<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1997
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: 0-19887
WORTHINGTON FOODS, INC.
(Exact name of registrant as specified in its charter)
OHIO 31-0733120
(State of incorporation) (IRS Employer Identification Number)
900 PROPRIETORS ROAD, WORTHINGTON, OH 43085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 885-9511
Not Applicable
(Former name, former address and formal fiscal year,
if changed from last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 12, 1997
Common shares, no par value 8,647,274
Exhibit Index at Pages 14-15
Page 1 of 31
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WORTHINGTON FOODS, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
July 4, 1997 and December 31, 1996 ................................................ 3-4
Condensed Consolidated Statements of Income -
For the three month and six month periods ended July 4, 1997 and June 28, 1996 .... 5
Condensed Consolidated Statements of Cash Flows -
For the six month periods ended July 4, 1997 and June 28, 1996 .................... 6
Notes to Condensed Consolidated Financial Statements ................................ 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................................... 8-10
Item 3. Quantitative and Qualitative Disclosures About Market Risk .......................... 10
PART II OTHER INFORMATION .................................................................... 11
Item 1. Legal Proceedings ................................................................... 11
Item 2. Changes in Securities ............................................................... 11
Item 3. Defaults Upon Senior Securities ..................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders ................................. 11
Item 5. Other Information ................................................................... 11
Item 6. Exhibits and Reports on Form 8-K .................................................... 11-12
Signature ................................................................................... 13
Exhibit Index ............................................................................... 14-15
Exhibit 4(a) - $25,000,000 Revolving Note with The Huntington National Bank
dated May 13, 1997 ................................................................ 16-19
Exhibit 4(b) - First Amendment to Loan Participation Agreement between The
Huntington National Bank and National City Bank of Columbus dated May 13, 1997 .... 20-21
Exhibit 4(c) - Second Amendment to Second Amended and Restated Loan Agreement between
Worthington Foods, Inc. and The Huntington National Bank dated May 13, 1997 ....... 22-29
Exhibit 11 - Computation of Earnings Per Share ...................................... 30
Exhibit 27 - Financial Data Schedule ................................................ 31
</TABLE>
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ITEM 1.
FINANCIAL STATEMENTS
WORTHINGTON FOODS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
7/4/97 12/31/96
------- -------
(UNAUDITED) (AUDITED)
(000'S OMITTED)
<S> <C> <C>
ASSETS
Current Assets
Cash ................................................. $ 1,054 $ 811
Accounts receivable less allowance ................... 10,732 8,664
(1997 - $149; 1996 - $100)
Inventories:
Finished goods ................................... 14,948 11,618
Work in process .................................. 1,096 830
Raw materials .................................... 4,617 3,170
Packaging materials and supplies ................. 2,015 1,801
------- -------
22,676 17,419
Income taxes ......................................... -- 128
Prepaid expenses and other ........................... 3,697 2,330
------- -------
Total Current Assets ............................. 38,159 29,352
Property, Plant and Equipment
Land ............................................. 781 817
Building and improvements ........................ 23,133 22,746
Machinery and equipment .......................... 43,416 40,832
Furniture and fixtures ........................... 2,189 1,693
Construction in progress ......................... 9,369 5,082
------- -------
78,888 71,170
Less accumulated depreciation and amortization ... 23,494 21,608
------- -------
55,394 49,562
Goodwill ............................................. 836 997
Other intangible assets .............................. 740 827
------- -------
1,576 1,824
TOTAL ASSETS ............................... $95,129 $80,738
======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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WORTHINGTON FOODS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
7/4/97 12/31/96
------- -------
(UNAUDITED) (AUDITED)
(000'S OMITTED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable (including outstanding checks
of $2,030 in 1997 and $767 in 1996) ........................... $ 5,623 $ 4,608
Accrued compensation ........................................... 454 1,435
Other accrued expenses ......................................... 3,131 1,549
Current portion of long-term debt and capital lease obligations 1,630 1,630
Income taxes ................................................... 893 --
------- -------
Total Current Liabilities .................................. 11,731 9,222
Long-Term Liabilities
Long-term debt and capital lease obligations ................... 25,226 17,960
Deferred income taxes .............................................. 5,102 4,825
------- -------
Total Long-Term Liabilities ................................ 30,328 22,785
Shareholders' Equity
Preferred shares, no par value, authorized 2,000,000 shares,
none issued ................................................... -- --
Common shares, $1.00 stated value, authorized 30,000,000 shares,
issued 8,643,496 shares in 1997 and 8,544,676 in 1996 ......... 8,643 8,545
Additional paid-in capital ..................................... 12,908 12,625
Retained earnings .............................................. 31,519 27,561
------- -------
53,070 48,731
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................. $95,129 $80,738
======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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WORTHINGTON FOODS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
7/4/97 6/28/96 7/4/97 6/28/96
---------- ---------- ---------- ----------
(UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales .......................... $ 31,398 $ 27,548 $ 57,887 $ 51,901
Cost of goods sold ................. 17,947 16,767 33,502 31,836
---------- ---------- ---------- ----------
Gross profit .................... 13,451 10,781 24,385 20,065
Selling and distribution expenses .. 7,581 6,181 13,730 11,871
General and administrative expenses 892 967 1,784 1,805
Research and development expenses .. 333 333 706 670
---------- ---------- ---------- ----------
8,806 7,481 16,220 14,346
---------- ---------- ---------- ----------
Income from operations ............. 4,645 3,300 8,165 5,719
Interest expense ................... 411 349 787 586
---------- ---------- ---------- ----------
Income before income taxes ......... 4,234 2,951 7,378 5,133
Provision for income taxes ......... 1,699 960 2,988 1,855
---------- ---------- ---------- ----------
Net income ......................... $ 2,535 $ 1,991 $ 4,390 $ 3,278
========== ========== ========== ==========
Earnings per share:
Primary ....................... $ 0.28 $ 0.23 $ 0.49 $ 0.37
========== ========== ========== ==========
Fully diluted ................. $ 0.28 $ 0.22 $ 0.49 $ 0.37
========== ========== ========== ==========
Dividends per share ................ $ 0.025 $ 0.02 $ 0.05 $ 0.04
========== ========== ========== ==========
Weighted average number of common
and common equivalent shares used in
computing earnings per share
Primary ....................... 9,005,190 8,804,255 8,986,479 8,792,325
Fully diluted ................. 9,039,106 8,829,028 9,033,977 8,828,048
</TABLE>
Note: 1996 share amounts have been adjusted to reflect the four-for-three share
split in December, 1996.
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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WORTHINGTON FOODS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
7/4/97 6/28/96
-------- --------
(UNAUDITED)
(000'S OMITTED)
<S> <C> <C>
Operating activities:
Net income .................................................. $ 4,390 $ 3,278
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation .............................................. 2,139 1,776
Deferred income taxes .................................... 277 174
Amortization of intangible assets ......................... 178 179
Deferred compensation ..................................... 0 21
Cash provided by (used for) current assets and liabilities:
Accounts receivable ..................................... (2,067) (252)
Inventories ............................................. (5,257) 480
Prepaid expenses and other .............................. (1,367) (800)
Accounts payable and accrued expenses ................... 1,616 (1,482)
Income taxes .................................................. 1,021 289
Decrease (increase) in other assets ....................... 69 (38)
-------- --------
Net cash provided by operating activities ................... 999 3,625
Investing activities:
Purchases of property, plant and equipment, net ............. (7,972) (7,125)
-------- --------
Net cash used for investing activities ...................... (7,972) (7,125)
Financing activities:
Proceeds from long-term borrowings .......................... 40,199 26,800
Payments on long-term borrowings ............................ (32,933) (23,260)
Proceeds from the issuance of common shares ................. 382 69
Dividends paid .............................................. (432) (382)
-------- --------
Net cash provided by financing activities ................... 7,216 3,227
Net increase (decrease) in cash ............................... 243 (273)
Cash at beginning of period ................................... 811 963
-------- --------
Cash at end of period ......................................... $ 1,054 $ 690
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 7
WORTHINGTON FOODS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed consolidated financial statements (unaudited)
include the accounts of Worthington Foods, Inc. and Subsidiary.
The information furnished reflects all adjustments (all of which were of a
normal recurring nature) which are, in the opinion of management,
necessary to fairly present the condensed consolidated financial position,
results of operations, and cash flows on a consistent basis. Operating
results for the three month and six month periods ended July 4, 1997 are
not necessarily indicative of the results that may be expected for the
year ended December 31, 1997.
The accompanying condensed consolidated financial statements (unaudited)
are presented in accordance with the requirements for Form 10-Q and
consequently do not include all the disclosures normally required by
generally accepted accounting principles. Reference should be made to the
Company's Form 10-K for the fiscal year ended December 31, 1996 (File No.
0-19887) for additional disclosures including a summary of the Company's
accounting policies, which have not significantly changed. The Company's
policy is that each fiscal year includes four, thirteen week periods.
2. The Board of Directors at its July 30, 1997 meeting declared a $0.025 per
share dividend payable October 31, 1997 to shareholders of record
September 26, 1997.
3. In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128 "Earnings Per Share" (Statement No. 128). Statement No.
128 requires adoption for periods ending after December 15, 1997. Until
that time, the Company will continue to apply the requirements of APB No.
15 for earnings per share.
The following table sets forth proforma earnings per share as calculated
under Statement No. 128 for the three month and six month periods ended
July 4, 1997 and June 28, 1996, respectively.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
7/4/97 6/28/96 7/4/97 6/28/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic:
Weighted average number of common
shares outstanding .............. 8,638,404 8,488,383 8,616,141 8,486,733
Net income ......................... $2,535,000 $1,991,000 $4,390,000 $3,278,000
========== ========== ========== ==========
Earnings per share ................. $ 0.29 $ 0.23 $ 0.51 $ 0.39
========== ========== ========== ==========
Diluted:
Weighted average number of common
shares outstanding .............. 8,638,404 8,488,383 8,616,141 8,486,733
Net effect of dilutive stock options
based on treasury stock method
using average market price ..... 366,786 315,872 370,338 305,592
---------- ---------- ---------- ----------
Weighted average common and common
equivalent shares ............... 9,005,190 8,804,255 8,986,479 8,792,325
========== ========== ========== ==========
Net income ......................... $2,535,000 $1,991,000 $4,390,000 $3,278,000
========== ========== ========== ==========
Earnings per share ................. $ 0.28 $ 0.23 $ 0.49 $ 0.37
========== ========== ========== ==========
</TABLE>
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<PAGE> 8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth selected items from the Company's Consolidated
Statements of Income expressed as a percentage of net sales for the periods
indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
7/4/97 6/28/96 7/4/97 6/28/96
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales ................................ 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ....................... 57.2 60.9 57.9 61.3
----- ----- ----- -----
Gross profit ........................... 42.8 39.1 42.1 38.7
Selling and distribution expenses ........ 24.1 22.4 23.7 22.9
General and administrative expenses ...... 2.8 3.5 3.1 3.5
Research and development expenses ........ 1.1 1.2 1.2 1.3
----- ----- ----- -----
28.0 27.1 28.0 27.7
----- ----- ----- -----
Income from operations ................... 14.8 12.0 14.1 11.0
Interest expense ......................... 1.3 1.3 1.4 1.1
----- ----- ----- -----
Income before income taxes ............... 13.5 10.7 12.7 9.9
Provision for income taxes ............... 5.4 3.5 5.2 3.6
----- ----- ----- -----
Net income ............................... 8.1% 7.2% 7.5% 6.3%
===== ===== ===== =====
Provision for income taxes as a percentage
of income before income taxes ........... 40.1% 32.5% 40.5% 36.1%
===== ===== ===== =====
</TABLE>
SECOND QUARTER AND SIX MONTH PERIOD OF 1997 COMPARED TO 1996
Net sales for the second quarter and six month period ended July 4, 1997
increased approximately $3,850,000 and $5,986,000 or 14.0% and 11.5% over the
similar prior year periods. Net sales for the second quarter and six month
period of 1997 to the Company's Specialty Markets (Seventh-day Adventist, Health
Food and International) increased approximately $1,067,000 and $722,000 or 11.3%
and 4.1% over the similar prior year periods. Solid gains continued in the
Health Food market as net sales increased approximately $389,000 and $669,000 or
15.7% and 14.2% over the similar prior year periods. Net sales to the
Seventh-day Adventist and International markets increased approximately $401,000
and $277,000 or 7.2% and 20.7% for the three month period ending July 4, 1997,
bringing year-to-date sales figures in line with the prior year.
Foodservice sales for the second quarter and six month period of 1997 increased
approximately $423,000 and $951,000 or 14.9% and 17.5% over the similar prior
year periods. New distributors continue to be added as the Company's new
Director of Foodservice continues to make progress in this important growth
category.
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<PAGE> 9
Net sales of Morningstar Farms products to supermarkets in the second quarter
and six month period of 1997 increased approximately $2,360,000 and $4,313,000
or 15.4% and 15.0% over the similar prior year periods. Net sales of Morningstar
Farms meat alternative products in the second quarter and six month period of
1997 increased approximately $2,659,000 and $4,546,000 or 21.1% and 19.5% over
the similar prior year periods. Morningstar Farms sales continue to benefit from
strong consumer programs and expanded distribution of new and existing products.
Chik Nuggets, introduced in early February, 1997, are now available in 39% of
the US supermarkets, and continue to show considerable market penetration. Net
sales of Morningstar Farms frozen egg substitutes for the second quarter and six
month period of 1997 decreased approximately $300,000 and $233,000 or 11.2% and
4.3% from the similar prior year periods.
Gross profit as a percentage of net sales for the second quarter of 1997
increased from 39.1% in 1996 to 42.8% in 1997. For the six month period of 1997,
gross profit increased from 38.7% in 1996 to 42.1% in 1997. The increased gross
profit percentages are the results of focused efforts to reduce variable costs,
improved operating efficiencies at the Company's two manufacturing facilities,
the elimination of contract manufacturers, and a modest price increase that went
into effect in January, 1997.
Selling and distribution expenses as a percentage of net sales for the second
quarter and six month period of 1997 increased from 22.4% and 22.9% in 1996 to
24.1% and 23.7% in 1997. These expenses reflect the additional costs associated
with aggressive new product introductions, expanded distribution of existing
products and higher selling and distribution expenses associated with increased
sales. General and administrative expenses for the second quarter and six month
period of 1997 decreased from 3.5% in 1996 to 2.8% and 3.1% in 1997. The
decrease is attributable to the timing of some expenses as well as efficiencies
gained through increased sales volume. Research and development expenses remain
comparable to prior year percentages.
Interest expense for the second quarter and six month period of 1997 increased
approximately $62,000 and $201,000 or 17.8% and 34.3% over the similar prior
year periods. The increase is attributable to higher average borrowing levels
associated with the Company's capital expansion at the Zanesville facility and
higher inventory levels to support future sales growth.
Net income for the second quarter and six month period of 1997 increased
approximately $544,000 and $1,112,000 or 27.3% and 33.9% over the similar prior
year periods. The increase is primarily attributable to increased sales and
increased gross profit percentages, partially offset by slightly higher selling,
general and administrative expenses, higher interest costs, and a higher tax
rate. In the second quarter of 1996, the Company recognized $250,000 of a
one-time $500,000 investment tax credit from the State of Ohio.
LIQUIDITY AND CAPITAL RESOURCES
On May 19, 1997, the Company increased its revolving credit facility from
$20,000,000 to $25,000,000. The Company relies on cash generated from operations
and the $25,000,000 revolving credit facility as its principal sources of
liquidity. As of August 12, 1997, $6,775,000 of this credit facility was unused.
The Company believes that this increased borrowing capability plus internally
generated funds will be adequate to finance current growth levels into the
foreseeable future.
The $11,500,000 capital expansion project at Zanesville to install a second
production line to produce meat alternatives and to finish additional warehouse
space for dry storage continues to progress. The project is expected to be
completed by the end of September, 1997 and is expected to be funded from cash
generated from operations and the revolving credit facility. As of August 12,
1997, approximately $8,244,000 of the $11,5000,000 has been paid.
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<PAGE> 10
Net cash provided by operating activities for the six month period of 1997
decreased from the similar prior year period due to changes in operating assets
and liabilities, partially offset by an increase in net income.
Net cash used for investing activities for the six month period of 1997
increased from the similar prior year period due to purchases of property, plant
and equipment related to the $11,500,000 Zanesville expansion project.
Net cash provided by financing activities for the six month period of 1997
increased from the similar prior year period, primarily due to increased
borrowings to finance capital expenditures for the $11,500,000 Zanesville
expansion project.
INFLATION
Although inflation has slowed in recent years, the Company continues to seek
ways to moderate any inflationary impact. To the extent possible based on
competitive conditions, the Company passes increased costs on to its customers
by increasing prices over time.
The Company uses the LIFO method of accounting for raw materials, packaging
materials and the materials content of work-in-process and finished goods. Under
this method, the cost of products sold reported in the financial statements
approximates current costs.
COMPLIANCE WITH ENVIRONMENTAL PROTECTION REGULATIONS
The Company does not anticipate that compliance with federal, state, and local
regulations with respect to the discharge of materials into the environment, or
otherwise relating to the protection of the environment, will have a material
effect on capital expenditures, earnings, or the competitive position of the
Company.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q which are not historical fact are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to differ
materially. Such risks, uncertainties and other factors include, but are not
limited to, changes in general economic conditions, fluctuation in interest
rates, increases in raw material costs, level of competition, market acceptance
of new and existing products, capital expenditure amounts, uninsured product
liability and other factors described in detail in the Company's filings with
the Securities and Exchange Commission and communication to shareholders.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
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<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 3(a). Amended and Restated Articles of Incorporation
of Worthington Foods, Inc. (as filed with the
Ohio Secretary of State on February 25, 1992)
Exhibit 3(b). Certificate of Amendment to Amended and Restated
Articles of Incorporation of Worthington Foods,
Inc. (as filed with the Ohio Secretary of State
on June 13, 1995)
Exhibit 3(c). Certificate of Amendment by Directors of
Worthington Foods, Inc. (as filed with the Ohio
Secretary of State on May 6, 1997)
Exhibit 3(d). Certificate of Amendment by Shareholders to the
Amended and Restated Articles of Incorporation
of Worthington Foods, Inc. (as filed with the
Ohio Secretary of State on May 6, 1997)
Exhibit 3(e). Amended and Restated Articles of Incorporation
of Worthington Foods, Inc. (reflecting
amendments through May 6, 1997)[for purposes of
SEC reporting compliance only; not filed with
Ohio Secretary of State]
Exhibit 4(a) $25,000,000 Revolving Note with The Huntington
National Bank dated May 13, 1997
Exhibit 4(b) First Amendment to Loan Participation Agreement
between The Huntington National Bank and
National City Bank of Columbus dated May 13,
1997
Exhibit 4(c) Second Amendment to Second Amended and Restated
Loan Agreement between Worthington Foods, Inc
and The Huntington National Bank dated May 13,
1997
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<PAGE> 12
Exhibit 10. Worthington Foods, Inc. 1993 Stock Option Plan
for Non-Employee Directors (reflects share
splits and amendments through April 22, 1997)
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
(b) No report on Form 8-K was filed during the fiscal quarter ended
July 4, 1997.
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<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORTHINGTON FOODS, INC.
(Registrant)
Date: August 14, 1997 By: /S/ WILLIAM T. KIRKWOOD
-----------------------------
William T. Kirkwood
Executive Vice President and
Chief Financial Officer
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<PAGE> 14
EXHIBIT INDEX
Filed with Worthington Foods, Inc. Quarterly Report on Form 10-Q for the Quarter
Ended July 4, 1997.
<TABLE>
<CAPTION>
Exhibit No. Page No.
- ----------- --------
<S> <C> <C>
3(a) Amended and Restated Articles of Incorporation of Incorporated herein by reference
Worthington Foods, Inc. (as filed with the Ohio to the Company's Registration
Secretary of State on February 25, 1992) Statement on Form S-1 filed
February 26, 1992 (Registration
No. 33-45945) ("Registrant's Form
S-1") [Exhibit 3(a)]
3(b) Certificate of Amendment to Amended and Restated Incorporated herein by reference
Articles of Incorporation of Worthington Foods, Inc. to the Company's Registration
(as filed with the Ohio Secretary of State on June Statement on Form S-8 filed
13, 1995) August 6, 1997 (Registration No.
333-33041) (the "Company's Form
S-8") [Exhibit 3(b)]
3(c) Certificate of Amendment by Directors of Worthington Incorporated herein by reference
Foods, Inc. (as filed with the Ohio Secretary of to the Company's Form S-8
State on May 6, 1997) [Exhibit 3(c)]
3(d) Certificate of Amendment by Shareholders to the Incorporated herein by reference
Amended and Restated Articles of Incorporation of to the Company's Form S-8
Worthington Foods, Inc. (as filed with the Ohio [Exhibit 3(d)]
Secretary of State on May 6, 1997)
3(e) Amended and Restated Articles of Incorporation of Incorporated herein by reference
Worthington Foods, Inc. (reflecting amendments to the Company's Form S-8
through May 6, 1997)[for purposes of SEC reporting [Exhibit 3(e)]
compliance only; not filed with Ohio Secretary of
State]
4(a) $25,000,000 Revolving Note with The Huntington 16-19
National Bank dated May 13, 1997
4(b) First Amendment to Loan Participation Agreement 20-21
between The Huntington National Bank and National
City Bank of Columbus dated May 13, 1997
</TABLE>
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<PAGE> 15
<TABLE>
<S> <C> <C>
4(c) Second Amendment to Second Amended and Restated Loan 22-29
Agreement between Worthington Foods, Inc. and The
Huntington National Bank dated May 13, 1997
10 Worthington Foods, Inc. 1993 Stock Option Plan for Incorporated herein by reference
Non-Employee Directors (reflects share splits and to the Company's Form S-8
amendments through April 22, 1997) [Exhibit 4]
11 Computation of Earnings Per Share 30
27 Financial Data Schedule 31
</TABLE>
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EXHIBIT 4(a)
SECOND REPLACEMENT NOTE
THE HUNTINGTON NATIONAL BANK
Revolving Note
================================================================================
City Office _________________ Division ______________ Branch _______ [ ] Secured
Account No. _______________________________ Note No. _____________ [ ] Unsecured
Account Name ___________________________________________________________________
[ ] Corporation [ ] Partnership [ ] Individual/Proprietorship
[ ] Other ______________________________________________________________________
Bank Approval Officer Initial __________ Bank Closing Officer Initial __________
================================================================================
$25,000,000.00 Columbus, Ohio May 13, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
HUNTINGTON NATIONAL BANK (hereinafter called the "Bank," which term shall
include any holder hereof) at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of
Twenty-Five Million and 00/100 Dollars ($25,000,000.00) or so much thereof as
shall have been advanced by the Bank at any time and not hereafter repaid
(hereinafter referred to as "Principal Sum") together with interest as
hereinafter provided and payable at the time(s) and in the manner(s) hereinafter
provided. The proceeds of the loan evidenced hereby may be advanced, repaid and
readvanced in partial amounts during the term of this revolving note ("Note")
and prior to maturity. Each such advance shall be made to the undersigned upon
receipt by the Bank of the undersigned's application therefor and disbursement
instructions, which shall be in such form as the Bank shall from time to time
prescribe. The Bank shall be entitled to rely on any oral or telephonic
communication requesting an advance and/or providing disbursement instructions
hereunder, which shall be received by it in good faith from anyone reasonably
believed by the Bank to be the undersigned, or the undersigned's authorized
agent. The undersigned agrees that all advances made by the Bank will be
evidenced by entries made by the Bank into its electronic data processing system
and/or internal memoranda maintained by the Bank. The undersigned further agrees
that the sum or sums shown on the most recent printout from the Bank's
electronic data processing system and/or on such memoranda shall be rebuttably
presumptive evidence of the amount of the Principal Sum and of the amount of any
accrued interest.
This Note is executed and the advances contemplated hereunder are to be
made pursuant to a Second Amended and Restated Loan Agreement dated as of June
15, 1993, a First Amendment thereto dated as of October 31, 1995, and a Second
Amendment thereto dated as of May 13, 1997 (hereinafter collectively called
"Loan Agreement"), and all the covenants, representations, agreements, terms,
and conditions contained therein, including but not limited to additional
conditions of default, are incorporated herein as if fully rewritten.
- 16 -
<PAGE> 17
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum until
paid at a variable rate of interest per annum, which shall change in the manner
set forth below, equal to the Prime Commercial Rate, or at such alternative rate
of interest as may have been selected by the undersigned pursuant to the terms
of the Loan Agreement.
Upon default, whether by acceleration or otherwise, interest will
accrue on the unpaid balance of the Principal Sum and unpaid interest, if any,
until paid at a variable rate of interest per annum, which shall change in the
manner set forth below, equal to two percentage points (2%) in excess of the
Prime Commercial Rate.
All interest shall be calculated on the basis of a 360 day year for the
actual number of days the Principal Sum or any part thereof remains unpaid.
There shall be due upon prepayment such additional sums as are provided in the
Loan Agreement.
As used herein, Prime Commercial Rate shall mean the rate established
by the Bank from time to time based on its consideration of economic, money
market, business and competitive factors. The Prime Commercial Rate is not
necessarily the Bank's most favored rate. Subject to any maximum or minimum
interest rate limitation specified herein or by applicable law, any variable
rate of interest on the obligation evidenced hereby shall change automatically
without notice to the undersigned immediately with each change in the Prime
Commercial Rate to the extent that the Prime Commercial Rate is the applicable
interest rate.
MANNER OF PAYMENT
The Principal Sum shall be payable on October 31, 2001, unless the Bank
and the undersigned shall hereafter agree in writing to extend that date.
Accrued interest shall be due and payable monthly beginning on May 30, 1997,
except as an alternative date or dates have been elected by the undersigned
pursuant to the terms of the Loan Agreement, and at maturity, whether by demand,
acceleration or otherwise.
SECURITY
As security for the payment of the obligations evidenced hereby (and
regardless of whether the Principal Sum evidenced hereby is reduced to zero and
thereafter increased an unlimited number of times), the undersigned has granted
Bank a security interest in the following property, including all substitutions
and replacements therefor and additions and accessions thereto, and any and all
products thereof, and any and all cash and non-cash proceeds thereof, including,
but not limited to, notes, drafts, checks, instruments and insurance proceeds
(all, together with any other property in which the Bank shall at any time be
given a security interest, hereinafter referred to as the "Collateral"):
All the undersigned's inventory, accounts and general intangibles,
whether now owned or hereafter acquired and wherever located.
- 17 -
<PAGE> 18
The security described herein is subject to an Intercreditor Agreement
dated October 31, 1995, and amended on even date herewith entered into by and
between the Bank and Principal Mutual Life Insurance Company and the security
interest referred to above may not be sold, assigned or transferred except to a
party that executes and agrees to be bound by the provisions of that agreement.
DEFAULT
Upon the occurrence of any one or more of the Events of Default
described in Section 12.1 of the Loan Agreement and the expiration of any
applicable cure period, then the Bank may, at its option, without notice or
demand, accelerate the maturity of the obligations evidenced hereby, which
obligations shall become immediately due and payable. In the event the Bank
shall institute any action for the enforcement or collection of the obligations
evidenced hereby, the undersigned agrees to pay all reasonable costs and
expenses of such action, including reasonable attorneys' fees, to the extent
permitted by law.
GENERAL PROVISIONS
All of the parties hereto, including the undersigned, and any indorser,
surety, or guarantor, hereby severally waive presentment, notice of dishonor,
protest, notice of protest, and diligence in bringing suit against any party
hereto, and consent that, without discharging any of them, the time of payment
may be extended an unlimited number of times before or after maturity without
notice. The Bank shall not be required to pursue any party hereto, including any
guarantor, or to exercise any rights against any Collateral herefor before
exercising any other such rights.
The obligations evidenced hereby may from time to time be evidenced by another
note or notes given in substitution, renewal or extension hereof. Any security
interest or mortgage which secures the obligations evidenced hereby shall remain
in full force and effect notwithstanding any such substitution, renewal, or
extension.
The captions used herein are for reference only and shall not be deemed a part
of this Note. If any of the terms or provisions of this Note shall be deemed
unenforceable, the enforceability of the remaining terms and provisions shall
not be affected. This Note shall be governed by and construed in accordance with
the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED ACKNOWLEDGE THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE
BETWEEN THE UNDERSIGNED AND THE BANK, THE COMMERCIAL NATURE OF THE TRANSACTION
OUT OF WHICH THIS NOTE ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL
BY JURY. ACCORDINGLY, THE UNDERSIGNED HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY AS
TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS NOTE OR TO ANY OF THE
OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
- 18 -
<PAGE> 19
WARRANT OF ATTORNEY
The undersigned authorizes any attorney at law to appear in any Court
of Record in the State of Ohio or in any state or territory of the United States
after the above indebtedness becomes due, whether by acceleration or otherwise,
to waive the issuing and service of process, and to confess judgment against the
undersigned in favor of the Bank for the amount then appearing due together with
costs of suit, and thereupon to waive all errors and all rights of appeal and
stays of execution.
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
WORTHINGTON FOODS, INC.
By: William T. Kirkwood
Its: EVP/CFO
By: Ronald L. McDermott
Its: Vice President - Research & Technology
- 19 -
<PAGE> 20
EXHIBIT 4(b)
FIRST AMENDMENT TO LOAN PARTICIPATION AGREEMENT
This First Amendment to Loan Participation Agreement (this "First
Amendment") is made and entered into as of this 13th day of May, 1997, by and
between The Huntington National Bank ("Seller") and National City Bank of
Columbus ("Purchaser").
RECITALS:
A. On or about October 31, 1995, pursuant to a Loan Participation
Agreement (the "Agreement"), Purchaser purchased from Seller a participation
interest in a commercial loan made by Seller to Worthington Foods, Inc.
("Borrower").
B. On or about May 13, 1997, Seller entered into a Second
Amendment (the "Second Amendment") to the Second Amended and Restated Loan
Agreement between Seller and Borrower and increased the revolving credit
available to Borrower from $20,000,000.00 to $25,000,000.00.
C. The Seller and Purchaser wish to enter into this First
Amendment to set forth their respective rights and obligations with respect to
the commercial loan from Seller to Borrower as amended by the Second Amendment.
NOW, THEREFORE, in consideration of the foregoing and mutual covenants
and promises contained herein, Seller and Purchaser do hereby amend the
Agreement and agrees as follows:
1. Section 1 of the Agreement is hereby amended to recite in its
entirety as follows:
a. "Loan" shall mean the revolving commercial loan in
the amount of $25,000,000.00 made by Seller to Borrower and
evidenced by the following: a Second Amended and Restated Loan
Agreement dated as of June 15, 1993, as amended by a First
Amendment to Second Amended and Restated Loan Agreement dated
as of October 31, 1995, and a Second Amendment to Second
Amended and Restated Loan Agreement dated as of May 15, 1997
(collectively, the "Loan Agreement"); a Second Replacement
Note dated as of May 13, 1997 (the "Second Replacement Note);
and related loan documents, as the amount of that revolving
commercial loan may be increased or decreased from time to
time in the future by the mutual agreement of Borrower, Seller
and Purchaser.
b. "Borrower" shall mean the borrower identified in the
recitals to this Agreement and any assignee or successor in
interest thereof.
c. "Loan Documents" shall mean the Loan Agreement, the
Second Replacement Note, the security documents relating to
the Collateral (as hereinafter defined) and all other
documents pertaining to the Loan, copies of which have been
delivered to Purchaser.
- 20 -
<PAGE> 21
d. "Collateral" shall mean the inventory, accounts and
general intangible in which Seller has been granted a security
interest in connection with the Loan.
e. "Participation" and "Participation Interest" shall
mean the interest of Purchaser in the Loan created hereby
equal to $11,250,000.00 as of the date hereof and equal at all
times to a forty-five percent (45%) interest in the Loan.
f. "Participation Share" and "Ratably" shall mean a
sharing pari passu and in the same portion as the respective
percent of ownership interest of Seller and Purchaser in the
Loan.
2. Except as modified herein, the Agreement and all other
agreements executed in connection therewith shall remain as written originally
and in full force and effect in all respects, and nothing herein shall affect,
modify, limit or impair any of the rights and powers of the parties thereunder.
3. Seller and Purchaser agree to perform and observe all of the
covenants, agreements, stipulations and conditions to be formed on each of their
parts under the Agreement and all other related agreements as amended by this
First Amendment.
4. Seller and Purchaser hereby represent and warrant to the other
that (a) each has the legal power and authority to execute and deliver this
First Amendment; (b) the officers executing this First Amendment on behalf of
each party hereto have been duly authorized to execute and deliver the same and
bind to the parties with respect to the provisions provided for herein; (c) the
execution and delivery of this First Amendment and the performance and
observance by the parties of the provisions hereof does not violate or conflict
with the articles of incorporation, regulations or bylaws of either party hereto
or any law applicable to either party or result in the breach of any provision
of or constitute a default under any agreement, instrument or document binding
upon or enforceable against either party; and (d) this First Amendment
constitutes a valid and legally binding obligation upon the parties in every
respect.
5. The capitalized terms used herein shall have the same meanings
as the capitalized terms used in the Agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Loan Participation Agreement as of the date set forth above.
THE HUNTINGTON NATIONAL BANK
By: Kathleen A. Willke
Its: Assistant Vice President
NATIONAL CITY BANK OF COLUMBUS
By: William J. Whitley
Its: Senior Vice President
- 21 -
<PAGE> 22
EXHIBIT 4(c)
SECOND AMENDMENT TO SECOND AMENDED AND
RESTATED LOAN AGREEMENT
This Second Amendment to Second Amended and Restated Loan Agreement (this
"Second Amendment") is entered into at Columbus, Ohio, by and between The
Huntington National Bank (the "Bank"), and Worthington Foods, Inc. (the
"Company"), as of the 13th day of May, 1997.
RECITALS
A. On or about June 15, 1993, the Bank and the Company entered
into a Second Amended and Restated Loan Agreement (the "Agreement") that set
forth the terms and conditions of certain loans to the Company, amending prior
loan agreements and related documents; and
B. Pursuant to the Agreement and prior loan agreements, the
Company executed and delivered to the Bank a promissory note in the amount of
$5,000,000.00 dated June 15, 1993 (the "Line of Credit Note") and a promissory
note in the amount of $20,000,000.00 dated June 15, 1993 (the "Revolving Note");
and
C. On or about October 31, 1995, the Bank and the Company entered
into a First Amendment to the Agreement (the "First Amendment"), which, inter
alia, amended the Agreement to cancel the Line of Credit Note; and
D. Pursuant to the Agreement and prior loan agreements, the
Company granted to the Bank a security interest in all the Company's personal
property and fixtures, all as described in a Security Agreement dated as of
January 15, 1990, and related financing statements and other security documents
(the "Security Documents"); and
E. The Bank and the Company desire further to amend the terms of
the Agreement and to provide for an increase in the amount of the Loan, a change
in the pricing of the Loan, an extension of the time within which the Company
may obtain advances pursuant to the Loan, and to provide for the replacement of
the Revolving Note.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises contained herein, the Bank and the Company do hereby
further amend the Agreement and agree as follows:
1. Section 1.1 of the Agreement is hereby amended to recite in
its entirety as follows:
1.1 Revolving Credit.
The Bank agrees to lend to the Company up to the sum
of $25,000,000 (the "Loan"), subject to the terms and
conditions of this Agreement. The Loan shall take the form of
a revolving credit, and the outstanding principal balance may
be increased and decreased an unlimited number of times. The
Company's right to obtain advances pursuant to the Loan shall
terminate on October 31, 2001 (the "Termination Date").
Beginning on October 31, 1996, and continuing on each
anniversary of that date, the Bank will consider a request by
the Company to extend the Termination Date for one year. The
decision as to whether such extension request will be approved
shall be in the sole and absolute discretion of the Bank.
- 22 -
<PAGE> 23
2. Section 2.2 of the Agreement is hereby amended to recite in
its entirely as follows:
2.2 LIBO Rate.
The Company may from time to time during the term of
this Agreement elect to have interest accrue on all or part of
the outstanding principal balances of the Loan at a rate of
interest calculated with reference to the LIBO Rate (as
hereinafter defined in this section). As to each LIBO Rate
Advance (as hereinafter defined in this Section 2.2), the rate
of interest shall be equal to nine-tenths of one percent
(0.9%) per annum in excess of the LIBO Rate. "LIBO Rate" shall
mean, with respect to any LIBO Rate Advance and the related
Interest Period (as hereinafter defined in Section 2.5), the
per annum rate that is equal to the quotient of:
(a) the actual or estimated arithmetic mean of the per
annum rates of interest at which deposits in U.S.
dollars, which deposits are for the related Interest
Period and in an aggregate amount comparable to the
amount of such LIBO Rate Advance, are being offered
to U.S. banks by one or more prime banks in the
London interbank market, as determined by the Bank in
its discretion based upon (i) reference to
information appearing in Telerate, a service of
Telerate Systems Incorporated, in the section
captioned "British Bankers Assoc. Interest Settlement
Rates," or any comparable index selected by the Bank,
(ii) the obtaining of rate quotations, or (iii) any
other reasonable procedure, all as determined at
approximately 11:00 a.m. London, England, time, on
the second LIBO business day prior to the first day
of the related Interest Period; all as determined by
the Bank, such sum to be rounded up, if necessary, to
the nearest whole multiple of 1/16 of 1%; divided by
(b) a percentage equal to 100% minus the rate (expressed
as a percentage), if any, at which reserve
requirements are imposed on the Bank, on the second
LIBO business day prior to the first day of the
related Interest Period, with respect to any
"Eurocurrency liabilities" under Regulation D of the
Board of Governors of the Federal Reserve System or
any other regulations of any governmental authority
having jurisdiction with respect thereto (including,
without limitation, any marginal, emergency,
supplemental, special or other reserves) for a term
comparable to such Interest Period. This provision is
for the benefit of the Bank and is not intended to
increase the expected yield to the Bank above the
rates of interest provided for in this Agreement.
"LIBO Rate Advance" shall mean any amount borrowed as part of
the Loans that bears interest at a rate calculated with
reference to the LIBO Rate; provided, however, that the
minimum amount of any LIBO Rate Advance shall be $1,000,000.
"LIBO business day" shall mean, with respect to any LIBO Rate
Advance, a day which is both a day on which the Bank is open
for business and a day on which dealings in U.S. dollar
deposits are carried out in the London interbank market.
- 23 -
<PAGE> 24
3. Section 3 of the Agreement is hereby amended to recite in its
entirety as follows:
SECTION 3. EVIDENCE OF THE LOANS AND TERMS OF PAYMENT.
The Loan shall be evidenced by a promissory note in
the form of Exhibit A to the Second Amendment to Second
Amended and Restated Loan Agreement (the "Second Replacement
Note"), as the same may be modified from time to time, or by
any notes subsequently executed in substitution therefor.
Repayment of the Loan shall be made in accordance with the
terms of the note then outstanding pursuant to this Agreement.
4. The Company hereby represents and warrants that no "Event of
Default," as defined in the Agreement, has occurred and is continuing, nor will
any occur immediately after the execution and delivery of this Second Amendment
by the performance or observance of any provision hereof or thereof.
5. Each reference to the Agreement, whether by use of the phrase
"Loan Agreement," "Agreement," the prefix "herein" or any other term, and
whether contained in the Agreement itself or in this Second Amendment, in any
document executed concurrently herewith or in any loan documents executed
hereafter, shall be construed as a reference to the Agreement as amended by the
First Amendment and this Second Amendment.
6. Except as modified herein and by the First Amendment and
except as the Replacement Note is cancelled and replaced by the Second
Replacement Note, the Agreement, the Loan Documents and all other agreements as
to payment or security executed in connection therewith shall remain as written
originally and in full force and effect in all respects, and nothing herein
shall affect, modify, limit or impair any of the rights and powers which the
Bank may have thereunder.
7. The Company agrees to perform and observe all the covenants,
agreements, stipulations, and conditions to be performed on its part under the
Agreement, the Second Replacement Note, the Loan Documents, and all other
related agreements, as amended by this Second Amendment.
8. The Company hereby represents and warrants to the Bank that
(a) the Company has legal power and authority to execute and deliver the Second
Amendment and the Second Replacement Note; (b) the officer executing the within
Second Amendment and the Second Replacement Note on behalf of the Company has
been duly authorized to execute and deliver the same and bind the Company with
respect to the provisions provided for herein and therein; (c) the execution and
delivery of the within Second Amendment and the Second Replacement Note by the
Company and the performance and observance by the Company of the provisions
hereof and thereof do not violate or conflict with the articles of
incorporation, regulations or by-laws of the Company or any law applicable to
the Company or result in the breach of any provision of or constitute a default
under any agreement, instrument or document binding upon or enforceable against
the Company; and (d) this Second Amendment and the Second Replacement Note
constitute valid and legally binding obligations upon the Company in every
respect.
- 24 -
<PAGE> 25
9. The capitalized terms used herein shall have the same meanings
as the capitalized terms used in the Agreement.
IN WITNESS WHEREOF, the Company and the Bank have hereunto set their
hands at Columbus, Ohio, as of the 13th day May, 1997.
WORTHINGTON FOODS, INC.
By: William T. Kirkwood
Its: EVP/CFO
By: Ronald L. McDermott
Its: Vice President - Research & Technology
THE HUNTINGTON NATIONAL BANK
By: Dean E. Haberkamp
Its: Vice President
- 25 -
<PAGE> 26
EXHIBIT A
SECOND REPLACEMENT NOTE
THE HUNTINGTON NATIONAL BANK
Revolving Note
================================================================================
City Office _________________ Division ______________ Branch _______ [ ] Secured
Account No. _______________________________ Note No. _____________ [ ] Unsecured
Account Name ___________________________________________________________________
[ ] Corporation [ ] Partnership [ ] Individual/Proprietorship
[ ] Other ______________________________________________________________________
Bank Approval Officer Initial __________ Bank Closing Officer Initial __________
================================================================================
$25,000,000.00 Columbus, Ohio May 13, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
HUNTINGTON NATIONAL BANK (hereinafter called the "Bank," which term shall
include any holder hereof) at such place as the Bank may designate or, in the
absence of such designation, at any of the Bank's offices, the sum of
Twenty-Five Million and 00/100 Dollars ($25,000,000.00) or so much thereof as
shall have been advanced by the Bank at any time and not hereafter repaid
(hereinafter referred to as "Principal Sum") together with interest as
hereinafter provided and payable at the time(s) and in the manner(s) hereinafter
provided. The proceeds of the loan evidenced hereby may be advanced, repaid and
readvanced in partial amounts during the term of this revolving note ("Note")
and prior to maturity. Each such advance shall be made to the undersigned upon
receipt by the Bank of the undersigned's application therefor and disbursement
instructions, which shall be in such form as the Bank shall from time to time
prescribe. The Bank shall be entitled to rely on any oral or telephonic
communication requesting an advance and/or providing disbursement instructions
hereunder, which shall be received by it in good faith from anyone reasonably
believed by the Bank to be the undersigned, or the undersigned's authorized
agent. The undersigned agrees that all advances made by the Bank will be
evidenced by entries made by the Bank into its electronic data processing system
and/or internal memoranda maintained by the Bank. The undersigned further agrees
that the sum or sums shown on the most recent printout from the Bank's
electronic data processing system and/or on such memoranda shall be rebuttably
presumptive evidence of the amount of the Principal Sum and of the amount of any
accrued interest.
This Note is executed and the advances contemplated hereunder are to be
made pursuant to a Second Amended and Restated Loan Agreement dated as of June
15, 1993, a First Amendment thereto dated as of October 31, 1995, and a Second
Amendment thereto dated as of May 13, 1997 (hereinafter collectively called
"Loan Agreement"), and all the covenants, representations, agreements, terms,
and conditions contained therein, including but not limited to additional
conditions of default, are incorporated herein as if fully rewritten.
- 26 -
<PAGE> 27
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum until
paid at a variable rate of interest per annum, which shall change in the manner
set forth below, equal to the Prime Commercial Rate, or at such alternative rate
of interest as may have been selected by the undersigned pursuant to the terms
of the Loan Agreement.
Upon default, whether by acceleration or otherwise, interest will
accrue on the unpaid balance of the Principal Sum and unpaid interest, if any,
until paid at a variable rate of interest per annum, which shall change in the
manner set forth below, equal to two percentage points (2%) in excess of the
Prime Commercial Rate.
All interest shall be calculated on the basis of a 360 day year for the
actual number of days the Principal Sum or any part thereof remains unpaid.
There shall be due upon prepayment such additional sums as are provided in the
Loan Agreement.
As used herein, Prime Commercial Rate shall mean the rate established
by the Bank from time to time based on its consideration of economic, money
market, business and competitive factors. The Prime Commercial Rate is not
necessarily the Bank's most favored rate. Subject to any maximum or minimum
interest rate limitation specified herein or by applicable law, any variable
rate of interest on the obligation evidenced hereby shall change automatically
without notice to the undersigned immediately with each change in the Prime
Commercial Rate to the extent that the Prime Commercial Rate is the applicable
interest rate.
MANNER OF PAYMENT
The Principal Sum shall be payable on October 31, 2001, unless the Bank
and the undersigned shall hereafter agree in writing to extend that date.
Accrued interest shall be due and payable monthly beginning on May 30, 1997,
except as an alternative date or dates have been elected by the undersigned
pursuant to the terms of the Loan Agreement, and at maturity, whether by demand,
acceleration or otherwise.
SECURITY
As security for the payment of the obligations evidenced hereby (and
regardless of whether the Principal Sum evidenced hereby is reduced to zero and
thereafter increased an unlimited number of times), the undersigned has granted
Bank a security interest in the following property, including all substitutions
and replacements therefor and additions and accessions thereto, and any and all
products thereof, and any and all cash and non-cash proceeds thereof, including,
but not limited to, notes, drafts, checks, instruments and insurance proceeds
(all, together with any other property in which the Bank shall at any time be
given a security interest, hereinafter referred to as the "Collateral"):
All the undersigned's inventory, accounts and general intangibles,
whether now owned or hereafter acquired and wherever located.
- 27 -
<PAGE> 28
The security described herein is subject to an Intercreditor Agreement
dated October 31, 1995, and amended on even date herewith entered into by and
between the Bank and Principal Mutual Life Insurance Company and the security
interest referred to above may not be sold, assigned or transferred except to a
party that executes and agrees to be bound by the provisions of that agreement.
DEFAULT
Upon the occurrence of any one or more of the Events of Default
described in Section 12.1 of the Loan Agreement and the expiration of any
applicable cure period, then the Bank may, at its option, without notice or
demand, accelerate the maturity of the obligations evidenced hereby, which
obligations shall become immediately due and payable. In the event the Bank
shall institute any action for the enforcement or collection of the obligations
evidenced hereby, the undersigned agrees to pay all reasonable costs and
expenses of such action, including reasonable attorneys' fees, to the extent
permitted by law.
GENERAL PROVISIONS
All of the parties hereto, including the undersigned, and any indorser,
surety, or guarantor, hereby severally waive presentment, notice of dishonor,
protest, notice of protest, and diligence in bringing suit against any party
hereto, and consent that, without discharging any of them, the time of payment
may be extended an unlimited number of times before or after maturity without
notice. The Bank shall not be required to pursue any party hereto, including any
guarantor, or to exercise any rights against any Collateral herefor before
exercising any other such rights.
The obligations evidenced hereby may from time to time be evidenced by another
note or notes given in substitution, renewal or extension hereof. Any security
interest or mortgage which secures the obligations evidenced hereby shall remain
in full force and effect notwithstanding any such substitution, renewal, or
extension.
The captions used herein are for reference only and shall not be deemed a part
of this Note. If any of the terms or provisions of this Note shall be deemed
unenforceable, the enforceability of the remaining terms and provisions shall
not be affected. This Note shall be governed by and construed in accordance with
the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED ACKNOWLEDGE THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE
BETWEEN THE UNDERSIGNED AND THE BANK, THE COMMERCIAL NATURE OF THE TRANSACTION
OUT OF WHICH THIS NOTE ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL
BY JURY. ACCORDINGLY, THE UNDERSIGNED HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY AS
TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS NOTE OR TO ANY OF THE
OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
- 28 -
<PAGE> 29
WARRANT OF ATTORNEY
The undersigned authorizes any attorney at law to appear in any Court
of Record in the State of Ohio or in any state or territory of the United States
after the above indebtedness becomes due, whether by acceleration or otherwise,
to waive the issuing and service of process, and to confess judgment against the
undersigned in favor of the Bank for the amount then appearing due together with
costs of suit, and thereupon to waive all errors and all rights of appeal and
stays of execution.
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
WORTHINGTON FOODS, INC.
By: ____________________________________
Its: ___________________________________
By: ____________________________________
Its: ___________________________________
- 29 -
<PAGE> 30
EXHIBIT 11
WORTHINGTON FOODS, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
7/4/97 6/28/96 7/4/97 6/28/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Weighted average number of common
shares outstanding 8,638,404 8,488,383 8,616,141 8,486,733
Net effect of dilutive stock options based
on treasury stock method using average
market price 366,786 315,872 370,338 305,592
---------- ---------- ---------- ----------
Weighted average common and common
equivalent shares 9,005,190 8,804,255 8,986,479 8,792,325
========== ========== ========== ==========
Net income $2,535,000 $1,991,000 $4,390,000 $3,278,000
========== ========== ========== ==========
Earnings per share $ 0.28 $ 0.23 $ 0.49 $ 0.37
========== ========== ========== ==========
Fully diluted:
Weighted average number of common
shares outstanding 8,638,404 8,488,383 8,616,141 8,486,733
Net effect of dilutive stock options based
on treasury stock method using market
price at end of period if greater than the
average market price during the period 400,702 340,645 417,836 341,315
---------- ---------- ---------- ----------
Weighted average common and common
equivalent shares 9,039,106 8,829,028 9,033,977 8,828,048
========== ========== ========== ==========
Net income $2,535,000 $1,991,000 $4,390,000 $3,278,000
========== ========== ========== ==========
Earnings per share $ 0.28 $ 0.22 $ 0.49 $ 0.37
========== ========== ========== ==========
</TABLE>
Note: 1996 share amounts have been adjusted to reflect the four-for-three share
split in December, 1996.
- 30 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUL-04-1997
<CASH> 1,054
<SECURITIES> 0
<RECEIVABLES> 10,732
<ALLOWANCES> 149
<INVENTORY> 22,676
<CURRENT-ASSETS> 38,159
<PP&E> 78,888
<DEPRECIATION> 23,494
<TOTAL-ASSETS> 95,129
<CURRENT-LIABILITIES> 11,731
<BONDS> 0
0
0
<COMMON> 8,643
<OTHER-SE> 44,427
<TOTAL-LIABILITY-AND-EQUITY> 95,129
<SALES> 57,887
<TOTAL-REVENUES> 57,887
<CGS> 33,502
<TOTAL-COSTS> 49,722
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 787
<INCOME-PRETAX> 7,378
<INCOME-TAX> 2,988
<INCOME-CONTINUING> 8,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,390
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.49
</TABLE>
