sixty (60) days prior to October 23, 1998, or any anniversary date thereof, of
desire to modify or terminate same, provided, however, in the event and change
is of pay or in the present requirement for pay at time and one half (1` 1/2)
the regular hourly rate of pay for hours worked in excess of forty (40) hours in
any work week, which change requires an adjustment of the wages and/or hours of
an employee covered by this Agreement. Either party may elect to reopen this
Agreement as of the effective date of any such law, governmental regulation or
ruling, for the sole purpose of renegotiating the wage schedule or work week and
overtime provision in the said contract or both, depending on which items are
affected by such laws, rulings or regulations, by notifying the other party
subsequent to the effective date of such law, governmental regulation or ruling.
IN WITNESS WHEREOF, the parties have on this 11th day of October 1996
caused their names to be subscribed by their duly authorized officers and
representatives.
Doughtie's Foods, Incorporated Bakery, Confectionery and Tobacco
Workers International Union, Local
Union. 66
By: Steven C. Houfek By: Donnie L. Block
(Signature) (Signature)
President Union President
Witness Witness
By: Sharon Stevens By: Vivian Garris
(Signature) (signature)
Dir. of Human Resources
<PAGE>
Appendix "A"
WAGES AND CLASSIFICATIONS
Rate Effective:
Classifications Apr. 28, 1996 Oct. 24, 1996 Oct. 24, 1997
Packer 8.25 8.60 8.90
Cook 8.35 8.70 9.00
Grinder 8.65 9.00 9.30
Tractor-Trailer Driver 8.80 9.15 9.45
Truck Driver 8.70 9.05 9.35
Shipping and Receiving 8.30 8.65 8.95
Prod./Whse. Worker 8.25 8.60 8.95
Cleaner 8.25 8.60 8.95
Freezer Selector 8.35 8.70 9.00
Slicer/Operator 8.40 8.75 9.05
Checker 8.30 8.65 8.95
Fork Lift Operator 8.65 9.00 9.30
Sauce Cooker 8.25 8.60 8.90
Patty Machine Operator 8.30 8.65 8.95
Band Saw Operator 8.40 8.75 9.05
Spice Room Operator 8.25 8.60 8.90
Meat Trimmer 8.40 8.75 9.05
Packaging Machine Opr. 8.25 8.60 8.90
Injection Machine Opr. 8.35 8.70 9.00
Truck Spotter 8.25 8.60 8.90
Fish Cutter 8.30 8.65 8.95
Loader 8.30 8.65 8.95
B. The rate of pay for new employees will be less $1.00 per hour from scheduled
classification pay. After 180 days the employee will be at the scheduled
classification pay rate.
C. When an employee is transferred from a lower paid job to a higher paid job
for less than three (3) hours, such employee shall continue to receive his/her
regular rate of pay at the lower rate. However, if such transfer exceeds three
(3) hours in any work day, the employee shall receive the higher rate of pay for
all hours worked on the higher paid job. Company shall not remove an employee
who is so transferred to a higher paid job from a lower paid job after less than
three (3) hours of work at the higher paid job solely in order to avoid paying
such employee the higher rate of pay.
D. Night Shift Differential: All employees who work during the period of 6:00
p.m. to 6:00 a.m. shall receive a night shift differential in the amount of an
additional hourly rate of twenty (20) cents over the rate listed in this
Appendix for all hours worked during such period.
E. Group leaders will be given additional pay depending on the scope of the
responsibility (determined exclusively by Management). The minimum amount would
be .20/hr.
F. Wage classification adjustment of 25 cents per hour for all drivers effective
upon ratification, in addition to the general increase. The employer may further
increase the classification rate for drivers during the term of
<PAGE>
this agreement, so long as such increase applies equally to all drivers in the
same classification. The Company agrees to notify the Union of any such
increase, amounts and those individuals affected.
<PAGE>
Exhibit "A"
Doughtie's Foods, Inc.
EMPLOYEES RULES AND POLICIES
Rules and regulations for the conduct of employees are necessary for the orderly
operation of any business and for the benefit and safety of all employees. In
order to clarify what is expected of its employees, Doughtie's has adopted the
following regulations. They are to guide us in our conduct and responsibilities
while at work. Changes and additions will be made as appropriate and employees
will be advised. Supervisors will be responsible for implementing these rules
and regulations.
Employees who fail to follow established rules and regulations will be
subject to corrective action or discharge. "Corrective Action" may range from a
simple or timely warning for minor offenses, to layoff without pay, for the more
serious or repeated failure to abide by the rules.
Immediate discharge with previous warning may result in cases of major
violations. Also, repeated or uncorrected conduct may result in discharge. Prior
to final action, an employee may be suspended by his supervisor, while the
proper action in his case is determined. Suspension in itself is not
disciplinary action, it is the pause in active employment during which an
investigation of an incident takes place.
The following are representative causes which may justify disciplinary
action including discharge:
Rule Disciplinary Action
1. Falsifying employment data............................................D
2. Ringing another employee timecard or falsifying time
records...............................................................D
3. Taking company property, ingredients, on or off premises, whether
damaged or undamaged..................................................D
4. Theft.................................................................D
5. Fighting, disorderly or immoral conduct...............................D
6. Sleeping on the job...................................................D
7. Disobeying orders.....................................................D
8. Willful damage to company property....................................D
9. Unauthorized strike action or slowdown-walking off the job............D
10. Smoking in unauthorized areas, drinking or being under the
influence of drugs and/or alcohol.....................................D
11. Eating in unauthorized areas........................................W-D
12. Loafing on the job..................................................W-D
13. Unreported absence................................................W-S-D
14. Violation of safety or sanitation rules..........................W-S-D
15. Carelessness......................................................W-S-D
16. Horseplay-improper conduct on the job.............................W-S-D
17. Chronic absence and/or tardiness..................................W-S-D
18. Unsatisfactory job performance....................................W-W-D
19. Improper dress or appearance......................................W-W-D
20. Failure to report personal injury.................................W-W-D
21. Carelessness which results in economic loss to the
Company.............................................................S-D
<PAGE>
22. Crimes off the premises.........................S-Pending Investigation
.....................................................D-After Conviction
23. All employees are required to wear a hair net or washable
hat...............................................................W-W-D
24. Chewing tobacco is forbidden........................................W-D
25. Bringing any particles of glass into plant such as
drinking glasses, bottles, etc., is forbidden.....................W-S-D
26. All employees must change clothes before punching in,
also they must punch out then change clothes......................W-S-D
W - Warning. Written reprimand to employee.
S - Suspension. Release from work for not more than one (1) week.
D - Discharge.
Disciplinary warning letters shall have no force or effect after a period of 12
months from issuance with the exception of chargeable vehicular accidents, which
remain in effect for a period of 36 months.
Weekly work schedule will be posted; kindly check this schedule daily. No
unauthorized persons such as relatives or friends are allowed in shipping or
production areas without permission first given by the foreman.
Disciplinary action shall be taken within five (5) days of infraction, unless
more time is needed for investigation or unless management's awareness of
incident occurs past this five (5) day limit.
<PAGE>
Schedule "A"
DOUGHTIE'S FOODS, INC.
MEDICAL AND DENTAL INSURANCE RATES - 1997
Your premium paid through weekly payroll deduction:
COVERAGE TYPE MEDICAL DENTAL BOTH
EMPLOYEE $ 8.25 $ 3.65 $ 11.90
EMPLOYEE/SPOUSE $ 16.00 $ 5.60 $ 21.60
EMPLOYEE/CHILD $ 16.00 $ 6.50 $ 22.50
FAMILY $ 16.50 $ 10.15 $ 26.65
EXHIBIT (c)(1)
Security Agreement
This Security Agreement is made by DOUGHTIE'S FOODS, INC., a Virginia
corporation (the Owner) for the use and benefit of Crestar Bank (the Bank).
1. Security Agreement. In order to induce the Bank from time to time to extend
or continue to extend credit to DOUGHTIE'S FOODS, INC. (the Borrower), the Owner
(which may include the Borrower) hereby grants the Bank, its successors and
assigns, a security interest in the collateral and all proceeds, products, rents
and profits thereof and all revenues from the right to use the collateral as
described below (the Collateral) to secure the payment of all present and future
indebtedness of every kind and description, however evidenced, of the Borrower
to the Bank, whether such indebtedness is direct or indirect, fixed or
contingent, liquidated or unliquidated, including any extensions, modifications
or renewals thereof (the Indebtedness) and to secure the performance by the
Owner of the agreements and warranties contained in this Security Agreement.
2. Collateral. As used in this Security Agreement, the term "Collateral,"
whether now existing or hereafter acquired, shall mean a blanket security
interest in all accounts ("Accounts"), inventory ("Inventory"), furniture,
fixtures and equipment ("Equipment"), general intangibles ("General
Intangibles"),instruments, documents and chattel paper, including, without
limitation, all goods represented thereby and all goods that may be reclaimed or
repossessed from or returned by account debtors and all proceeds, products,
rents and profits thereof (as all such terms are defined in the Uniform
Commercial Code).
All or a portion of the Collateral will be attached as a fixture to realty
located at 2410 and 2415 Wesley Street and 800-840 Florida Avenue, Portsmouth,
Virginia.
The Owner also grants the Bank a security interest in all rights to which an
owner of the Collateral is now or may become entitled by virtue of owning such
Collateral including, without limitation, interest, cash dividends, stock
dividends and stock rights, all of which shall, when received, and upon request
by the Bank, be delivered to the Bank with written authority to sell, transfer
or rehypothecate the same.
If the Collateral includes all rights, title and interest in an Estate or Trust,
the security interest shall not apply to any shares of capital stock of Crestar
Financial Corporation or any of its affiliates, or to any units of participation
in the Bank's
<PAGE>
Common Trust Fund held by the Estate or Trust, but shall apply to any proceeds
from the sale of such stocks and units or cash dividends thereof.
3. Accounts. If the Collateral includes Accounts: a) The Owner warrants that
each and every Account, now owned or hereafter acquired, is a bona fide existing
obligation, valid and enforceable against the account debtor, for goods sold or
leased and delivered or services rendered in the ordinary course of business; it
is subject to no dispute, defense or offset; the Owner has good title to the
Account and has full right and power to grant the Bank a security interest in
the Collateral; b) The Owner will immediately notify the Bank of any Account to
which the above warranties are or become untrue; c) The Owner will prepare and
deliver to the Bank, at the Bank's request, a listing and aging of all Accounts
and any further schedules or information that the Bank may require. d) The Bank
shall have the right at any time to notify account debtors of its security
interest in the Accounts and require payments to be made directly to the Bank.
The Owner hereby appoints the Bank and any officer or employee of the Bank, as
the Bank may from time to time designate, as its attorneys-in-fact for the
Owner, to sign and endorse in the name of the Owner, to give notice in the name
of the Owner, and to perform all other actions necessary or desirable at the
reasonable discretion of the Bank to effect these provisions and carry out the
intent hereof, all at the cost and expense of the Owner. The Owner hereby
ratifies and approves all acts of such attorneys-in-fact and neither the Bank
nor any other such attorneys-in-fact will be liable for any acts of commission
or omission nor for any error of judgment or mistake of fact or law. This power
being coupled with an interest is irrevocable so long as any Account or General
Intangible assigned to the Bank remains unpaid and the Borrower has any
Indebtedness to the Bank. The costs of such collection and enforcement,
including attorneys' fees and out-of-pocket expenses, shall be borne solely by
the Owner whether the same are incurred by the Bank or the Owner; e) At the
option of the Bank, all payments on the Accounts received by the Owner shall be
remitted to the Bank in their original form on the day of receipt; all notes,
checks, drafts and other instruments so received shall be duly endorsed to the
order of the Bank. At the Bank's election, the payments shall be deposited into
a special deposit account ("Special Account") maintained with the Bank. The Bank
may designate with each such deposit the particular Account upon which payment
was made. The Special Account shall be held by the Bank as security for the
Indebtedness. Prior to depositing payments on the Accounts into the Special
Account, the Owner agrees that it will not commingle such payments with any of
the Owner's funds or property, but will hold them separate and apart and in
trust for the Bank. The Bank will have the power to withdraw from the Special
Account. The Bank may at any time and from time to time, in its sole discretion,
apply any part of the funds in the Special Account to the Indebtedness whether
or not the same is due. Upon full and final satisfaction of the Indebtedness
plus termination of any
<PAGE>
commitment to extend additional funds, the Bank will pay to the Owner any excess
funds, whether received by the Bank as a deposit in the Special Account or as a
direct payment on any of the Indebtedness; f) If any of the Owner's Accounts
arise out of contracts with the United States or any department, agency, or
instrumentality thereof, the Owner will immediately notify the Bank in writing
and execute any instruments and take any steps required by the Bank in order
that all monies due and to become due under such contracts shall be assigned to
the Bank and in order that proper notice be given under the Federal Assignment
of Claims Act; g) The Bank shall not be liable and shall suffer no loss on
account of loss or deprivation of any account due to acts or omissions of the
Bank unless the Bank's conduct is willful and malicious, and the Bank shall have
no duty to take any action to preserve the Collateral or collect Accounts.
4. Inventory. If the Collateral includes Inventory: a) The Owner agrees to
maintain books and records pertaining to the Inventory in such detail, form and
scope as the Bank shall require. The Owner shall promptly advise the Bank of any
substantial changes relating to the type, quality or quantity of the Inventory
or any event which would have a material effect on the value of the Inventory or
on the security interest granted to the Bank. Upon reasonable notice by the
Bank, the Owner shall assemble and make readily available for inspection and
examination all of the Inventory and all books and records pertaining to the
Inventory at any time; b) If the Inventory remains in the possession or control
of any of the Owner's agents or processors, the Owner shall notify such agents
or processors of the Bank's security interest, and upon request, instruct them
to hold such Inventory for the Bank's account and subject to the Bank's
instructions; c) The Owner will prepare and deliver to the Bank, at the Bank's
request, listing of all Inventory and such information regarding the Inventory
as the Bank may require.
5. Securities, Instruments, Certificates of Deposit, Documents, Chattel Paper
and General Intangibles. If the Collateral includes securities, instruments,
certificates of deposit, documents, chattel paper or general intangibles: a) The
Owner represents and warrants, as may be applicable, that (i) The Owner has good
and marketable title to the Collateral. The Collateral is valid and genuine and
represents a bona fide, binding, legal obligation of the maker, issuer, or
grantor, and all signatures are genuine; (ii) The Collateral is in full force
and effect and is not in default and no prepayments have been made; (iii) The
Collateral is not represented by a judgment or any other document not provided
to the Bank; (iv) The Collateral is not subject to any assignment, claim, lien,
right of setoff or security interest of any other party; (v) Unless otherwise
stated, the face amount on the Collateral is the correct amount actually and
unconditionally due or to become due according to the terms of the Collateral,
and such amount is not disputed or subject to any setoff, credit, deduction, or
counterclaim;
<PAGE>
(vi) With respect to the security on the Collateral, the lien or security
interest represented thereby is not subject to prior claim, lien, or security
interest of any other party, unless otherwise stated herein, or in the document
evidencing such security; (vii) With respect to the security on the Collateral,
it has been properly perfected by the filing or recording of all necessary
financing statements, deeds of trust or other documents and the payment of all
recording, transfer and other taxes and fees made in the appropriate public
offices. b) At any time, and from time to time, whether before or after default,
without notice, and at the expense of the Owner, the Bank in its name or in the
name of its nominee or of the Owner, may, but shall not be obligated to: (i)
Notify the obligors on any Collateral to make payment to the Bank of any or all
dividends, interest, principal payments and other sums now or hereafter payable
upon or on account of the Collateral, may collect the same by legal proceedings
or otherwise, and may perform any contract or endorse in the name of the Owner
any checks, drafts, notes, instruments or other documents which constitute the
collateral; (ii) Enter into any extension, reorganization, deposit, merger or
consolidation agreement or any agreement in any way relating to or affecting the
Collateral and in connection therewith may deposit or surrender control of the
Collateral, accept other property in exchange for the Collateral and do and
perform such acts and things as it may deem proper, and any money or property
received in exchange for the Collateral may be either applied to any
Indebtedness or may be held by the Bank pursuant to the provisions of this
Security Agreement; (iii) Make any compromise or settlement it deems desirable
or proper with reference to the Collateral; (iv) Insure, process and preserve
the Collateral; (v) Cause the Collateral to be transferred to its name or the
name of its nominee; (vi) Exercise as to the Collateral all the rights, powers
and remedies of an owner.
6. Representations and Warranties. The Owner represents and warrants to the Bank
as follows: a) The Owner is and will continue to be the absolute owner of the
Collateral and that there are no other liens or security interests affecting the
Collateral other than the security interest granted in this Security Agreement
except those previously disclosed to the Bank in writing by the Owner; if the
Owner is acting in the capacity of trustee, administrator or executor of an
estate, such fact shall be disclosed and evidence of capacity shall be provided
to the Bank; b) The Owner will defend the Collateral against the claims and
demands of all parties. The Owner will not, without prior written consent of the
Bank, grant any security interest in the Collateral and will keep it free from
any lien, encumbrance or security interest; c) The Owner represents and warrants
that the Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used for the generation, collection,,
manufacture, storage, treatment, disposal, release or threatened release of any
hazardous substance, as those terms are defined in
<PAGE>
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), Superfund
Amendments and Reauthorization Act ("SARA"), applicable state laws, or
regulations adopted pursuant to either of the foregoing. The Owner agrees to
comply with any federal, state or local law, statute, ordinance or regulation,
court or administrative order or decree or private agreement regarding materials
which require special handling in collection, storage, treatment or disposal
because of their impact on the environment ("Environmental Requirements"). The
Owner agrees to indemnify and hold the Bank harmless against any and all claims,
losses and expenses resulting from a breach of this provision of this Agreement
and the Owner will pay or reimburse the Bank for all costs and expenses for
expert opinions or investigations required or requested by the Bank which, in
the Bank's sole discretion, are necessary to ensure compliance with this
provision of this Agreement. This obligation to indemnify shall survive the
payment of the indebtedness and the satisfaction of the Agreement; d) The
Collateral is and will be used or bought for use primarily for the following
purpose: business; e) The Owner warrants and represents that all Collateral has
been produced in compliance with the Fair Labor Standards Act or other
applicable wage and employee law, rule, regulation or order, and that no
existing or future liability shall occur as a result thereof. The Owner may
contest, in good faith, the applicability of any such law, rule, regulation or
order, including prosecuting any appeals, so long as the Bank's interest in the
Collateral, in the opinion of the Bank, is not jeopardized thereby; f) The
Owner, if an individual, is above the age of majority and has the legal capacity
to enter into this Security Agreement; g) If an individual, the Owner's home
address is ____________________________; h) The Owner, if a corporation, is duly
organized and existing under the laws of Virginia; is duly qualified and in good
standing as a foreign corporation in every jurisdiction where such qualification
is necessary; the execution and performance of this Security Agreement have been
duly authorized by action of its Board of Directors, no action of its
shareholders being necessary; the execution and performance of this Security
Agreement will not violate or contravene any provisions of law or regulation or
its Articles of Incorporation, Shareholder Agreement, By-Laws or other
agreements to which it is a party or by which it is bound; and that no consent
or approval of any governmental agency or authority is required in making or
performing the obligations under this Security Agreement; i) The Owner, if a
partnership, is duly qualified and in good standing to do business in every
jurisdiction where such qualification is necessary; the execution and
performance of this Security Agreement have been duly authorized by its
partners, no further actions of its partners is necessary; the execution and
performance of this Security Agreement will not violate or contravene any
provisions of law or regulation or its Partnership Agreement or other agreements
to which it is a party or by which it is bound; and that no consent or approval
of any governmental agency or authority is required in making or performing the
obligations under this Security Agreement; j) If a corporation,
<PAGE>
partnership or proprietorship, the location of the Owner's principal place of
business in Virginia (Jurisdiction) is Portsmouth (City) and it does __ does not
__ have a place of business in another city or county in that jurisdiction (list
other jurisdiction if applicable):____________________; k) The Collateral will
be located at the locations specified on the Schedule attached hereto; l) The
Owner will maintain the Collateral in the above locations. The Collateral shall
not be moved from the above locations without the prior written consent of the
Bank. The Owner must notify the Bank in writing at least 30 days prior to any
change of its name, corporate structure or identity; m) The Owner maintains its
books of account and records only at 2410 Wesley Street, Portsmouth, Virginia;
n) All information supplied and statements made to the Bank in any financial or
credit statement or application are true, correct, complete, valid and genuine
in all material respects.
7. Covenants.
a) The Owner shall maintain complete and accurate books of account and records,
and its principal books of account and records, including all records concerning
Accounts and contract rights, shall be kept and maintained at the place (s)
specified above. The Owner shall not move such books of account and records
without giving the Bank at least 30 days prior written notice and executing and
delivering to the Bank financing statements satisfactory to the Bank prior to
any such move. All accounting records and financial reports furnished to the
Bank shall be maintained and prepared in accordance with generally accepted
accounting principles consistently applied. It is specifically agreed that the
bank shall have and the Owner hereby grants to the Bank a security interest in
all books of account and records of the Owner and shall have access to them at
any time for inspection, verification, examination and audit; b) The Owner shall
furnish to the Bank such financial and business information and reports in form
and content satisfactory to the Bank as and when the Bank may from time to time
require; c) The Owner, if a corporation, shall maintain its corporate existence
in good standing and shall not consolidate or merge with or acquire the stock of
any other corporation without the prior written consent of the Bank. If the
Owner is a corporation, the Owner shall, at the request of the Bank, qualify as
a foreign corporation and obtain all requisite licenses and permits in each
jurisdiction where the Owner does business. The Owner shall not discontinue
business, liquidate, sell, transfer, assign or otherwise dispose of any of its
assets, except with the prior written permission of the Bank, provided, however,
that it may sell in the ordinary course of business and for a full consideration
in money or money's worth, any product, merchandise or service produced or
marketed by it. The Bank's security interest shall attach to all proceeds of all
sales or dispositions of the Collateral; d) The Owner shall maintain all of the
Collateral in good condition and repair. The Bank shall have the right to
inspect the Collateral at any reasonable time and shall have the right to obtain
such appraisals, reappraisals, appraisal updates or environmental inspections as
the Bank, in
<PAGE>
its sole discretion, may deem necessary from time to time. e) The Owner shall at
all times keep insurable Collateral insured against any and all risks,
including, without limitation, fire, and such other insurance as may be required
by the Bank from time to time; and in such amounts as may be satisfactory to the
Bank. The Bank shall be named as Loss Payee on any such insurance policies.
Insurance may be purchased from an insurer of the Owner's choice, except as
otherwise required by law. The Owner shall pay and discharge all taxes,
assessments and charges of every kind prior to the date when such taxes,
assessments or charges shall become delinquent and provide proof of such
payments to the Bank, upon request. However, nothing contained in this Security
Agreement shall require the Owner to pay any such taxes, assessments and charges
so long as it shall contest its validity in good faith and shall post any bond
or security required by the Bank against the payment. Upon the failure of the
Owner to pay such required amounts, the Bank, at its option, and at the Owner's
expense, may obtain such insurance or pay such taxes, assessments or charges
with the costs or premiums becoming part of the Indebtedness at the option of
the Bank, such amounts may be payable on demand. Any insurance obtained by the
Bank, at its option, may be single or dual interest, protecting its rights,
rights of the Owner or joint rights. Any insurance obtained by the Bank, at its
option, may be single or dual interest, protecting its rights, rights of the
Owner or joint rights. Any insurance obtained by the Bank may provide, at its
option, that such insurance will pay the lesser of the unpaid balance of the
indebtedness or the repair or replacement value of the Collateral. The Owner
authorizes the Bank to give effect to any of these options without prior notice
to Owner or further consent from owner. No matter which insurance coverage or
repayment options the Bank chooses, the collateral will secure payment of these
amounts. The Bank may use the proceeds of any insurance obtained by Owner or by
the Bank to repair or replace the collateral or, if the Bank elects to do so, to
repay part of all of the indebtedness, and the Borrowers will still be
responsible to repay any remaining unpaid balance of the indebtedness. Owner
assigns to the Bank all amounts payable under the insurance, including unearned
premiums, directing the insurer to make payment to the Bank, and Owner appoints
us attorney-in=fact to endorse any draft. f) The Owner will not pledge or grant
any security interest in any of the Collateral to anyone except the Bank, or
permit any lien or encumbrance to attach to any of the Collateral, or any levy
to be made on the Collateral, or any financing statement (except financing
statements in favor of the Bank) to be on file against the collateral; g)The
Owner agrees that it will not permit any return of merchandise, the sale of
which gave rise to any of the Accounts, except in the usual and regular course
of business.
8. Default. In addition to any right which the Bank may have to demand payment
of the Indebtedness under any other agreement, upon the occurrence of any of the
following events of default, the Bank, at its option, may declare any or all of
the Indebtedness immediately due and payable and may exercise any and
<PAGE>
all of the rights and remedies of default of a secured party under the Uniform
Commercial Code and other applicable law and all rights provided herein, all of
which rights and remedies shall, to the full extent permitted by law, be
cumulative. The occurrence of an Event of Default as defined in the Amended and
Restated Credit Agreement of even date herewith between the Borrower and the
Bank. The Bank may require the Owner to assemble the Collateral and make it
available to the Bank at a place to be designated by the Bank which is
reasonably convenient to the Bank and the Owner. The Bank may take possession of
the Collateral without a court order. The Owner shall pay to the Bank on demand
all legal expenses and reasonable attorneys' fees if the Bank refers this
Security Agreement to an attorney who is not a salaried employee of the Bank,
appraisal fees and all expenses incurred or paid by the Bank, in protecting and
enforcing the rights of the Bank under this Security Agreement, including the
Bank's right to take possession of the Collateral and its proceeds, and to hold,
prepare for sale, sell and dispose of the Collateral. Any required notice by the
Bank of sale or other disposition on default, when placed in the mail and
addressed to or left upon the premises of the Owner, at the address specified
next to the Owner's signature below or such other address of the Owner as may
from time to time be shown on the Bank's records, at least ten days prior to
such action shall constitute reasonable notice to the Owner.
9. Term. This security Agreement shall be a continuing agreement and shall
remain in full force and effect irrespective of any interruptions in the
business relations of the Borrower with the Bank and shall apply to any ultimate
balance which shall remain due by the Borrower to the Bank; provided, however,
that the Owner may be written notice terminate this Security Agreement with
respect to all Indebtedness of the Borrower incurred or contracted by the
Borrower or acquired by the Bank after the date on which such notice is
personally delivered to or mailed via registered mail and accepted by the
Borrower's lending officer.
10. Execution by More than One Party. The term "Owner" as used in this Security
Agreement shall, if this instrument is signed by more than one Party, mean the
"Owner and each of them" and each shall be jointly and severally obligated and
liable. If any Party shall be a partnership, the agreements and obligations on
the part of the Owner shall remain in force and applicable regardless of any
changes in the individuals composing the partnership and the term "Owner" shall
include any altered or successive partnerships and the predecessor partnerships
and their partners shall not be released from any obligation or liability.
11. Waivers by the Owner. The Owner hereby waives (1) notice of acceptance of
this Security Agreement and of any extensions or renewals of credit by the Bank
to the Borrower; (2) presentment and demand for payment of the Indebtedness; (3)
protest and notice of dishonor or default to the Owner or to any other party
with respect to the Indebtedness; (4) all other notices to which
<PAGE>
the Owner might otherwise be entitled; and (5) if for business purposes, the
benefit of the Homestead Exemption. The Owner further waives any right to
require that any action be brought against the Borrower or any other party, to
require that resort be had to any security or to any balance of any deposit
account or credit on the books of the Bank in favor of the Borrower or any other
party. The Owner further agrees that it shall not be subrogated and will not
enforce on its part or behalf any right of action which the Bank may have
against the borrower until every Indebtedness secured under this Security
Agreement is paid in full.
12. No Obligations to Extend Credit. This contract shall not be
construed to impose any obligation on the Bank to extend or
continue to extend any credit at any time.
13. Indemnity. The Owner agrees to indemnify and hold harmless the Bank and its
subsidiaries, affiliates, successors, parents, and assigns and their respective
agents, directors, employees, and officers from and against any and all
complaints, claims, defenses, demands, actions, bills, causes of action
(including, without limitation, costs and attorneys' fees), and losses of every
nature and kind whatsoever, which may be raised or sustained by any directors,
officers, employees, shareholders, creditors, regulators, successors in
interest, or receivers of the Borrower or any third party as a result of or
arising out of, directly or indirectly, the Bank extending credit as evidenced
by the Indebtedness to the Borrower, and taking the Collateral as security for
the Indebtedness, and the Owner further agrees to be liable for any and all
judgments which may be recovered in any such action, claim, proceeding, suit, or
bill, including any compromise or settlement thereof, and defray any and all
expenses, including, without limitation, costs and attorneys' fees, that may be
incurred in or by reason of such actions, claims, proceedings, suits, or bills.
14. Financing Statements. The Owner will deliver such instruments of further
assignment or assurance as the Bank may from time to time request to carry out
the intent of this Security Agreement, and will join with the Bank in executing
financing statements and other documents in form satisfactory to the Bank and
pay the cost of filing the same, including all recordation, transfer and other
taxes and fees, continuation statements and any other documents in any public
office deemed advisable by the Bank. The Owner agrees that a carbon,
photographic or other reproduction of a financing statement or this Security
Agreement shall be sufficient as a financing statement.
15. Successor In Interest. This Security Agreement shall be binding upon the
Owner, its successors and assigns, and the benefits hereof shall inure to the
Bank, its successors and assigns.
<PAGE>
16. Waiver by the Bank. The Bank may waive any default or remedy any default
without waiving the default remedied or any other prior or subsequent default.
The Bank's failure to exercise any right or take any action under this Security
Agreement shall not constitute a waiver of that or any other right or action.
17. Waiver of Jury Trial. To the extent legally permissible, the Owner waives
all right to trial by jury in any litigation relating to transactions under this
Security Agreement, whether sounding in contract, tort or otherwise.
18. Governing Law. The laws of the jurisdiction in which the Bank is located
shall govern the construction of this Security Agreement and the rights and
duties of the Owner and Parties.
The undersigned have executed or caused this Security Agreement to be executed,
under seal, as of this 14th day of June, 1996.
DOUGHTIE'S FOODS, INC.,
a Virginia corporation
2410 Wesley Street
Portsmouth, Virginia 23707
By: Marion S. Whitfield, Jr.
------------------------
(Signature)
Senior Vice President
<PAGE>
EXHIBIT (c)(2)
Security Agreement
This Security Agreement is made by DUTTERER'S OF MANCHESTER CORPORATION, a
Maryland corporation (the Owner) for the use and benefit of Crestar Bank (the
Bank).
1. Security Agreement. In order to induce the Bank from time to time to extend
or continue to extend credit to DOUGHTIE'S FOODS, INC. (the Borrower), the Owner
(which may include the Borrower) hereby grants the Bank, its successors and
assigns, a security interest in the collateral and all proceeds, products, rents
and profits thereof and all revenues from the right to use the collateral as
described below (the Collateral) to secure the payment of all present and future
indebtedness of every kind and description, however evidenced, of the Borrower
to the Bank, whether such indebtedness is direct or indirect, fixed or
contingent, liquidated or unliquidated, including any extensions, modifications
or renewals thereof (the Indebtedness) and to secure the performance by the
Owner of the agreements and warranties contained in this Security Agreement.
2. Collateral. As used in this Security Agreement, the term "Collateral,"
whether now existing or hereafter acquired, shall mean the following securities,
instruments, including unsecured notes and notes secured by deeds of trust or
otherwise, certificates of deposit, documents, including documents of title,
documentary drafts, accounts, letters of credit, chattel paper, general
intangibles, including interest in estates and trusts, and other property
described as: Promissory note dated September 3, 1995, made by Value Added Food
Services, Inc., and payable to the Owner in the original principal amount of
$1,038,756, together with any and all documents which evidence and/or secure
such note.
The Owner also grants the Bank a security interest in all rights to which an
owner of the Collateral is now or may become entitled by virtue of owning such
Collateral including, without limitation, interest, cash dividends, stock
dividends and stock rights, all of which shall, when received, and upon request
by the Bank, be delivered to the Bank with written authority to sell, transfer
or rehypothecate the same.
If the Collateral includes all rights, title and interest in an Estate or Trust,
the security interest shall not apply to any shares of capital stock of Crestar
Financial Corporation or any of its affiliates, or to any units of participation
in the Bank's Common Trust Fund held by the Estate or Trust, but shall apply to
any proceeds from the sale of such stocks and units or cash dividends thereof.
<PAGE>
3. Accounts. If the Collateral includes Accounts: a) The Owner warrants that
each and every Account, now owned or hereafter acquired, is a bona fide existing
obligation, valid and enforceable against the account debtor, for goods sold or
leased and delivered or services rendered in the ordinary course of business; it
is subject to no dispute, defense or offset; the Owner has good title to the
Account and has full right and power to grant the Bank a security interest in
the Collateral; b) The Owner will immediately notify the Bank of any Account to
which the above warranties are or become untrue; c) The Owner will prepare and
deliver to the Bank, at the Bank's request, a listing and aging of all Accounts
and any further schedules or information that the Bank may require. d) The Bank
shall have the right at any time to notify account debtors of its security
interest in the Accounts and require payments to be made directly to the Bank.
The Owner hereby appoints the Bank and any officer or employee of the Bank, as
the Bank may from time to time designate, as its attorneys-in-fact for the
Owner, to sign and endorse in the name of the Owner, to give notice in the name
of the Owner, and to perform all other actions necessary or desirable at the
reasonable discretion of the Bank to effect these provisions and carry out the
intent hereof, all at the cost and expense of the Owner. The Owner hereby
ratifies and approves all acts of such attorneys-in-fact and neither the Bank
nor any other such attorneys-in-fact will be liable for any acts of commission
or omission nor for any error of judgment or mistake of fact or law. This power
being coupled with an interest is irrevocable so long as any Account or General
Intangible assigned to the Bank remains unpaid and the Borrower has any
Indebtedness to the Bank. The costs of such collection and enforcement,
including attorneys' fees and out-of-pocket expenses, shall be borne solely by
the Owner whether the same are incurred by the Bank or the Owner; e) At the
option of the Bank, all payments on the Accounts received by the Owner shall be
remitted to the Bank in their original form on the day of receipt; all notes,
checks, drafts and other instruments so received shall be duly endorsed to the
order of the Bank. At the Bank's election, the payments shall be deposited into
a special deposit account ("Special Account") maintained with the Bank. The Bank
may designate with each such deposit the particular Account upon which payment
was made. The Special Account shall be held by the Bank as security for the
Indebtedness. Prior to depositing payments on the Accounts into the Special
Account, the Owner agrees that it will not commingle such payments with any of
the Owner's funds or property, but will hold them separate and apart and in
trust for the Bank. The Bank will have the power to withdraw from the Special
Account. The Bank may at any time and from time to time, in its sole discretion,
apply any part of the funds in the Special Account to the Indebtedness whether
or not the same is due. Upon full and final satisfaction of the Indebtedness
plus termination of any commitment to extend additional funds, the Bank will pay
to the Owner any excess funds, whether received by the Bank as a deposit
<PAGE>
in the Special Account or as a direct payment on any of the Indebtedness; f) If
any of the Owner's Accounts arise out of contracts with the United States or any
department, agency, or instrumentality thereof, the Owner will immediately
notify the Bank in writing and execute any instruments and take any steps
required by the Bank in order that all monies due and to become due under such
contracts shall be assigned to the Bank and in order that proper notice be given
under the Federal Assignment of Claims Act; g) The Bank shall not be liable and
shall suffer no loss on account of loss or deprivation of any account due to
acts or omissions of the Bank unless the Bank's conduct is willful and
malicious, and the Bank shall have no duty to take any action to preserve the
Collateral or collect Accounts.
4. Inventory. If the Collateral includes Inventory: a) The Owner agrees to
maintain books and records pertaining to the Inventory in such detail, form and
scope as the Bank shall require. The Owner shall promptly advise the Bank of any
substantial changes relating to the type, quality or quantity of the Inventory
or any event which would have a material effect on the value of the Inventory or
on the security interest granted to the Bank. Upon reasonable notice by the
Bank, the Owner shall assemble and make readily available for inspection and
examination all of the Inventory and all books and records pertaining to the
Inventory at any time; b) If the Inventory remains in the possession or control
of any of the Owner's agents or processors, the Owner shall notify such agents
or processors of the Bank's security interest, and upon request, instruct them
to hold such Inventory for the Bank's account and subject to the Bank's
instructions; c) The Owner will prepare and deliver to the Bank, at the Bank's
request, listing of all Inventory and such information regarding the Inventory
as the Bank may require.
5. Securities, Instruments, Certificates of Deposit, Documents, Chattel Paper
and General Intangibles. If the Collateral includes securities, instruments,
certificates of deposit, documents, chattel paper or general intangibles: a) The
Owner represents and warrants, as may be applicable, that (i) The Owner has good
and marketable title to the Collateral. The Collateral is valid and genuine and
represents a bona fide, binding, legal obligation of the maker, issuer, or
grantor, and all signatures are genuine; (ii) The Collateral is in full force
and effect and is not in default and no prepayments have been made; (iii) The
Collateral is not represented by a judgment or any other document not provided
to the Bank; (iv) The Collateral is not subject to any assignment, claim, lien,
right of setoff or security interest of any other party; (v) Unless otherwise
stated, the face amount on the Collateral is the correct amount actually and
unconditionally due or to become due according to the terms of the Collateral,
and such amount is not disputed or subject to any setoff, credit, deduction, or
counterclaim; (vi) With respect to the security on the Collateral, the lien or
security interest represented thereby is not subject to prior
<PAGE>
claim, lien, or security interest of any other party, unless otherwise stated
herein, or in the document evidencing such security; (vii) With respect to the
security on the Collateral, it has been properly perfected by the filing or
recording of all necessary financing statements, deeds of trust or other
documents and the payment of all recording, transfer and other taxes and fees
made in the appropriate public offices. b) At any time, and from time to time,
whether before or after default, without notice, and at the expense of the
Owner, the Bank in its name or in the name of its nominee or of the Owner, may,
but shall not be obligated to: (i) Notify the obligors on any Collateral to make
payment to the Bank of any or all dividends, interest, principal payments and
other sums now or hereafter payable upon or on account of the Collateral, may
collect the same by legal proceedings or otherwise, and may perform any contract
or endorse in the name of the Owner any checks, drafts, notes, instruments or
other documents which constitute the collateral; (ii) Enter into any extension,
reorganization, deposit, merger or consolidation agreement or any agreement in
any way relating to or affecting the Collateral and in connection therewith may
deposit or surrender control of the Collateral, accept other property in
exchange for the Collateral and do and perform such acts and things as it may
deem proper, and any money or property received in exchange for the Collateral
may be either applied to any Indebtedness or may be held by the Bank pursuant to
the provisions of this Security Agreement; (iii) Make any compromise or
settlement it deems desirable or proper with reference to the Collateral; (iv)
Insure, process and preserve the Collateral; (v) Cause the Collateral to be
transferred to its name or the name of its nominee; (vi) Exercise as to the
Collateral all the rights, powers and remedies of an owner.
6. Representations and Warranties. The Owner represents and warrants to the Bank
as follows: a) The Owner is and will continue to be the absolute owner of the
Collateral and that there are no other liens or security interests affecting the
Collateral other than the security interest granted in this Security Agreement
except those previously disclosed to the Bank in writing by the Owner; if the
Owner is acting in the capacity of trustee, administrator or executor of an
estate, such fact shall be disclosed and evidence of capacity shall be provided
to the Bank; b) The Owner will defend the Collateral against the claims and
demands of all parties. The Owner will not, without prior written consent of the
Bank, grant any security interest in the Collateral and will keep it free from
any lien, encumbrance or security interest; c) The Owner represents and warrants
that the Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used for the generation, collection,,
manufacture, storage, treatment, disposal, release or threatened release of any
hazardous substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et
<PAGE>
seq. ("CERCLA"), Superfund Amendments and Reauthorization Act ("SARA"),
applicable state laws, or regulations adopted pursuant to either of the
foregoing. The Owner agrees to comply with any federal, state or local law,
statute, ordinance or regulation, court or administrative order or decree or
private agreement regarding materials which require special handling in
collection, storage, treatment or disposal because of their impact on the
environment ("Environmental Requirements"). The Owner agrees to indemnify and
hold the Bank harmless against any and all claims, losses and expenses resulting
from a breach of this provision of this Agreement and the Owner will pay or
reimburse the Bank for all costs and expenses for expert opinions or
investigations required or requested by the Bank which, in the Bank's sole
discretion, are necessary to ensure compliance with this provision of this
Agreement. This obligation to indemnify shall survive the payment of the
indebtedness and the satisfaction of the Agreement; d) The Collateral is and
will be used or bought for use primarily for the following purpose: business; e)
The Owner warrants and represents that all Collateral has been produced in
compliance with the Fair Labor Standards Act or other applicable wage and
employee law, rule, regulation or order, and that no existing or future
liability shall occur as a result thereof. The Owner may contest, in good faith,
the applicability of any such law, rule, regulation or order, including
prosecuting any appeals, so long as the Bank's interest in the Collateral, in
the opinion of the Bank, is not jeopardized thereby; f) The Owner, if an
individual, is above the age of majority and has the legal capacity to enter
into this Security Agreement; g) If an individual, the Owner's home address is
____________________________; h) The Owner, if a corporation, is duly organized
and existing under the laws of Maryland; is duly qualified and in good standing
as a foreign corporation in every jurisdiction where such qualification is
necessary; the execution and performance of this Security Agreement have been
duly authorized by action of its Board of Directors, no action of its
shareholders being necessary; the execution and performance of this Security
Agreement will not violate or contravene any provisions of law or regulation or
its Articles of Incorporation, Shareholder Agreement, By-Laws or other
agreements to which it is a party or by which it is bound; and that no consent
or approval of any governmental agency or authority is required in making or
performing the obligations under this Security Agreement; i) The Owner, if a
partnership, is duly qualified and in good standing to do business in every
jurisdiction where such qualification is necessary; the execution and
performance of this Security Agreement have been duly authorized by its
partners, no further actions of its partners is necessary; the execution and
performance of this Security Agreement will not violate or contravene any
provisions of law or regulation or its Partnership Agreement or other agreements
to which it is a party or by which it is bound; and that no consent or approval
of any governmental agency or authority is required in making or performing the
obligations under this Security Agreement; j) If a corporation, partnership or
proprietorship, the location of the Owner's principal place of business in
_________(jurisdiction) is
<PAGE>
___________(city) and it does __ does not __ have a place of
business in another city or county in that jurisdiction (list
other jurisdiction if applicable):____________________; k) The
Collateral will be located at the Bank; l) The Owner will maintain the
Collateral in the above locations. The Collateral shall not be moved from the
above locations without the prior written consent of the Bank. The Owner must
notify the Bank in writing at least 30 days prior to any change of its name,
corporate structure or identity; m) The Owner maintains its books of account and
records only at ____________; n) All information supplied and statements made to
the Bank in any financial or credit statement or application are true, correct,
complete, valid and genuine in all material respects.
7. Covenants.
a) The Owner shall maintain complete and accurate books of account and records,
and its principal books of account and records, including all records concerning
Accounts and contract rights, shall be kept and maintained at the place (s)
specified above. The Owner shall not move such books of account and records
without giving the Bank at least 30 days prior written notice and executing and
delivering to the Bank financing statements satisfactory to the Bank prior to
any such move. All accounting records and financial reports furnished to the
Bank shall be maintained and prepared in accordance with generally accepted
accounting principles consistently applied. It is specifically agreed that the
bank shall have and the Owner hereby grants to the Bank a security interest in
all books of account and records of the Owner and shall have access to them at
any time for inspection, verification, examination and audit; b) The Owner shall
furnish to the Bank such financial and business information and reports in form
and content satisfactory to the Bank as and when the Bank may from time to time
require; c) The Owner, if a corporation, shall maintain its corporate existence
in good standing and shall not consolidate or merge with or acquire the stock of
any other corporation without the prior written consent of the Bank. If the
Owner is a corporation, the Owner shall, at the request of the Bank, qualify as
a foreign corporation and obtain all requisite licenses and permits in each
jurisdiction where the Owner does business. The Owner shall not discontinue
business, liquidate, sell, transfer, assign or otherwise dispose of any of its
assets, except with the prior written permission of the Bank, provided, however,
that it may sell in the ordinary course of business and for a full consideration
in money or money's worth, any product, merchandise or service produced or
marketed by it. The Bank's security interest shall attach to all proceeds of all
sales or dispositions of the Collateral; d) The Owner shall maintain all of the
Collateral in good condition and repair. The Bank shall have the right to
inspect the Collateral at any reasonable time and shall have the right to obtain
such appraisals, reappraisals, appraisal updates or environmental inspections as
the Bank, in its sole discretion, may deem necessary from time to time. e) The
Owner shall at all times keep insurable Collateral
<PAGE>
insured against any and all risks, including, without limitation, fire, and such
other insurance as may be required by the Bank from time to time; and in such
amounts as may be satisfactory to the Bank. The Bank shall be named as Loss
Payee on any such insurance policies. Insurance may be purchased from an insurer
of the Owner's choice, except as otherwise required by law. The Owner shall pay
and discharge all taxes, assessments and charges of every kind prior to the date
when such taxes, assessments or charges shall become delinquent and provide
proof of such payments to the Bank, upon request. However, nothing contained in
this Security Agreement shall require the Owner to pay any such taxes,
assessments and charges so long as it shall contest its validity in good faith
and shall post any bond or security required by the Bank against the payment.
Upon the failure of the Owner to pay such required amounts, the Bank, at its
option, and at the Owner's expense, may obtain such insurance or pay such taxes,
assessments or charges with the costs or premiums becoming part of the
Indebtedness at the option of the Bank, such amounts may be payable on demand.
Any insurance obtained by the Bank, at its option, may be single or dual
interest, protecting its rights, rights of the Owner or joint rights. Any
insurance obtained by the Bank, at its option, may be single or dual interest,
protecting its rights, rights of the Owner or joint rights. Any insurance
obtained by the Bank may provide, at its option, that such insurance will pay
the lesser of the unpaid balance of the indebtedness or the repair or
replacement value of the Collateral. The Owner authorizes the Bank to give
effect to any of these options without prior notice to Owner or further consent
from owner. No matter which insurance coverage or repayment options the Bank
chooses, the collateral will secure payment of these amounts. The Bank may use
the proceeds of any insurance obtained by Owner or by the Bank to repair or
replace the collateral or, if the Bank elects to do so, to repay part of all of
the indebtedness, and the Borrowers will still be responsible to repay any
remaining unpaid balance of the indebtedness. Owner assigns to the Bank all
amounts payable under the insurance, including unearned premiums, directing the
insurer to make payment to the Bank, and Owner appoints us attorney-in=fact to
endorse any draft. f) The Owner will not pledge or grant any security interest
in any of the Collateral to anyone except the Bank, or permit any lien or
encumbrance to attach to any of the Collateral, or any levy to be made on the
Collateral, or any financing statement (except financing statements in favor of
the Bank) to be on file against the collateral; g)The Owner agrees that it will
not permit any return of merchandise, the sale of which gave rise to any of the
Accounts, except in the usual and regular course of business.
8. Default. In addition to any right which the Bank may have to demand payment
of the Indebtedness under any other agreement, upon the occurrence of any of the
following events of default, the Bank, at its option, may declare any or all of
the Indebtedness immediately due and payable and may exercise any and all of the
rights and remedies of default of a secured party under the Uniform Commercial
Code and other applicable law and
<PAGE>
all rights provided herein, all of which rights and remedies shall, to the full
extent permitted by law, be cumulative. The occurrence of an Event of Default as
defined in the Amended and Restated Credit Agreement of even date herewith
between the Borrower and the Bank. The Bank may require the Owner to assemble
the Collateral and make it available to the Bank at a place to be designated by
the Bank which is reasonably convenient to the Bank and the Owner. The Bank may
take possession of the Collateral without a court order. The Owner shall pay to
the Bank on demand all legal expenses and reasonable attorneys' fees if the Bank
refers this Security Agreement to an attorney who is not a salaried employee of
the Bank, appraisal fees and all expenses incurred or paid by the Bank, in
protecting and enforcing the rights of the Bank under this Security Agreement,
including the Bank's right to take possession of the Collateral and its
proceeds, and to hold, prepare for sale, sell and dispose of the Collateral. Any
required notice by the Bank of sale or other disposition on default, when placed
in the mail and addressed to or left upon the premises of the Owner, at the
address specified next to the Owner's signature below or such other address of
the Owner as may from time to time be shown on the Bank's records, at least ten
days prior to such action shall constitute reasonable notice to the Owner.
9. Term. This security Agreement shall be a continuing agreement and shall
remain in full force and effect irrespective of any interruptions in the
business relations of the Borrower with the Bank and shall apply to any ultimate
balance which shall remain due by the Borrower to the Bank; provided, however,
that the Owner may be written notice terminate this Security Agreement with
respect to all Indebtedness of the Borrower incurred or contracted by the
Borrower or acquired by the Bank after the date on which such notice is
personally delivered to or mailed via registered mail and accepted by the
Borrower's lending officer.
10. Execution by More than One Party. The term "Owner" as used in this Security
Agreement shall, if this instrument is signed by more than one Party, mean the
"Owner and each of them" and each shall be jointly and severally obligated and
liable. If any Party shall be a partnership, the agreements and obligations on
the part of the Owner shall remain in force and applicable regardless of any
changes in the individuals composing the partnership and the term "Owner" shall
include any altered or successive partnerships and the predecessor partnerships
and their partners shall not be released from any obligation or liability.
11. Waivers by the Owner. The Owner hereby waives (1) notice of acceptance of
this Security Agreement and of any extensions or renewals of credit by the Bank
to the Borrower; (2) presentment and demand for payment of the Indebtedness; (3)
protest and notice of dishonor or default to the Owner or to any other party
with respect to the Indebtedness; (4) all other notices to which the Owner might
otherwise be entitled; and (5) if for business purposes, the benefit of the
Homestead Exemption. The Owner
<PAGE>
further waives any right to require that any action be brought against the
Borrower or any other party, to require that resort be had to any security or to
any balance of any deposit account or credit on the books of the Bank in favor
of the Borrower or any other party. The Owner further agrees that it shall not
be subrogated and will not enforce on its part or behalf any right of action
which the Bank may have against the borrower until every Indebtedness secured
under this Security Agreement is paid in full.
12. No Obligations to Extend Credit. This contract shall not be construed to
impose any obligation on the Bank to extend or continue to extend any credit at
any time.
13. Indemnity. The Owner agrees to indemnify and hold harmless the Bank and its
subsidiaries, affiliates, successors, parents, and assigns and their respective
agents, directors, employees, and officers from and against any and all
complaints, claims, defenses, demands, actions, bills, causes of action
(including, without limitation, costs and attorneys' fees), and losses of every
nature and kind whatsoever, which may be raised or sustained by any directors,
officers, employees, shareholders, creditors, regulators, successors in
interest, or receivers of the Borrower or any third party as a result of or
arising out of, directly or indirectly, the Bank extending credit as evidenced
by the Indebtedness to the Borrower, and taking the Collateral as security for
the Indebtedness, and the Owner further agrees to be liable for any and all
judgments which may be recovered in any such action, claim, proceeding, suit, or
bill, including any compromise or settlement thereof, and defray any and all
expenses, including, without limitation, costs and attorneys' fees, that may be
incurred in or by reason of such actions, claims, proceedings, suits, or bills.
14. Financing Statements. The Owner will deliver such instruments of further
assignment or assurance as the Bank may from time to time request to carry out
the intent of this Security Agreement, and will join with the Bank in executing
financing statements and other documents in form satisfactory to the Bank and
pay the cost of filing the same, including all recordation, transfer and other
taxes and fees, continuation statements and any other documents in any public
office deemed advisable by the Bank. The Owner agrees that a carbon,
photographic or other reproduction of a financing statement or this Security
Agreement shall be sufficient as a financing statement.
15. Successor In Interest. This Security Agreement shall be binding upon the
Owner, its successors and assigns, and the benefits hereof shall inure to the
Bank, its successors and assigns.
16. Waiver by the Bank. The Bank may waive any default or remedy any default
without waiving the default remedied or any other prior or subsequent default.
The Bank's failure to
<PAGE>
exercise any right or take any action under this Security Agreement shall not
constitute a waiver of that or any other right or action.
17. Waiver of Jury Trial. To the extent legally permissible, the Owner waives
all right to trial by jury in any litigation relating to transactions under this
Security Agreement, whether sounding in contract, tort or otherwise.
18. Governing Law. The laws of the jurisdiction in which the Bank is located
shall govern the construction of this Security Agreement and the rights and
duties of the Owner and Parties.
The undersigned have executed or caused this Security Agreement to be executed,
under seal, as of this 14th day of June, 1996.
DUTTERER'S OF MANCHESTER CORPORATION
a Maryland corporation
By: Mary Beth Bulog
------------------------
(Signature)
Secretary/Treasurer
EXHIBIT (c)(3)
GUARANTY AGREEMENT
GUARANTY AGREEMENT, made and entered into as of the 14th day of June,
1996, by DUTTERER'S OF MANCHESTER CORP., a Maryland corporation ("Guarantor")
for the benefit of CRESTAR BANK ("Bank").
As an inducement for the Bank to enter into an Amended and Restated
Credit Agreement of even date herewith (such Revolving Credit Agreement, as now
or hereafter amended, being herein referred to as the "Agreement") with
Doughtie's Foods, Inc., a Virginia corporation ("Doughtie's"), Guarantor has
agreed to guarantee unconditionally the indebtedness and other obligations to
the Bank of Doughtie's under or pursuant to the Agreement, including, but not
limited to, Doughtie's obligations to pay the principal of and interest on the
Notes (as defined in the Agreement). Such indebtedness and obligations are
hereinafter collectively referred to as the "Guaranteed Obligations."
1. Guarantor unconditionally guarantees to the Bank the payment, when due, by
acceleration, extension or otherwise, of the Guaranteed Obligations and the due
and punctual observance or performance of each and every other covenant or
agreement of Doughtie's thereunder.
2. Guarantor agrees that the whole or any part of any security now or hereafter
held for the Guaranteed Obligations may be exchanged, comprised or surrendered
from time to time; that the time or place of payment of The Guaranteed
Obligations may be changed or extended, in whole or in part, to a time certain
or otherwise, and may be renewed or accelerated, in whole or in part; that the
obligors under the Guaranteed Obligations may be granted indulgences generally;
that any of the provisions of the Agreement, any note or other instrument
evidencing the Guaranteed Obligations or any security therefor may be modified,
amended or waived; that any part liable for the payment thereof (including but
not limited to any other guarantor of the Guaranteed Obligations) may be granted
indulgences or released, all without notice to or further assent by Guarantor,
who shall remain bound thereon, notwithstanding any such exchange, compromise,
surrender, change, extension, renewal, acceleration, indulgence, modification,
amendment, waiver or release.
3. Guarantor expressly waives: (a) notice of acceptance of this Guaranty; (b)
presentment and demand for payment of any of the Guaranteed Obligations; (c)
protest and notice of dishonor or of default to Guarantor or to any other party
with respect to the Guaranteed Obligations or with respect to any security
therefor; (d) all other notices to which Guarantor might otherwise be entitled;
(e) demand for payment under this Guaranty; and (f) any right to assert against
the Bank, any defense (legal or equitable), set-off, counterclaim or claim which
it may now or hereafter have against Doughtie's.
<PAGE>
4. This is a guaranty of payment and not of collection. The liability of
Guarantor on this Guaranty shall be direct and immediate and not conditioned or
contingent upon the pursuit of any remedies against Doughtie's or any other
person, nor against securities or liens available to the Bank, its successors,
assigns or agents. Guarantor waives any right to require that an action be
brought against Doughtie's or any other person or guarantor or to require that
resort be had to any security. If the Guaranteed Obligations are partially paid
through the election of the Bank to pursue any of the remedies mentioned in this
paragraph, or if the Guaranteed Obligations are otherwise partially paid,
guarantor shall remain liable for any balance thereof.
5. If at any time or times hereafter the Bank employs counsel to intervene, or
to file a petition, answer, motion or other pleading in any suit or proceeding
relating to the Guaranty, then in such event, all of the reasonable attorneys'
fees relating thereto shall be an additional liability of Guarantor to the Bank,
payable on demand.
6. As security for its obligations hereunder, the Guarantor agrees that (a) in
the event it fails to pay its obligations hereunder when due and payable under
this Guaranty, any of Guarantor's assets of any kind, nature or description in
the possession, control or custody of the Bank, may, without notice to Guarantor
be reduced to cash or the like and applied to the Bank in reduction or payment
of Guarantor's obligations hereunder; (b) all indebtedness and liabilities now
and at any time or times hereafter owing by Doughtie's to Guarantor are hereby
subordinated to the Guaranteed Obligations; and (c) all security interests,
liens and encumbrances which Guarantor now has or from time to time hereafter
may have upon any of the assets of Doughtie's are hereby subordinated to the
Guaranteed Obligations.
7. This Guaranty shall continue in full force and effect until the Guaranteed
Obligations are fully paid, performed and discharged. This Guaranty shall be
binding upon and inure to the benefit of the Bank, its successors and assigns.
8. Guarantor represents to the Bank that it has knowledge of the financial
condition and affairs of Doughtie's and represents and agrees that it will keep
informed of such financial condition and affairs so long as this Guaranty is in
force. Guarantor further agrees that the Bank will have no obligation to
investigate such financial condition or affairs for the benefit of Guarantor nor
to advise Guarantor of any fact respecting, or any change in, such financial
condition or affairs which might come to the knowledge of the Bank at any time,
whether or not the Bank knows or believes or has reason to know or believe that
any such fact or change is unknown to Guarantor or might (or does) materially
increase the risk of Guarantor as guarantor of the Guaranteed Obligations.
9. This Guaranty shall be deemed to be a contract made under, and for all
purposes shall be construed in accordance with, the internal laws and judicial
decisions of the Commonwealth of Virginia.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day
and year first above written.
DUTTERER'S OF MANCHESTER CORP.
<PAGE>
By: Mary Beth Balog
-------------------
(Signature)
Title: Secretary/Treasurer
EXHIBIT (c)(4)
ASSIGNMENT
Know all men by these presents that DOUGHTIE'S FOODS, INC., a Virginia
corporation with its principal office at 2410 Wesley Street, Portsmouth,
Virginia 23707 (hereinafter called the Assignor), for valuable consideration,
the receipt of which is hereby acknowledged, hereby sells, assigns and transfers
(under the Assignment of Claims Act, 31 U.S.C. section 3727 and 41 U.S.C.
section 15) to CRESTAR BANK, a Virginia banking corporation with a place of
business at 500 Main Street, Norfolk, Virginia 23510, and its successors and
assigns (hereinafter called the Assignee), all monies due and to become due from
the United States of America, together with all rights to receive the same,
under a certain Contract No. SP0300-967-D-2900 dated 26 January, 1996, between
the United States of America acting through the Defense Logistics Agency,
Defense Personnel Support Center, 2800 South 20th Street, Philadelphia,
Pennsylvania 19145-5099, and the Assignor, for the supply of subsistence items
(foods) to military facilities in Zone One, Southern Virginia of the
Mid-Atlantic Region; under any letter of intent, letter of award, letter of
acceptance of bid or proposal, informal or incomplete contract, order,
authorization to commence performance or other similar instrument or
communication made or received by the Assignor in anticipation of or in
connection with said contract and under any and all amendments thereof and
supplements thereto.
The Assignor hereby authorizes and directs the United States of America to
make all payments due under said formal and/or informal contract and any and all
amendments thereof and supplements thereto direct to the Assignee by checks or
other orders, payable to the order of the Assignee, and constitutes and appoints
the Assignee its true and lawful attorney, irrevocably with full power of
substitution for it and in its name or in the name of the Assignor or otherwise,
to ask, require, demand and receive and give acquittance for any and all said
monies due or to become due, and to endorse the name of the Assignor to any
checks, drafts or other orders for the payment of money payable to the Assignor
in payment thereof.
The Assignor warrants that it is the lawful owner of all rights under said
formal and/or informal contract and any and all amendments thereof and
supplements thereto; that it has good right to assign same; that its said rights
are free from all liens and encumbrances that it will warrant and defend the
same against the lawful claims and demands of all persons. The Assignor agrees
(1) that, if any payments under said formal and/or informal contract or any
amendment thereof or supplement thereto shall be made to the Assignor, it will
receive and hold
<PAGE>
the same in trust for the Assignee and will forthwith upon receipt deliver the
same to the Assignee in the identical form of payment received by the Assignor;
and (2) that it will execute and deliver all such further instruments and do all
such further acts and things as the Assignee may reasonable request or as shall
be necessary or desirable to further and more perfectly assure to the Assignee
its rights under said formal and/or informal contract or any amendments thereof
or supplements thereto. IN WITNESS WHEREOF, the Assignor has caused this
instrument to be signed, sealed and delivered by its proper officer thereunto
duly authorized this 14th day of June, 1996
DOUGHTIE'S FOODS, INC.
By: Marion S. Whitfield, Jr.
------------------------
(Signature)
Title: Senior Vice President
COMMONWEALTH OF VIRGINIA
CITY OF NORFOLK, to-wit:
The foregoing instrument was acknowledged before me this 14th day of June,
1996, in the aforesaid jurisdiction by Marion S. Whitfield, Jr., as Senior Vice
Pres. of Doughtie's Foods, Inc., on behalf of the corporation.
[Illegible]
-------------------
(Signature)
Notary Public
My commission expires: July 31, 1999
EXHIBIT (c)(5)
This Is A Credit Line Deed Of Trust
This Credit Line Deed of Trust, made and entered into this 14th day of June,
1996, by and among DOUGHTIE'S FOODS, INC., a Virginia corporation (herein,
whether one or more, referred to as "Grantor"), DAVID A. DURHAM, and DAVID
SINGLETON, who reside in the City of Virginia Beach, and the City of Virginia
Beach, Virginia, respectively (either of whom may act and who are referred to
herein as "Trustee"); and Crestar Bank (herein "Lender"), provides: The name of
the noteholder secured hereby is Crestar Bank. Communications to the noteholder
pursuant to Va. Code 55-58.2 are to be mailed or delivered to 500 East Main
Street, Norfolk, Virginia 23510, Attention: Bruce W. Nave. The maximum aggregate
amount of principal to be secured hereby at any one time is Three Million
Twenty-Five Thousand Dollars ($3,025,000).
For and in consideration of the indebtedness herein recited and the trust
herein created, Grantor hereby grants, bargains, mortgages, assigns, sells and
conveys unto Trustee, in trust, with power of sale and with general warranty of
title, all of Grantor's present and future right, title and interest in and to
certain real estate located in the City of Portsmouth, Virginia, and more
particularly described as follows:
SEE EXHIBIT A ATTACHED
which has the address of 2410 and 2415 Wesley Street, and 149 Chautauqua Avenue,
Portsmouth, Virginia 23707, together with all easement and appurtenances
thereto, all of the rights of Grantor in and to the streets, alleys, and
rights-of-way appurtenant to and adjoining or adjacent to the land hereinabove
described; and together with any and all right, title and interest of Grantor in
and to the improvements, which shall include any and all buildings and
structures now or at any time hereafter erected, constructed or situated upon
said land or any part thereof, together with all fixtures, machinery, apparatus,
fittings and equipment now or hereafter located in or upon the premises and now
owned or which may hereafter be owned by Grantor, in and upon said land and
premises, or which may hereafter be placed thereon, including, but not limited
to, any equity which may be acquired by Grantor in such property and as a result
of the making of instalment payments on account of the purchase thereof,
including but not limited to elevators, escalators, boilers, engines, heating,
ventilating and air conditioning systems, sprinkler or fire extinguishing
systems, plumbing, partitions, wiring, storm doors and windows, wire screens,
awnings, carpeting, drapes, window shades, switchboards, communications
apparatus, floor tiling, linoleum, attached cabinets, wall panels and
decorations
<PAGE>
attached to walls and ceilings, gas and electrical fixtures, chattels, attached
appliances, and material used and to be used in the buildings and structures.
Reference in this Deed of Trust to "Property" shall be deemed to include, in
addition to the described land, improvements now or hereafter located thereon
and rights appurtenant thereto, all the equipment, furnishings, fixtures, goods
and chattels, above-mentioned and conveyed, all of which are deemed part and
parcel of the real estate and appropriated to the use of the real estate and,
whether affixed or not, shall for the purposes of this Deed of Trust be deemed
conclusively to be real estate and conveyed hereby, together with the proceeds
of all the foregoing. In Trust (a) to secure the prompt payment of Secured
Indebtedness (as hereinafter defined), payable to Lender at the address set out
above; and (b) to secure performance and observance of the terms and conditions
of this Deed of Trust, any Note (as hereinafter defined) or any Agreement (as
hereinafter defined). Lender has extended credit, or may in the future extend
credit to Grantor (herein, whether one or more, "Debtor", and which as used
herein shall include any one or more and any combination of the parties
constituting Debtor). The term "Secured Indebtedness" as used herein shall mean
all indebtedness of Debtor to Lender, whether now existing or hereinafter
arising, direct or indirect, fixed or contingent, due or to become due, joint or
several, for whatever purpose whether or not related to the Notes or Agreements,
as defined below, irrespective of how such indebtedness is evidenced, whether by
notes, bonds, letters of credit, advances, overdrafts, accounting entries or
otherwise, or by the endorsement or guaranty by Debtor of the obligations of
another; provided, however, that the aggregate outstanding principal amount of
the Secured Indebtedness secured by this Deed of Trust shall not at any one time
exceed the maximum aggregate amount of principal stated above, plus interest
thereon (at the rate or rates set forth in the Noted or Agreements or other
evidences of such indebtedness), fees due with respect to any such indebtedness,
and, to the extent permitted by applicable law, all costs of collection with
respect thereto, including without limitation, any costs and expenses incurred
by Trustee or Lender in connection with the enforcement of this Deed of Trust or
as otherwise provided herein. Secured indebtedness shall include, but not be
limited to, the principal of, interest on and all other amounts due under or in
connection with the note from Grantor to the Lender dated June 14, 1996, in the
amount of $1,750,000, the note from Grantor to the Lender dated June 14, 1996,
in the amount of $7,500,000, and any modifications, extensions or renewals of
such notes, agreements or loans.
As used herein the term "Note" shall mean each note from Debtor to Lender
and specifically referred to above, and any and all other notes or obligations
executed and delivered by Debtor to Lender, whether joint or several or joint
and several, to repay the Secured Indebtedness or any part thereof. The term
"Agreement" as used herein shall mean any and each agreement between Debtor and
Lender specifically referred to above, and any and all other agreements of
whatever nature executed and delivered by Debtor to Lender in connection with
any Note or the
<PAGE>
Secured Indebtedness or any part thereof.
It is understood and agreed that the Secured Indebtedness will be advanced
from time to time by Lender in accordance with the provisions of any Note or any
Agreement, each of which is incorporated herein and made a part hereof by
reference to the same extent as if fully set forth herein, and it is further
understood and agreed that, from time to time, repayments on account of the
Secured Indebtedness may be made and Lender may thereafter make additional
advances including re-advances of sums previously repaid, as provided in any
Note or any Agreement, it being understood and agreed that each and every
advance made at the present or hereafter to Debtor or on behalf of Debtor or
Grantor shall be deemed to be an advance made on account of the Secured
Indebtedness and secured hereby unless otherwise specifically provided in the
Note, Agreement or other documents evidencing such advance. Repayment to Lender
of all of the Secured Indebtedness by Debtor shall not terminate the lien of
this Deed of Trust unless it is released by Lender upon receipt of the written
request of Grantor, payment of all outstanding Secured Indebtedness and
termination of all applicable Notes and Agreements; otherwise it shall remain in
force to secure future advances and indebtedness, irrespective of any additional
security that may be taken as to the Secured Indebtedness. Upon authorization of
Lender, Trustee and/or Lender shall release and discharge, at the expense of
Grantor or Debtor, this Deed of Trust and the liens, security interests and
assignments created hereby. Grantor represents, warrants, covenants and agrees
as follows:
1. Payment and Performance. Grantor shall perform its obligations under and
comply with the provisions of this Deed of Trust and any Note and any Agreement
to which it is a party.
2. Covenants; Warranty of Title; Payment of Taxes and Assessments; Prior Deeds
of Trust or Mortgages. Grantor makes the covenants and agrees to the other
provisions set forth in Section 55-59 of the Code of Virginia (1950), as
amended. Grantor is lawfully seized of the Property in fee simple absolute or
the leasehold estate if this Credit Line Deed of Trust is on a leasehold, and
has the right to convey the same. At the time of recordation, this Deed of Trust
shall be a First lien and encumbrance on the Property. Grantor will execute such
further assurances as Trustee or Lender deems necessary or desirable in order to
more fully vest title in Trustee. So long as any part of the Secured
Indebtedness shall be unpaid, Grantor will protect the title and possession of
the Property and will pay when the same become due all taxes and assessments now
existing or hereafter levied or assessed upon the Property or the interest
therein created by this Deed of Trust, or which by the laws of the jurisdiction
where the Property is located may be levied or assessed against Trustee or its
successors, or Lender, for or on account of the Secured Indebtedness upon this
Deed of Trust or the interest in the Property thereby created, together with all
sums now or hereafter owing on any senior deeds of trust or mortgages. Grantor
will provide Lender with evidence of any such
<PAGE>
payments which from time to time may be required by Lender. Grantor will, at its
expense, take such other action and execute such other instruments as may be
necessary or desirable in the sole discretion of Lender to preserve and protect
the lien and priority of this Deed of Trust and all other instruments evidencing
or securing payment of the sums secured hereby.
3. Preservation and Maintenance of Property; Environmental Requirements. No
building or other improvement shall be substantially altered, removed or
demolished, except for changes which enhance its value, nor shall any fixtures
or attached appliances on, in or about said buildings or improvements be
severed, removed, sold or mortgaged without the prior written consent of Lender
(provided, however, that minor non-structural changes costing not more than
$10,000 may be undertaken without such consent, and that replacement of such
appliances or fixtures of equivalent value and function may be undertaken
without such consent). Grantor will not commit or suffer any waste, nor permit
or suffer any impairment or deterioration of the Property, or any part thereof.
Grantor will at all times keep and maintain the Property and every part thereof
in good condition, fit and proper for the respective purposes for which they
were originally erected or installed. Grantor will comply in all material
respects with all statutes, orders, requirements or decrees relating to the
Property, whether under federal, state, county or municipal authority, and will
observe and comply with all conditions and requirements necessary to preserve
and extend any and all rights, licenses, permits (including, but not limited to,
zoning variances, special exceptions and nonconforming uses), privileges,
franchises and concessions which are applicable to the Property or which have
been granted to or contracted for by Grantor in connection with any existing or
presently contemplated use of Property. Grantor will permit Lender or its agents
to enter upon and inspect the Property at all reasonable times and Lender shall
have the right to obtain such appraisals, reappraisals, appraisal updates or
environmental inspections as Lender, in its sole discretion, may deem necessary
from time to time.
Grantor represents and warrants that the Property never has been, and never
will be so long as this Deed of Trust remains in effect, used for the
generation, collection, manufacture, storage, treatment, disposal, release or
threatened release of any hazardous substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), Superfund Amendments and
Reauthorization Act ("SARA"), applicable state laws, or regulations adopted
pursuant to either of the foregoing. Grantor agrees to comply with any federal,
state, or local law, statute, ordinance or regulation, court or administrative
order or decree or private agreement regarding materials which require special
handling in collection, storage, treatment or disposal because of their impact
on the environment ("Environmental Requirements"). Grantor agrees to indemnify
and hold Lender harmless against any and all claims and losses and expenses and
costs resulting from a breach of this
<PAGE>
paragraph and Grantor will pay or reimburse Lender for all costs and expenses
for expert opinions, inspections or investigations required or requested by
Lender which, in Lender's sole discretion, are necessary to ensure compliance
with this paragraph. This obligation to indemnify shall survive the payment of
the Secured Indebtedness and the release of this Deed of Trust.
4. Insurance. Grantor will keep the Property and the improvements thereon
insured against loss by fire, casualty and other hazards (including flood
damage, if the improvements are located in a special flood hazard area) as may
from time to time be required by Lender for the benefit of Lender. If permitted
by applicable law, Grantor will maintain such public liability and indemnity
insurance as may from time to time be required by Lender. To the extent
permitted by applicable law, all such insurance shall be written in forms,
amounts and by companies satisfactory to Lender and losses thereunder shall be
payable to Lender pursuant to a standard noncontributing mortgagee's clause.
Certificates or other proof of insurance shall be delivered to Lender and
Grantor shall provide Lender with such evidence of payment of premiums due on
account of such insurance as from time to time may be required by Lender. All
such policies shall provide for at least thirty (30) days' prior written notice
to Lender of any cancellation or modification thereof, including without
limitation, cancellation for nonpayment of premium. Grantor shall give Lender
prompt notice of any loss covered by such insurance and Lender shall have the
right to join Grantor in adjusting any loss. Grantor hereby authorizes Lender,
at Lender's option, to collect, adjust and compromise any losses under any such
insurance policies herein referred to. Any funds received as payment for any
loss under any such insurance shall be paid over to Lender and shall be applied,
after deducting the costs of collection, at the option of Lender, either to the
prepayment of the Secured Indebtedness or to the reimbursement of Grantor for
expenses actually incurred by Grantor in the restoration or replacement of
Property, or any part thereof. In the event of foreclosure of this Deed of Trust
or other transfer of title to the Property conveyed hereby, all right, title and
interest of Grantor, in and to any insurance policies then in force, shall pass
to the purchaser or grantee, which may be, but shall not be limited to, Lender.
5. Lender's Right to Remedy Defaults. In the event Grantor shall neglect or
refuse (a) to keep the Property in good repair and condition; (b) to pay
promptly when due all taxes and assessments as aforesaid; (c) to remove any
statutory liens on the Property; (d) to keep the buildings, improvements and
chattels insured as aforesaid; (e) to deliver certificates or other proof of the
policies or policy of insurance or the renewals thereof to Lender as aforesaid;
(f) or if all amounts owed under any Note, Agreement or other obligation secured
by this Deed of Trust or any other deed of trust or other lien on the Property
are not paid promptly when due or all obligations, covenants, conditions and
agreements under such deed of trust or
<PAGE>
other lien are not observed, then Lender may, if it shall so elect, in addition
to any other rights it may have under this Deed of Trust, take possession of the
Property, make repairs as it deems necessary, pay such taxes and assessments
with the accrued penalties and/or interest, pay any necessary expenses, redeem
the Property which may have been sold or forfeited for taxes or assessments
thereon, purchase any tax title thereon, remove any statutory liens or
encumbrances and prosecute or defend any suit in relation thereto, or insure and
keep insured said buildings, improvements and chattels as provided herein, or
make any payments as may be necessary to cure any default. Any sums including,
without limitation, costs, expenses and attorneys' fees which may be expended by
Lender or Trustee in so doing or otherwise for the protection or preservation of
the Property hereby or the lien of this Deed of Trust thereon, shall bear
interest from the dates of such payments at the highest rate of interest being
paid on any Secured Indebtedness (but in no event higher than the rate or rates
permitted under applicable law(, shall be paid by Grantor to Lender upon demand,
shall become a part of the Secured Indebtedness and shall be recoverable as such
in all respects. Any such liens, claims, taxes, expenses, assessments or tax
titles so purchased, paid or redeemed by Lender shall, as between the parties
hereto and their successors in interest, be deemed valid, so that in no event
shall the necessity or validity of any such payment be disputed. The occurrence
of an "Event of Default" as defined in the Amended and Restated Credit Agreement
of even date herewith by and between the Grantor and the Lender shall constitute
a default under this Deed of Trust.
6. Default, Acceleration of Payments; Trustee's Sale or Lease; Advertisement
Required. Upon the occurrence of any event of default regardless of whether
Lender shall have cured such event of default on behalf of Grantor in accordance
with the terms of this Deed of Trust, Lender may elect, without notice, to cause
all the Secured Indebtedness to be at once due and payable in full, and the
Trustee, or its successor in trust, as soon as reasonably practicable after
requested to do so by Lender (i) may take possession of the Property, may make
any repairs or replacements to the Property deemed necessary by Trustee or
Lender and/or sell (and in case of default of any purchaser, resell) in whole or
in part the Property at public auction at such time and place and upon such
terms and conditions as Trustee may deem appropriate or as otherwise required by
applicable law or rule of the court following public advertisement for the time
and in the manner prescribed by applicable law and in accordance with paragraph
16a, and in case of any sale, Trustee may require a bidder's deposit of not more
than ten percent (10%) of the outstanding amount secured, but not less than
$1,000, and shall (the terms of sale having been complied with) execute a deed
or deeds, assignment and transfer of title to the Property to the purchaser,
with such purchaser being discharged from all liability to see to the
application of the purchase money; at any such sale Lender may bid and become
the purchaser of the Property; or (ii) may take possession of the Property and
may
<PAGE>
lease the Property either pending sale or until the amount of the Secured
Indebtedness is paid and deduct from rents received all costs of collection,
repair, replacement and administration and apply the net proceeds to the Secured
Indebtedness. The Trustee is hereby empowered to bring in its name, or in the
name of the Grantor, any suit or action it deems advisable for the enforcement
of the provisions of this clause, but the Trustee and the Lender shall be in no
way personally liable under any of the provisions of such lease or of this
clause, and shall not be personally liable to any person by virtue of their
possession of the Property or by virtue of their acting under any provisions of
this clause, except to the extent of accounting for rents actually received by
them. The proceeds of any sale of the Property by Trustee shall be applied by
Trustee: First, to pay all proper costs and charges, including but not limited
to court costs, advertising expenses, auctioneers' allowances, the expenses, if
any, required to correct any irregularity in the title, premium for Trustee's
bond, auditors' fees, attorneys' fees, cost of repairs or replacements, and all
other expenses of sale incurred in and about the protection and execution of
this Deed of Trust, and all moneys advanced for taxes, assessments, insurance,
and with interest thereon at the highest rate of interest being paid on any
Secured Indebtedness (but in no event higher than the rate or rates permitted
under applicable law), and all taxes and assessments due upon said land and
premises at time of sale, and to retain as compensation a trustee's commission
of not more than five percent (5%) on the amount of said sale or sales unless a
larger percentage or amount is agreed upon in writing by Lender, and attorneys'
fees and expenses of any litigation which may arise on account of the execution
and enforcement of this Deed of Trust or any Note or Agreement; second, to pay
and satisfy all Secured Indebtedness, interest and all other charges hereby
secured then remaining unpaid, and interest thereon to date of payment, whether
the same shall be due or not, it being understood and agreed by Grantor that the
amounts due under any Note or Agreement shall, upon such sale being made before
the maturity thereof, be and become immediately due and payable at the election
of Lender; and Third, to pay the remainder of said proceeds, if any, to Grantor,
its heirs, personal representatives, successors or assigns, or to any other
person lawfully entitled thereto, upon the delivery and surrender to the
purchaser, his, her or their heirs and assigns, of possession of the Property
and premises, less costs and expenses of obtaining possession. If after so
applying such proceeds, any portion of the Secured Indebtedness shall remain
unpaid, such balances shall continue to be due and payable, and shall be subject
to collection by Lender by suit or otherwise. In the event the Property shall be
advertised for sale as above provided but be withdrawn from sale or for any
other reason not sold, Trustee shall be entitled to a reasonable fee and
accruals, and any fees of attorneys or auctioneers, and any other expenses shall
be charged to and paid by Grantor. In addition, in the event of default
hereunder, Lender shall have all rights and remedies permitted by law and by any
document evidencing, governing, or securing the obligations secured hereby.
<PAGE>
7. Substitute Trustee. Lender has the irrevocable right and power to substitute
without cause or notice a trustee or trustees in the place of any Trustee named
under this Deed of Trust. Such power of appointment and substitution may be
exercised at any time hereafter and as many times as Lender, its successors or
assigns, may desire. Such substitute Trustee(s) shall be vested with the same
titles and powers as are granted herein to the original Trustee. Nothing herein
contained shall deprive Lender of its right to apply for an receive any relief
regarding the Trustee hereunder which is now, or which may hereafter be,
provided for by the internal laws of the jurisdiction in which the Property is
located or applicable federal law.
8. Condemnation. Grantor hereby irrevocably grants, assigns, transfers and set
over unto Lender all right, title and interest of Grantor in and to any award or
payment made (not to exceed the outstanding Secured Indebtedness including,
without limitation, accrued interest, and costs, expenses, reasonable attorneys'
fees, and disbursements incurred by Lender in connection with collection of such
award and payment) in respect of (a) any taking of the Property or any part
thereof as a result of, or by agreement in anticipation or in lieu of, any
exercise of the power of eminent domain or condemnation; and (b) any such taking
of any appurtenances to the Property; and (c) any damage to the Property or any
part thereof due to governmental action affecting, but not resulting in a taking
of, the Property, including, by way of example and not by way of limitation, the
changing of the grade of a street adjacent or proximate to the Property provided
that if no Event of Default has occurred which remains uncured and such
condemnation does not affect more than 25% of the fair market value of the
improvements and Land constituting a portion of the Property, Lender agrees to
allow Grantor to use such condemnation proceeds to rebuild or restore the
Property. Grantor agrees to promptly notify Lender of the commencement of any
condemnation or eminent domain proceeding. Grantor further agrees, upon request,
to make, execute and deliver any assignments or other instruments necessary for
the purpose of assigning or transferring any such award or awards to Lender free
and clear of any encumbrances whatsoever. The excess amount of such award over
and above sums due Lender on account of the Secured Indebtedness, interest and
other charges, shall be paid to Grantor, its successors and assigns.
9. Restrictions on Transfer of Property; No Secondary Financing; Mechanics'
Liens. NOTICE - THE DEBT SECURED HEREBY IS SUBJECT TO CALL IN FULL OR THE TERMS
THEREOF BEING MODIFIED IN THE EVENT OF SALE OR CONVEYANCE OF THE PROPERTY. (a)
If all or any part of the Property is sold, transferred, conveyed or encumbered
without Lender's prior written consent, Lender may, at its option, require
immediate payment in full of all sums secured by this Deed of Trust and exercise
all remedies provided in this Deed of Trust in the event of default. However,
this option shall not be exercised by Lender if exercise is prohibited by
federal law as of the date of this Deed of Trust. Lender reserves the absolute
option and right, if permitted by
<PAGE>
applicable law, among other things, to: require the agreement by Grantor and
Grantor's transferee to any terms and conditions that Lender may require upon
transfer, increase the rate of interest upon transfer, and charge an assumption
fee. (b) To the extent permitted by applicable law, Grantor shall not
voluntarily or otherwise permit to be created or filed against the Property,
without the prior written consent of Lender in each instance, any other deed of
trust or mortgage or other lien or liens or superior to the lien of this Deed of
Trust. c) Grantor will keep and maintain the Property free from all liens
arising by virtue of all persons supplying labor or materials performed thereon
or incorporated therein, notwithstanding by whom such labor or materials may
have been contracted, and if any liens in respect to any such labor or materials
are filed against the Property, Grantor shall cause the same to be released
completely of record either by payment and discharge or by the posting of
substitute collateral therefore in accordance with applicable laws within twenty
(20) days of the filing thereof, and Grantor will make all payments on all liens
permitted herein (if any), when due.
10. Assignment of Rents. Grantor hereby assigns unto Lender the rents, issues
and profits accrued and to accrue from all tenants of the Property or any part
thereof, during the term of this Deed of Trust, or any extensions thereof, it
being understood that as long as there is no event of default hereunder Grantor
shall have the privilege of collecting and receiving all rents, issue, and
profits (but no more than one (1) month in advance) accruing under leases or
contacts of tenancy for the Property or any part thereof. Upon the occurrence of
an event of default, Lender may immediately collect such rents, issues and
profits as they become due and apply the same, less the costs and expenses of
collection thereof, toward the payment of any of the Secured Indebtedness.
Grantor will not execute any assignment of the rents, issues and profits from
the Property or any part thereof unless such assignment shall provide that it is
subordinate to the assignment of rents set forth in this Deed of Trust and any
other assignments executed pursuant hereto or in conjunction herewith.
11. Notice of Adverse Claim of Lien. If Grantor shall receive any notice or
other instrument which might materially adversely affect the Property or the
lien of this Deed of Trust thereon, Grantor will furnish, within three (3) days
following such receipt, by certified mail, a copy of such notice or other
instrument to Lender. The notices referred to herein shall include, but not be
limited to, notices from any tenant or lessee claiming a default by Grantor
under any lease or occupancy agreement, any notice by any public authority
concerning any tax or special assessment, and any notice of any alleged
violation of any building, zoning, fire or other law or regulation affecting the
Property.
12. Remedies Cumulative; Forbearance by Lender/Trustee Not a Waiver. All
remedies available to Lender or the Trustee with
<PAGE>
respect to this Deed of Trust or under any instrument evidencing, governing, or
securing the Secured Indebtedness, including, but not limited to, any other
deeds conveying other property in trust to secure payment of the obligations
secured hereunder, or provided by law or in equity or by any statute, or
otherwise, shall be cumulative and may be pursued concurrently or successively.
Grantor, for itself and all who claim under it, waives to the extent that it
lawfully may, all right to have the Property marshaled upon any sale or
foreclosure hereunder. No delay or omission of Trustee or Lender to exercise any
right, power or remedy shall impair any such right, power or remedy, or shall be
construed to be a waiver of any default or any acquiescence therein. No delay or
omission on the part of Lender to exercise any option granted for acceleration
of the maturity of the Secured Indebtedness or for foreclosure following any
default or any other option granted to Lender hereunder in any one or more
instances, or tender to and/or acceptance by Lender of any partial payment on
account of Grantor's or Debtor's obligations shall constitute a waiver of any
such default or operate to rescind any such acceleration and each such option
shall remain continuously in full force and effect.
13. Covenants Running with the Land. All covenants hereof
shall run with and be binding on the land and improvements
conveyed hereby until this Deed of Trust shall be released of
record.
14. Hold Harmless. Grantor shall save Lender and Trustee harmless from all costs
and expenses, including reasonable attorneys' fees and costs incurred by reason
of any action, suit, proceeding, hearing, motion or application before any court
or administrative body in and to which Lender and/or Trustee may be or become a
party by reason of this Deed of Trust, including, but not limited to,
condemnation, bankruptcy, probate and administration proceedings, as well as any
of the foregoing wherein proof of claim is by law required to be filed or in
which it becomes necessary to defend or uphold the terms or priority of this
Deed of Trust, and all money paid or expended by Lender or Trustee in that
regard, together with interest thereon from date of such payment at the highest
rate of interest being charged on any Secured Indebtedness (but in no event
higher than the rate or rates permitted under applicable law), shall be
immediately and without notice due and payable by Grantor, shall become a part
of the Secured Indebtedness and shall be recoverable as such in all respects.
15. Trustee's Authority. Trustee or any person acting in its stead shall have,
at its discretion, authority to employ all proper agents and attorneys in the
execution of this Deed of Trust, and pay for such services rendered out of the
proceeds of the sale of the Property conveyed hereby, should any be realized;
and if no sale be made, then Grantor hereby undertakes and agrees to pay to
Trustee the cost of such services rendered. If from time to time more than one
Trustee or Substitute Trustee shall have been appointed hereunder, then any one
Trustee or Substitute Trustee may act for all such Trustees and/or Substitute
Trustee(s).
<PAGE>
16. Governing Law. This Deed of Trust, without regard for the place of contract,
advance of funds or payment, shall be governed, construed and enforced according
to the laws of the Commonwealth of Virginia, with reference to Articles 2 and 3,
Chapter Four, Title 55 of the Code of Virginia of 1950, as amended, and with
such further understandings in short form as provided therein, including the
following provisions: (a) Advertisement Required: Advertisement of the time,
place and terms of sale once a week for two weeks in a newspaper having general
circulation in the city or county where the Property or some part thereof is
located, after the giving of prior notice as prescribed by law.
(b) Exemptions waived.
(c) Subject to all upon default.
(d) Renewal, extensions or reinstatement permitted.
(e) Fire and extended coverage insurance required: $full replacement value.
(f) Substitution of Trustee permitted with or without cause.
(g) Any Trustee may act.
17. Severability of Provisions. In the event any one or more of the provisions
hereof or of any Note or Agreement shall for any reason be held to be invalid,
illegal, or unenforceable, in whole or in part or in any respect, or in the
event any one or more of the provisions hereof or of any Note or Agreement
operate or would prospectively operate to invalidate this Deed of Trust, then
and in any of those events, at the option of Lender, such provision or
provisions shall be severable and shall not affect any other provision hereof or
of the Note or Agreement shall remain operative and in full force and effect and
shall in no way be affected, prejudiced, or disturbed thereby.
18. Waiver of Notice of Future Advances and Consent to Extensions, Modifications
and Release. If Grantor (or any one or more of the parties constituting Grantor)
is not the Debtor, then Grantor expressly (a) waives notice of any and all loans
and/or advances made, from time to time during the continuance of this Deed of
Trust by the Lender to Debtor (or any one or more of the parties constituting
Debtor; (b) agrees that modifications of the terms of any Note or Agreement,
including without limitation, modifications extending the term for payment or
adjusting the interest rate applicable to any Secured Indebtedness, may be made
from time to time between Lender and Debtor without notice to or consent of
Grantor; (c) agrees that Lender, without notice to or further consent of
Grantor, may grant extension of time and other indulgences to and renew any of
the obligations of Debtor without regard to the number and length of such
extensions, renewals or other indulgences. Grantor further agrees that Lender
without notice to or further consent of Grantor, may release or discharge any
persons who are or may be liable for the payment of any Note or Agreement or
release or discharge any collateral for payment of the Secured Indebtedness and
that any such release or discharge shall not alter, modify, release or limit the
liability
<PAGE>
of Grantor (or any one or more of the parties constituting Grantor) or the
validity or the enforceability of this Deed of Trust; and (d) agrees that Lender
may exercise its rights under this Deed of Trust prior to taking any action
against the Debtor.
19. Time is of the Essence. Time shall be of the essence for each and every
provision of any Note, any Agreement, this Deed of Trust and all other
documents, agreements and contacts evidencing, securing, or governing the
obligations secured hereby.
20. References; Applicability. All references in the foregoing covenants to
Lender shall apply equally to any subsequent holder or assignee of any Note or
any Agreement.
21. Titles. The paragraph titles contained in this Deed of Trust are for
reference purposes only and shall not affect the meaning or interpretation of
this Deed of Trust.
22. Designations. In any designation hereunder, the use of one gender shall
include any other gender wherever same may be appropriate, and the plural shall
be substituted for the singular or the singular substituted for the plural in
any place herein in which the context may require such substitution.
23. Riders to this Deed of Trust. If a rider is executed by Grantor and recorded
together with this Deed of Trust, the covenants and agreements of the rider
shall be incorporated into and shall amend and supplement the covenants and
agreements of this Deed of Trust as if the riders were a part of this Deed of
Trust.
IN WITNESS WHEREOF, Grantor on the year and day first written above, has caused
this Deed of Trust to be signed, sealed and delivered.
DOUGHTIE'S FOODS, INC.
By: Marion S. Whitfield, Jr. (SEAL)
------------------------
(Signature)
Senior Vice President
[Acknowledgment for corporate Grantor]
Commonwealth of Virginia City of Norfolk, to wit:
[Illegible], a Notary Public in and for the aforesaid jurisdiction, do certify
that Marion S. Whitfield, Jr., whose name is signed to the Deed of Trust above,
bearing date on the 14th day of June, 1996, as Senior Vice Pres. of Doughtie's
Foods, Inc., a Virginia corporation, has acknowledged the same, before me in the
jurisdiction aforesaid. Given under my hand this 14th day of June, 1996.
<PAGE>
My commission expires: July 31, 1996 [Illegible] (SEAL)
-------------
(Signature)
Notary Public
<PAGE>
EXHIBIT A TO CREDIT LINE DEED OF TRUST DATED JUNE 14, 1996, BY
AND AMONG DOUGHTIE'S FOODS, INC., a Virginia corporation, as
Grantor, DAVID A. DURHAM and DAVID SINGLETON, as Trustees, and
CRESTAR BANK
PARCEL ONE:
THAT certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate in the City of Portsmouth, State of Virginia, and
is shown on a certain plat entitled: "Plat Showing Property To Be Conveyed To
Doughtie's Barbecue, Portsmouth, Virginia", dated December 11, 1962, made by
Ball-Hassell & Wilson, and bounded and described according to said plat as
follows:
BEGINNING at a point at the intersection of the north side of Wesley
Street and the west line of a right of way of Norfolk & Portsmouth Belt Line
Railroad, and running thence North 4 degrees 58' West along said right of way
585.00 feet to a point; thence South 85 degrees 02' West 242.56 feet to a point
at the intersection of the south side of Arlington Street and the east side of a
twelve foot (12) lane; thence South 4 degrees 58' East along said lane 585.00
feet to the north side of Wesley Street, and thence east along the north side of
Wesley Street, North 85 degrees (formerly erroneously designated as 58 degrees)
02' East 242.56 feet to the point of beginning, and containing 3.258 acres;
BEING the same property conveyed by Portsmouth Industrial Foundation,
Incorporated to Robert Realty Corporation by deed dated July 13, 1964, recorded
in the Office of the Clerk of the Circuit Court of Portsmouth, Virginia in Deed
Book 430, page 39; the said Robert Realty Corporation having merged into
Doughtie's Barbecue, Inc. on March 7, 1972, and the said Doughtie's Barbecue,
Inc. having merged into Doughtie's Foods, Inc. on March 7, 1972, as described in
a Certificate of the Clerk of the Virginia State Corporation Commission recorded
in the Office of the Clerk of the Circuit Court of Portsmouth, Virginia in Deed
Book 918, page 129.
PARCEL TWO:
All that certain piece or parcel of property, with the appurtenances
thereunto belonging, situate in the City of Portsmouth, Virginia, containing
approximately 4.36 acres, and bounded and described as follows:
Beginning at a point on the east side of Chautauqua Avenue 160 feet north
from the northeast intersection of Chautauqua Avenue and Adriatic (formerly
Arlington) Street, and from thence running N 4 degrees 58' W along Chautauqua
Avenue 349.65 feet; thence N 85 degrees 02' E 394.56 feet to the right-of-way of
the Norfolk and Portsmouth Belt Line Railroad; thence S 4 degrees 58' E along
said right-of-way 559.65 feet; thence S 85 degrees 02' W 242.56 feet to the
<PAGE>
eastern end of Adriatic Street; thence N 4 degrees 58' W along the eastern end
of Adriatic Street 50 feet; thence S 85 degrees 02' W along the northern side of
Adriatic Street 6 feet; thence N 4 degrees 58' W 160 feet; and thence S 85
degrees 02' W 146 feet to the point of beginning;
BEING the same property conveyed by Portsmouth Port and Industrial
Commission to Doughtie's Foods, Inc. by deed dated June 28, 1984, recorded in
the Office of the Clerk of the Circuit Court of Portsmouth, Virginia in Deed
Book 889, page 819.
PARCEL THREE:
All those ten certain lots of land, with the buildings and improvements
thereon, situate, in the City of Portsmouth, Virginia, and known and designated
as Lots Numbers 2279, 2280, 252, 253, 254, 255, 256, 257, 258, and 259 on the
plat of the Port Norfolk Land Company, recorded in the Clerk's Office of the
Circuit Court of the City of Chesapeake (formerly Norfolk County), Virginia, in
Map Book 4, pages 70 and 71; the said lots taken together being bounded and
described as follows:
Beginning at the southwest intersection of Virginia Avenue and Wesley
Street, and thence running southerly along the west side of Virginia Avenue 400
feet to a point 200 feet north of the north side of Detroit Street; thence
westerly and at right angles to Virginia Avenue 140 feet to an alley; thence
northerly along said alley 400 feet to Wesley Street; and thence easterly along
the south side of Wesley Street 140 feet to the point of beginning.
Being a portion of the same property acquired by Doughtie's Foods, Inc.,
a Virginia corporation, by deed from Raymond B. Smith and Ann T. Smith, dated
July 14, 1980, and recorded in the Clerk's Office of the Circuit Court of the
City of Portsmouth, Virginia, in Deed Book 786, at page 321.
PARCEL FOUR:
All that certain piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the City of Portsmouth,
Virginia, and being more particularly bounded and described as follows:
A parcel of land 35 feet in width and 400 feet in length lying in front
and east of the aforesaid lots [Parcel Three], being the western one-half of
Virginia Avenue, as shown on the plat of the Port Norfolk Land Company, recorded
in the Clerk's Office of the Circuit Court of the City of Chesapeake (formerly
Norfolk County), Virginia, in Map Book 4, pages 70 and 71; said portion of
Virginia Avenue having been closed and vacated as a public street by an
ordinance adopted by the City Council of the City of Portsmouth on November 23,
1965, a copy of which ordinance is recorded in the Clerk's Office of the Circuit
Court of the City of Portsmouth, in Deed Book 574, at page 263.
<PAGE>
IT BEING the same property conveyed to DOUGHTIE'S FOODS
INC. by deed from W. Eugene White, General Receiver for The Port
Norfolk Land Co., dated May 27, 1981, recorded in Deed Book 807,
page 686; and
IT BEING part of the same property conveyed to DOUGHTIE'S FOODS INC. by
deed from Raymond B. Smith and Ann T. Smith, his wife, dated July 14, 1980,
recorded in Deed Book 786, page 321.
EXHIBIT (c)(6)
Indemnity Deed Of Trust
This Indemnity Deed of Trust is made and entered into this 12th day of
June, 1996, by and among DUTTERER'S OF MANCHESTER CORPORATION, a Maryland
corporation (herein "Grantor"); DAVID A. DURHAM (a resident of Virginia Beach,
Virginia) and DAVID SINGLETON (a resident of Virginia Beach, Virginia) (either
of whom may act and who are referred to herein as "Trustee"); and CRESTAR BANK
(herein "Lender").
RECITALS
The Lender has made loans to Doughtie's Foods, Inc., a Virginia
corporation (herein "Debtor"), in the aggregate principal sum of Nine Million
Two Hundred and Fifty Thousand and no/100 Dollars ($9,250,000.00), as evidenced
by the Note, as defined below.
The Grantor has guaranteed the "Secured Indebtedness" (as defined below)
and has agreed to secure the Secured Indebtedness of the Debtor, including the
Note, by conveying, in trust, the hereinafter described property of the Grantor
to the Trustee; provided, however, that the total outstanding principal amount
of the Secured Indebtedness secured hereby shall not exceed $1,200,000.00.
THE OBLIGATIONS OF THE GRANTOR HEREUNDER REPRESENT A FUTURE CONTINGENT
LIABILITY AND NOT A PRESENT LIABILITY.
For and in consideration of the indebtedness herein recited and the trust
herein created, Grantor hereby grants, bargains, mortgages, assigns, sells and
conveys unto Trustee, in trust with power of sale and with general warranty of
title, all of Grantor's present and future right title and interest in and to
certain real estate located in the State of Maryland, and more particularly
described on Exhibit A, together with all easements and appurtenances thereto,
all of the rights of Grantor in and to the streets, alleys, and rights-of-way
appurtenant to and adjoining or adjacent to the land hereinabove described; and
together with any and all right, title and interest of Grantor in and to the
improvements which shall include any and all buildings and structures now or at
any time hereafter erected, constructed or situated upon the premises or any
part thereof, together with all fixtures, machinery, apparatus, fittings and
equipment now or hereafter located in or upon the premises and now owned or
which may hereafter be owned by Grantor, in and upon said land and premises, or
which may hereafter be placed thereon, including but
<PAGE>
not limited to, any equity which may be acquired by Grantor in such property as
a result of the making of instalment payments on account of the purchase
thereof, including but not limited to elevators, escalators, boilers, engines,
heating, ventilating and air conditioning systems, sprinkler or fire
extinguishing systems, plumbing, partitions, wiring, storm doors and windows,
wire screens, awnings, carpeting, drapes, window shades, switchboards,
communications apparatus, floor tiling, linoleum, attached cabinets, wall panels
and decorations attached to walls and ceilings, gas and electrical fixtures,
chattels, attached appliances, and material used and to be used in the buildings
and structures. Reference in this Deed of Trust to "Property" shall be deemed to
include, in addition to the described land, improvements now or hereafter
located thereon and rights appurtenant thereto, all the equipment, furnishings,
fixtures, goods and chattels, above-mentioned and conveyed, all of which are
deemed part and parcel of the real estate and appropriated to the use of the
real estate and, whether affixed or not shall for the purposes of this Deed of
Trust be deemed conclusively to be real estate and conveyed hereby, together
with the proceeds of all the foregoing.
TO HAVE AND TO HOLD the Property to the Trustee, and the Trustee's
successors and assigns in fee simple forever.
In Trust (a) to secure the prompt payment of Secured Indebtedness (as
hereinafter defined), payable to Lender, and (b) to secure performance and
observance of the terms and conditions of this Deed of Trust, any Note (as
hereinafter defined) or any Agreement (as hereinafter defined); provided,
however, that if all of the Secured Indebtedness is paid and all of the terms
and conditions under this Deed of Trust, the Note, any Agreement are performed,
completed and satisfied, then all interests of the Trustee in the Property shall
cease and be void and the Trustee shall release and reconvey the Property to the
Grantor and terminate this Deed of Trust at the sole cost and expense of the
Grantor.
Lender has extended credit, or may in the future extend credit to the
Debtor. The term "Secured Indebtedness" as used herein shall mean all
indebtedness of Debtor to Lender, whether now existing or hereinafter arising,
direct or indirect, fixed or contingent, due or to become due, joint or several,
for whatever purpose whether or not related to the Note or Agreement,
irrespective of how such indebtedness is evidenced, whether by notes, bonds,
letters of credit, advances, overdrafts, accounting entries or otherwise, or by
the endorsement or guaranty by Debtor of the obligations of another; provided,
however, that the aggregate outstanding amount of the Secured Indebtedness shall
not at any one time exceed the total outstanding principal amount stated above,
plus interest thereon (at the rate or rates set forth in the Note or Agreement
or other evidences of such indebtedness), fees due with respect to any such
indebtedness, and, to the extent permitted by applicable law, all costs of
collection with respect thereto, including without limitation,
<PAGE>
any costs and expenses incurred by Trustee or Lender in connection with the
enforcement of this Deed of Trust or as otherwise provided herein. Secured
Indebtedness shall include, but not limited to, the principal of, interest on
and all other amounts due under or in connection with a note from Debtor to
Lender dated June 14, 1996, in the amount of $1,750,000, and a note from Debtor
to Lender dated June 14, 1996, in the amount of $7,500,000.
As used herein the term "Note" shall mean each note from Debtor to Lender
and specifically referred to above and any and all other notes or obligations
executed and delivered by Debtor to Lender, whether joint or several or joint
and several to repay the Secured Indebtedness or any part thereof and any
renewals, amendments, extensions, modifications or replacements thereof. The
term "Agreement" used herein shall mean any and each agreement between Debtor
and Lender specifically referred to above and any and all other agreements of
whatever nature executed and delivered by Debtor to Lender in connection with
any Note or the Secured Indebtedness or any part thereof.
It is understood and agreed that the Secured Indebtedness will be
advanced from time to time by Lender in accordance with the provisions of any
Note or any Agreement, each of which is incorporated herein and made a part
hereof by reference to the same extent as if fully set forth herein, and it is
further understood and agreed that, from time to time repayments on account of
the Secured Indebtedness may be made and Lender may thereafter make additional
advances including re-advances of sums previously repaid, as provided in any
Note or any Agreement, it being understood and agreed that each and every
advance made at the present or hereafter to Debtor on behalf of Debtor or
Grantor shall be deemed to be an advance made on account of the Secured
Indebtedness and secured hereby unless otherwise specifically provided in the
Note, Agreement or other documents evidencing such advance.
Grantor represents, warrants, covenants and agrees as follows:
A. Payment and Performance. Grantor shall perform its obligations under
and comply with the provisions of this Deed of Trust and any Note and any
Agreement to which it is a party.
B. Warranty of Title; Payment of Taxes and Assessments; Prior Deeds of
Trust or Mortgages. Grantor is lawfully seized of the Property in fee simple
absolute or the leasehold estate if this Deed of Trust is on a leasehold and has
the right to convey the same. The Trustee hereunder shall quietly enjoy the
property. At the time of recordation, this Deed of Trust shall be a first
priority lien and encumbrance on the Property. Grantor will execute such further
assurances as Trustee or Lender deems necessary or desirable in order to more
fully vest title in Trustee. So long as any part of the Secured Indebtedness
shall be unpaid, Grantor will protect the title and possession of the
<PAGE>
Property and will pay when the same become due all taxes and assessments now
existing or hereafter levied or assessed upon the Property or the interest
therein created by this Deed of Trust, or which by the laws of the jurisdiction
where the Property is located may be levied or assessed against Trustee or its
successors, or Lender, for or on account of the Secured Indebtedness upon this
Deed of Trust or the interest in the Property thereby created, together with all
sums now or hereafter owing on any senior deeds of trust or mortgages. Grantor
will provide Lender with evidence of any such payments which from time to time
may be required by Lender. Grantor will, at its expense, take such other action
and execute such other instruments as may be necessary or desirable in the sole
discretion of Lender to preserve and protect the lien and priority of this Deed
of Trust and all other instruments evidencing or securing payment of the sums
secured hereby.
C. Preservation and Maintenance of Property; Environmental
Requirements. No building or other improvement shall be substantially altered,
removed a demolished, except for changes which enhance its value, nor shall any
fixtures or attached appliances on, in or about said buildings or improvements
be severed, removed, sold or mortgaged without the prior written consent of
Lender (provided, however, that minor non-structural changes costing not more
than $10,000 may be undertaken without such consent, and that replacement of
such appliances or fixtures of equivalent value and function may be undertaken
without such consent). Grantor will not commit or suffer any waste, nor permit
or suffer any impairment or deterioration of the Property, or any part thereof.
Grantor will at all times keep and maintain the Property and every part thereof
in good condition, fit and proper for the respective purposes for which they
were originally erected or installed. Grantor will comply in all material
respects with all statutes, orders, requirements or degrees relating to the
Property, whether under federal, state, county or municipal authority, and will
observe and comply in all material respects with all conditions and requirements
necessary to preserve and extend any and all rights, licenses, permits
(including, but not limited to, zoning variances, special exceptions and
nonconforming uses), privileges, franchises and concessions which are applicable
to the Property or which have been granted to or contracted for by Grantor in
connection with any existing or presently contemplated use of Property. Grantor
will permit Lender or its agents to enter upon and inspect the Property at all
reasonable times. Grantor represents and warrants that the Property never has
been, and never will be so long as this Deed of Trust remains in effect, used
for the generation, collection, manufacture, storage, treatment, disposal,
release or threatened release of any hazardous substance, as those terms are
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), Superfund
Amendments and Reauthorization Act ("SARA"), applicable state laws, or
regulations adopted pursuant to any of the foregoing. Grantor agrees to comply
with any federal, state or local law,
<PAGE>
statute, ordinance or regulation, court or administrative order or decree or
private agreement regarding materials which require special handling in
collection, storage, treatment or disposal because of their impact on the
environment ("Environmental Requirements"). Grantor agrees to indemnify and hold
Lender harmless against any and all claims and losses and expenses resulting
from a breach of this paragraph and Grantor will pay or reimburse Lender for all
costs and expenses for expert opinions, inspections or investigations required
or requested by Lender which, in Lender's sole discretion, are necessary to
ensure compliance with this paragraph. This obligation to indemnify shall
survive the payment of the Secured Indebtedness and the release of this Deed of
Trust.
D. Insurance. Grantor will keep the Property and the improvements
thereon insured against loss by fire, casualty and other hazard (including flood
damage, if the improvements are located in a special flood hazard area) as may
from time to time be required by Lender for the benefit of Lender. If permitted
by applicable law, Grantor will maintain such public liability and indemnity
insurance as may from time to time be required by Lender. To the extent
permitted by applicable law, all such insurance shall be written in forms,
amounts and by companies satisfactory to Lender and losses thereunder shall be
payable to Lender pursuant to a standard noncontributing mortgagee's clause.
Certificates or other proof of insurance shall be delivered to Lender and
Grantor shall provide Lender with such evidence of payment of premiums due on
account of such insurance as from time to time may be required by Lender. All
such policies shall provide for at least thirty (30) days' prior written notice
to Lender of any cancellation or modification thereof, including without
limitation, cancellation for nonpayment of premium. Grantor shall give Lender
prompt notice of any loss covered by such insurance and Lender shall have the
right to join Grantor in adjusting any loss. Grantor hereby authorizes Lender,
at Lender's option to collect, adjust and compromise any losses under any such
insurance policies herein referred to. Any funds received as payment for any
loss under any such insurance shall be paid over to Lender and shall be applied,
after deducting the costs of collection, at the option of Lender, either to the
prepayment of the Secured Indebtedness or to the reimbursement of Grantor for
expenses actually incurred by Grantor in the restoration or replacement of
Property, or any part thereof. In the event of foreclosure of this Deed of Trust
or other transfer of title to the Property conveyed hereby, all right title and
interest of Grantor, in and to any insurance policies then in force, shall pass
to the purchaser or grantee, which may be, but shall not be limited to, Lender.
E. Lender's Right to Remedy Defaults. In the event Grantor shall
neglect or refuse (a) to keep the Property in good repair and condition; (b) to
pay promptly when due all taxes and assessments as aforesaid; (c) to remove any
statutory liens on the Property; (d) to keep the buildings, improvements and
chattels insured as aforesaid; (e) to deliver certificates or other proof of the
policies or policy of
<PAGE>
insurance or the renewals thereof to Lender as aforesaid; (f) or if all amounts
owed under any Note, Agreement or other obligation secured by this Deed of Trust
or any other deed of trust or other lien on the Property are not paid promptly
when due or all obligations, covenants, conditions and agreements under such
deed of trust or other lien are not observed, then Lender may, if it shall so
elect in addition to any other rights it may have under this Deed of Trust, take
possession of the Property, make such repairs, pay such taxes and assessments
with the accrued penalties and/or interest, pay any necessary expenses, redeem
the Property which may have been sold or forfeited for taxes or assessments
thereon, purchase any tax title thereon, remove any statutory liens or
encumbrances and prosecute or defend any suit in relation thereto, or insure and
keep insured said buildings, improvements and chattels as provided herein, or
make any payments as may be necessary to cure any default. Any sums including,
without limitation, costs, expenses and attorneys' fees which may be expended by
Lender or Trustee in so doing or otherwise for the protection or preservation of
the Property hereby or the lien of this Deed of Trust thereon, shall bear
interest from the dates of such payments at the highest rate of interest being
paid on any Secured Indebtedness (but in no event higher than the rate or rates
permitted under applicable law) shall be paid by Grantor to Lender upon demand,
shall become a part of the Secured Indebtedness and shall be recoverable as such
in all respects. Any such liens, claims, taxes, expenses, assessments or tax
titles so purchased, paid or redeemed by Lender shall, as between the parties
hereto and their successors in interest be deemed valid, so that in no event
shall the necessity or validity of any such payment be disputed.
F. Default, Acceleration of Payments; Trustee's Sale or Lease;
Advertisement Required. The occurrence of an "Event of Default" as defined in
the Amended and Restated Credit Agreement of even date herewith between the
Debtor and the Lender shall constitute an event of default under this Deed of
Trust. Upon the occurrence of any event of default regardless of whether Lender
shall have cured such event of default on behalf of Grantor in accordance with
the terms of this Deed of Trust, Lender may elect without notice, to cause all
the Secured Indebtedness to be at once due and payable in full, and the Trustee,
or its successor in trust, as soon as reasonably practicable after requested to
do so by Lender (i) may make any repairs or replacements to the Property deemed
necessary by Trustee or Lender, and/or elect to institute foreclosure
proceedings, and the Grantor hereby expressly assents to the passage of a decree
for the sale of the Property, and any such sale of the Property, whether by way
of the assent to decree or power of sale, and whether (in the Trustee's
discretion) of the whole or any part of the Property, shall be made in
accordance with the provisions of Section 7-105, Real Property Article,
Annotated Code of Maryland, as amended, and Rules W70 and W77 of the Maryland
Rules of Procedure, as amended, or other applicable general or local laws of the
State of Maryland or judicial rules of procedure relating to the foreclosure of
deeds of trust, with
<PAGE>
the terms of the sale being cash upon settlement of the sale or such other and
additional terms as the Trustee deems necessary, proper or convenient, except as
specifically limited by applicable law or court rule; or (ii) may lease the
Property either pending sale or until the amount of the Secured Indebtedness is
paid and deduct from rents received all costs of collection, repair, replacement
and administration and apply the net proceeds to the Secured Indebtedness. The
Trustee is hereby empowered to bring in its name, or in the name of the Grantor,
any suit or action it deems advisable for the enforcement of the provisions of
this clause, but the Trustee and the Lender shall be in no way personally liable
under any of the provisions of such lease or of this clause, and shall not be
personally liable to any person by virtue of their possession of the Property or
by virtue of their acting under any provisions of this clause, except to the
extent of accounting for rents actually received by them.
The proceeds of any sale of the Property by Trustee shall be applied by
Trustee: First, to pay all proper costs and charges, including but not limited
to court costs, advertising expenses, auctioneers' allowances, the expenses, if
any, required to correct any irregularity in the title, premium for Trustee's
bond, auditors' fees, attorneys' fees, cost of repairs or replacements, and all
other expenses of sale incurred in and about the protection and execution of
this Deed of Trust and all moneys advanced for taxes, assessments, insurance,
and with interest thereon at the highest rate of interest being paid on any
Secured Indebtedness (but in no event higher than the rate or rates permitted
under applicable law), and all taxes and assessments due upon said land and
premises at time of sale, and to retain as compensation a trustee's commission
of five percent (5%) on the amount of said sale or sales unless a larger
percentage or amount is agreed upon in writing by Lender, but in no event more
than the commission allowed to the for making sales of property by virtue of a
decree of a court of equity in the State of Maryland, and attorneys' fees and
expenses of any litigation which may arise on account of the execution and
enforcement of this Deed of Trust or any Note or Agreement; Second, to pay and
satisfy all Secured Indebtedness, interest and all other charges hereby secured
then remaining unpaid, and interest thereon to date of payment, whether the same
shall be due or not, it being understood and agreed by Grantor that the amounts
due under any Note or Agreement shall, upon such sale being made before the
maturity thereof, be and become immediately due and payable at the election of
Lender, and Third, to pay the remainder of said proceeds, if any, to Grantor,
its heirs, personal representatives, successors or assigns or any other person
lawfully entitled thereto upon the delivery and surrender to the purchaser, his,
her or their heirs and assigns, of possession of the Property and premises, less
costs and expenses of obtaining possession. If after so applying such proceeds,
any portion of the Secured Indebtedness shall remain unpaid, such balances shall
continue to be due and payable, and shall be subject to collection by Lender by
suit or otherwise. In the
<PAGE>
event the Secured Indebtedness shall be paid after the filing of a foreclosure
proceeding with the appropriate court, but before sale of the Property, the
Grantor shall also be required to pay all of the expenses of any advertisement
or notice, all court costs, and all other expenses incident to or resulting from
the foreclosure proceedings under this Deed of Trust and a commission on the
total amount of the Secured Indebtedness owed at such time, both principal and
interest, remaining unpaid, equal to one-half (1/2) of the percentage allowed as
commission to trustees making a sale under a decree of a court of equity in
Maryland and a counsel fee of Five Thousand Dollars ($5,000.00), but if legal
services are rendered to the Trustee or the Lender in connection with any
contested matter with respect to the foreclosure proceeding, the status or
priority of the lien and security interest of this Deed of Trust or otherwise,
then such reasonable and necessary counsel fees and expenses as the Trustee or
the Lender may have incurred, even if greater than the aforementioned amount;
provided, however, that the sale may be proceeded with unless, prior to the date
on which the sale is scheduled, payment is made by the Grantor of the Secured
Indebtedness then due (including payment of all costs, expenses, commissions and
fees, as provided herein).
Upon any sale made under or by virtue of this Deed of Trust, whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or a judgment or decree of foreclosure and sale, the Lender may bid
for and acquire the Property or any part thereof and, in lieu of paying cash
therefor may make settlement for the purchase price by crediting the Secured
Indebtedness against the net sales price after deducting therefrom the expenses
and costs of the sale and any other sums which the Lender is authorized to
deduct under this Deed of Trust.
In the event of a sale of the Property under either the power of sale
or assent to decree, such sale may be made, at the option of the Lender subject
to one or more of the tenancies entered into subsequent to the recording of this
Deed of Trust, in accordance with the provisions of Section 7-105(f)(2), Real
Property Article, Annotated Code of Maryland, as amended.
The Trustee in any foreclosure proceedings under the provisions of this
Deed of Trust shall be entitled, without regard to the adequacy or inadequacy of
any security for the Secured Indebtedness, to the appointment of a receiver to
collect the rents and account therefor as the court may direct and to take
possession of the Property and operate the same.
In addition, in the event of default hereunder, Lender shall have all
rights and remedies permitted by law and by any document evidencing, governing,
or securing the obligations secured hereby.
<PAGE>
G. Substitute Trustee. Lender has the irrevocable right and power to
substitute without cause or notice a trustee or trustees in the place of any
Trustee named under this Deed of Trust by filing for record among the land
records where this Deed of Trust is recorded a deed of appointment, and upon the
filing of a deed of appointment all of the title and estate, powers, rights, and
duties of the Trustee or the Trustees thus superseded shall terminate and shall
be vested in the successor trustee or trustees. Such power of appointment and
substitution may be exercised at any time hereafter and as many times as Lender,
its successors or assigns, may desire. The Grantor, the Lender and the Trustee,
their substitutes and successors, expressly waive notice of the exercise of this
power, the giving of bond by any Trustee, and any requirement for application to
any court for removal, substitution or appointment of a Trustee hereunder. In
addition, the act of any one (1) Trustee, whether such Trustee is a sole acting
Trustee or whether there is more than one (1) acting Trustee, shall be
sufficient and effective for all purposes set forth herein and any person may
rely upon any document or instrument executed and delivered by one (1) Trustee
to the same extent as though the document had been executed by all of the
Trustees. Nothing herein contained shall deprive Lender of its right to apply
for and receive any relief regarding the Trustee hereunder which is now, or
which may hereafter be, provided for by the internal laws of the jurisdiction
where the Property is located or applicable federal law.
H. Condemnation. Grantor hereby irrevocably grants, assigns, transfers
and sets over unto Lender all right, title and interest of Grantor in and to any
award or payment made (not to exceed the outstanding Secured Indebtedness
including, without limitation, accrued interest, and costs, expenses, reasonable
attorneys' fees, and disbursements incurred by Lender in connection with
collection of such award and payment) in respect of (a) any taking of the
Property or any part thereof as a result of, or by agreement in anticipation or
in lieu of, any exercise of the power of eminent domain or condemnation; and (b)
any such taking of any appurtenances to the Property; and (c) any damage to the
Property or any part thereof due to governmental action affecting, but not
resulting in a taking of, the Property, including, by way of example and not by
way of limitation, the changing of the grade of a street adjacent or proximate
to the Property. Grantor agrees to promptly notify Lender of the commencement of
any condemnation or eminent domain proceeding. Grantor further agrees, upon
request, to make, execute and delivery any assignments or other instruments
necessary for the purpose of assigning or transferring any such award or awards
to Lender free and clear of any encumbrances whatsoever. The excess amount of
such award over and above sums due Lender on account of the Secured
Indebtedness, interest and other charges, shall be paid to Grantor, its
successors and assigns.
<PAGE>
I. Restrictions on Transfer of Property; No Secondary Financing;
Mechanics' Liens.
NOTICE - THE DEBT SECURED HEREBY IS SUBJECT TO CALL IN FULL OR THE TERMS THEREOF
BEING MODIFIED IN THE EVENT OF SALE OR CONVEYANCE OF THE PROPERTY.
(1) If all or any part of the Property is sold, transferred, conveyed or
encumbered without Lender's prior written consent, Lender may, at its option,
require immediate payment in full of all sums secured by this Deed of Trust and
exercise all remedies provided in this Deed of Trust in the event of default.
However, this option shall not be exercised by Lender if exercise is prohibited
by federal law as of the date of this Deed of Trust. Lender reserves the
absolute option and right, if permitted by applicable law, among other things,
to: require the agreement by Grantor and Grantor's transferee to any terms and
conditions that Lender may require upon transfer, increase the rate of interest
upon transfer, and charge an assumption fee.
(2) To the extent permitted by applicable law, Grantor shall not
voluntarily or otherwise permit to be created or filed against the Property,
without the prior written consent of Lender in each instance, any other deed of
trust or mortgage or other lien or liens inferior or superior to the lien of
this Deed of Trust.
(3) Grantor will keep and maintain the Property free from all liens
arising by virtue of all persons supplying labor or materials performed thereon
or incorporated therein, notwithstanding by whom such labor or materials may
have been contracted, and if any liens in respect to any such labor or materials
are filed against the Property, Grantor shall cause the same to be released
completely of record either by payment and discharge or by the posting of
substitute collateral therefore in accordance with applicable laws within twenty
(20) days of the filing thereof, and Grantor will make all payments on all liens
permitted herein (if any), when due.
J. Assignment of Rents. Grantor hereby assigns unto Lender or its
successors, the rents, issues and profits accrued and to accrue from all tenants
of the Property or any part thereof during the term of this Deed of Trust, or
any extensions thereof, it being understood that as long as there is no event of
default hereunder Grantor shall have the privilege of collecting and receiving
all rents, issue, and profits (but no more than one (1) month in advance)
accruing under leases or contracts of tenancy for the Property or any part
thereof. Upon the occurrence of an event of default, Lender may immediately
collect such rents, issues and profits as they become due and apply the same,
less the costs and expenses of collection thereof, toward the payment of any of
the Secured Indebtedness. Grantor will not execute any assignment of the rents
issues and profits from the Property or any part thereof unless such assignment
shall provide that it is subordinate to the assignment of rents set forth in
this Deed of Trust and any other assignments executed pursuant hereto or in
conjunction herewith.
<PAGE>
K. Notice of Adverse Claim of Lien. If Grantor shall receive any notice
or other instrument which might materially adversely affect the Property or the
lien of this Deed of Trust thereon, Grantor will furnish, within three (3) days
following such receipt, by certified mail, a copy of such notice or other
instrument to Lender. The notices referred to herein shall include, but not be
limited to, notices from any tenant or lessee claiming a default by Grantor
under any lease or occupancy agreement; any notice by any public authority
concerning any tax or special assessment; and any notice of any alleged
violation of any building, zoning, fire or other law or regulation affecting the
Property.
L. Remedies Cumulative; Forbearance by Lender/Trustee Not a Waiver. All
remedies available to Lender or the Trustee with respect to this Deed of Trust
or under any instrument evidencing, governing, or securing the Secured
Indebtedness, including, but not limited to, any other deeds conveying other
property in trust to secure payment of the obligations secured hereunder, or
provided by law or in equity or by any statute, otherwise, shall be cumulative
and may be pursued concurrently or successively. Grantor, for itself and all who
claim under it, waives to the extent that it lawfully may, all right to have the
Property marshalled upon any sale or foreclosure hereunder. No delay or omission
of Trustee or Lender to exercise any right, power or remedy shall impair any
such right, power or remedy,, or shall be construed to be a waiver of any
default or any acquiescence therein. No delay or omission on the part of Lender
to exercise any option granted for acceleration of the maturity of the Secured
Indebtedness or for foreclosure following any default or any other option
granted to Lender hereunder in any one or more instances, or tender to and/or
acceptance by Lender of any partial payment on account of Grantor's or Debtor's
obligations shall constitute a waiver of any such default or operate to rescind
any such acceleration and each such option shall remain continuously in full
force and effect.
M. Covenants Running with the Land. All covenants hereof shall run with
and be binding on the land and improvements conveyed hereby until this Deed of
Trust shall be released of record.
N. Hold Harmless. Grantor shall save Lender and Trustee harmless from
all costs and expenses, including reasonable attorneys' fees and costs incurred
by reason of any action, suit, proceeding, hearing, motion or application before
any court or administrative body in and to which Lender and/or Trustee may be or
become party by reason of this Deed of Trust, including but not limited to,
condemnation, bankruptcy, probate and administration proceedings, as well as any
of the foregoing wherein proof of claim is by law required to be filed or in
which it becomes necessary to defend or uphold the terms or priority of this
Deed of Trust, and all money paid or expended by Lender or Trustee in that
regard, shall be immediately and without notice due and payable by Grantor and
shall become a part of the Secured Indebtedness and shall bear interest from the
date of payment at the highest rate of interest being charged on any Secured
Indebtedness but in no event higher than the rate or rates permitted by
applicable law.
<PAGE>
O. Trustee's Authority. Trustee or any person acting in its stead shall
have, at its discretion, authority to employ all proper agents and attorneys in
the execution of this Deed of Trust and pay for such services rendered out of
the proceeds of the sale of the Property conveyed hereby, should any be
realized; and if no sale be made, then Grantor hereby undertakes and agrees to
pay to Trustee the cost of such services rendered. If from time to time more
than one Trustee or Substitute Trustee shall have been appointed hereunder, then
any one Trustee or Substitute Trustee may act for all such Trustees and/or
Substitute Trustee(s).
P. Governing Law. This Deed of Trust, without regard for the place of
contact, advance of funds or payment, shall be governed, construed and enforced
according to the laws of the jurisdiction in which the Property is located.
Q. Severability of Provisions. In the event any one or more of the
provisions hereof or of any Note or Agreement shall for any reason be held to be
invalid, illegal, or unenforceable, in whole or in part or in any respect, or in
the event any one or more of the provisions hereof or of any Note or Agreement
operate or would prospectively operate to invalidate this Deed of Trust, then
and in any of those events, at the option of Lender, such provision or
provisions shall be severable and shall not affect any other provision hereof or
of such Note or Agreement or the validity of Grantor's or Debtor's other
obligations and the remaining provisions hereof or of the Note or Agreement
shall remain operative and in full force and effect and shall in no way be
affected, prejudiced, or disturbed thereby.
R. Waiver of Notice of Future Advances and Consent to Extensions,
Modifications and Release. If Grantor (or any one or more of the parties
constituting Grantor) is not the Debtor, then Grantor expressly (a) waives
notice of any and all loans and/or advances made from time to time during the
continuance of this Deed of Trust by the Lender to Debtor (or any one or more of
the parties constituting Debtor); (b) agrees that modifications of the terms of
any Note or Agreement, including without limitation, modifications extending the
term for payment or adjusting the interest rate applicable to any Secured
Indebtedness, may be made from time to time between Lender and Debtor without
notice to or consent of Grantor (c) agrees that Lender, without notice to or
further consent of Grantor, may grant extension of time and other indulgences to
and renew any of the obligations of Debtor without regard to the number and
length of such extensions, renewals or other indulgences. Grantor further agrees
that Lender without notice to or further consent of Grantor, may release or
discharge any persons who are or may be liable for the payment of any Note or
Agreement or release or discharge any collateral for payment
<PAGE>
of the Secured Indebtedness and that any such release or discharge shall not
alter, modify, release or limit the liability of Grantor (or any one or more of
the parties constituting Grantor) or the validity or the enforceability of this
Deed of Trust, and (d) agrees that Lender may exercise its rights under this
Deed of Trust prior to taking any action against the Debtor.
S. Time is of the Essence. Time shall be of the essence for each and
every provision of any Note, any Agreement, this Deed of Trust and all other
documents, agreements and contracts evidencing, securing, or governing the
obligations secured hereby.
T. References; Applicability. All references in the foregoing covenants
to Lender shall apply equally to any subsequent holder or assignee of any Note
or any Agreement.
U. Titles. The paragraph titles contained in this Deed of Trust are for
reference purposes only and shall not affect the meaning or interpretation of
this Deed of Trust.
V. Designations. In any designation hereunder, the use of one gender
shall include any other gender wherever same may be appropriate, and the plural
shall be substituted for the singular or the singular substituted for the plural
in any place herein in which the context may require such substitution.
W. Riders to this Deed of Trust. If a rider is executed by Grantor and
recorded together with this Deed of Trust, the covenants and agreements of such
rider shall be incorporated into and shall amend and supplement the covenants
and agreements of this Deed of Trust as if the rider is a part of this Deed of
Trust. [] If checked, a Condominium Rider is attached to this Deed of Trust.
IN WITNESS WHEREOF, Grantor on the year and day first written above,
has caused this Deed of Trust to be signed, sealed and delivered.
DUTTERER'S OF MANCHESTER CORPORATION
By: Mary Beth Balog
-------------------
(Signature)
Secretary/Treasurer
State of Maryland, To Wit: City/County of Baltimore, I, Susan M.
Ruppert, a Notary Public in and for the aforesaid jurisdiction, do hereby
certify that Mary Beth Balog, who is personally well known to me as the
Secty/Treasurer of Dutterer's of Manchester Corporation, a Maryland corporation,
named in the foregoing Deed of Trust
<PAGE>
bearing date as of the 12 day of June, 1996, and hereunto annexed, personally
appeared before me in said jurisdiction, and as Secty/Treasurer of Dutterer's of
Manchester Corporation, a Maryland corporation, as aforesaid, acknowledged the
same to be the act and deed of said corporation.
Given under my hand and seal this 12 day of June, 1996.
My Commission Expires: August 1, 1998 Susan M. Ruppert
------------------
(Signature)
Notary Public
(Notary Seal)
<PAGE>
EXHIBIT A
All that certain land situate in Town of Manchester, County of Carroll, State of
Maryland, and more particularly described as follows:
PARCEL 1 (ORIGINALLY DESCRIBED IN DEED RECORDED IN LIBER 522, AT FOLIO 568, AS
THE FOURTH PARCEL.):
TRACT ONE (1):
All that lot or parcel of land containing 18 square perches of land, more or
less, being all and the same land secondly described in an Assignment from
George W. Steger and wife, to Clarence F. Renoll and wife, dated April 27, 1945,
and recorded in Liber E.A.S. No. 186, Folio 325, the reversion in which was
conveyed unto Clarence R. Renoll and wife, by Deed of Harold C. Frankforter,
unmarried, dated April 22, 1953, and recorded among said land records in Liber
E.A.S. No. 219, Folio 240.
TRACT TWO (2):
All that parcel of land containing 2 acres, 1 rood and 7 perches of land, more
or less, being all and the same land thirdly described in an Assignment from
George W. Steger and wife, to Clarence F. Renoll and wife, dated April 27, 1945,
and recorded in Liber E.A.S. No. 186, Folio 325.
SAVING AND EXCEPTING therefrom, all that piece of the above parcel conveyed unto
John A. Myers and wife, by Clarence F. Renoll and wife, in a Deed of Exchange,
dated May 15, 1947 and recorded among the said land records in Liber E.A.S. No.
194, Folio 433, and granting and conveying unto the Grantors therein said piece
of parcel on the north side of the line described therein, conveyed by the said
John A. Myers and wife, to the said Clarence F. Renoll and wife.
(THE ABOVE TWO PARCELS OF LAND BEING INTENDED TO BE IN THE REAR OF NOS. 115 AND
117 OF S. MAIN STREET, MANCHESTER.)
PARCEL 2 (ORIGINALLY DESCRIBED IN DEED RECORDED IN LIBER 522, AT FOLIO 568 AS
THE FIFTH PARCEL.):
All that lot or parcel containing 1 acre 1 rood and 14 square perches of land,
more or less, with an outlet along the south 48 half degrees west line to an
alley leading to the original Church Street; and being all and the same land
that said granted and assigned by Harvey H. Nott and wife, to Charles W.
Schuckle, by deed, dated April 22, 1955 and recorded among the land records of
Carroll County in Liber E.A.S. No. 245, folio 66.
PARCEL THREE (ORIGINALLY DESCRIBED IN DEED RECORDED IN LIBER 522,
<PAGE>
AT FOLIO 568 AS PARCEL SEVEN.):
All that tract or parcel of land situate near the Town of Manchester, and
according to an unrecorded certificate of survey made by J.H. Rife, Registered
Surveyor, on April 11, 1962, is more particularly described as follows:
BEGINNING for a corner at a steel pin at the end of line 3 in the deed from
Joseph M. Parks, et al., to Daniel Bowman, dated January 7, 1882 and recorded
among the land records of Carroll County, Maryland in Liber F.T.S. No. 56, Folio
215, then with said line reversely, (1) north 52 degrees 49 minutes 40 seconds
east 180.35 feet to a steel pin; then (2) north 39 degrees 43 minutes 10 seconds
west 212.06 feet to a steel pin at a stone; then (3) north 46 degrees 21 minutes
30 seconds east 395.35 feet to a steel pin at the southwest corner of the
portion of the Daniel Riley parcel now to be conveyed to him; then binding on
the south line of said Daniel Riley parcel and a lot of John L. Riley (4) south
48 degrees 19 minutes 05 seconds east 189.05 feet to a steel pin; then binding
on the east side of John L. Riley lot and lands of Hamilton Singer; (5) north 44
degrees 25 minutes 30 seconds east 1000.10 feet to a marble stone corner on the
north side of a gravel and earth road, an extension of Locust Street; thence
binding on lands of the cemetery and Town of Manchester (6) north 44 degrees 13
minutes 10 seconds east 1482.50 feet to a stone at a steel pin; then by lands of
the Town of Manchester; (7) south 70 degrees 51 minutes 25 seconds east 385.56
feet to a steel pin on the north side of a small stream; then by lands of Engman
the five following courses: (8) south 46 degrees 30 minutes 20 seconds west
1639.48 feet to a steel pin; then (9) south 46 degrees 02 minutes 45 seconds
west 352.64 feet to a steel pin; then (10) south 24 degrees 43 minutes 05
seconds west 175.32 feet to a steel pin; then (11) south 60 degrees 18 minutes
15 seconds east 505.16 feet to a steel pin; then (12) south 30 degrees 32
minutes 05 seconds west 704.60 feet to a stone at a steel pin at lands of Walter
Brilhart; thence binding on said Brilhart land the two following courses: (13)
north 50 degrees 45 minutes 00 seconds west 386.60 feet to a 36 inch oak tree;
then (14) south 22 degrees 45 minutes 55 seconds west 640.79 feet to a steel pin
at lands of Oscar Garrett; thence by said Garrett land the following two
courses: (15) north 40 degrees 03 minutes 45 seconds west 587.91 feet to a stone
at a steel pin; thence (16) north 38 degrees 31 minutes 20 seconds west 276.63
feet to a steel pin, the place of beginning, containing 38.7655 acres of land,
more or less.
TOGETHER WITH a right of way for ingress, egress and regress to and from said
above described tract of land to York Street, Manchester, Maryland, across the
land reserved as a right of way in a Deed from Martha L. Riley, et al., to
Daniel C. Riley and wife, dated April 28, 1955 and recorded among the land
records aforesaid in Liber E.A.S. No. 245, Folio 274.
PARCEL FOUR (ORIGINALLY DESCRIBED IN DEED RECORDED IN LIBER 522, FOLIO 570 AS
PARCEL EIGHT.):
<PAGE>
All that certain piece or parcel of land, lying, situate and being in the Town
of Manchester, Carroll County, Maryland, and being more particularly described
as:
BEGINNING at the seventh, or south 76 degrees west 10.4 roods line as described
in a Deed, dated October 29, 1946 and recorded among the land records of Carroll
County in Liber E.A.S. No. 192, Folio 443, was granted and conveyed by Harold C.
Frankforter to John A Myers and wife, at a point distant 50.02 feet from the end
thereof, said place of beginning being on the northeast side of Monroe Street
(now laid out 50 feet wide) and running thence (1) north 67 degrees 54 minutes
21 seconds east binding reversely on said seventh line 108.73 feet, thence
running (2) south 82 degrees 21 minutes 52 seconds east 313.76 feet binding on
the line established in an Agreement between John A. Myers and wife and Clarence
F. Renoll and wife, dated May 15, 1947 and recorded among the land records
aforesaid in Liber E.A.S. No. 194, folio 433, to the end of the first line of
the aforesaid Deed from Frankforter to Myers, thence binding reversely on said
first line (3) south 38 degrees 38 minutes 01 second east 276.18 feet to a steel
pin set at the beginning thereof, thence running (4) south 40 degrees 04 minutes
59 seconds east binding in part reversely on the fourth line of the second
parcel of land in a Deed, dated July 6, 1935 and recorded among the land records
aforesaid in Liber E.M.M. No. 162, folio 343, was granted and conveyed by Wm. N.
Gettier and wife to C. Robert Brillhart and wife, 184.44 feet, thence running
for a new line of division and in part binding on the rear lines of Lots Nos. 1
and 2 Block C on the Plat of Manchester South, an unrecorded plat prepared by J.
H. Rife, Surveyor, dated October 20, 1964, (5) south 66 degrees 27 minutes 10
seconds west 501.50 feet to the northeast side of the above mentioned Monroe
Street, thence binding on the east side of said Street (6) north 23 degrees 32
minutes 50 seconds west 608.69 feet to the place of beginning, containing 5.3671
acres of land (neat measure). The above property is shown on a plat by J. H.
Rife, entitled "Town of Manchester Election District No. 6, Carroll County,
Maryland", recorded in Liber 423, Folio 267.
PARCEL FIVE (DESCRIBED IN DEED RECORDED IN LIBER 1159, FOLIO 855):
All that lot or parcel of land situate, lying and being on the North side of
Beaver Street, situated in the Town of Manchester, Sixth Election District of
Carroll County, State of Maryland, and more particularly described in an
unrecorded certificate of survey prepared by BPR, Incorporated, dated May 10,
1989, as follows:
BEGINNING for the same at an iron pin found on the northern right-of-way line of
Beaver Street (60 foot wide right-of-way), said iron pin found also being at the
end of the Second or South 23 degrees 32 minutes 50 seconds East, 153.34 foot
line as described in Lot Two of a conveyance from the Town of Manchester to
Dorothy G. Shaffer by deed dated June 15, 1967, and recorded among the land
records of Carroll County in Liber CCC 423, folio
<PAGE>
220; thence leaving the north side of Beaver Street and running reversely with
and binding on the second line in said conveyance to Dorothy G. Shaffer, as now
surveyed by BPR, Incorporated, bearings herein being referred to Magnetic North,
dated April, 1977, (1) North 13 degrees 59 minutes 25 seconds West, 153.32 feet
to an iron pin found on the fifth or South 66 degrees 27 minutes 10 seconds
West, 501.50 foot line as described in a conveyance from the Town of Manchester
to Dutterer's of Manchester, Inc., by deed dated June 28, 1967, and recorded
among the land records of Carroll County in Liber CCC 423, folio 263, at a
distance of 200.00 feet measured reversely along said line from the end thereof;
thence leaving the outline as described in Lot No. Two of said conveyance to
Dorothy G. Shaffer and running reversely with and binding on a part of said
fifth line as described in said conveyance to Dutterer's of Manchester, Inc.,
(2) North 75 degrees 36 minutes 37 seconds East, 50.00 feet to a rebar now set;
thence leaving the outline as described in said conveyance to Dutterer's of
Manchester, Inc. and running for two new lines of division through the lands as
described in a conveyance from Oscar W. Garrett and Cora E. Garrett, his wife,
and Charles C. Ruby and Hilda D. Ruby, his wife, to the Town of Manchester by
deed dated December 23, 1963, and recorded among the land records of Carroll
County in Liber CCC 368, folio 271, which the land now being described is a
part, (3) South 13 degrees 59 minutes 25 seconds East, 140.67 feet to a rebar
now set on the aforementioned northern right-of-way line of Beaver Street (60
foot wide right-of-way); thence running with and binding on the northern
right-of-way line of Beaver Street, (4) by a curve to the right, southwesterly,
51.81 feet, said curve having a radius of 234.16 feet and a chord bearing and
distance of South 61 degrees 14 minutes 49 seconds West, 51.71 feet to the place
of beginning, containing 7,403.58 square feet or 0.16996 acres of land, more or
less.
EXHIBIT (e)(1)
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement") made as of January 30,
1997, by and between DOUGHTIE'S FOODS, INC., a Virginia corporation (hereinafter
referred to as "Seller"), THE SMITHFIELD HAM & PRODUCTS COMPANY, INCORPORATED, a
Virginia corporation (hereinafter referred to as "Buyer"), THE SMITHFIELD
COMPANIES, INC., a Virginia corporation (hereinafter referred to as "Company"),
VERNON MULES, individually (hereinafter referred to as "Mules"), and STEVE
HOUFEK, individually (hereinafter referred to as "Houfek").
R E C I T A L S:
WHEREAS, Seller desires to sell certain of its assets used in the
manufacturing division of Seller's business for the production and sale of the
Products set forth on the attached Exhibit A which is incorporated in and made a
part of this Agreement (the "Products");
WHEREAS, Buyer desires to purchase said assets used in Seller's
manufacturing division for the production and sale of the Products (the
"Business") as more fully set forth in this Agreement;
WHEREAS, Seller desires to acquire and Company desires to sell certain
common stock of Seller as an integral part of the transactions provided for in
this Agreement; and
WHEREAS, Mules and Houfek are entering into this Agreement for the sole
purpose of contractually obligating themselves to the execution and delivery of
the Non-Competition Agreements described herein, which said Non-Competition
Agreements are an integral part of the transaction provided for in this
Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms, and subject to the
conditions hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. PURCHASE OF ASSETS
1.1 Purchase and Sale. Seller shall sell, convey, transfer, assign and
deliver to Buyer, and Buyer shall purchase and accept from Seller, at the
Closing (as that term is defined in Section 4.1), all of Seller's right, title
and interest in and to the assets listed on Schedule 1.1A (the assets being
purchased hereunder from Seller are hereinafter sometimes collectively referred
to as the "Purchased Assets"); free and clear of any and all options, pledges,
mortgages, security interests, liens, charges, burdens and other encumbrances
whatsoever. The Purchased Assets shall not include cash and cashequivalents,
prepaid expenses (except sales and marketing prepaid expenses), notes
receivable, accounts receivable, rent receivable, and all other assets,
properties, rights, claims and contracts set forth on Schedule 1.1B (hereinafter
and hereinabove referred to as the "Excluded Assets").
<PAGE>
ARTICLE II. PURCHASE PRICE
2.1 Cash Purchase Price. The purchase price for the Purchased Assets
shall be (a) $625,000 (the "Base Price"); (b) plus the value, as of the Closing
Date, valued at the lower of cost or current market as of the Closing Date, of
all good and useable raw materials and packaging inventories, and all saleable
finished goods inventories of Products.
2.2 Non-Assumption and Assumption of Certain Obligations. (a) Buyer
shall not be obligated to hire any of Seller's employees and shall not assume
and shall not be liable for the payment, performance or discharge of any debts,
contracts, agreements, liabilities, obligations, commitments, restrictions,
disabilities or duties, whether direct or indirect, fixed, contingent or
otherwise, of Sellers, except that Buyer shall assume the vendor and customer
purchase orders, contract packaging agreements, and private label agreements
related to the Purchased Assets, entered into by Seller prior to the Closing
Date in the ordinary course of Business, provided such vendor and customer
purchase orders, contract packaging agreements, and private label agreements are
set forth on Schedule 2.2 or have been entered into between the execution hereof
and the Closing Date and have been approved by Buyer, in writing, prior to the
Closing Date. Schedule 2.2 shall be updated on the Closing Date to show each
vendor and customer purchase order that Buyer will assume at Closing.
2.3 Allocation of Purchase Price. (a) The Base Price for the Assets
shall be allocated among the Purchased Assets as follows:
<TABLE>
<S> <C>
A. Machinery and Equipment, Furniture and
Labels (Paragraphs A, C and D on
Schedule 1.1A excluding raw materials,
packaging inventories and finished goods) $ 323,000
B. Contracts, Customers Lists, Recipes
and Formulas, and Prepaid Expenses
(Paragraphs B and E on Schedule 1.1A) $ 290,000
D. Non-compete Seller $ 10,000
E. Non-compete Mules $ 1,000
F. Non-compete Houfek $ 1,000
</TABLE>
ARTICLE III. PAYMENT OF PURCHASE PRICE
3.1 Cash Payable at Closing. At the Closing, Buyer shall deliver to
Seller a cashier's check or wire transfer of immediately available funds for an
amount equal to the Base Purchase Price (except for that portion thereof
allocated in Section 2.3 to the Mules and Houfek Non-Competition Agreements,
which said portion shall be paid to them) plus the value of the inventory taken
and determined pursuant to Section 3.2.
3.2 Physical Inventory. At 5:00 P.M. on February 24, 1997, Seller shall
cease/terminate the manufacture and processing of the Products. An inventory
shall be taken on February 25 - 27, 1997, of all good
<PAGE>
and useable raw materials and packaging materials (excluding labels) of the
Business and of all saleable finished goods and products of the Business. The
good and useable raw materials and packaging inventories of the Business shall
be valued at the cost paid by Seller for same, and the saleable finished goods
so inventoried shall be valued at Seller's manufacturing division listed
wholesale price as shown on Schedule 3.2 less twenty-five percent (25%).
For purposes of this Section 3.2, good and useable raw materials and
packaging materials shall include only those raw materials that are in
quantities reasonably required for the conduct of the Business and sufficiently
fresh for use in the production of the Products by Buyer following the Closing
Date and saleable finished goods shall include only those goods that are of
sufficient quality and freshness for sale to Seller by Buyer following the
Closing Date under the terms of the Product Supply Agreement attached hereto as
Exhibit B.
ARTICLE IV. DATE AND PLACE OF CLOSING
4.1 Date and Place of Closing. Subject to satisfaction or waiver of the
conditions to the obligations of the parties, the purchase and sale of the
Purchased Assets pursuant to this Agreement shall be consummated at a closing
(the "Closing") to be held in the offices of McGuire, Woods, Battle & Boothe in
Norfolk, Virginia or such other place as mutually agreed on by the parties, at
10:00 A.M. on February 28, 1997, or such other date as the parties may mutually
agree upon (the "Closing Date"). Title to the Purchased Assets shall pass from
Seller to Buyer at the Closing.
<PAGE>
ARTICLE V. CLOSING
5.1 Seller's Performance. At the Closing, concurrently with performance
by Buyer of its obligations to be performed at the Closing:
5.1.1 Conveyances. (a) Seller shall execute and deliver to Buyer, in
form and substance acceptable to Buyer, (i) warranty bills of sale conveying to
Buyer all tangible personal property and other tangible assets owned by it and
included among the Purchased Assets, (ii) assignments of Seller's claims, rights
and benefits, to and under the vendor and customer purchase orders, contract
packaging agreements, and private label agreements to be assumed by Buyer
pursuant to Section 2.2, and all transferable licenses, permits, certificates,
manufacturer equipment warranties, and authorizations pertaining to the
Purchased Assets.
(b) Seller shall execute and deliver to Buyer all other conveyances,
bills of sale, assignments, endorsements and instruments of transfer as shall be
necessary or appropriate to carry out the intent of this Agreement, and as shall
be sufficient to vest in Buyer title to all of the Purchased Assets and all
right, title and interest of Sellers thereto. If requested by Buyer, such
documents shall be in a form suitable for recording.
5.1.2 Records. Seller shall deliver to Buyer all customer lists, sales
contracts, contract packaging agreements, private label agreements, sales lists,
licenses, and business files and records, formulas, recipes, seasoning recipes,
processing procedures, research and development records, advertising materials
and labels relating to the Products, including without limitation the contracts
set forth on Schedule 2.2 hereof (hereinafter sometimes collectively referred to
as the "Records").
5.1.3 Certificates and Opinions. Seller shall execute and deliver to
Buyer the certificates referred to in Sections 10.3 and 10.4 and deliver to
Buyer the opinions of counsel referred to in Section 10.8.
5.1.4 Supply Agreement. Execute and deliver the Product Supply
Agreement between Seller and Buyer, the form of which is attached hereto as
Exhibit B (the "Supply Agreement").
5.1.5 License Agreement. Execute and deliver the License Agreement
between Seller and Buyer, the form of which is attached hereto as Exhibit C (the
"License Agreement").
5.1.6 Non-Competition Agreement. Execute and deliver the
Non-Competition Agreement between Seller and Buyer, the form of which is
attached hereto as Exhibit D (the "Non-Competition Agreement").
5.1.7 Other Actions. Seller shall take all such other steps as may be
necessary or appropriate to put Buyer in actual and complete ownership and
possession of the Purchased Assets.
5.1.8 Stock Purchase. Seller shall deliver to Company the cashier's
check or wire transfer referred to in Section 9.2. for the purchase by Seller of
all of the shares of the common stock of Seller owned by Company on the Closing
Date, up to but not exceeding 16,500 shares.
<PAGE>
5.2 Buyer's Performance. At the Closing, concurrently with the
performance by Seller of its obligations to be performed at the Closing:
5.2.1 Purchase Price. Buyer shall deliver to Seller the cashier's check
or wire transfer specified in Section 3.1.
5.2.2 Supply Agreement. Buyer shall execute and deliver to Seller the
Supply Agreement.
5.2.3 Assumption Agreement. Buyer shall execute and deliver to Seller
an agreement to assume the vendor and customer purchase orders, contract
packaging agreements, and private label agreements, Buyer has agreed to assume
pursuant to Section 2.2. The form of the Assumption Agreement is attached hereto
as Exhibit E.
5.2.4 Certificates and Opinions. Buyer shall execute and deliver to
Seller the certificates referred to in Sections 11.3 and 11.4 and deliver the
opinions of counsel referred to in Section 11.6.
5.2.5 License Agreement. Buyer shall execute and deliver to Seller the
License Agreement.
5.2.6 Non-Competition Agreement. Buyer shall execute and deliver to
Seller the Non-Competition Agreement.
5.3 Company's Performance. At the Closing, concurrently with the
performance by Seller of its obligations to be performed at the Closing:
5.3.1 Transfer of Stock. Company shall endorse and deliver to Seller
all of the shares of the common stock of Seller and owned by Company on the
Closing Date, up to but not exceeding 16,500 shares.
5.4 Further Action by Parties. In addition to the foregoing, the
parties agree as follows:
5.4.1 Further Action by Seller. At any time and from time to time, at
or after the Closing, upon request of Buyer, Seller shall do, execute,
acknowledge and deliver or shall cause to be done, executed, acknowledged and
delivered, all such further acts, assignments, transfers, conveyances, powers of
attorney and assurances as may reasonably be required in order to vest in and
confirm to Buyer full and complete title to and, possession of, and the right to
use and enjoy, the Purchased Assets.
5.4.2 Further Action by Buyer. At any time and from time to time, at or
after the Closing, upon request of Seller, Buyer shall do, execute, acknowledge
and deliver or shall cause to be done, executed, acknowledged and delivered all
such further acts and assurances as may reasonably be required to complete the
assumption by Buyer of its obligations assumed by Buyer pursuant to this
Agreement including without limitation the Assumption Agreement.
<PAGE>
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that:
6.1 Due Organization and Qualification. Seller is a corporation duly
organized, validly existing, qualified to do business, and in good standing
under the laws of the State of Virginia.
6.2 Corporate Power and Authority. The Board of Directors of Seller
have duly approved this Agreement and the transactions contemplated hereby. The
execution and delivery of this Agreement and the performance by Seller of its
obligations hereunder have been duly authorized by all requisite corporate
action, and no further action or approval is required in order to permit Seller
to consummate the transactions contemplated by this Agreement. Seller has full
power, authority and legal right to enter into this Agreement and to consummate
the transactions contemplated hereby. The making and performance of this
Agreement and the consummation of the transactions contemplated hereby in
accordance with the terms hereof will not (a) conflict with the Certificate or
Articles of Incorporation or the Bylaws of Seller, (b) result in any breach or
termination of, or constitute a default under, or constitute an event that with
notice or lapse of time, or both, would become a default under, or result in the
creation of any Encumbrance upon any of the Purchased Assets, or create any
rights of termination, cancellation, or acceleration in any person under any
vendor or customer purchase order assumed by Buyer hereunder, or violate any
order, writ, injunction or decree by which any of the Purchased Assets, or the
Business may be bound or affected or under which any of the Purchased Assets, or
the Business receive benefits, (c) result in the loss or adverse modification of
any material license, permit or other authorization granted to or otherwise held
by Seller and related to the Purchased Assets, or the Business, (d) violate any
provision of any law, ordinance, regulation, rule, requirement or order to which
Seller, the Purchased Assets, or the Business, are subject, except for
violations that, in the aggregate, would not have a material adverse affect upon
the business, operations, condition (financial or otherwise), results of
operations, value or prospects of the Purchased Assets, or the Business, (a
"Material Adverse Effect").
6.3 Title. Seller has and upon conveyance, transfer and assignment of
the Purchased Assets to Buyer by Seller at the Closing, Buyer will acquire and
hold, good and marketable title in fee simple to all of the Purchased Assets, in
each case, free and clear of any and all options, rights, pledges, mortgages,
security interests, liens, charges, burdens, servitudes and other encumbrances
whatsoever (herein sometimes collectively referred to as "Encumbrances").
Neither Seller, any affiliate or subsidiary of Seller owns or holds under lease
any assets of any kind, character or description that are utilized in a material
way to the Business or the Purchased Assets, except as set forth on Schedule
6.3.
6.4 Inventories. The Inventories consist of current items of a quality
and quantity that are usable or marketable in the ordinary course of the
Business, and items not so usable or marketable in the Business have been
written down in value to estimated net realizable market values. Since January
1, 1997, the Inventories have been maintained at a level consistent with the
operation of the Business in its normal course, and no change has occurred in
such Inventories that materially adversely affects or will materially adversely
affect their usability or salability. Orders for inventory items have not been
given for amounts materially in excess of the amounts necessary to maintain the
Inventories of Seller for the Business at normal levels based on past practice.
Notwithstanding the foregoing, Buyer acknowledges and agrees that, from
the date of the execution of this Agreement until Closing, Seller intends only
with
<PAGE>
Smithfield's permission to be rendered on a weekly basis, to reduce Inventories
below its historically normal levels based on past practice. Seller agrees to
keep Buyer informed of its running estimate as to the expected levels of the
Inventories at Closing. In addition, Seller will cooperate with and assist Buyer
during the pre-Closing period to prepare for Buyer's production of the Products
as soon as practicable after Closing, provided that such assistance shall not
require additional out-of-pocket expenses. In the event that Closing does not
occur, (i) Buyer agrees that it will promptly return to Seller and keep
confidential all formulas, recipes, and materials provided by Seller and (ii)
Seller agrees to purchase all Products that Buyer may have produced provided
said Product is of reasonable quality and was produced according to the formulas
and recipes provided to Buyer by Seller, the price for same to be calculated in
accordance with the valuation method of Doughtie's compensible product items
under the provisions of Section 3.2.
6.5 Physical Properties. Schedule 6.5 sets forth an accurate and
complete listing of all tangible personal property and other tangible assets
owned or leased by Seller and used in the Business, other than Inventory and
other than raw materials and other similar assets used or consumed in the
ordinary course of business between the date hereof and the Closing Date. All
equipment and machinery included among the Purchased Assets are sold "as is"
except that Seller warrants that the equipment and machinery is in good
operating condition and repair and sufficient to operate the Business as
presently conducted and are not deemed unsafe or unsanitary. Seller enjoys
peaceful possession of the Purchased Assets.
6.6 Contracts. Schedule 6.6 sets forth a brief description of all
material contracts, consulting agreements, contract packaging agreements,
private label agreements, employment agreements, other agreements, leases,
arrangements and commitments (whether oral or written) to which Seller is a
party and by which any of the Purchased Assets, or the Business are affected or
are bound, except vendor and customer purchase orders, contract packaging
agreements, and private label agreements, in the ordinary course of business
consistent with past practice, assumed by Buyer under this Agreement and set
forth on Schedule 2.2.
6.7 Contract Defaults. To the best of Seller's knowledge, no other
party thereto is, in default in any material respect under any of the contracts,
agreements, leases, arrangements and commitments listed on Schedules 6.6 or the
contracts described in Section 2.2 to be assigned to and assumed by Buyer. To
the best of Seller's knowledge, (a) there has not occurred any event which, with
the lapse of time or giving of notice or both, would constitute such a material
default; (b) such contracts, agreements, leases, arrangements, and commitments
are legal, valid, and binding obligations of the respective parties thereto in
accordance with their terms and, except to the extent reflected in Schedules 6.6
have not been amended; and (c) no defenses, offsets, or counterclaims thereto
have been asserted, or to the best knowledge of Seller, may validly be made, by
any party thereto other than Seller.
6.8 Litigation. Schedule 6.8 sets forth all actions, suits,
proceedings, investigations, or grievances pending against Seller to the best
knowledge of Seller, threatened against Seller, and affecting the Purchased
Assets, or the Business, or involving products manufactured by Seller in its
manufacturing division, at law, in equity or in admiralty, before or by any
court or any federal, state, municipal or other governmental department,
commission, board,
<PAGE>
bureau, agency or instrumentality, domestic or foreign (hereinafter sometimes
collectively referred to as "Agencies"). None of the actions, suits, proceedings
or investigations listed on Schedule 6.8, either (a) has resulted in, or would,
if adversely determined, result in, a Material Adverse Effect, or (b) has
affected, affects or would, if adversely determined, affect the right or ability
of Seller to carry on the Business substantially as now conducted. To Seller's
knowledge, Seller is neither subject to nor in default of any continuing court
or Agency order, writ, injunction or decree, applicable to the Purchased Assets
or the Business.
6.9 Compliance with Laws. Except as listed on Schedule 6.9 A., Seller,
to the best of its knowledge, (a) has complied with, is in compliance with, and
has no basis to believe it is not in compliance with, all federal, state,
county, and municipal laws, ordinances, regulations, rules, requirements and
orders applicable to the Purchased Assets or the Business to the operation of
the Business, the breach or violation of which could have a Material Adverse
Effect, (b) has filed with the proper authorities all statements and reports
required by all laws, ordinances, regulations, rules, licensing and other
requirements and orders to which the Purchased Assets or the Business, is
subject the failure to file which could have a Material Adverse Effect, and none
of such statements and reports contains untrue statements of material fact or
omits any statement of material fact necessary to make such statements and
reports not misleading, and (c) has obtained and maintained all licenses,
permits and governmental authorizations necessary for the present ownership and
use of the Purchased Assets and for the conduct of the Business in the manner in
which and in the jurisdictions and places where the Business is now conducted
the failure to have which could have a Material Adverse Effect. Seller has not
received written notice of any violation of, or any pending investigation under,
any of such laws, ordinances, regulations, rules, licensing and other
requirements and orders during the last three (3) years related to the Business.
Schedule 6.9B correctly lists all material licenses, permits, certificates,
approvals, memberships and authorizations, and all registrations and
applications pending before any agency or authority for the issuance of any
licenses, permits, certificates, approvals, memberships or authorizations or the
renewal thereof related to the Business. Seller has no franchises relating to
its Business, and none are presently required for the conduct thereof.
6.10 Attachments and Other Proceedings. There are no attachments,
executions, assignments for the benefit of creditors, receiverships,
conservatorships or voluntary or involuntary proceedings in bankruptcy or
pursuant to any debtor relief laws contemplated or filed by Seller or pending
against Seller.
6.11 Taxes. Seller has duly filed, or has duly obtained effective
extensions for filing, all U.S. federal, foreign, state, county, local and other
excise, franchise, property, payroll, income, profits, capital stock, sales and
use, and other tax returns which are required to be filed, and all such returns
are true and correct in all material respects. Seller has paid, collected or
withheld and remitted to the appropriate governmental agency all taxes which
have become due or have been assessed against it and all taxes, penalties and
interest which any taxing authority has proposed or asserted to be due and
owing. All tax liabilities to which the Purchased Assets have been subjected
have been discharged and there are no liens for taxes on the Purchased Assets
except for property taxes assessed but not yet payable or as described in
Schedule 6.11. Except as described in Schedule 6.11, there are no tax
deficiencies or claims presently being asserted, or, to the best of Seller's
knowledge, threatened, against Seller and Seller has no knowledge of any basis
for such claims or deficiencies.
<PAGE>
Seller has not granted any extension to any taxing authority of the limitation
period during which any tax liability may be asserted.
6.12 Consents. Except as set forth on Schedule 6.12, no consent,
approval, authorization or order of any court, Agency or any other person is
required under any law, ordinance, regulation, rule, requirement, order, writ,
judgment, decree, contract, agreement, lease, commitment, charter or bylaw
applicable to or binding upon Seller in order to permit Seller to consummate the
transactions contemplated by this Agreement and to perform its obligations
hereunder and under the Supply Agreement, and the License Agreement.
6.13 Patents, Trademarks, Etc. Seller neither has contracted for, nor
has licenses or agreements to use any trade secrets, know-how, processes,
formulae, royalties, inventions, discoveries, improvements, proprietary or
technical information, proprietary rights, joint venture or joint operating
interests, copyrights, patents, tradenames, trademarks, service marks and
applications for copyright, patent, tradename, trademark and service mark
registration (hereinafter sometimes collectively referred to as "Intangible
Rights") for use at, or in connection with, the operation of the Business except
for its rights to the "Doughtie's" trade name, and the Intangible Rights among
the Purchased Assets. None of the Purchased Assets or activities or operations
of the Business infringe or involve or have resulted within three years prior to
the date hereof in (a) the infringement of, or (b) any claim of infringement of,
any Intangible Right of any other person, firm or corporation; and no
proceedings have been instituted, are pending, or are threatened, that challenge
the rights of Seller in respect thereof. To the best knowledge of Seller, the
"Doughtie's" tradename is not being infringed by the products, activities,
operations, patents, trade names, trademarks, service marks or copyrights of any
other person or persons and is not subject to any outstanding order, judgment,
decree, stipulation or agreement restricting the use thereof.
6.14 Product Warranties. No shipment or other delivery of Products made
or to be made by Seller on or prior to the Closing Date was or as of the Closing
Date will be, and no food or food ingredients in inventory on the Closing Date
will be as of the Closing Date: (i) adulterated or misbranded within the meaning
of the Federal Food, Drug and Cosmetic Act, as amended; (ii) an article which
may not under the provisions of ss.404 or ss.505 of such Act be introduced into
interstate commerce; or (iii) adulterated or misbranded within the meaning of
any pure food laws or ordinances of any state or city to which such articles are
shipped or to be shipped. All such Inventory will meet the Seller's reasonable
standards of quality and sanitation and all requirements of the laws and
regulations enforced by the United States Department of Agriculture. All
products processed as of the Closing Date shall be labeled in accordance with
the requirements of the National Labeling and Education Act.
6.15 Brokerage Commissions. There are no claims for, or rights to,
brokerage commissions or agent's or finder's fees resulting from any action
taken by Seller in connection with the transactions contemplated by this
Agreement.
6.16 Hart-Scott-Rodino. Neither Seller nor any "ultimate parent" of
Seller have sales or assets of $100,000,000.00 or more.
6.17 No Affiliates. Seller has no affiliates or affiliated business
entities that have a material effect on the Business or the Purchased Assets
except those set forth on Schedule 6.17.
<PAGE>
6.18 Employee Benefit Plans; Employees. "Plan" means any employee
benefit plan as defined in Section 3(3) of ERISA. All Plans maintained by or
contributed to by Seller ("Employee Benefit Plans") fully comply with all
requirements of the Internal Revenue Code ("Code") and ERISA. All contributions
required to be made to any Plans for employees of Seller have been made on or
before their due dates, and all amounts properly accrued to date as liabilities
of the Seller that have not been made have been properly recorded on the books
of Seller. No Plan has applied for or obtained a waiver from the Internal
Revenue Service of any minimum funding requirement under Section 412 of the Code
which could have a Material Adverse Effect. Neither Seller nor any ERISA
Affiliate have terminated any employee pension benefit plan (within the meaning
of Section 3(2) of ERISA) subject to Title IV of ERISA (herein referred to as a
"Title IV Plan") under circumstances giving rise to, or that could give rise to
any actual or potential liability to the Pension Benefit Guaranty Corporation
("PBGC") or any other person which could have a Material Adverse Effect, (ii) no
event or condition exists which presents a risk of termination of any Title IV
Plan by the PBGC which could have a Material Adverse Effect, and (iii) there is
no actual or potential liability to the PBGC or any other person expected by the
Seller or any ERISA Affiliate to be incurred with respect to any Title IV Plan,
including, but not limited to, any liability for any accumulated funding
deficiency as defined in Section 302 of ERISA or for any minimum funding
contribution under Section 302 of ERISA which could have a Material Adverse
Effect. No lien imposed under Section 401(a)(29) or Section 412(n) of the Code,
Section 302(f) or Section 4068 of ERISA, or arising out of any action filed
under ERISA Section 4301(b), exists upon any Purchased Assets.
6.19 Full Disclosure. No representation or warranty of Seller made in
this Agreement, nor any written statement, schedule or certificate heretofore
furnished to Buyer by Seller pursuant hereto, or in connection with the
transactions contemplated hereby, contains, or will contain any untrue statement
of a material fact, or omits, or will omit to state a material fact necessary to
make the statement or facts contained herein or therein not misleading. Seller
has not withheld and will not withhold from Buyer knowledge of any events,
conditions or facts, of which Seller has knowledge, that could have a Material
Adverse Effect.
ARTICLE VII. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER AND COMPANY
A. Buyer represents, warrants and covenants to Seller that:
7.1 Due Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
Virginia. Buyer is qualified to do business and is in good standing in the State
of Virginia.
7.2 Corporate Power and Authority. The Board of Directors of Buyer has
duly approved this Agreement and the transactions contemplated hereby. The
execution and delivery of this Agreement and the performance by Buyer of its
obligations hereunder has been duly authorized by all requisite corporate
action, and no further action or approval is required in order to permit Buyer
to consummate the transactions contemplated by this Agreement. Buyer has full
power, authority and legal right to enter into this Agreement and to consummate
the transactions contemplated hereby. The making and performance of this
<PAGE>
Agreement and the consummation of the transactions contemplated hereby in
accordance with the terms hereof will not (a) conflict with the Articles of
Incorporation or the Bylaws of Buyer or (b) violate any provision of any law,
ordinance, regulation, rule, requirement, order, writ, judgment, decree,
contract, agreement, lease, arrangement or commitment to which Buyer is subject
or is a party that, individually or in the aggregate, would have a Material
Adverse Effect upon the ability of Buyer to perform its obligations hereunder
and under the Supply Agreement or the License Agreement.
7.3 Actions, Suits, Etc. There are no actions, suits, proceedings or
investigations pending, or to the knowledge of Buyer, threatened against or
affecting Buyer at law or in equity or before any federal, state, municipal or
other instrumentality in which it is sought to restrain or prohibit or obtain
damages in respect of the consummation of the purchase and sale of the Purchased
Assets or the other transactions contemplated hereby. Moreover, Buyer is, to the
best knowledge of Buyer, not in default with respect to any order, writ,
injunction or decree of any court, or Agency with respect to the consummation of
the purchase and sale of the Purchased Assets or the other transactions
contemplated hereby.
7.4 Consents. No consent, approval, authorization or order of any
court, Agency or any other person is required under any law, ordinance,
regulation, rule, requirement, order, writ, judgment, decree, contract,
agreement, lease, commitment, charter or bylaw applicable to or binding upon
Buyer in order to permit Buyer to consummate the transactions contemplated by
this Agreement and to perform its obligations hereunder and under the Supply
Agreement or the License Agreement.
7.5 Brokerage Commissions. There are no claims for, or rights to,
brokerage commissions or agent's or finder's fees resulting from any action
taken by Buyer in connection with the transactions contemplated by this
Agreement.
7.6 Hart-Scott-Rodino. Neither Buyer nor any "ultimate parent" of
Seller have sales or assets of $100,000,000.00 or more.
7.7 Sophisticated Purchaser. A. The transactions contemplated in this
Agreement are for the Buyer's own account for the purposes of operating the
Business as a going concern and not with a view towards resale or distribution.
The Buyer acknowledges that, in reliance on the foregoing, the transactions
contemplated hereby have not been registered under any federal or state
securities laws.
B. Company represents, warrants and covenants to Seller that the shares
of Doughtie's Foods, Inc. to be sold to Seller pursuant to this Agreement are
free and clear of any Encumbrances and will be free and clear of any
Encumbrances at Closing.
ARTICLE VIII. COVENANTS OF SELLER
8.1 Negative Covenants Regarding Conduct of Business. Except as may be
otherwise expressly provided herein, from and after the date of this Agreement
and until the Closing Date, with respect to the Purchased Assets and the
Business, without the consent of Buyer, Seller covenants and agrees that it will
not in respect of the Business or the Purchased Assets:
<PAGE>
8.1.1 Creation of Obligations. Incur any obligation or liability,
absolute or contingent, except current liabilities incurred, and obligations
under contracts entered into, in the ordinary course of business consistent with
past practice.
8.1.2 Encumbrances. Execute, grant, create or suffer any Encumbrance
upon the Purchased Assets.
8.1.3 Disposition of Assets. Effect any sale, transfer, Encumbrance or
other disposition of assets and properties that would otherwise be included in
the Purchased Assets, except for sales of Inventories in the ordinary course of
business, except for machinery, equipment, furniture and fixtures replaced with
items of equivalent or greater value, and except for supplies and other similar
assets used or consumed in the ordinary course of business.
8.1.4 Contracts, Licenses, Etc. Amend, modify, assign, transfer, grant
or terminate any contract, agreement, lease, arrangement or commitment listed in
Schedule 6.6. and Schedule 2.2.
8.1.5 Rights. Waive, modify or release any rights of material value to
the Business or the Purchased Assets.
8.1.6 Termination of Operations. Terminate, discontinue, close or
dispose of any part of the operations of the Business.
8.1.7 Other Transactions. Enter into any other transaction or series of
transactions that have a material effect on the Business or Purchased Assets
other than in the ordinary course of business.
8.2 Affirmative Covenants Regarding Conduct of Business. From and after
the date of this Agreement and until the Closing Date, Seller covenants and
agrees that it will:
8.2.1 Ordinary Course of Business. Carry on the operations of Business
only in the usual, regular and ordinary course consistent with good business
practices and with prior practices. 8.2.2 Maintenance of Relationships. Use its
best efforts to maintain and preserve the Business and to maintain its present
relationships with customers, suppliers and others having business dealings with
the Business.
8.2.3 Maintenance of the Purchased Assets. Maintain the Purchased
Assets in good operating repair and condition and maintain the level of
Inventories in accordance with past practices., except as otherwise provided in
this Agreement.
8.2.4 Payment of Obligations in Ordinary Course. Pay and discharge all
costs and expenses of carrying on the operations of the Business and of
maintaining and operating the Purchased Assets as they become due and pay and
discharge any such costs and expenses that at the date hereof are past due,
unless contested in good faith.
<PAGE>
8.2.5 Representations and Warranties. Use its best efforts to prevent
the occurrence of any change or event that would prevent any of the
representations and warranties of Seller contained herein from being true in all
material respects at and as of the Closing Date with the same effect as though
such representations and warranties (in the exact language contained in this
Agreement with appropriate modification of tense in the case of representations
and warranties relating to statements of fact as of specific dates) had been
made at and as of the Closing Date.
8.2.6 Maintenance of Records. Maintain its books, accounts, and records
relating to the Business and the Purchased Assets in the usual, regular and
customary manner on a basis consistently applied.
8.2.7 Access to and Updating of Information. During reasonable business
hours, afford to the officers, attorneys, accountants, and other authorized
representatives of Buyer, free and full access to the Purchased Assets and the
Business, in order that Buyer may have full opportunity to make a reasonable
investigation with respect to the Purchased Assets, the Business, the contracts,
leases, arrangements and commitments listed in Schedule 6.6 hereto, the books
and records of the Business and their operations, including, without limitation,
fixed asset records, sales records relating to the customers of the Business,
purchase records, and inventory records. Seller will furnish to Buyer all such
further information concerning the Purchased Assets and the Business as Buyer
may reasonably request. Seller will update by amendment or supplement each of
the Schedules referred to herein and any other disclosures made in writing to
Buyer forthwith upon any material change in the information set forth in said
Schedules or other disclosure, and Seller represents and warrants that such
Schedules and such written disclosures, as so amended or supplemented, shall be
true, correct and complete in all material respects as of the date or dates of
such amendments or supplements; provided, however, that the inclusion of any
information in any such amendment or supplement, not included in the original
Schedule at or prior to the date of this Agreement, shall not limit or impair
any rights that Buyer might otherwise have respecting the representations or
warranties of Seller contained in this Agreement.
ARTICLE IX. AGREEMENTS OF SELLER AND BUYER
9.1 Delivery of Purchased Assets. Buyer shall supervise and assist and
Seller shall, at Seller's cost, have the Purchased Assets ready for shipment on
its docks in Portsmouth, Virginia, on the Closing Date. Seller shall cooperate
with Buyer in the orderly transfer of the Purchased Assets from Seller's
facility in Portsmouth, Virginia, to Buyer's facility in Smithfield, Virginia.
Buyer shall bear the cost of shipment from Seller's dock to its facilities in
Smithfield, Virginia. For purposes of this Section 9.1, "ready for shipment"
shall mean secured on skids and ready for shipment in a commercially reasonable
manner.
9.2 Sale of Stock. Company owns 16,500 shares of the common stock of
Seller. On the Closing Date, Company shall sell and Seller shall purchase so
much of said 16,500 shares of Doughtie's Foods, Inc. stock owned by Company on
the Closing Date (but not to exceed 16,500 shares) for $4.25 per share. At the
Closing, Seller shall deliver to Company a cashier's check or wire transfer of
immediately available funds for the purchase price for said stock and Company
shall in exchange therefore deliver the shares of stock to Seller. Company
reserves and shall have the right to sell any or all of such stock to another
person or entity before the Closing Date.
<PAGE>
9.3 Public Disclosures. Seller and Buyer shall cooperate with each
other and give each other advance notice in respect of any public announcements
or disclosures pertaining to the transaction described herein. Buyer shall draft
the form of public announcement or disclosure pertaining to this transaction
which shall be approved by Seller prior to release. Notwithstanding the
foregoing, nothing in the Section will preclude either party from making any
disclosures required by law or regulation or necessary and proper in conjunction
with the compliance with all applicable federal and state securities laws and
the filing of any tax return or other document required to be filed with any
federal, state, or local governmental body, authority, or agency.
9.4 Promotion/Damaged Goods Allowances. In the event that customers of
the Business bill Buyer or make deductions against Buyer's otherwise valid
invoices for promotional pricing allowances or damaged goods applicable to sales
of Products produced or sold by Seller, which said bill-backs or deductions
shall be the liability of Seller, Buyer will promptly forward such bill to
Seller and Seller will, in turn, promptly pay all such bills or compensate Buyer
for any bill-back or deduction made by such customer and Seller shall resolve
directly any dispute over such bill-back or deduction directly with its
customer.
9.5 Return of Inventories and Damaged Goods. From and after the Closing
Date, Buyer shall settle in good faith any claims for returns or damaged goods
relating to Products shipped prior to the Closing Date and made by customers of
the Business on or after the Closing Date. Seller shall reimburse Buyer for all
costs incurred by Buyer as a result of such returned Products. Buyer's costs
shall include the invoice price for any Products shipped to a customer in place
and stead of the returned Product, plus any reasonable and customary
transportation and handling costs incurred by Buyer.
9.6 Consumer Claims and Complaints. The parties shall assure that their
respective Consumer Affairs Departments cooperate and assist each other to
assure the expeditious handling of customer claims and complaints. All customer
claims and complaints made with respect to Products sold by Seller prior to the
Closing Date or Products acquired by Buyer from Seller at the Closing shall be
the responsibility of the Seller.
9.7 Due Diligence Investigation. Buyer may, prior to the Closing Date,
make or cause to be made such investigation of the Business and properties of
the Business and of its financial and legal condition as Buyer deems necessary
or advisable. Seller will permit Buyer and its authorized agents or
representatives, including its independent accountants, to have full access to
the properties, books, and records of the Business at reasonable hours to review
information and documentation relative to the properties, books, contracts,
commitments, and other records of the Business and Assets. If for any reason the
transactions contemplated by this Agreement are not consummated, Buyer and its
representatives will promptly return to Seller all materials and documents
provided by Seller and all copies thereof, and will hold in confidence all
confidential information obtained from Seller, its officers, agents,
representatives, or employees; provided, however, that information which (i) was
in the public domain or (ii) was, in fact, known to Buyer prior to disclosure by
Seller or its respective officers, agents, representatives or employees, or
(iii) becomes known to Buyer from or through a third party not under an
obligation of non-disclosure to Seller shall not be deemed to be confidential
information.
ARTICLE X. CONDITIONS TO OBLIGATIONS OF BUYER
<PAGE>
The obligations of Buyer under this Agreement are subject to the
satisfaction, or the written waiver thereof by Buyer, of the following
conditions on or prior to the Closing Date:
10.1 Representations and Warranties of Seller. All of the
representations and warranties of Seller contained in this Agreement shall have
been true and correct when made, and shall be true and correct in all material
respects on and as of the Closing Date, except to the extent that changes shall
have been approved in writing by Buyer.
10.2 Covenants of Seller. All of the covenants and agreements herein on
the part of Seller to be complied with or performed on or before the Closing
Date, shall have been fully complied with and performed.
10.3 Seller's Certificates. There shall be delivered to Buyer a
certificate dated as of the Closing Date and signed by Seller to the effect set
forth in Sections 10.1 and 10.2 as they relate to Seller, which certificate
shall have the effect of a representation and warranty made by Seller on and as
of the Closing Date.
10.4 Certificates of Authorities; Corporate Documents. Seller shall
have furnished to Buyer (a) a certificate of the State Corporation Commission
dated as of a date not more than twenty days prior to the Closing Date,
attesting to the organization and good standing of Seller, (b) copies, certified
by the Secretary or an Assistant Secretary of Seller as of the Closing Date, of
Seller's Certificate of Incorporation and all amendments thereto and Bylaws as
amended and in effect at the Closing Date, (c) a copy, certified by the
Secretary or Assistant Secretary of Seller, of resolutions duly adopted by the
Board of Directors of Seller duly authorizing this Agreement, the Supply
Agreement, and the transactions contemplated hereby.
10.5 No Material Adverse Changes. There shall not have occurred any
change in the Business, or the Purchased Assets that could have a Material
Adverse Effect, and Seller shall not have suffered any loss (whether or not
insured) by reason of physical damage caused by fire, earthquake, flood, wind,
accident or other calamity, or by reason of any taking by eminent domain or
condemnation, which could have a Material Adverse Effect.
10.6 Litigation. At the Closing Date, there shall not be pending or
threatened any litigation in any court or any proceeding before any Agency (a)
in which it is sought to restrain or prohibit or obtain damages in respect of
the consummation of the purchase and sale of the Purchased Assets or the other
transactions contemplated hereby, (b) that could, if adversely determined,
result in a Material Adverse Effect, (c) that could, if adversely determined,
affect the right or ability to carry on the Business as now conducted, or (d) as
a result of which, in the reasonable judgment of Buyer, Buyer could be deprived
of the material benefits of its ownership of the Purchased Assets.
10.7 Satisfactory to Buyer's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto, and all other related matters shall have been satisfactory to Edmunds &
Williams (A Professional Corporation), counsel for Buyer.
10.8 Opinion of Seller's Counsel. Buyer shall have received an opinion
of McGuire, Woods, Battle, and Boothe, counsel for Seller,
<PAGE>
dated the Closing Date, to the effect that: (a) Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Virginia and is qualified to carry on its business and is in good standing under
the laws of the State of Virginia, (b) Seller has full power, authority and
legal right to enter into this Agreement and the Supply Agreement to which it is
a party and to consummate the transactions contemplated hereby and thereby; (c)
all corporate actions required to be taken by Seller to approve this Agreement,
the Supply Agreement, the License Agreement, and the Non-Competition Agreement
(Exhibit D), to which it is a party, and the transactions contemplated hereby
and thereby and to authorize execution and delivery of this Agreement, the
Supply Agreement, the License Agreement, and the Non-Competition Agreement
(Exhibit D), to which it is a party and the performance by Seller of its
obligations hereunder and thereunder, have been duly and properly taken, and no
further action or approval is required in order to permit Seller to consummate
the transactions contemplated by this Agreement, the Supply Agreement, the
License Agreement, and the Non-Competition Agreement (Exhibit D) to which it is
a party; (d) this Agreement, the Supply Agreement, the License Agreement, and
the Non-Competition Agreement (Exhibit D) have been duly executed and delivered
by Seller and constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms (subject to the availability of the
discretionary remedy of specific performance and, as to enforcement of remedies,
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws from time to time in effect but excluding any presently pending proceedings
and the exercise by a court of its general powers of equity); (e) the
instruments of transfer of the Purchased Assets from Seller to Buyer have been
duly authorized, executed and delivered, and are legal, valid and binding
instruments enforceable in accordance with their terms (subject to the
availability of the discretionary remedy of specific performance and, as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect but excluding any
presently pending proceedings and the exercise by a court of its general powers
of equity); (f) the execution and delivery of this Agreement, the Supply
Agreement, the License Agreement, and the Non-Competition Agreement (Exhibit D)
by Seller and the performance by Seller of its obligations thereunder do not
constitute a violation of or a default under its certificate or articles of
incorporation or bylaws; and (g) such counsel has no knowledge of any action,
suit, proceeding or investigation that would be required by the terms of Section
6.8 to be listed in Schedule 6.8 that is not listed in Schedule 6.8.
10.9 Supply Agreement. Seller shall have executed and delivered to
Buyer the Supply Agreement.
10.10 Non-Competition Agreements. Seller shall have executed and
delivered to Buyer the Non-Competition Agreement and each of Vernon Mules and
Steve Houfek shall have executed and delivered to Buyer a NonCompetition
Agreement in the form attached hereto as Exhibits D-1 and D-2.
10.11 License Agreement. Seller shall have executed and delivered to
Buyer the License Agreement.
10.12 Customer and Supplier Accounts. Buyer shall not have reasonable
cause to believe that any of the top five (5) customers of Seller (in terms of
sales for the Seller's last previous fiscal year) or any of the top five (5)
suppliers of raw material (in terms of sales for the Seller's last previous
fiscal year) to Seller intends to cease doing business with the Business
following the Closing.
<PAGE>
10.13 Release of Encumbrances. All Encumbrances on the Purchased Assets
(other than any imposed or permitted by lenders to Buyer) shall have been
released.
10.14 Due Diligence Investigation. The results of any due diligence
investigations by Buyer of the Business and the Purchased Assets shall be
satisfactory to Buyer in its reasonable discretion.
ARTICLE XI. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are subject to the
satisfaction, or the written waiver thereof by Seller, of the following
conditions on or prior to the Closing Date:
11.1 Representations and Warranties of Buyer. All of the
representations and warranties of Buyer contained in this Agreement shall have
been true and correct when made, and shall be true and correct in all material
respects on and as of the Closing Date, except to the extent that changes shall
have been approved in writing by Seller.
11.2 Covenants of Buyer. All of the covenants and agreements herein on
the part of the Buyer to be complied with or performed on or before the Closing
Date shall have been fully complied with and performed.
11.3 Buyer's Certificates. There shall be delivered to Seller a
certificate dated as of the Closing Date and signed by the President of Buyer to
the effect set forth in Sections 11.1 and 11.2 as they relate to Buyer, which
certificate shall have the effect of a representation and warranty made by Buyer
on and as of the Closing Date.
11.4 Certificates of Authorities. Buyer shall have furnished to Seller
(a) a certificate of the State Corporation Commission dated as of not more than
twenty days prior to the Closing Date, attesting to the organization and good
standing of Buyer, (b) copies, certified by the Secretary or an Assistant
Secretary of Buyer as of the Closing Date, of Buyer's Certificate of
Incorporation and all amendments thereto and Bylaws as amended and in effect at
the Closing Date, and (c) a copy, certified by the Secretary or an Assistant
Secretary of Buyer, of resolutions duly adopted by the Board of Directors of
Buyer duly authorizing this Agreement, the Supply Agreement and the transactions
contemplated hereby and thereby.
11.5 Injunctions. At the Closing Date, there shall not be in effect any
injunctions or restraining orders restraining or prohibiting the consummation of
the purchase and sale of the Purchased Assets or the other transactions
contemplated hereby.
11.6 Satisfactory to Seller's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related legal matters shall have been satisfactory to
McGuire, Woods, Battle & Boothe.
11.7 Opinion of Counsel to Buyer. Seller shall have received an opinion
from Edmunds & Williams (A Professional Corporation), counsel for Buyer, dated
the Closing Date, to the effect that (a) Buyer is a corporation duly organized,
validly existing and in good standing under the laws of
<PAGE>
the State of Virginia; (b) Buyer has full power, authority and legal right to
enter into this Agreement, the Supply Agreement, the License Agreement and the
NonCompetition Agreement (Exhibit D), and to consummate the transactions
contemplated hereby and thereby; (c) the execution and delivery of this
Agreement, the Supply Agreement, the License Agreement, and the Non-Competition
Agreement (Exhibit D), and the performance by Buyer of its obligations hereunder
and thereunder, have been duly authorized by all requisite corporate action, and
no further action or approval is required in order to permit Buyer to consummate
the transactions contemplated by this Agreement, the Supply Agreement, the
License Agreement, and the Non-Competition Agreement (Exhibit D); and (d) this
Agreement, the Supply Agreement, the License Agreement, and the Non-Competition
Agreement (Exhibit D) have been duly executed by Buyer, this Agreement, the
Supply Agreement, the License Agreement, and the NonCompetition Agreement
(Exhibit D) constitute valid and binding obligations of Buyer, enforceable in
accordance with their terms (subject to the availability of the discretionary
remedy of specific performance and, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
from time to time in effect but excluding any presently pending proceedings and
the exercise by a court of its general powers of equity); and (e) the execution
and delivery of this Agreement, the Supply Agreement, the License Agreement, and
the Non-Competition Agreement (Exhibit D) by Buyer and the performance by Buyer
of its obligations thereunder do not constitute a violation of or a default
under their respective certificates or articles of incorporation or bylaws, or
any writs, orders, judgments or decrees by which either of them are bound and of
which counsel has actual knowledge.
11.8 Supply Agreement. Buyer shall have executed and delivered to
Seller the Supply Agreement.
11.9 License Agreement. Buyer shall have executed and delivered to
Seller the License Agreement.
11.10 Non-Competition Agreement. Buyer shall have executed and
delivered to Seller the Non-Competition Agreement.
11.11 Assumption Agreement. Buyer shall have executed and delivered to
Seller the Assumption Agreement.
ARTICLE XII. INDEMNIFICATION
12.1 Buyer's Losses. Seller agrees to indemnify Buyer and save and hold
it harmless from, against and in respect of any and all damages (including,
without limitation, amounts paid in settlement with Seller's consent), losses,
obligations, liabilities, liens, deficiencies, costs and expenses, including,
without limitation, reasonable attorney's fees and costs incurred to comply with
injunctions and other court and Agency orders, and other costs and expenses
incident to any suit, action, investigation, claim or proceeding or to establish
Buyer's right to indemnification hereunder (herein referred to collectively as
the "Buyer's Losses") suffered, sustained, incurred or required to be paid by
Buyer by reason of (a) the failure by Seller to comply with applicable laws
relating to bulk transfers, including, without limitation, the provisions of the
Uniform Commercial Code of the State of Virginia; (b) any representation or
warranty made by Seller in or pursuant to this Agreement being untrue or
incorrect in any respect; (c) any failure by Seller to observe or perform its
covenants and agreements set forth in this Agreement; (d) any liability for
product warranties or defective products arising from sales of finished goods
manufactured and sold by
<PAGE>
Seller prior to the Closing Date; (e) any failure by Seller to perform its
obligations in connection with any of its Employee Benefit Plans as defined in
Section 3(3) of ERISA; or (f) any failure by Seller to satisfy and discharge any
other debt, contract, agreement, liability, obligation, commitment, restriction,
disability or duty, whether direct or indirect, fixed, contingent or otherwise,
not expressly assumed by Buyer pursuant to this Agreement.
12.2 Sellers' Losses. Buyer agrees to indemnify Seller and save and
hold it harmless from, against, for and in respect of any and all damages
(including, without limitation, amounts paid in settlement with Buyer's
consent), losses, obligations, liabilities, claims, deficiencies, costs and
expenses, including, without limitation, reasonable attorneys' fees and costs
incurred to comply with injunctions and other court and Agency orders, and other
costs and expenses incident to any suit, action, investigation, claim or
proceeding or to establish Seller's right to indemnification hereunder (herein
referred to collectively as "Seller's Losses") suffered, sustained, incurred or
required to be paid by Seller by reason of (a) any representation or warranty
made by Buyer in or pursuant to this Agreement being untrue or incorrect in any
respect, (b) any failure by Buyer to observe or perform its covenants and
agreements set forth in this Agreement, (c) any liability for product warranties
or defective products arising from sales of finished goods manufactured or sold
by Buyer after the Closing Date, or (d) any failure by Buyer to satisfy and
discharge any liability or obligation expressly assumed by Buyer pursuant to
this Agreement.
12.3 Notice of Loss; Indemnified Party's Negligence. Notwithstanding
anything herein contained, the Indemnifying Party (as hereinafter defined in
Section 12.4) shall not have any liability under the indemnity provisions of
this Agreement with respect to a particular matter unless a notice setting forth
in reasonable detail the breach that is asserted has been given to the
Indemnifying Party and, in addition, if such matter arises out of a suit,
action, investigation or proceeding, such notice is given promptly after the
Indemnified Party (as hereinafter defined in Section 12.4) shall have been given
notice of the commencement of the suit, action, investigation or proceeding.
Notwithstanding the preceding sentence, failure of the Indemnified Party to give
notice hereunder shall not release the Indemnifying Party from its obligations
under this Article XII, except to the extent the Indemnified Party is actually
prejudiced by such failure to give notice. With respect to Buyer's Losses (as
defined below), Seller shall be the Indemnifying Party and Buyer shall be the
Indemnified Party. With respect to Seller's Losses, Buyer shall be the
Indemnifying Party and Seller shall be the Indemnified Party. An Indemnified
Party's failure to investigate or lack of due diligence occurring for any reason
whatsoever, shall not (a) constitute a defense to any action or proceeding
brought by the Indemnified Party to enforce his or its rights under this Article
XII, (b) excuse performance by the Indemnifying Party of its obligations under
this Article XII, or (c) entitle the Indemnifying Party to any right of setoff
or counterclaim against amounts owed under this Article XII.
12.4 Right to Defend. Upon receipt of notice of any suit, action,
investigation, claim or proceeding for which indemnification might be claimed by
an Indemnified Party, the Indemnifying Party shall be entitled promptly to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding at its own cost and expense. The Indemnified
Party shall have the right, but not the obligation, to participate at its own
expense in a defense thereof by counsel of its own choosing, but the
Indemnifying Party shall be entitled to control the defense unless the
Indemnified Party has
<PAGE>
relieved the Indemnifying Party from liability with respect to the particular
matter or the Indemnifying Party fails to assume the defense of the matter. If
the Indemnifying Party fails to defend, contest or otherwise protect in a timely
manner against any such suit, action, investigation, claim or proceeding, the
Indemnified Party shall have the right, but not the obligation, to defend,
contest or otherwise protect against the same, and make any compromise or
settlement thereof and recover the entire cost thereof from the Indemnifying
Party including reasonable attorneys' fees, disbursements and all amounts paid
as a result of such suit, action, investigation, claim or proceeding or the
compromise or settlement thereof. However, if the Indemnifying Party undertakes
the defense of such matters, the Indemnified Party shall not, so long as the
Indemnifying Party does not abandon the defense thereof, be entitled to recover
from the Indemnifying Party any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than the
reasonable costs of investigation undertaken by the Indemnified Party with the
prior written consent of the Indemnifying Party.
12.5 Cooperation. Seller and Buyer, and each of their affiliates,
successors and assigns shall cooperate with each other in the defense of any
suit, action, investigation, proceeding or claim by a third party and, during
normal business hours, shall afford each other access to their books and records
and employees relating to such suit, action, investigation, proceeding or claim
and shall furnish each other all such further information that they have the
right and power to furnish as may reasonably be necessary to defend such suit,
action, investigation, proceeding or claim.
ARTICLE XIII. TERMINATION
13.1 Termination. This Agreement may be terminated and abandoned at any
time prior to or on the Closing Date:
13.1.1 Mutual Consent. By the mutual consent in writing of Buyer and
Seller.
13.1.2 By Buyer. By Buyer in writing if any of the conditions to the
obligations of Buyer contained herein shall not have been satisfied or, if
unsatisfied, waived as of the Closing Date.
13.1.3 By Seller. By Seller in writing if any of the conditions to the
obligations of Seller herein contained shall not have been satisfied or, if
unsatisfied, waived as of the Closing Date.
13.1.4 Closing Delayed. By Buyer or Seller in writing if the Closing
shall not have occurred by March 15, 1997.
13.2 No Further Force or Effect. In the event of termination and
abandonment of this Agreement pursuant to the provisions of Section 12.1, this
Agreement shall be of no further force or effect, except for Sections 13.1 and
13.2 and the post-termination provisions of Section 9.7, which shall not be
affected by termination of this Agreement.
ARTICLE XIV. MISCELLANEOUS
14.1 Expenses. Except for the parties agreement to share equally the
attorneys' fees and costs associated with the preparation of the initial draft
of this Agreement, the initial draft of the Supply Agreement, the
<PAGE>
initial draft of the License Agreement and the initial draft of the
Non-Competition Agreement (which fee and cost shall not exceed a total of
$10,000) or as otherwise expressly provided herein, Seller and Buyer, shall each
pay its own expenses in connection with the preparation of this Agreement, and
the consummation of the transactions contemplated hereby, including, without
limitation, fees of its own counsel, auditors and other experts, whether or not
such transactions be consummated.
14.2 Notices. All notices, requests or other communications hereunder
shall be in writing, addressed to Seller or Buyer, at the following addresses:
(i) If to Doughtie's Foods, Inc.:
Mr. Vernon Mules, Chairman
Doughtie's Foods, Inc.
P. O. Box 7229
115 Chautauqua Avenue
Portsmouth, VA 23707
Telephone: (757) 399-6007
<PAGE>
with copy to:
William R. Waddell, Esquire
McGuire, Woods, Battle and Boothe, L.L.P.
World Trade Center - Suite 9000
101 West Main Street
Norfolk, VA 23510-1655
Telephone: (757) 640-3700
Telecopier: (757) 640-3701
(ii) If to Buyer:
Mr. Peter D. Pruden, III, President
The Smithfield Ham & Products Co., Inc.
P. O. Box 487
Smithfield, VA 23430
Telephone: (757) 357-2121
Telecopier: (757) 357-5407
with copy to
Bernard C. Baldwin, III, Esquire
Edmunds & Williams, P.C.
801 Main Street (24504)
P. O. Box 958 (24505)
Lynchburg, VA
Telephone: (804) 846-9000
Telecopier: (804) 846-0337
The address of either party may be changed by giving notice in writing at any
time to the other party. Any notice to be given under this Agreement shall be
deemed duly given if (i) delivered personally, (ii) sent by telecopy and
acknowledged by recipient, (iii) delivered by overnight express, or (iv) sent by
United States registered or certified mail, postage prepaid. Any notice that is
delivered personally, or sent by telecopy or overnight express in the manner
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt (and, in the case of telecopy acknowledgment) by
such party. Any notice that is addressed and mailed in the manner provided
herein shall be conclusively presumed to have been given to the party to which
it is addressed at the close of business, local time of the recipient, on the
third day after it is so placed in the mail.
14.3 Entire Agreement; Modification and Waiver. This Agreement sets
forth all of the promises, covenants, agreements, conditions and understandings
between the parties hereto and supersedes all prior and contemporaneous
agreements and understandings, inducements or conditions, expressed or implied,
oral or written. This Agreement may be amended, modified, superseded or
cancelled and any of the terms, covenants, representations, warranties or
conditions hereof or any breach thereof may be waived only in writing signed by
Sellers and Buyer, or in the case of a waiver, by the party waiving compliance.
No waiver by
<PAGE>
any party of any condition, or the breach of any term, covenant, representation
or warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be construed as a further or continuing waiver of
any such condition or breach or a waiver of any other condition or of the breach
of any other term, covenant, representation or warranty set forth in this
Agreement.
14.4 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Virginia.
14.5 Captions. The captions of the various Articles and Sections are
for convenience of reference only and shall not affect the interpretation of the
provisions hereof.
14.6 Successors and Assigns. This Agreement, and the rights and
obligations hereunder of Buyer, may be assigned by Buyer to an "Affiliate" of
The Smithfield Companies, Inc. or Buyer, provided, however, any agreements,
waivers, or consents made or given by Buyer hereunder shall be binding upon any
such assignee and any such assignee shall assume the obligations of Buyer
hereunder. No such assignment shall relieve the assignor of its obligations
hereunder. For purposes of this Section, the term "Affiliate" shall mean any
corporation, partnership, association, trust or other legal entity in which The
Smithfield Companies, Inc. or Buyer has a direct or indirect majority equity
interest. Except as set forth above, this Agreement may not be assigned by any
party except with the prior written consent of the other parties. This
Agreement, and all of the terms, covenants and representations, or warranties
and conditions hereof, shall be binding upon, and inure to the benefit and be
enforceable by, the parties hereto and their successors and assigns. Nothing in
this Agreement, express or implied, is intended to confer or shall confer upon
any person other than the parties hereto, their successors and permitted assigns
any rights or remedies under or by reason of this Agreement.
14.7 Survival. All covenants and agreements set forth in this
Agreement, or any agreement furnished pursuant hereto, shall survive the Closing
and any investigation made by or in behalf of any party hereto. All
representations and warranties set forth in this Agreement, or any schedule or
document furnished pursuant hereto, shall survive the Closing and any
investigation made by or in behalf of any party hereto for a period of one year
from the Closing Date; provided, however, that the representations and
warranties in the first sentence of Section 6.3 shall survive indefinitely,
Section 6.12 shall survive until the statutes of limitations applicable to the
matters covered by such Section have expired, running from the Closing Date.
14.8 Schedules and Certificates. All statements contained in any
disclosure schedule, certificate or other instrument delivered by or on behalf
of the parties hereto, or in connection with the transactions contemplated
hereby, are an integral part of this Agreement, and shall be deemed
representations and warranties hereunder.
14.9 Facts "Known" to a Corporation. Whenever a representation or
warranty is made herein as being "to the best of knowledge," "to the knowledge
of," or "known" to a party, it is understood and agreed that an individual will
be deemed to have "knowledge" of a particular fact or other matter if: (a) such
individual is actually aware of such fact or other matter; or (b) a prudent
individual could be expected to discover or otherwise become aware of such
<PAGE>
fact or other matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other matter. A party,
person, or entity (other than an individual) will be deemed to have "knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, partner, executor, or trustee of
such party, person, or entity (or in any similar capacity) has, or at any time
had, knowledge of such fact or other matter.
14.10 Severability. If any provision or provisions of this Agreement or
any portion of any provision hereof, shall be deemed invalid or unenforceable
pursuant to a final determination of any court of competent jurisdiction or as a
result of future legislative action, such determination or action shall be
construed so as not to affect the validity or enforceability hereof and shall
not affect the validity or effect of any other portion hereof.
14.11 Bulk Transfer Laws. Buyer acknowledges that Seller will not
comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have duly caused this Agreement to be
executed as of the day and year first above written.
DOUGHTIE'S FOODS, INC.
By: Steven C. Houfek
(signature)
President
ATTEST:
Marion S. Whitfield, Jr.
(signature)
THE SMITHFIELD HAM & PRODUCTS
COMPANY, INCORPORATED
By: Peter D. Pruden, III
(Signature)
President
ATTEST:
Richard S. Fuller
(signature)
THE SMITHFIELD COMPANIES, INC.
By: Richard S. Fuller
(signature)
President
ATTEST:
Peter D. Pruden, III
(signature)
Vernon Mules
(signature)
Steve Houfek
(signature)
EXHIBIT (e)(2)
PRODUCT SUPPLY AGREEMENT
THIS PRODUCT SUPPLY AGREEMENT (the "Agreement") is entered into effective
the 28th day of February, 1997, by and between THE SMITHFIELD HAM & PRODUCTS
COMPANY, INCORPORATED, a Virginia corporation (hereinafter referred to as
"Smithfield"); and DOUGHTIE'S FOODS, INCORPORATED, a Virginia corporation
(hereinafter referred to as "Doughtie's");
W I T N E S S E T H :
WHEREAS, pursuant to the Asset Purchase Agreement dated as of January
30, 1997 (the "Purchase Agreement"), by and among Doughtie's and Smithfield,
Smithfield has agreed to buy certain of the assets of Doughtie's Manufacturing
Processing Division (the "Transaction"); and
WHEREAS, Smithfield following the Closing of the Purchase Agreement,
will manufacture and sell to Doughtie's the product described on Exhibit A
attached hereto (hereinafter referred to individually and jointly as the
"Product") and made a part hereof; and
WHEREAS, both Smithfield and Doughtie's are unwilling to proceed with
the Transaction unless the other party has entered into an agreement for the
purchase and sale of the Product; and
WHEREAS, the Purchase Agreement provides, as a condition to the
obligations of the parties to proceed with the Closing thereunder that
Smithfield and Doughtie's shall execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and in order to
induce Doughtie's and Smithfield to proceed with the Transaction, and in
consideration of the mutual covenants hereinafter contained, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. Purchase and Sale of Products.
Subject to the terms and conditions of this Agreement, Smithfield agrees to
sell to Doughtie's, and Doughtie's agrees to purchase from Smithfield at the
Purchase Price (as hereinafter defined) all of Doughtie's requirements for the
Product identified on Exhibit A attached hereto and any other (i) fresh or
frozen pork, beef, or chicken barbecue, (ii) fresh or frozen chili, and (iii)
Doughtie's label BBQ sauce, except for certain sales to Multi-Unit Accounts, as
hereinafter defined).
It is agreed and understood that the term "Product" as used herein is to
be construed to mean the identical products listed on Exhibit A; produced and
manufactured under the same formulas used by Doughtie's during its manufacture
of such products, which formulas are being sold to Smithfield pursuant to the
terms of
<PAGE>
the Asset Purchase Agreement. Doughtie's shall be under no obligation hereunder
to purchase from Smithfield Products which are produced with different formulas
or recipes.
B. Multi-Unit and Large End User Accounts.
Doughtie's shall not be obligated to purchase Product hereunder for sale to
any Multi-Unit Account which is defined as any account with over five (5)
affiliated locations to which Doughtie's sells or will sell Product on a current
basis and which account requires, after the closing of the Transaction,
Doughtie's to sell such account product other than that produced or sold by
Smithfield; (hereinafter referred to as "Multi-Unit Account" or "Multi-Unit
Accounts").
1. As a precondition to Doughtie's ability to sell product of
another vendor to a Multi-Unit Account under this Agreement, Doughtie's must
provide Smithfield with a written notice from the Multi-Unit Account requiring
such competing product.
2. Ten (10) business days prior to a sale by Doughtie's to any
excluded Multi-Unit Account hereunder, Doughtie's shall give Smithfield notice
of its intent to sell competing product from another supplier to such Account
and specify the competing product to be sold to such Account. Upon receipt of
such notice, Smithfield shall have the right to call on such Account with
Doughtie's assistance to try to sell Product produced by Smithfield or then
currently stocked and offered for sale by Smithfield to such Account instead of
the competing product being specified or offered to such Account by Doughtie's
pursuant to its notice to Smithfield.
3. Under no condition, during the term of this Agreement shall
Doughtie's "general list" for sale Product of any other vendor (other than
Smithfield). For purposes of this Agreement "general list" means Doughtie's
cannot offer a general product line other than the Product sold by Smithfield
hereunder.
4. Attached hereto and made a part hereof as Exhibit B is a list of
each customer to which Doughtie's currently sells a competing product, together
with a list of the vender and brand name of the competing product sold by
Doughtie's to each such customer. There shall be no restriction hereunder
against Doughtie's ability to continue to sell the listed competing product to
the applicable customer(s) set forth on Exhibit B.
C. Smithfield's Audit of Multi-Unit Accounts.
Smithfield shall have the right to audit Doughtie's records to confirm the
existence of any Multi-Units that Doughtie's represents to be an exception under
the terms of Sections A and B above, and in the event such audit reveals that a
customer does not fall within the exceptions of Sections A and B above, then
Doughtie's shall bear the cost of such audit and shall immediately cease sales
to such Account of Product other than those purchased or sold by Smithfield. If
the audit reveals that the customer is a properly designated Multi-Unit ,
Smithfield shall bear the cost of such audit, including all costs incurred by
Doughtie's in accommodating such audit.
<PAGE>
D. Purchase Price.
Smithfield shall sell to Doughtie's Product at a price reasonably
comparable and of the same quality to competitors pricing of same Product as
others buying in comparable volumes and shall offer to Doughtie's the same
rebate, growth, or marketing programs offered for the same Product except that
Smithfield may price Product at special rates lower than those sold to
Doughtie's in the case of bids or proposals made directly by Smithfield to
school or governmental entities and for unique pricing opportunities for major
end users (excluding other distributors).
1. Doughtie's shall have upon three days notice to Smithfield the
right to audit Smithfield's records to confirm the "Purchase Price" compliance
with the provisions of this Section D. In the event such audit reveals that the
invoice price for an item of Product from Smithfield to Doughtie's, over a
six-month rolling period, exceeds the price for the same item of Product sold by
Smithfield to other distribution customers of Smithfield, buying in comparable
volumes, then Smithfield shall promptly pay to Doughtie's any "over-charge" so
determined. If the audit reveals that Smithfield has complied with the "Purchase
Price" provisions of this Agreement, Doughtie's shall bear the cost of such
audit including all costs incurred by Smithfield in accommodating such audit.
E. Term.
The term of this Agreement shall be Five (5) years commencing on the date
hereof and terminating February 28, 2002.
F. Orders.
Products must be ordered from Smithfield not less than seven (7) days
prior to delivery date. Smithfield may accept, in its discretion any Product
ordered for delivery in less than seven (7) days.
G. Quality.
Smithfield warrants that the quality of the Product sold will be
reasonably equal to the standards of quality existing at the time of the Closing
of the Transaction.
H. Customer Complaints.
In the event Doughtie's loses fifty percent (50%) of the tonnage volume
for all Doughtie's customers for a category item of Product purchased from
Smithfield from the volume figures set forth on Exhibit C attached hereto, as a
result of quality complaints only, Doughtie's shall give Smithfield sixty (60)
days written notice of such loss of business and the nature of the qualtiy
complaint and will work with Smithfield during such 60-day period to cure or
correct any quality problem existing with such Product item(s). In the event
Doughtie's customers cannot be satisfied as to the quality of the Product item
within sixty (60) days from the receipt by Smithfield of notice from Doughtie's,
then Doughtie's shall have the option to carry other competitive brands to
satisfy its customer needs with respect to such Product items(s).
I. Payments.
1. Smithfield shall render its invoices covering shipments as soon
as practicable after each shipment. Terms of payment are net ten (10) days after
<PAGE>
date of invoice and other terms set forth on Smithfield's standard invoice, a
copy of which is attached hereto as Exhibit D and made a part hereof.
2. In case Smithfield shall have any reasonable doubt at any time as
to Doughtie's financial responsibility, Smithfield may decline to make further
shipments hereunder except upon payment in cash at the time of delivery.
3. All payments shall be made at Smithfield's principal place of
business or the place specified for payment on the applicable Smithfield
invoice.
J. Parties Cooperations.
Doughtie's agrees that its distribution division will maintain the
same selling practices and procedures, and customer service relating to the
Products to the extent practical during the term of this Agreement. The parties
hereto agree to cooperate with each other to market and sell the Products
through Seller's distribution business.
K. Force Majeure.
1. In the event of an Act of God, explosion, accident, fire,
drought, flood, earthquake, tornado, hurricane, strike, labor disturbance,
insurrection, riot, war, act of a public enemy, the acts or orders of a
governmental unit, freight embargo, transportation, power, utility, labor or
material shortage, delay in transportation or default of supplier or any other
cause beyond Smithfield's reasonable control, interfering with the production,
supply, transportation, or consumption of the Product or with the supply of raw
materials or utilities used in connection therewith (a "Force Majeure Event"),
the obligation of Smithfield to supply Product hereunder shall be held in
abeyance for the duration of the Force Majeure Event and the term of this
Agreement shall be extended for a period equal thereto. If a Force Majeure Event
results in or may reasonably be expected to result in an inability of Smithfield
to ship Product for more than seven (7) days past their scheduled shipping
dates, then Doughtie's may purchase the Product covered by any orders so
affected by the Force Majeure Event from other suppliers. SMITHFIELD SHALL NOT
BE LIABLE FOR ANY DAMAGES, DIRECT OR CONSEQUENTIAL, ARISING OUT OF ANY DELAY IN
DELIVERY OR FAILURE TO DELIVER ANY OF THE PRODUCT SOLD HEREUNDER IF SUCH DELAY
OR FAILURE TO DELIVER IS DUE TO A FORCE MAJEURE EVENT.
2. Any suspension or reduction of deliveries of Product under this
Agreement due to the occurrence of any Force Majeure Event shall not invalidate
or be a basis for termination of this Agreement, and, upon the removal or
termination of the Force Majeure Event during the term of this Agreement,
delivery shall be made and taken, as the case may be, on the specified terms in
effect immediately prior to such suspension or reduction.
3. If in consequence of any Force Majeure Event, Smithfield's
production is partially curtailed, Smithfield may allocate its available supply
of Product among its then present customers on such basis as Smithfield may deem
fair and practical, and in making such allocation, Smithfield shall, as near as
practicable, limit its reduction of shipments to such customers to the same
percentage in each case.
<PAGE>
4. The provisions of this Paragraph I shall not be available to any
party hereto which shall fail to use reasonable diligence to remedy the
situation and to remove the Force Majeure Event affecting its performance
hereunder with all reasonable dispatch. The requirement that any Force Majeure
Event be remedied with all reasonable dispatch shall not require the settlement
of strikes or labor controversies by acceding to the demands of the opposing
party or parties.
L. Assignment.
This Agreement shall be binding upon and inure to the benefit of the
successors of the parties hereto but shall not be assignable by either party
without the written consent of the other party except in connection with a
merger of such party or the sale of substantially all of the assets of such
party.
M. Notices.
All notices, requests or other communications hereunder shall be in
writing, addressed to Doughtie's or Smithfield, at the following addresses:
(i) If to Doughtie's:
Mr. Vernon Mules, Chairman
Doughtie's Foods, Inc.
P.O. Box 7229
115 Chautauqua Avenue
Portsmouth, VA 23707
Telephone (757) 399-6007
with copy to:
William R. Waddell, Esquire
McGuire, Woods, Battle and Boothe, L.L.P.
World Trade Center - Suite 9000
101 West Main Street
Norfolk, VA 23510-1655
Telephone: (757) 640-3700
Telecopier: (757) 640-3701
(ii) If to Smithfield:
Mr. Peter D. Pruden, III, President
The Smithfield Ham & Products Company, Incorporated
P. O. Box 487
Smithfield, VA 23464
Telephone: (757) 357-2121
Telecopier: (757) 357-5407
with copy to:
Bernard C. Baldwin, III, Esquire
Edmunds & Williams, P.C.
<PAGE>
801 Main Street (24504)
P. O. Box 958 (24505)
Lynchburg, VA
Telephone: (804) 846-9000
Telecopier: (804) 846-0337
The address of either party may be changed by giving notice in writing at any
time to the other party. Any notice to be given under this Agreement shall be
deemed duly given if (i) delivered personally, (ii) sent by telecopy and
acknowledged by recipient, (iii) delivered by overnight express, or (iv) sent by
United Stated registered or certified mail, postage prepaid. Any notice that is
delivered personally, or sent by telecopy or overnight express in the manner
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt (and, in the case of telecopy acknowledgement)
by such party. Any notice that is addressed and mailed in the manner provided
herein shall be conclusively presumed to have been given to the party to which
it is addressed at the closed of business, local time of the recipient, on the
third day after it is so placed in the mail.
N. Termination.
1. Except as otherwise provided in the paragraph dealing with Force
Majeure Event, in the event either of the parties hereto fails to perform in any
material respect any of the terms or conditions of this Agreement to be
performed by such party, and such failure continues for a period of 30 days
after written notice by the other party to the non-performing of such failure
and of a demand for performance, then this Agreement shall, at the option of the
injured party, terminate.
2. In the event of any voluntary or involuntary bankruptcy,
receivership, insolvency or reorganization proceedings involving either party or
its property, or the assignment of all, or substantially all, of the assets of
either party for the benefit of creditors, or a receiver is appointed for it or
any substantial part of its property, the other party may terminate its
obligations hereunder by giving written notice of such termination which shall
become effective upon the giving of such notice.
3. The parties' right of termination shall be in addition to, and
not in lieu of, any other rights or remedies available to the non-breaching
party.
4. The parties hereto acknowledge that damages may not be a
sufficient remedy in the event of the breach of this Agreement and, as a result,
agree that an injured party may have as a remedy against the other party, the
specific performance of the provisions of this Agreement.
O. Non-Waiver.
The failure of either party to insist in any one or more instances upon
strict performance of any of the provisions of this Agreement or to take
advantage of any of its rights hereunder shall not be construed as a waiver of
any such provisions or the relinquishment of any such rights, but the same shall
continue and remain in
<PAGE>
full force and effect.
P. Entire Agreement.
This Agreement sets forth the entire agreement between the parties with
respect to the subject matter hereof, and the parties shall not be bound by any
representations or agreements which are not expressly set forth in this
Agreement.
Q. Amendments.
No modification, amendment or waiver of any provision of this Agreement
shall be effective unless in writing signed by an authorized officer of each of
the parties hereto.
R. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original and all of which
together shall constitute one and the same instrument.
S. Captions.
The captions of the various paragraphs of this Agreement are for
convenience of reference only and shall not affect the interpretation of the
provisions hereof.
T. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Virginia (other than its choice of law principles).
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by the respective officers as of the date first written above.
SMITHFIELD HAM & PRODUCTS COMPANY,
INCORPORATED
By: Peter D. Pruden, III
(signature)
President
DOUGHTIE'S FOODS, INC.
By: Marion S. Whitfield, Jr.
(signature)
Senior Vice President
EXHIBIT (e)(3)
TRADEMARK LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made as of the 28th day of
February, 1997, by and between DOUGHTIES'S FOODS, INC., a Virginia corporation
with offices located in Portsmouth, Virginia (the "Licensor") and SMITHFIELD HAM
AND PRODUCTS COMPANY, INCORPORATED (the "Licensee").
W I T N E S S E T H T H A T:
WHEREAS, Licensor is the owner of the federally registered (Registration
No. 1053389) trademark DOUGHTIE'S; and,
WHEREAS, Licensee wishes to produce, market and sell Doughtie's BBQ
products, Chili Products, Sauces, Soups, and Stews, under the Trademark; and
WHEREAS, Licensor is willing to grant to Licensee licenses to use the
trademark on the Goods pursuant to the terms of this Agreement, and to pursue
the registration of the said Trademark with the United States Patent Office.
NOW, THEREFORE, for good and valuable consideration and the exchange of
obligations and promises contained herein, the parties hereby agree as follows:
1. Definitions. For the purposes of this Agreement, the terms below are
defined as follows:
"Goods" means the items shown on Exhibit A.
"Territory" means the United States, its territories and protectorates.
"Trademark" means the trademark "DOUGHTIE'S" as federally registered.
2. Grant of Licenses. Licensor hereby grants to Licensee:
a. an exclusive paid-up license (the "Retail License"), to the
exclusion of Licensor as well as third parties, for the use of the trademark
DOUGHTIE'S to produce, market, and sell the Goods in the Territory to retail
groceries, including, without limitation, Sam's Club and similar wholesale
clubs, mass merchandisers, military commissaries, convenience stores and vending
machines, and all other retail outlets that sell to the general public without
repackaging; and
b. a non-exclusive paid-up license (the "Institutional
License") for the use of the trademark DOUGHTIE'S, to produce, market, and sell
the Goods in the Territory to the institutional food service distributors listed
on Exhibit B attached hereto and made a part hereof; and
<PAGE>
c. Licensee agrees that it shall not use the Trademark or any
form of the DOUGHTIE'S name except as expressly permitted by this Agreement.
Licensee may add BBQ products, cili products, and BBQ or chile sauces (but not
other products) to its "DOUGHTIE'S" product line without the consent of Licensor
provided that each such added product meets the quality standards of Section 7
herein. Each such added product shall be subject to the terms and conditions of
this Agreement.
3. Term.
a. The term of the Retail License shall be for a period of
five (5) years from the date hereof, automatically renewable for successive
twenty (20) year terms, unless sooner terminated under the provisions of this
Agreement.
b. The term of the Institutional License shall be for two (2)
years from the date hereof, unless sooner terminated under the provisions of
this Agreement.
4. Ownership of the Trademark. It is expressly agreed that Licensor
retains ownership of the Trademark and that any and all use of the Trademark by
Licensee will inure to the benefit of the Licensor and that the Licensor shall
continue during the term hereof and thereafter to use the Trademark for all
products other than the Goods. Licensee shall not contest the validity,
ownership or title of Licensor to any of the Trademark and Licensee shall not
apply for nor assist or aid others in applying for registrations of the
Trademark or any other tradename or trademark which could be confusingly similar
to the Trademark in any state, country or other political jurisdiction anywhere
in the world. In the event the Licensee desires to make use of the Trademark in
a country other than the United States, the Licensee shall so notify Licensor
and advise Licensor of the country or other political jurisdiction in which
Licensee desires to use the Trademark and, at the expense of and for the account
of Licensee, Licensor shall forthwith apply for a registration in the name of
the Licensor for the name of the Trademarks. Any applications for or
registrations of the Trademark shall issue and be maintained in the name of the
Licensor and the new applications and/or registrations shall be included under
the terms of this Agreement.
5. Registration of Trademark. Licensor shall, at its expense, maintain
the federal registration for the Trademark "DOUGHTIE'S" with the United States
Patent and Trademark Office for the Goods in the Territory, and shall not permit
the registration to become abandoned. The failure to maintain the registration
of the Trademark shall not diminish Licensee's rights to the use of same as
provided herein.
6. Use of the Trademark.
a. Licensee shall affix the Trademark to the Goods in a manner
consistent with the labels that are used by the Licensor on its products bearing
the same Trademark or as otherwise specified in writing by Licensor and shall
display the Trademark on all written materials utilizing the Trademark with
prominence achieved at a minimum, by capitalizing the initial letter of the
Trademark. The Licensee shall display the circle registration symbol (a) after
the Trademark on the Goods and at least once in the written materials and the
Goods, and written materials shall bear the following ownership notice:
DOUGHTIE'S is a trademark of Doughtie's Foods, Inc.
<PAGE>
b. Licensee shall provide reasonable assistance to Licensor in
executing documents for the Licensor to obtain whatever additional protection
Licensor deems reasonably necessary to protect Licensor's interest in the
Trademarks.
7. Quality Control.
a. All Goods marketed and sold by Licensee under the Trademark
shall not be of a quality less than the quality of such Goods now being sold
under the Trademark by Licensor, and Licensee shall consistently apply good
manufacturing practices in all phases of production, packaging, storage, and
shipment of the Goods. For the purpose of ensuring such quality, Licensor may at
any reasonable time during regular business hours inspect the processing
facilities of Licensee, inspect the Goods at the places where they are processed
or stored and take reasonable samples thereof.
b. At least once per calendar year upon receipt of Licensor's
written request, Licensee shall furnish to Licensor two (2) cases of Goods and
representative samples of labels, packaging and advertising materials bearing
the Trademarks.
c. Licensee shall comply with all applicable federal and state
laws and regulations regarding the processing and packaging of the Goods, and
its failure to do so will be deemed a material breach of this Agreement.
d. Licensee acknowledges that Licensor has an overriding
interest in protecting the reputation of Licensor and of DOUGHTIE'S branded
products. Accordingly, Licensee shall, immediately upon notice thereof, fully
inform Licensor as to any actual or proposed action, by any governmental agency,
consumer or environmental group, media or other organization directed toward
removing any quantity of any of the Goods from the market in all or any portion
of the Territory, based on alleged injury or death, alleged unwholesomeness or
potential for harm, alleged contamination, tampering or similar act and/or
alleged violation of law in connection with production, labeling, packaging,
storage, shipment, advertising and/or sale. Except for the removal of the Goods
from the inventories of third parties in the ordinary course of normal quality
maintenance as established by industry norms based on the shelf life of the
Goods, Licensee shall likewise immediately and full inform Licensor as to any
proposal on Licensee's part to remove any quantity of any of the Goods from the
market in all or in any portion of the Territory on account of suspected
nonconformity with the specifications, improper labeling, unwholesomeness,
possibility of consumer harm and/or violation of any law(s). Licensee shall
closely coordinate with Licensor in respect to any proposed actions and public
statements in respect to the foregoing, and shall carefully consider, and if
reasonable to do so, follow all requests of Licensor in respect thereto.
Licensee shall not issue any public statement implying that Licensor has any
responsibility for the manufacture, packaging, labeling, shipping, advertising
or any other activity related to the sale of the Goods. All information
pertaining to the matters dealt with in this Section 7.d shall be held in
absolute confidence, except only as between Licensee and Licensor and their
respective attorney(s) or as ordered by any court or agency of competent
jurisdiction. Any violation of Licensee's obligations described in this Section
7.d shall be grounds for immediate termination of this Agreement.
8. Infringement. Licensee shall immediately notify Licensor of any use
of the Trademark by third parties which
<PAGE>
infringes the Retail License or the Institutional License during their
respective terms. Licensor shall have the obligation to pursue any infringements
of the Trademark at Licensor's expense; provided however that Licensor may at
its option, in lieu of such defense, transfer and convey the Trademark to
Licensee for use on and in connection with the Goods and any other items
Licensor may have approved under Section 2 hereof If Licensor makes such
transfer, Licensee shall grant to Licensor a perpetual, paid-up license for all
uses not then covered by Licensee's license, on terms comparable to those set
out herein excluding the provisions herein dealing with the duty to defend the
Trademark. In the event Licensor files suit and is successful in obtaining a
decision of infringement, any monetary award of the court in Licensor shall be
for Licensor's sole account. Licensor shall not enter into any settlement
agreements with any infringers that permits the continuing use of the infringing
mark unless Licensee has been advised of all of the terms of the settlement and
has agreed in writing to the Licensor's acceptance of such terms. Licensee
agrees to reasonably cooperate with Licensor in pursuing infringements of the
Trademark. In the event that Licensor takes no action against an infringer of
the Trademark, Licensee may do so at Licensor's expense and may join Licensor as
a party, and Licensor shall provide all reasonable cooperation to Licensee for
the prosecution of the case. In the event the Licensee is awarded a monetary
judgment for the successful prosecution of the infringement, the award shall be
for the sole account of the Licensee, subject to a credit to the Licensor for
its obligation to bear the expense of the action. Licensee shall not enter into
any settlement agreements with any infringers that permits the continuing use of
the infringing mark unless Licensor has been advised of all the terms of the
settlement and has agreed in writing to Licensor's acceptance of such terms.
9. Assignability.
a. This Agreement shall be assignable by Licensee upon written
approval of Licensor, which approval shall not be unreasonably withheld. It is,
however, understood and agreed that it shall not be unreasonable for Licensor to
withhold its approval of such an assignment to a direct competitor of Licensor.
b. Licensor shall have the unrestricted right to assign this
Agreement.
10. Termination. Licensor may terminate this Agreement as follows:
a. Upon sixty (60) days written notice to Licensee for any
breach by Licensee of any of its obligations hereunder. Licensee shall have
sixty (60) days from receipt of the notice to remedy or make a good faith and
expeditious effort toward remedy of such breach.
b. If Licensee becomes insolvent, ceases sale of the Goods
bearing the Trademark (that are then covered by this Agreement) for a period of
one year and/or files for bankruptcy under the provisions of Chapter 7 of the
Bankruptcy Code, Licensor may immediately terminate this Agreement.
11. Notices. All notices, requests or other communications hereunder
shall be in writing, addressed to Doughtie's or Americana, at the following
addresses:
<PAGE>
(i) If to Doughtie's:
Mr. Vernon Mules, Chairman
Doughtie's Foods, Inc.
P.O. Box 7229
115 Chautauqua Avenue
Portsmouth, VA 23707
Telephone: (757) 399-6007
with copy to:
William R. Waddell, Esquire
McGuire, Woods, Battle and Boothe, L.L.P.
World Trade Center - Suite 9000
101 West Main Street
Norfolk, VA 23510-1655
Telephone: (757) 640-3700
Telecopier: (757) 640-3701
(ii) If to Smithfield:
Mr. Peter D. Pruden, III, President
The Smithfield Ham & Products Company, Incorporated
P. O. Box 487
Smithfield, VA 23430
Telephone: (757) 357-2121
Telecopier: (757) 357-5407
with copy to:
Bernard C. Baldwin, III, Esquire
Edmunds & Williams, P.C.
801 Main Street (24504)
P. O. Box 958 (24505)
Lynchburg, VA
Telephone: (757) 357-2121
Telecopier: (757) 357-5407
The address of either party may be changed by giving notice in writing at any
time to the other party. Any notice to be given under this Agreement shall be
deemed duly given if (i) delivered personally, (ii) sent by telecopy and
acknowledged by recipient, (iii) delivered by overnight express, or (iv) sent by
United States registered or certified mail, postage prepaid. Any notice that is
delivered personally, or sent by telecopy or overnight express in the manner
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt (and, in the case of telecopy acknowledgment) by
such party. Any notice that is addressed and mailed in the manner provided
herein shall be conclusively presumed to have been given to the party to which
it is addressed at the close of business, local time of the recipient, on the
third day after it is so placed in the mail.
12. Captions. The captions used in connection with the paragraphs and
subparagraphs of this Agreement are inserted only for the purpose of reference.
<PAGE>
Such captioning shall not be deemed to govern, limit, modify, or in any manner
affect the scope, meaning or intent of the provisions of this Agreement or any
part thereof; nor shall such captions otherwise be given any legal effect.
13. Governing Law. This Agreement shall be construed in accordance with
the law of the State of Virginia and the United States of America.
14. Entire Understanding. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof. No
alterations, changes or amendments hereto shall be effective unless made in
writing signed by both parties.
15. Indemnification.
a. By Licensee. Licensee shall be liable for and hereby agrees
promptly, competently, completely and at not cost to Licensor, to defend,
release, discharge, fully indemnify and hold Licensor and each of its directors,
officers, employees and agents harmless from and against any and all claims,
demands, damage, liability, actions, causes of action, loss, cost and expenses
of any nature whatsoever (including with limitation, investigation costs and
expenses and accountant's fees and expenses and attorneys' fees and expenses
incident thereto) by reason of any actual or alleged injury, including death of
any person whomsoever, or any actual or alleged financial loss to any person or
other entity,. whomsoever or whatsoever, or any actual or alleged loss, damage
or destruction of property of every class and description owned by or in the
possession of any person or other entity, whomsoever or whatsoever, in any
manner and however arising out of or attributed to Licensee's production,
manufacture, marketing, or sale of the Goods pursuant to this Agreement.
b. By Licensor. Licensor shall be liable for and hereby agrees
promptly, competently, completely and at no cost to Licensee, to defend,
release, discharge, fully indemnify and hold Licensee and each of its directors,
officers, employees and agents harmless from and against any and all claims,
demands, damage, liability, actions, causes of action, loss, cost and expenses
of any nature whatsoever (including with limitation, investigation costs and
expenses and accountant's fees and expenses and attorney's fees and expenses
incident thereto) arising by reason of Licensor's breach of any of its
representations, warranties, or covenants contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto have cause
this Agreement to be executed by their duly authorized officers the day and year
first above written.
DOUGHTIE'S FOODS, INC.
By: Marion S. Whitfield, Jr.
(Signature)
Senior Vice President
SMITHFIELD HAM AND PRODUCTS
COMPANY, INCORPORATED
By: Peter D. Pruden, III
(Signature)
President
EXHIBIT (g)
ASSET PURCHASE AGREEMENT
TTHIS ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of September
6, 1996 by and among LOETITIA ADAM ST. JAMES and CHRIS L. ST. JAMES ("St.
James"), TWB GOURMET FOODS, INC., a Virginia corporation ("TWB") CP SPECIALTY
FOODS, INC. ("CP Specialty Foods") and DOUGHTIE'S FOODS, INC. (the
"Doughtie's").
R E C I T A L S
A. Capitalized terms used in the Recitals to this Agreement shall have
the meanings assigned in Article I.
B. CP Specialty Foods desires to purchase certain assets of TWB and TWB
desires to sell certain assets of TWB to CP Specialty Foods.
C. St. James has agreed to release TWB of any liability under the
Employment Contract or license agreement.
D. St. James, Doughtie's and TWB have agreed to execute general
releases, releasing each other from any and all obligations unless expressly set
forth herein to the contrary.
A G R E E M E N T
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the following terms
have the following meanings:
"Accounts Receivable" shall mean indebtedness owed to TWB arising out of
the ordinary course of business which are more accurately listed in Schedule
3.6.
"Agreement" shall mean this Asset Purchase Agreement, as amended,
supplemented or otherwise modified from time to time.
"Closing Date" shall mean September 6, 1996.
<PAGE>
"Collateral" shall mean Equipment, the License Agreement, Inventory and
Accounts Receivable.
"Contract Date" shall mean the date set forth on page 1 of the Agreement.
"Contractual Obligation" shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Employment Contract" shall refer to the employment agreements between St.
James and TWB dated September 5, 1994 as the same may have been amended,
supplemented or otherwise modified from time to time.
"Financing Statements" shall refer to the documents filed to perfect TWB's
lien in the Collateral.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time.
"General Release" shall mean the General Mutual Release to be executed by
St. James, TWB, CP Specialty Foods and Doughtie's at closing in a form
acceptable to all parties and their counsel.
"Guarantors" shall refer to St. James.
"Indebtedness" as to any Person, at a particular time, (a) all Indebtedness
for borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which such Person otherwise assures a
creditor against loss, including, without limitation, accounts payable, accrued
expenses and other current liabilities, and inter-company accounts, and (b) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof.
"Inventory" shall mean good and useable raw material, finished goods and
supplies of CP Specialty Foods.
"Lease Agreement" shall mean the Industrial Lease Agreement dated August
17, 1994 by and between Wendall's Machine & Welding, Inc. and TWB.
"License Agreement" shall mean the License Agreement between St. James and
CP Specialty Foods dated April 24, 1996.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having
<PAGE>
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction).
"Loan Documents" shall mean the collective reference to this Agreement, the
Note, the Security Documents, and all other documents and agreements executed
and delivered in connection with this Agreement and/or the Loans, as any of the
same may be amended, supplemented, replaced, restated or otherwise modified from
time to time.
"Note" shall mean that certain Promissory Note dated September __, 1996,
made by CP Specialty Foods to TWB for $20,000.00 as set forth in Section 4.1(A)
of this Agreement.
"Obligors" shall refer to CP Specialty Foods under the
Note.
"Person" an individual, a partnership, a corporation, a business trust, a
joint stock company, a trust, an unincorporated association, a joint venture, a
Governmental Authority or any other entity of whatever nature.
"Requirements of Law" shall mean as to any Person, the certificate of
incorporation and bylaws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of it properties or to which such Person
or any of its property is subject.
"Security Agreement" shall refer to the agreement between CP Specialty
Foods and TWB which provides TWB with a Lien on the Collateral.
"Security Documents" shall mean the collective reference to the Security
Agreement and Financing Statements and all other documents and agreements
securing the Loan, in whole or in part, as any of the same may be amended,
supplemented, replaced, restated or otherwise modified from time to time.
Section 1.2 Other Definitional Provisions. Except as otherwise specified
herein, all references herein (I) to any Person shall be deemed to include such
Person's successors, transferees and assignees, but only, in the case of
transferees and assignees of the parties to this Agreement, to the extent the
applicable transfer or assignment complies with the provisions of this
Agreement, and (ii) to any applicable law defined or referred to herein shall be
deemed references to such applicable law as the same may have been or may be
amended or supplemented from time to time.
a. When used in this Agreement, the words "herein", "hereof", and
"hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision
<PAGE>
of this Agreement, and the words "section", "schedule" and "exhibit" shall
refer to Sections of and Schedules and Exhibits to this Agreement unless
otherwise specified.
b. Whenever the context so requires, each gender includes the other
genders, and the singular number includes the plural, and vice versa.
c. All terms defined in this Agreement shall have such defined
meanings when used in the Loan Documents except as otherwise expressly
stated therein.
d. When used in this Agreement in conjunction with a reference to the
Loan or any Loan Documents, the terms "related" and "relate to" shall refer
to events, circumstances or conditions directly affecting or directly
applying to the particular maker, endorser, guarantor or grantor or pledgor
of collateral with respect to the Loan, as the case may be.
Section 1.3 Captions. Article and Section captions in this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
ARTICLE II
RELEASE OF LIEN
Doughtie's hereby agrees to release its lien against the Collateral and to
authorize the sale of TWB's assets upon the agreement of St. James, CP Specialty
Foods and TWB to the terms set forth in this Asset Purchase Agreement.
ARTICLE III
SALE OF ASSETS
Section 3.1 Purchase and Sale of Assets. At the Closing Date, TWB agrees to
sell and transfer to CP Specialty Foods, and CP Specialty Foods agrees to
purchase and acquire from TWB, the assets set forth in Schedule 3.1, which is
attached hereto and made a part hereof by reference (the "Purchased Assets").
Section 3.2 Excluded Assets. The following are not included in the
Purchased Assets and for emphasis are expressly excluded, namely (I) cash, cash
equivalents, Merchandise Credits and securities, (ii) any accounts receivables
due from orders filled by TWB prior to April 24, 1996, (iii) the licenses and
permits which are not assignable and (iv) all Equipment not listed on Schedule
3.1.
Section 3.3 Assumed Liabilities. At the Closing, CP Specialty Foods will
not assume any of the liabilities and obligations of TWB except for making the
September rental payment
<PAGE>
of the Lease Agreement and any claim asserted by the ABC chain. Doughtie's shall
no longer have any implied or express obligation to guaranty obligations due by
TWB which obligations arose subsequent to April 24, 1996 .
Section 3.4 Purchase Price. CP Specialty Foods agrees to pay TWB a purchase
price equal to One Hundred Seventy-Five Thousand Four Hundred Sixteen and 00/100
Dollars ($175,416.00). The price consists of the following; (I) Thirty Thousand
and 00/100 Dollars ($30,000.00) in cash at closing; ; (ii) an assignment of
$20,000 in current accounts receivable within 45 days after closing and (iii) a
trade credit (without interest) to Doughtie's Foods, Inc. of $125,416 which can
be used over six (6) years but not exceeding $5,000 in any month without the
consent of CP Specialty Foods. St. James agrees to unconditionally guarantee the
deferred portion of the purchase price and the trade credit. The personal
guaranty as it relates to the trade credit shall be in a dollar amount equal to
the unused balance of the trade credit, which shall be due and owing within 45
days after CP fails to satisfy all or part of any reasonable request by
Doughtie's Foods to provide product pursuant to the trade credit or immediately,
without further notice, in the event CP files for protection under the
Bankruptcy Code. CP shall not impose any minimum quantities except as set forth
in Schedule 3.4.
Section 3.5 Security Agreement. The security agreement for the trade credit
and deferred portion of the Purchase Price shall be in the form of Schedule 3.5.
Section 3.6 Application of Accounts Receivables, Cash and Returned
Merchandise Credit. On April 24, 1996 , TWB agreed to transfer and assign its
Accounts Receivables, cash and Returned Merchandise Credit to Doughtie's to be
applied, at its face value amount to the obligations between Doughtie's and TWB.
TWB, St. James and CP Specialty Foods agree to reasonably cooperate with
Doughtie's in any efforts initiated to collect the Accounts Receivables. TWB
certifies that the Accounts Receivables set forth on Schedule 3.6, which is
attached hereto is an accurate listing of the Accounts Receivables assigned to
Doughtie's on April 24, 1996.
ARTICLE IV
RELATED AGREEMENTS
Section 4.1 Other Agreements At the Closing Date, TWB, St. James, CP
Specialty Foods and Doughtie's will enter into certain additional agreements
(the "Related Agreements") as follows: (A) Mutual Rescission of License and
Escrow Agreement between TWB and St. James and the return of formulas in the
possession of TWB or its agents which shall be in a separate agreement
acceptable to all parties and their counsel and which shall be executed at
closing; (B) Mutual release of liabilities executed by Doughtie's, TWB and St.
James which shall be in a
<PAGE>
separate agreement acceptable to all parties and their counsel and which shall
be executed at closing; Separate Corporate resolutions from TWB, Doughtie's and,
CP Specialty Foods authorizing the execution of all documents contemplated
hereunder; (D) CP Specialty Foods' agrees to hold prices charged to Doughtie's
Foods, Inc. at CP Specialty Foods' current published rates, as of the date of
this agreement, a copy of which is attached as Schedule 4.1(d) for products sold
to Doughtie's by CP Specialty Foods for 18 months after the Closing Date; (E) CP
Specialty Foods will satisfy the claim for close-dated product shipped by TWB to
the ABC chain which is demanding compensation and agrees to hold TWB harmless
from such claim; (F) The parties acknowledge that CP Specialty Foods has already
returned the unusable inventory; (G) If the $20,000 in assigned accounts
receivable have not been paid to Doughtie's Foods within 60 days after closing,
CP Specialty Foods and St. James shall jointly and severally be liable for this
$20,000 pursuant to the Note attached hereto as Schedule 4.1(g), which Note will
be secured by the security agreement attached hereto as Schedule 3.5; (H) CP
Specialty Foods agrees that during the period while there is an unused balance
on the trade credit, if Doughtie's Foods is providing CP Specialty Foods product
to any of its customers, CP Specialty Foods will not sell its product to the
customers listed on the attached Schedule 4.1(h); nor will it direct any
distributor to do so, it being understood, however, that CP Specialty Foods
cannot control distributor sales; (I) St. James shall at closing authorize Ron
Gates as escrow agent to deliver their 1500 shares of stock in TWB to TWB or its
designee.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TWB
TWB represents and warrants to CP Specialty Foods the following:
5.1 Non-Contravention. The execution and delivery by TWB of this Agreement
and the Related Agreements do not, and the consummation of the transactions
contemplated hereby and thereby, will not (I) result in a default, or give rise
to any right of termination, cancellation or acceleration (whether immediately
or after the giving of notice or the passage of time, or both), under the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which TWB is a party or by
which TWB or any of the purchased assets may be bound by a Person other than
Doughtie's, or (ii) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to TWB, any of the purchased assets or the business of
the TWB.
5.2 Litigation. There are no actions, suits, claims, investigations or
proceedings (legal, administrative or arbitrative) pending or threatened against
TWB, whether at law or in equity and whether civil or criminal in nature, before
any
<PAGE>
court, arbitrator, governmental department, commission, agency or
instrumentality, which, if adversely determined, could reasonably be expected to
affect the purchased assets. Furthermore, there are no existing judgments,
orders or decrees of any such court, arbitrator, governmental department,
commission, agency or other instrumentality which have, or can reasonably be
expected to have, the effect described in the preceding sentence.
5.3 Title to Properties. TWB will deliver good and marketable title to all
of the purchased assets, free and clear of any liens, mortgages, charges,
security interests or other encumbrances and has paid all sales taxes in
connection with the purchased assets, except for the security interest in
Collateral to secure Notes (collectively the "Encumbrances"). Doughtie's, also,
agrees to release its existing lien on the Purchase Assets.
5.4 Material Contracts. TWB has not breached any material contract, lease
or other agreement to which it is a party and has no knowledge of a breach by
any other party to any such material contract, lease or other agreement, which
affects or can reasonably be expected to affect the purchased assets.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ST. JAMES
CP Specialty Foods represents and warrants to TWB the following:
6.1 Organization; Authority. CP Specialty Foods has power and
authority to execute and deliver this Agreement and the Related Agreements and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of CP Specialty Foods of this Agreement and the Related Agreement
and the consummation by him of the transactions contemplated hereby and thereby,
have been duly authorized by CP Specialty Foods, and no other proceedings on the
part of CP Specialty Foods are necessary with respect thereto. This Agreement
constitutes, and the Related Agreements when executed and delivered by the
parties will constitute, valid and binding obligations of CP Specialty Foods,
enforceable in accordance with their terms except as limited by (I) any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally or (ii) general principles of equity,
whether considered in a proceeding in equity or at law.
6.2 Consents and Approvals. There is no requirement applicable to CP
Specialty Foods to make any filing with, or to obtain any consent or approval of
any public body, business entity or individual as a condition to the
consummation of the transactions contemplated by this Agreement.
6.3 Non-Contravention. The execution and delivery by CP Specialty Foods of
this Agreement and the Related Agreements does not and will not result in a
default, or give rise to any right of termination, cancellation or acceleration
(whether immediately
<PAGE>
or after the giving of notice or the passage of time, or both), under the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which CP Specialty Foods
is a party or by which CP Specialty Foods may be bound, or violate any order,
writ, injunction, decree, statute, rule or regulation applicable to CP Specialty
Foods.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Collection of Receivables. Doughtie's shall have the right to initiate
any collection actions against debtors who are customers of TWB to collect
Accounts Receivables. TWB shall execute any and all documents necessary to
properly transfer and assign any Accounts Receivables to Doughtie's.
7.2 Expenses. Except as otherwise provided in this Agreement, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by Doughtie's, CP Specialty Foods or St. James
according to which of them incurred such costs and expenses.
7.3 Public Announcements. The parties will consult with each other before
issuing any press releases or making any public statements with respect to this
Agreement, and the transactions contemplated hereby, and will not issue any such
press release or make any such public statement without the consent of the
other.
7.4 Subsequent Events. If any event shall occur after the date of this
Agreement and prior to the Closing which, had it occurred prior to the execution
of this Agreement, should have been disclosed by TWB or CP Specialty Foods to
the other or Doughtie's in a representation and warranty or otherwise, then,
upon the happening of such event, the party which would have been required to
disclose the happening of such event prior to the execution of this Agreement
will promptly disclose it to the other party.
7.5 Efforts to Consummate. Each of the parties agrees to use its reasonable
best efforts to consummate, as promptly as practicable, the transactions
contemplated hereby. Each party agrees to cooperate fully with the other in
assisting it to comply with the provisions of this Section.
7.6 Further Assurances. TWB will use reasonable efforts to implement the
provisions of this Agreement, and for such purpose, at the request of CP
Specialty Foods or Doughtie's, will at or after the Closing Date, without
further consideration, promptly execute and deliver such additional documents as
CP Specialty Foods or Doughtie's may reasonably deem necessary or desirable in
order to consummate more effectively the transactions contemplated hereby and to
vest in CP Specialty Foods title to the purchased assets free and clear of any
Encumbrances and properly document St. James obligations under the Note and
Security Documents.
<PAGE>
7.7 Labels. Doughtie's authorizes CP Specialty Foods to use the remaining
labels in TWB's Inventory which contain Doughtie's UPC Header Code 78087. CP
Specialty Foods, however, cannot reorder any additional labels with Doughtie's
UPC Header Code. Furthermore, CP Specialty Foods agrees to indemnify and hold
Doughtie's harmless for any and all losses or claims filed against the
Doughtie's which result from CP Specialty Foods' use of the remaining labels in
its Inventory.
7.8 Restricted Authority. Chris St. James shall have no
authority to negotiate checks made payable to TWB, to dispose of
any of the Purchased Assets except as provided herein, or to
negotiate or modify the amount of the existing Accounts
Receivables. TWB and Doughtie's will not negotiate checks made
payable to CP Specialty Foods.
ARTICLE VIII
DOCUMENTS DELIVERED AT CLOSING
8.1 Deliveries by TWB. At the Closing or sooner in some case TWB shall
deliver the following:
(a) a Bill of Sale and Assignment and such other documents as may be
necessary to transfer to CP Specialty Foods the Purchased Assets, all of which
shall be in form satisfactory to CP Specialty Foods; and
(b) an executed Mutual Release of License Agreement and Escrow
Agreement and formula held in escrow; and
an executed corporate resolution necessary to authorize the
transactions contemplated hereunder; and
(d) cash on hand and a proper assignment of Accounts Receivables to
Doughtie's; and
(e) an executed General Mutual Release Note to Doughtie's; and
(f) such additional documents as CP Specialty Foods or Doughtie's may
reasonably request.
8.2 Deliveries by CP Specialty Foods. At the Closing CP Specialty Foods
shall deliver the following:
(a) settlement funds due TWB required under this Agreement; and
(b) The executed Note and Security Documents; and
(c) Such other additional documents as CP Specialty Foods or Doughtie's
may reasonably request; and
<PAGE>
(d) Mutual release of liabilities; and
(e) Mutual rescission of license.
8.3 Delivery by St. James. An unconditional guarantee to pay the Note and
trade credit, if necessary, and a mutual release.
8.4 Closing Documents. All documents required under this Agreement shall be
in such form as provided in the Exhibits or if not attached as an Exhibit in a
form acceptable to all parties and their counsel.
ARTICLE IX
CONDITIONS TO OBLIGATION OF CP SPECIALTY FOODS
The obligation of CP Specialty Foods to consummate the transactions
contemplated by this Agreement is subject, to the extent not waived, to the
following conditions.
9.1 Representations and Warranties. Each of the representations and
warranties of TWB contained in this Agreement shall be true and correct in all
respects as of the date of this Agreement and as of the Closing.
9.2 Performance of this Agreement. TWB and Doughtie's shall have complied
with all of their obligations under this Agreement.
9.3 Consents and Approvals. All consents and approvals of governmental
bodies, business entities or individuals which TWB must obtain to transfer the
purchased assets.
ARTICLE X
CONDITIONS TO OBLIGATION OF TWB
The obligation of TWB to consummate the transactions contemplated by this
Agreement is subject, to the extent not waived, to the following conditions.
10.1 Representations and Warranties. Each of the representations and
warranties of CP Specialty Foods contained in this Agreement shall be true and
correct in all respects as of the date of this Agreement and as of the Closing.
10.2 Performance of this Agreement. CP Specialty Foods and Doughtie's shall
have complied with all of its obligations under this Agreement.
10.3 Corporate Authorization. All action required to be taken by CP
Specialty Foods in connection with the transactions
<PAGE>
contemplated by this Agreement shall have been taken, all documents incident
thereto shall be reasonably satisfactory in substance and form to TWB and
Doughtie's and TWB and Doughtie's shall have received such originals or copies
of such documents as it may reasonably request.
10.4 Merger. Dutterers of Manchester Corporation, a Maryland corporation
shall have merged into TWB.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF Doughtie's
The obligations of Doughtie's to consummate the transactions contemplated
by this Agreement is subject, to the extent not waived of legally binding the
transfer of St. James' interest in TWB to TWB or its assigns at no additional
cost to Doughtie's.
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices. All notices and other communications required to be
given to the parties hereto shall be in writing and shall be (I) delivered
personally, (ii) transmitted by telefax or (iii) mailed by registered or
certified mail (return receipt requested and postage prepaid) as follows:
If to St. James, to:
Loetitia Adam St. James and Chris L. St. James
9304 Willow Terrace
Norfolk, Virginia
Telefax No.:531-9440
with a copy to:
Ronald M. Gates, Esquire
Payne, Gates, Farthing & Radd, P.C.
15th Floor, Dominion Tower
999 Waterside Drive
Norfolk, Virginia 23510
Telefax No.:627-6583
If to Doughtie's, to:
Vernon Mules
c/o Doughtie's Foods, Inc.
2700 Lord Baltimore Drive
Baltimore, Maryland 21244
with a copy to:
William R. Waddell, Esquire
9000 World Trade Center
Norfolk, Virginia 23510
(804) 640-3722
If to TWB, to:
Doughtie's Foods, Inc.
2410 Wesley Street
Portsmouth, Virginia 23707
and
Loetitia Adam St. James and Chris L. St. James
9304 Willow Terrace
Norfolk, Virginia
Telefax No.: 531-9440
or to such other business entities, individuals, addresses or telefax numbers as
the parties entitled thereto shall specify from time to time by notice. If given
personally or transmitted by telefax, a notice or other communication shall be
deemed to have been given when it is received. If given by mail, it shall be
deemed to have been given on the third business day following the day on which
it was posted.
12.2 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
12.3 Schedules. The information contained in any schedule which is referred
to in a representation or warranty shall be deemed to have been disclosed in
connection with, and be a part of, that particular representation or warranty
only, and shall not be deemed a part of any other representation or warranty.
12.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.5 Miscellaneous. This Agreement (I) constitutes the entire agreement and
supersedes any prior agreements or understandings, written or oral, between the
parties with respect to the subject matter hereof; (ii) is not intended to, and
shall not confer upon any other person or business entity other than the parties
hereto, any rights or remedies with respect to the subject matter hereof; (iii)
shall not be assigned by operation of law or otherwise; and (iv) shall be
governed in all respects by the laws of the Commonwealth of Virginia without
regard to its choice of law rules.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and their corporate seals to be hereto affixed and attested by their
duly authorized officers.
TWB GOURMET FOODS, INC.
<PAGE>
By: /s/ Marion S. Whitfield, Jr.
-----------------------------
Its: Authorized Agent
----------------------------
/s/ Loetitia Adam St. James
--------------------------------
LOETITIA ADAM ST. JAMES
/s/ Chris L. St. James
--------------------------------
CHRIS L. ST. JAMES
DOUGHTIE'S FOODS, INC.
By: /s/ Marion S. Whitfield, Jr.
-----------------------------
Its: Senior Vice President
----------------------------
CP SPECIALTY FOODS, INC.
By: /s/ Andrew J. Feldman
-----------------------------
Its: President
----------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Description of Capital Transaction Years ended
- ----------------------------------------------------------------------------------------------------------
December 28, December 30, December 31, December 25, December 26,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Shares issued and outstanding
December 28, 1991 1,019,319 1,019,319 1,019,319 1,019,319 1,019,319
Acquisition of treasury stock (2,926) (2,926) (2,926) (2,926) (2,194)
Acquisition of treasury stock (2,541) (2,541) (2,541) (1,578) -
Acquisition of treasury stock (5,334) (5,334) (2,622) - -
Acquisition of treasury stock (5,991) (750) - - -
Acquisition of treasury stock (2,215) - - - -
--------- --------- --------- --------- ---------
Weighted average number of
shares outstanding 1,000,312 1,007,768 1,011,230 1,014,815 1,017,125
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<PAGE>
Note:
The effects of the treasury stock transactions on the weighted average number of
shares outstanding are calculated as follows:
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.
1996
- ----
1,900 shares times 301 days divided by 364 days equals 1,571.
2,575 shares times 91 days divided by 364 days equals 644.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
- ------------------------------
Name of Corporation State of Incorporation
------------------- ----------------------
TWB Gourmet Foods, Inc. Virginia
<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 28, 1996 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-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 373
<SECURITIES> 0
<RECEIVABLES> 7,266
<ALLOWANCES> 341
<INVENTORY> 4,498
<CURRENT-ASSETS> 12,272
<PP&E> 9,616
<DEPRECIATION> 6,048
<TOTAL-ASSETS> 15,932
<CURRENT-LIABILITIES> 2,812
<BONDS> 5,065
0
0
<COMMON> 998
<OTHER-SE> 7,056
<TOTAL-LIABILITY-AND-EQUITY> 15,932
<SALES> 80,633
<TOTAL-REVENUES> 80,633
<CGS> 67,481
<TOTAL-COSTS> 79,438
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 469
<INCOME-PRETAX> 726
<INCOME-TAX> (202)
<INCOME-CONTINUING> 928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 928
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.93
</TABLE>
