<PAGE>
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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 31, 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: 33-15962
WHITEFORD PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0222842
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
770 NORTH CENTER STREET, VERSAILLES, OHIO 45380
- ----------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
1-800-225-6328
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
LIMITED PARTNERSHIP UNITS
1,306,890 UNITS OUTSTANDING
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 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. Yes X No
--- ---
At March 31, 1998, 1,306,890 Class A units had been subscribed for and
issued.
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<PAGE>
INDEX
<TABLE>
<CAPTION>
ITEM
NO. DESCRIPTION PAGE
- ------ ------------------------------------------------------------- ----
<S> <C> <C>
PART I
1. Business 3
2. Properties 5
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters 5
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Results of Operations
and Financial Condition 7
8. Financial Statements and Supplementary Data 9
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 9
PART III
10. Directors and Executive Officers of the Partnership 9
11. Executive Compensation 10
12. Security Ownership of Certain Beneficial Owners and Management 11
13. Certain Relationships and Related Transactions 11
PART IV
14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 11
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
Whiteford Partners, L.P. (the "Partnership") was formed on June 30,
1987, as a Delaware limited partnership. The Partnership consists of a
General Partner, Gannon Group, Inc., and Limited Partners. The offering
period of the Partnership terminated on November 10, 1989, with $13,557,550
of Limited Partner gross subscriptions received in the form of Class A Units.
Pursuant to the terms of the Prospectus, offering proceeds in the amount of
$140,365 were returned to certain Ohio residents when the Partnership's
business acquisition program was not substantially completed by December,
1989. The Partnership was organized principally to form, acquire, own and
operate businesses engaged in the development, production, processing,
marketing, distribution and sale of food and related products (the "Food
Businesses").
In the first quarter of 1990, the Partnership entered into a limited
partnership, Whiteford Foods Venture, L.P. ("Whiteford's") which was formerly
named Granada/Whiteford Foods Venture, L.P., with a wholly-owned subsidiary
of the former General Partner, G/W Foods, Inc., for the purpose of acquiring
the assets, certain liabilities and the operations of Whiteford's Inc., a
further processor and distributor of beef products to major fast food
restaurants and regional chains, which was located in Versailles, Ohio. The
acquisition, which was made with Partnership funds, was closed March 26,
1990, with the Partnership's resultant equity interest in Whiteford's being
in excess of 99%. On April 23, 1990, all outstanding and contingent items
were resolved and completed, and the acquisition of the assets was funded on
April 24, 1990.
On May 4, 1992, the outstanding shares of G/W Foods, Inc. were assigned by
the former General Partner to Gannon Group, Inc., a corporation owned by
Kevin T. Gannon, a Director and Vice President of G/W Foods, Inc. At that
time, Mr. Gannon was also a former Vice President of Granada Corporation and
certain of its affiliates. Also on May 4, 1992, Granada Management
Corporation assigned its sole general partnership interest in the Partnership
to Gannon Group, Inc. The effect of these assignments is for Gannon Group,
Inc. to have general partnership authority and responsibility with respect to
the Partnership and, through G/W Foods, Inc., of Whiteford's.
Subject to the availability of capital resources and/or financing, the
Partnership Agreement permits the acquisition of additional Food Businesses
that produce, process or distribute specialty food products including
businesses that possess technology or special processes which could increase
the productivity or processing capability of the Partnership's current Food
Business or which enhance the marketability or resale value of the
Partnership's Food Business products. At the present time, no acquisitions
are contemplated.
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership operates principally in the food processing and
distribution business.
C. DESCRIPTION OF BUSINESS
The Partnership was organized to form, acquire, own and operate businesses
engaged in the development, production, processing, marketing, distribution
and sale of food and related products. The Partnership presently operates
further processing and meat production operations at one location--Versailles,
Ohio.
3
<PAGE>
VERSAILLES, OHIO PLANT OPERATION
Whiteford's is a further processor and distributor of meat products to
major fast food restaurants and regional chains. It serves major
metropolitan areas such as Chicago, Cincinnati, Cleveland, Columbus, Detroit,
Indianapolis, Louisville and St. Louis. Whiteford's principal products are
fresh frozen hamburger patties; precooked and uncooked ground beef, taco meat
and roast beef; marinated beef entrees; and other items processed to
customers' specifications. Major food chains served include Burger King,
Rally's and Cracker Barrel.
Whiteford's purchases products principally from major domestic packers and
regional distributors. However, it also utilizes imported beef. The General
Partner believes its sources of supply are adequate for the foreseeable
future.
For the years ended December 31, 1997, 1996 and 1995 Whiteford's processed
and sold 66.7 million pounds of products ($62.2 million), 64.8 million pounds
of products ($59.0 million) and 59.8 million pounds of products ($57.6
million) respectfully, through its further processing and distribution
operations.
MARKETING AND SALES
Whiteford's customers consist primarily of major national and regional
fast food retail chains in addition to HRI (Hotel, Restaurant, Institutional)
customers and food products distributors. Sales operations are conducted
locally by sales representatives from the Versailles location and through
unaffiliated food products distributors and food brokers.
The following customers contributed more than 10% of Whiteford's revenues
for the fiscal year ended December 31, 1997: Gordon Food Service, 20.77%;
Kings Provision, 19.21%; Maines Paper and Food Service, 16.95%; I Supply,
11.32%, and Sygma Network of Ohio, Inc., 11.26%.
Historically, a significant portion of Whiteford's business has been
lodged with relatively few major national and regional accounts. Whiteford's
believes that its relationships with its current significant customers are
satisfactory. In the past, Whiteford's has been able to obtain additional
orders for products from existing accounts or obtain orders for products from
new accounts when a significant account diminishes or terminates its
purchases with Whiteford's.
All of Whiteford's sales are to customers in the United States and Canada.
REGULATORY MATTERS
All of Whiteford's meat production operations are subject to ongoing
inspection and regulation by the United States Department of Agriculture
("USDA"). Whiteford's plant and facilities are subject to periodic or
continuous inspection, without advance notice, by USDA employees to ensure
compliance with USDA standards of sanitation, product composition, packaging
and labeling. All producers of meat and other food products must comply with
substantially similar standards. Compliance with these standards is not
expected to have a significant effect on Whiteford's competitive position.
Whiteford's is subject to federal, state and local laws and regulations
governing environmental protection, compliance with which has required
capital and operating expenditures. The General Partner believes Whiteford's
is in substantial compliance with such laws and regulations and does not
anticipate making additional capital expenditures for such compliance in
1998. The General Partner is not aware of any violations of, or pending
changes in such laws and regulations that are likely to result in material
penalties or material increases in compliance costs. Changes in the
requirements or mode of enforcement of certain of these laws and regulations,
however, could impose additional costs upon Whiteford's which could
materially and adversely affect its cost of doing business.
Whiteford's is subject to various other federal, state and local
regulations, none of which imposes material restrictions on its operations.
4
<PAGE>
EMPLOYEES
The Partnership's operations have been managed by its general partner,
Gannon Group, Inc. since May 4, 1992, and Granada Management Corporation from
inception to May 4, 1992. Directly, the Partnership has no employees. The
Partnership has utilized the services of employees of the General Partner and
the former General Partner as needed for certain administrative services.
The Whiteford's operation at Versailles, Ohio employed 243 personnel at
December 31, 1997. The General Partner believes there will be sufficient
personnel available to adequately manage the Partnership's business affairs.
ITEM 2. PROPERTIES
PROPERTIES UTILIZED BY THE PARTNERSHIP
The Partnership's executive offices are those of the General Partner,
located at 770 North Center Street, Versailles, Ohio 45380.
The following table sets forth Whiteford's operational facilities and
approximate capacities as of December 31, 1997.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
TONS OF PRODUCTION
------------------
GENERAL 1997
LOCATION CHARACTER SIZE CAPACITY ACTUAL
- ---------------- ----------- ------------------------- -------- ------
<S> <C> <C> <C> <C>
Versailles, Ohio Meat Two separate facilities 40,000 32,400
Processing (1) 71,400 and (1) 33,000
Plant square feet on 20 acres
of land, (8)
hamburger/specialty
lines, (2) grinding
lines, (1) precooked
line, (3) smoke houses,
freezers, coolers, dry
storage and office space.
</TABLE>
All Whiteford's facilities are subject to a mortgage with two banks.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending or threatened legal proceedings involving
the Partnership, known to either the Partnership or the General Partner.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Limited Partners of the Partnership
during 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Partnership's
Limited Partnership Units.
The following table sets forth the amounts and dates of distributions to
holders of Limited Partnership Units in 1995 and 1997. There were no
distributions during 1996.
5
<PAGE>
<TABLE>
<CAPTION>
Amount Per Limited
Date Aggregate Amount Partnership Unit
---- ---------------- ------------------
<S> <C> <C>
March 15, 1995 52,275.60 0.04
June 15, 1995 52,275.60 0.04
August 29, 1997 65,344.50 0.05
November 28, 1997 65,344.50 0.05
</TABLE>
Certain of the Partnership's loans with its lender contain restrictive
covenants. One of the covenants restricts the Partnership from declaring or
paying any distributions to its partners without the prior consent of the
bank, except for amounts already classified as reinvested distributions in
the balance sheet.
The following table sets forth the approximate number of holders of record
of the equity securities of the Partnership as of December 31, 1997:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Limited Partnership Units 1,521
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with the consolidated financial statements, the notes thereto and other
financial information included elsewhere herein, including ``Management's
Discussion and Analysis of Results of Operations and Financial Condition."
The table following reflects the results of operations of acquired businesses
for periods subsequent to their respective acquisition dates.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Sale of meat products $ 62,224,110 $ 59,026,632 $ 57,667,240 $ 64,108,391 $ 63,182,785
Interest and other 256,416 339,931 159,531 236,930 156,012
------------ ------------ ------------ ------------ ------------
Total revenues 62,480,526 59,366,563 57,826,771 64,345,321 63,338,797
------------ ------------ ------------ ------------ ------------
Cost of sales 57,846,006 54,188,228 53,757,014 60,428,954 60,119,285
------------ ------------ ------------ ------------ ------------
Gross Profit
Meat products 4,378,104 4,838,404 3,910,226 3,679,437 3,063,500
Other 256,416 339,931 159,531 236,930 156,012
------------ ------------ ------------ ------------ ------------
Total gross profit 4,634,520 5,178,335 4,069,757 3,916,367 3,219,512
------------ ------------ ------------ ------------ ------------
Selling and admin expenses 2,447,303 2,211,351 2,197,506 1,963,623 1,622,827
Depreciation, amortization
and interest 1,932,836 1,986,149 1,851,707 1,121,232 1,072,817
Other expense -- 163,157 -- -- --
------------ ------------ ------------ ------------ ------------
4,380,139 4,360,657 4,049,213 3,084,855 2,695,644
------------ ------------ ------------ ------------ ------------
Net Income $ 254,381 $ 817,678 $ 20,544 $ 831,512 $ 523,868
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Income per unit of
Limited Partners' Capital $ 0.19 $ 0.63 $ 0.02 $ 0.64 $ 0.40
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average units
outstanding 1,306,890 1,306,890 1,306,890 1,306,890 1,323,473
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (DECEMBER 31):
Working capital (deficit) $ (397,866) $ 156,933 $ (525,037) $ 154,050 $ 890,360
Total assets $ 21,798,022 $ 21,566,960 $ 22,280,444 $ 19,339,095 $ 15,970,758
Long-term debt, less current
maturities $ 4,732,167 $ 5,704,645 $ 6,754,525 $ 5,245,342 $ 3,578,836
Total partners' capital $ 9,732,547 $ 9,610,163 $ 8,792,485 $ 8,877,538 $ 8,178,022
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Management's discussion and analysis set forth below should be read in
conjunction with the Consolidated Financial Statements and the notes thereto
included elsewhere herein.
The Partnership was organized as a Limited Partnership with a maximum
operating life of twenty years ending 2007. The source of its capital has
been from the sale of Class A, $10 Limited Partnership units in a public
offering that terminated on November 10, 1989.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997, COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues for the year ended December 31, 1997 were $62,480,526 versus
$59,366,563 for the year ended December 31, 1996, an increase of 5.2%.
During the 1997 period, 66,752,355 pounds of meat products were sold versus
64,788,156 pounds during the 1996 period, an increase of 1,964,199 pounds or
3.0%. The increase in pounds of meat products sold is primarily attributable
to the increased sales effort and production capabilities at the Versailles
plant.
Costs of meat products sold for the year ended December 31, 1997 were
$57,846,006 versus $54,188,228 for the year ended December 31, 1996, an
increase of 6.8% During the 1997 period, 66,752,355 pounds of meat products
were sold versus 64,788,156 pounds during the 1996 period, an increase of
3.0%. The average cost of meat products sold for 1997 was $.867 versus $.836
in the 1996 period, an increase of 3.7%. The increase in the cost per pound
is primarily attributable to general composition of the product. The General
Partner expects general commodity prices to increase slightly during 1998.
Gross margins on meat sales were 7.0% for the year ended December 31, 1997
and 8.2% for the 1996 period. This decrease in gross margins is primarily
attributable to: i) increase in raw material costs and decrease in sales
price; and ii) the semi-variable nature of certain costs in the costs of meat
products sold such as labor, packaging, and utilities.
Selling and administrative expenses increased to $2,447,303 during the year
ended December 31, 1997 versus $2,211,351 for the same period in 1996. The
increase is primarily attributable to normal expense increases and volume.
Depreciation and amortization expense for the year ended December 31, 1997
was $1,204,975 versus $1,146,951 for the same period in 1996, an increase of
5.1%. Such increase is primarily due to the expansion of the freezer space
and the employee welfare room at the Versailles plant. The 1400 square foot
employee welfare room was completed in August 1997.
Interest expense for the year ended December 31, 1997 was $727,861 versus
interest expense of $839,198 for the same period in 1996. This decrease of
$111,337 primarily relates to the decrease in the average debt outstanding
during 1997.
The Partnership reported net income of $254,381 for the year ended December
31, 1997 versus $817,678 for the 1996 period. This decrease in operating
profit is primarily attributable to: i) the additional labor cost to produce
excess pounds for a major customer during the fourth quarter of 1997; and ii)
reduced sales leads related to Rally's Corporate business during the fourth
quarter of 1997. This reduction in sales represents less than 5% for 1997
and is not expected to have a material impact on future revenues. These two
major actions created higher than normal inventories during a declining
market.
7
<PAGE>
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of
Whiteford Food's internal use computer programs and its software products
that are data sensitive may recognize a date using "00" as the Year 1900
rather than the Year 2000. This could result is a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in normal
business activities.
Based on preliminary assessment, Whiteford Foods has determined that it
will be required to modify or replace some of its internal use software so
that it will function properly with respect to dates in the Year 2000 and
thereafter. Whiteford's presently believes that with modifications to its
existing software and/or conversions to new internal use software, the Year
2000 issue will not pose significant operational problems for Whiteford Foods
or its customers.
Whiteford Foods will utilize both internal and external resources to
reprogram, or replace and test its software products for the Year 2000
modifications. Whiteford Foods anticipates completing the Year 2000 project
as soon as practical but not later than June, 1999, which is prior to any
anticipated impact. The total cost of the Year 2000 project has currently
not been determined, but will be funded through operating cash flows. The
requirements for the correction of Year 2000 issue and the date on which
Whiteford Foods believes it will complete the Year 2000 modifications are
based on Management's best estimates which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third party modification plans and other factors. However, there
can be no guarantee that these estimates will be achieved and actual results
could differ materially from those anticipated. Specific factors that may
cause such material differences include, but are not limited to, the
availability of personnel trained in this area, the ability to locate and
collect all relevant computer codes and similar uncertainties.
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues for the year ended December 31, 1996 were $59,366,563 versus
$57,826,771 for 1995, an increase of 2.7% over the revenues for the prior
period. This increase was primarily attributable to the increased sales
effort and production capabilities at the Versailles plant.
Gross profit from the sale of meat products increased to $4,838,404 in 1996
from $3,910,226 in 1995, reflecting an increase of pounds sold. Gross
margins for 1996 were 8.2% versus 6.8% in 1995.
Selling and administrative expenses increased to $2,211,351 in 1996 from
$2,197,506 in 1995, a total increase of $13,845 or 0.6% over 1995 amounts.
This increase was primarily attributable to increased poundage. Selling and
administrative expenses represented 3.7% of sales in 1996 versus 3.8% of
revenue during 1995.
Depreciation and amortization increased to $1,146,951 in 1996 from
$1,052,213 in 1995, a total increase of $94,738, due primarily to the
expansion of the Versailles, Ohio facility and equipment used therein.
Interest expense increased to $839,198 in 1996 from $799,494 in 1995. The
increase was primarily attributable to an increase in the average debt
outstanding during 1996 due primarily to the $3.8 million expansion of the
Versailles plant.
The Partnership reported a net income of $817,678 for 1996 versus a net
income of $20,544 for 1995.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Partnership had a negative working capital
position of $397,866, versus a positive working capital of $156,933 at
December 31, 1996.
Cash provided by operating activities was $1,535,529 for the year ended
December 31, 1997 reflecting net income of $254,381, depreciation and
amortization of $1,204,975, and other net operating assets of $76,173. Cash
provided by operating activities for the year ended December 31, 1996 was
$1,289,705, with a net income of $817,678, depreciation and amortization of
$1,146,951, offset by net decreases in other net operating assets of $674,924.
Cash used in investing activities was $886,589 for 1997 versus $335,936 for
1996. The increase in cash used in investing activities is primarily
attributable to the construction of a 1400 square foot employee welfare room
at the Versailles plant. Cash provided by financing activities for 1997
consisted of net decreases in bank debt of $373,859 and distributions.
8
<PAGE>
The Limited Partnership Agreement provides for the General Partner to
receive an annual administrative fee. The fee is equal to 2% (adjusted for
changes in the Consumer Price Index after 1989) of net business investment
(defined as $8.50 multiplied by Partnership units outstanding). However,
such amounts payable to the General Partner are limited to 10% of aggregate
distributions to all Partners from "Cash Available for Distributions." As
defined in the Limited Partnership Agreement, that portion of the management
fee in excess of such 10% limitation is suspended, and future payment is
contingent.
The Administrative Management Fees paid to the General Partner and recorded
by the Partnership were $13,069 in 1997, -0- in 1996, $10,455 in 1995,
$13,069 in 1994, $2,614 in 1993, and -0- in 1992. Suspended fees during
1997, 1996, 1995, 1994, 1993 and 1992 respectively, are $287,000, $300,000,
$290,000, $222,000, $229,000, and $228,000.
Whiteford's working capital and equipment requirements are primarily met by
(a) a revolving credit agreement with Whiteford's principal lender in the
maximum amount of $2,600,000 (with $2,600,000 outstanding at December 31,
1997), (the "Principal Revolver"); (b) a five year term credit facility of
$2,200,000 (the "Principal Term Loan"); (c) a five year credit facility of
$4,165,000 (the "Principal Mortgage Loan"); (d) a two year credit facility of
$700,000, (the "Second Term Loan"); and (e) a five year credit facility of
$500,000, (the "Third Term Loan")(collectively, the "Loans"). The final
payment on the credit facility with Greenaway Consultant, Inc. was made in
December 1997.
The Principal Revolver bears interest at prime plus 1/2%. The Principal
Term Loan bears an interest rate of 8.717%. The Principal Mortgage Loan
bears an interest rate of 8.99%. The Second Term Loan bears an interest rate
of prime plus 1/2%. The Third Term Loan bears an interest rate of 9.42%.
The Loans require the Partnership to meet certain financial covenants and
restrict the ability of the Partnership to make distributions to Limited
Partners without the consent of the principal lender. The Principal Revolver
and the Principal Term Loan together with the Principal Mortgage Loan
provided by the principal lender are secured by real property, fixed assets,
equipment, inventory, receivables and intangibles of Whiteford's.
The Partnership's 1998 capital budget calls for the expenditure of
approximately $800,000 for building, plant, and equipment modifications and
additions. The General Partner believes Whiteford's is in compliance with
environmental protection laws and regulations, and does not anticipate making
additional capital expenditures for such compliance in 1997. Such amounts
are expected to be funded by internally generated cash flow. The General
Partner believes that the above credit facilities along with cash flow from
operations will be sufficient to meet the Partnerships' working capital and
credit requirements for 1998.
The nature of the Partnership's business activities (primarily meat
processing) are such that should annual inflation rates increase materially
in the foreseeable future, the Partnership would experience increased costs
for personnel and raw materials; however, it is believed that increased costs
could substantially be passed on in the sales prices of its products.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data of the Partnership are
included in this report after the signature page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
MANAGEMENT
The Partnership has no officers or directors. The affairs of the Partnership
are managed by the Gannon Group, Inc., the General Partner. The directors,
executive officers and key employees of the General Partner as of December 31,
1997, are as follows:
9
<PAGE>
KEVIN T. GANNON, age 41, sole director, President and sole stockholder of
Gannon Group, Inc.
Mr. Gannon is a Managing Director of Robert A. Stanger & Co., Inc., a New
Jersey based investment banking, investment research and consulting firm.
Mr. Gannon was formerly a Vice President - Corporate Development of Granada
Corporation and Director and Vice President of Granada BioSciences, Inc. and
Granada Foods Corporation, former affiliate of the Partnership. From August
1983 to April 1988, Mr. Gannon was employed by Robert A. Stanger & Co. Ltd.
Mr. Gannon is a Certified Public Accountant.
No director or officer of the General Partner was, during the last five (5)
years, the subject (directly, or indirectly as a general partner of a
partnership or as an executive officer of a corporation) of a bankruptcy or
insolvency petition, of any criminal proceeding (excluding traffic violations
and other minor offenses), or restrictive orders, judgments or decrees
enjoining him from or otherwise limiting him from acting as a futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an associated
person of any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan association or
insurance company, or engaging in or continuing any conduct or practice in
connection with such activity, engaging in any business activity, or engaging
in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of Federal or State securities
laws or Federal commodities laws, or was the subject of any existing order of
a federal or state authority barring or suspending for more than sixty (60)
days the right of such person to be engaged in such activity.
ITEM 11. EXECUTIVE COMPENSATION
CURRENT YEAR REMUNERATION
The Partnership has no officers or directors. Accordingly, no direct
remuneration was paid to officers and directors of the Partnership for the
year ended December 31, 1997. Remuneration to the General Partner is
pursuant to Articles VI of the LIMITED PARTNERSHIP AGREEMENT (filed as
Exhibit A to the Prospectus included in the Partnership's Registration
Statement on Form S-1 [File No. 2-98273]) and incorporated herein by
reference.
Pursuant to Section 6.4(c) of the Limited Partnership Agreement, the
General Partner is entitled to receive a management fee of approximately
$300,000 for the calendar year 1997. However, Section 6.4(c)(v) limits all
amounts payable to the General Partner pursuant to Section 6.4(c) to an
amount which does not exceed 10% of aggregate distributions to Partners from
"Cash Available for Distributions". Under the Limited Partnership Agreement,
Cash Available for Distributions is comprised of cash funds from operations
(after all expenses, debt repayments, capital improvements and replacements,
but before depreciation) less amounts set aside for restoration or reserves.
That portion of the management fee in excess of such 10% limitation is
suspended, and future payment is delayed until such payment may be made
without exceeding such limit.
On dissolution of the Partnership, Section 15.3(a)(ii) of the Limited
Partnership Agreement generally provides for the payment of creditors, and
then pro rata payment to record holders for loans or other amounts owed to
them by the Partnership, including without limitation any amounts owed to the
General Partner pursuant to Section 6.4. Any amounts payable to the General
Partner under Section 15.3(a)(ii) will be dependent upon the funds available
for distribution on the dissolution of the Partnership.
Section 6.4(e) of the Limited Partnership Agreement also provides the
General Partner a subordinated special allocation equal to 15% of any gain on
the sale of partnership assets or food businesses. Among other things, this
special allocation is subordinated to payments to the limited partners for
certain distributions. Any payment pursuant to Section 6.4(e) will be
dependent upon the ultimate sale price of such partnership assets or food
businesses.
During calendar year 1997, the Partnership made aggregate distributions of
$130,689 to the Partners. During calendar year 1996, the Partnership made no
distributions to the Partners. During calendar year 1995, the Partnership
made aggregate distributions to Partners from Cash Available for Distribution
in the amounts of $104,551. As a result in 1997, the Partnership paid the
General Partner 10% of such amount or $13,069, and suspended payment of
approximately $287,000 of such management fee. The cumulative amount of
annual management fees that have been suspended is $1,556,0000.
10
<PAGE>
OTHER COMPENSATION ARRANGEMENTS
There is no plan provided for or contributed to by the Partnership or the
General Partner which provides annuity, pension or retirement benefits for
the General Partner or the officers and directors of the General Partner.
There is no existing plan provided for or contributed to by the General
Partner which provides annuity, pension or benefits for its officers or
directors. There are no arrangements for remuneration covering services as a
director between the Partnership and any director of the General Partner. No
options to purchase any securities of the General Partner were granted or
exercised during its fiscal year ended December 31, 1997. No options were
held to purchase securities of the Partnership as of December 31, 1997, and
as of the date hereof.
After the Partnership acquired the assets of Whiteford's, Inc., Whiteford's
entered into a Services Agreement with Greenaway Consultant, Inc. ("GCI")
under which GCI managed Whiteford's. GCI is owned by one of Whiteford's,
Inc.'s former principal shareholders. This agreement has been extended to
December 31, 2002.
Subsequent to the Services Agreement, Whiteford's determined that it was
desirable to lessen the cash flow burden resulting from the Installment Loan
and the tax payment obligation. Whiteford's determined it was in a position
to refinance $250,000 of the Installment Loan on a more favorable
amortization basis and at a more favorable interest rate. As a result,
Whiteford's consulted with GCI about GCI's willingness to accept a partial
payment of the Installment Loan, extend the payments under the Installment
Loan and to accept a right to receive payments in the future in lieu of being
awarded part of the limited partnership units. As a result, Whiteford's and
GCI entered into a "1993 Services Agreement" which (i) rescinds the original
Services Agreement and the Letter Agreement, (ii) reaffirms the covenant not
to compete for GCI and its shareholder, (iii) provides for the remaining
principal balance of the Installment Loan ($420,000) to be payable over a
four year period with quarterly principal payments of $26,250 plus interest,
(the first quarterly payment beginning March 31, 1994), (iv) restricts GCI's
equity interest in the limited partnership units to 1,00% (all of which has
been delivered to GCI effective January 1, 1994, (v) provides Whiteford's
payment to GCI of approximately $250,000 per year for its management
services, and $500,000 upon a change of control or the sale of substantially
all Whiteford's assets. The final payment of the Installment Loan with GCI
was made in December 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SECURITY HOLDERS
The General Partner owns the entire general partnership interest, which
interest controls the Partnership. The General Partner does not beneficially
own, either directly or indirectly, any equity security in the Partnership,
other than the general partner interest.
CONTRACTUAL ARRANGEMENTS AFFECTING CONTROL
On May 4, 1992, the outstanding shares of G/W Foods, Inc. were assigned by
Granada Management Corporation to Gannon Group, Inc., a corporation owned by
Kevin T. Gannon, a Director and Vice President of G/W Foods, Inc. and also a
former Vice President of Granada Corporation and certain of its affiliates.
Also on May 4, 1992, Granada Management Corporation assigned its sole general
partnership interest in the Partnership to Gannon Group, Inc. The effect of
these assignments is for Gannon Group, Inc. to have general partnership
authority and responsibility with respect to the Partnership and, through G/W
Foods, Inc., of Whiteford's.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
None.
11
<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.
Whiteford Partners L.P.
-------------------------------
(Registrant)
By Gannon Group, Inc.
Its General Partner
Date: March 30, 1998 /s/ Kevin T. Gannon
------------------------------- -------------------------------
Chief Executive Officer
and President
Pursuant to the requirements of the Securities 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:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------- -------------------------------- --------------
<S> <C> <C>
/s/ Kevin T. Gannon Chief Executive Officer, March 30, 1998
- --------------------- President, Chairman of the Board
Kevin T. Gannon and Sole Director (Principal
Executive Officer), Chief
Financial Officer, and Chief
Accounting Officer
</TABLE>
12
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2), (c) AND (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1997
WHITEFORD PARTNERS, L.P.
13
<PAGE>
FORM 10-K -- ITEM 8, ITEM 14 (a) (1) AND (2), (c) AND (d)
The following financial statements and financial statement schedules
of the Partnership are included as part of this report at Item 8:
(a) 1. Financial Statements
CONSOLIDATED BALANCE SHEETS - December 31, 1997, and 1996.
CONSOLIDATED STATEMENTS OF OPERATIONS - for the years ended December
31, 1997, 1996, and 1995.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL - for the
years ended December 31, 1997, 1996, and 1995.
CONSOLIDATED STATEMENTS OF CASH FLOWS - for the years ended December
31, 1997, 1996, and 1995.
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) 2. See Index to Exhibits immediately following the financial statement
schedules.
14
<PAGE>
WHITEFORD PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 264,247 $ 121,163
Accounts receivable - trade 3,558,557 3,196,376
Inventories 3,024,597 2,612,515
Prepaid expenses 88,041 479,031
------------ ------------
TOTAL CURRENT ASSETS 6,935,442 6,409,085
PROPERTY AND EQUIPMENT:
Land and improvements 86,700 86,700
Buildings 7,162,424 7,169,342
Machinery and equipment 9,985,864 9,096,286
Accumulated depreciation (5,205,058) (4,154,597)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT 12,029,930 12,197,731
OTHER ASSETS - NET OF AMORTIZATION 2,832,650 2,960,144
------------ ------------
TOTAL ASSETS $ 21,798,022 $ 21,566,960
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable - trade $ 3,249,121 $ 2,685,099
Notes payable and current maturities on
long-term debt 3,425,625 2,827,006
Accrued expenses and other liabilities 658,562 740,047
------------ ------------
TOTAL CURRENT LIABILITIES 7,333,308 6,252,152
LONG-TERM DEBT 4,732,167 5,704,645
PARTNERS' CAPITAL:
General Partner:
Capital contributions 132,931 132,931
Capital transfers to Limited Partners (117,800) (117,800)
Interest in Partnership net income 18,684 16,140
Distributions (34,251) (32,943)
------------ ------------
(436) (1,672)
Class A Limited Partners: Capital
contributions, net of organization
and offering costs of $2,010,082 11,172,274 11,172,274
Capital transfers from the General Partner 116,554 116,554
Interest in Partnership net income 1,838,686 1,586,849
Distributions (3,394,531) (3,263,842)
------------ ------------
9,732,983 9,611,835
------------ ------------
TOTAL PARTNERS' CAPITAL 9,732,547 9,610,163
------------ ------------
TOTAL LIABILITIES & PARTNERS' CAPITAL $ 21,798,022 $ 21,566,960
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-1
<PAGE>
WHITEFORD PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES
Sales of meat products $ 62,224,110 $ 59,026,632 $ 57,667,240
Interest and other 256,416 339,931 159,531
------------- ------------- -------------
62,480,526 59,366,563 57,826,771
COST AND EXPENSES
Cost of meat products sold 57,846,006 54,188,228 53,757,014
Selling and administrative 2,434,234 2,211,351 2,187,051
Administrative fee -- General Partner 13,069 -- 10,455
Depreciation and amortization 1,204,975 1,146,951 1,052,213
Interest 727,861 839,198 799,494
Other -- 163,157 --
------------- ------------- -------------
62,226,145 58,548,885 57,806,227
------------- ------------- -------------
NET INCOME $ 254,381 $ 817,678 $ 20,544
------------- ------------- -------------
------------- ------------- -------------
Summary of net income allocated to:
General Partner $ 2,544 $ 8,177 $ 205
Class A Limited Partners 251,837 809,501 20,339
------------- ------------- -------------
$ 254,381 $ 817,678 $ 20,544
------------- ------------- -------------
------------- ------------- -------------
Net income per unit of Limited Partner Capital $ 0.19 $ 0.63 $ 0.02
------------- ------------- -------------
------------- ------------- -------------
Weighted average units issued and outstanding 1,306,890 1,306,890 1,306,890
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
WHITEFORD PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS
-------------------------------------------- ----------------------------------------------------
CAPITAL CONTRIBUTIONS
------------------------
CAPITAL INTEREST
CAPITAL TRANSFERS INTEREST FROM FROM IN NET
CONTRI- TO LIMITED IN NET DISTRI- LIMITED GENERAL INCOME DISTRI-
BUTION PARTNERS INCOME BUTIONS PARTNERS PARTNER (LOSS) BUTIONS
--------- ------------ --------- ---------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1994 $ 132,931 $ (117,800) $ 7,758 $ (31,897) $ 11,172,274 $ 116,554 $ 757,009 $ (3,159,291)
Net Income 205 20,339
Distributions (1,046) (104,551)
--------- ------------ --------- ---------- ------------ ---------- ---------- -------------
Balances, December 31, 1995 132,931 (117,800) 7,963 (32,943) 11,172,274 116,554 777,348 (3,263,842)
Net Income 8,177 809,501
--------- ------------ --------- ---------- ------------ ---------- ---------- -------------
Balances, December 31, 1996 132,931 (117,800) 16,140 (32,943) 11,172,274 116,554 1,586,849 (3,263,842)
Net Income 2,544 251,837
Distributions (1,308) (130,689)
--------- ------------ --------- ---------- ------------ ---------- ---------- -------------
Balances, December 31, 1997 $ 132,931 $ (117,800) $ 18,684 $ (34,251) $ 11,172,274 $ 116,554 $1,838,686 $ (3,394,531)
--------- ------------ --------- ---------- ------------ ---------- ---------- -------------
--------- ------------ --------- ---------- ------------ ---------- ---------- -------------
</TABLE>
$.10 weighted average outstanding units of Limited Capital
in 1997, 1996 and 1995 respectively.
See notes to consolidated financial statements.
F-3
<PAGE>
WHITEFORD PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 254,381 $ 817,678 $ 20,544
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,204,975 1,146,951 1,052,213
Gain (Loss) on sale of fixed assets (23,091) 103,157 ---
Increase (decrease) operating assets
and liabilities:
Accounts receivable (362,181) (651,207) (113,339)
Inventories (412,082) (193,049) 9,887
Prepaid expenses 390,990 276,484 (675,890)
Accounts payable 564,022 (15,345) 246,603
Accrued expenses and other liabilities (81,485) (194,964) 308,985
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,535,529 1,289,705 849,003
INVESTING ACTIVITIES:
Purchase of property and equipment (928,913) (443,036) (3,155,430)
Proceeds from disposal of property and equipment 42,324 107,100 ---
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (886,589) (335,936) (3,155,430)
FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt 22,894,939 18,795,383 19,484,383
Payments on notes payable (23,268,798) (20,116,236) (17,013,569)
Distributions to Limited and General Partners (131,997) --- (105,597)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (505,856) (1,320,853) 2,365,217
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 143,084 (367,084) 58,790
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 121,163 488,247 429,457
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 264,247 $ 121,163 $ 488,247
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
WHITEFORD PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
- -------------------------------------------------------------------------------
NOTE A - ORGANIZATION, BUSINESS AND ACQUISITIONS
Whiteford Partners, L.P., (the Partnership), formerly Granada Foods, L.P.,
was formed on June 30, 1987, as a Delaware limited partnership. Prior to May
4, 1992, the Partnership consisted of a General Partner, Granada Management
Corporation, (Granada), and the Limited Partners. On May 4, 1992, Granada
assigned its sole general partner interest in the Partnership to Gannon
Group, Inc. and the Partnership was renamed Whiteford Partners, L.P.
The operational objectives of the Partnership are to own and operate
businesses engaged in the development, production, processing, marketing,
distribution and sale of food and related products (Food Businesses) for the
purpose of providing quarterly cash distributions to the partners while
providing capital appreciation through the potential appreciation of the
Partnership's Food Businesses. The Partnership expects to operate for twenty
years from inception, or for such shorter period as the General Partner may
determine is in the best interest of the Partnership, or for such shorter
period as determined by the majority of the Limited Partners.
The Partnership Agreement provides that a maximum of 7,500,000 Class A,
$10 partnership units can be issued to Limited Partners. Generally, Class A
units have a preference as to cumulative quarterly cash distributions of $.25
per unit. The sharing of income and loss from the Partnership operations is
99% to the Class A and 1% to the General Partner. Amounts and frequency of
distributions are determinable by the General Partner.
On March 26, 1990, the Partnership, through Whiteford Foods Venture,
(Whiteford's) L.P. (formerly Granada/Whiteford Foods Venture, L.P.), a joint
venture with an affiliate of the then General Partner, acquired the business
assets of Whiteford's Inc., a meat processing and distribution company. The
Partnership's interest in the operations and equity of Whiteford's is greater
than 99.9%. The cash purchase price of the assets was $8,275,000 with
liabilities of $3,776,806 assumed. The excess of the purchase price over the
estimated fair value of the net tangible assets acquired of approximately
$3,825,000 was recorded as goodwill. The acquisition was accounted for using
the purchase method of accounting and, accordingly, the financial statements
include the operations of Whiteford's from the date of acquisition.
In 1993, the Partnership entered into a settlement agreement with certain
participants in the Partnership's Distribution Reinvestment and Unit
Acquisition Plan under which the Partnership repurchased 33,165 class A Units
for a total purchase price of $218,194 payable over a five year period. The
first installment in the amount of $62,049 was paid in 1993 with four
subsequent annual installments of $39,036.25. The final installment was paid
in July, 1997.
At December 31, 1997 and at December 31, 1996, the Partnership had
1,306,890 Class A limited partnership units issued and outstanding.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the Partnership and Whiteford's, from the date of acquisition (March
26, 1990). Significant intercompany account balances and transactions have
been eliminated in consolidation.
INVENTORIES. Inventories of meat, meat products and packaging supplies
are stated at the lower of first-in, first-out (FIFO) cost or market. The
major components of inventories are as follows at December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Finished products $ 722,300 $ 721,949
Raw materials 1,145,188 793,511
Packaging supplies and other 1,157,109 1,097,055
---------- ----------
$3,024,597 $2,612,515
---------- ----------
---------- ----------
</TABLE>
F-5
<PAGE>
PROPERTY AND EQUIPMENT. Property and equipment is stated at cost.
Depreciation, computed using the straight-line method on the basis of the
estimated useful lives of the depreciable assets, was $1,077,482, $1,019,458
and $924,719 in years 1997, 1996 and 1995, respectively. The costs of ordinary
repairs and maintenance are charged to expense, while betterment and major
replacements are capitalized.
The carrying value of property and equipment and other long lived assets is
reviewed if the facts and circumstances suggest it may be impaired. If this
review indicates the carrying value of the assets may not be recoverable, based
on estimates of their undiscounted cash flows, the carrying value will be
reduced to the asset's fair market value.
OTHER ASSETS. Goodwill associated with the acquisition of Whiteford's
Inc. is being amortized on a straight-line basis over a thirty-year period.
Related accumulated amortization at December 31, 1997, 1996, and 1995, was
$960,214, $839,345 and $718,476, respectively.
DISTRIBUTIONS. The Partnership records distributions of income and/or
return of capital to the General Partner and Limited Partners when paid.
Special transfers of equity, as determined by the General Partner, from the
General Partner to the Limited Partners are recorded in the period of
determination. Distributions of $130,689 and $104,551 to Limited Partners
were recorded in 1997 and 1995 respectively. No distributions were paid in
1996.
INCOME TAXES. The Partnership files an information tax return. The items
of income and expense are allocated to the partners pursuant to the terms of
the Partnership Agreement. Income taxes applicable to the Partnership's
results of operations are the responsibility of the individual partners and
have not been provided for in the accounts of the Partnership. At December
31, 1997, the book basis of assets exceeds the tax basis of such assets by
approximately $46,927 primarily due to the use of accelerated depreciation
methods utilized for tax reporting purposes.
CASH AND CASH EQUIVALENTS AND CASH FLOWS. Cash and cash equivalent
amounts approximate fair value. For the purpose of the statement of cash
flows, the Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. Total
interest paid was $733,733, $859,393 and $749,059 for 1997, 1996 and 1995,
respectively.
NET INCOME PER UNIT OF LIMITED PARTNERS CAPITAL. The net income per unit
of limited partners capital is calculated by dividing the net income
allocated to limited partners by the weighted average units outstanding.
CONCENTRATIONS. Financial instruments which potentially expose the
Company to concentrations of credit risk, as defined by Statement of
Financial Accounting Standards No. 105, DISCLOSURE OF INFORMATION ABOUT
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FINANCIAL INSTRUMENTS
WITH CONCENTRATIONS OF CREDIT RISKS, consist primarily of accounts
receivable. The Partnership's accounts receivable are concentrated in major
fast food restaurants and regional chains.
To date, the Partnership has relied on a limited number of customers for a
substantial portion of its total sales. The Partnership expects that a
significant portion of its future revenues will continue to be generated by a
limited number of customers. The failure to obtain new customers, the loss
of existing customers or the reduction in sales from existing customers could
materially adversely affect the Partnership's operating results (see Note G).
The Partnership currently buys its meat and necessary supplies from a few
vendors. Although there are a limited number of vendors capable of supplying
these items, management believes that other suppliers could provide the
products on comparable terms. A change in suppliers, however, could cause
delay in delivery and a possible loss of sales, which would adversely affect
operating results.
USE OF ESTIMATES. The preparation of the financial statements in
accordance with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those results.
NOTE C - RELATED PARTY TRANSACTIONS
The Limited Partnership Agreement provides for the General Partner to
receive an annual administrative fee. The fee is equal to 2% (adjusted for
changes in the consumer price index after 1989) of net business investment
(defined as $8.50 multiplied by
F-6
<PAGE>
Partnership units outstanding). However, such amounts payable to the General
Partner are limited to 10% of aggregate distributions to all Partners from
"Cash Available for Distributions". As defined in the Limited Partnership
Agreement, that portion of the management fee in excess of such 10%
limitation is suspended, and future payment is contingent.
The Administrative Management Fees paid to the General Partner and
recorded by the Partnership were $13,069 in 1997 and $10,455 in 1995. There
were no administrative fees paid to the General Partner in 1996. Suspended
fees as of December 31, 1997, for which no accrual has been recorded, total
$1,556,000 ($1,269,000 as of December 31, 1996). This only becomes an
obligation of the Partnership upon a change of control or sale of
substantially all of the assets of the Partnership. The Partnership also has
a service agreement with Greenaway Consultant, Inc. (GCI), which provides for
the former principal owner of Whiteford's to provide consulting services to
the Partnership. The agreement has been extended for five years expiring
December 31, 2002, and provides minimum consulting fees of approximately
$250,000 per annum. During 1997, 1996, and 1995 the minimum was paid. GCI
will receive payment of $500,000 upon a change of control or sale of
substantially all of the assets of the Partnership.
NOTE D - LONG TERM DEBT
The following schedule summarizes long-term
debt at December 31:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Notes payable to bank due March, 2000
interest at 8.99% at December 31, 1997 $ 3,700,149 $ 3,887,105
Notes payable to bank due July, 1999,
interest at 8.717% at December 31, 1997 1,302,561 1,590,087
Revolving credit agreement with a bank, due
July 1998, interest at prime 1/2% at
December 31, 1997 2,600,000 2,053,347
Note payable to Greenaway Consultant, Inc.,
due December 31, 1997, interest at prime plus
1.5% at December 31, 1997 -0- 105,000
Note payable to bank due January, 1999,
interest at prime plus 1.25% at December 31, 1997 250,000 450,000
Note payable to bank due May, 2000
interest at 9.42% at December 31, 1997 274,454 368,923
Other 30,628 77,189
------------ ------------
$ 8,157,792 $ 8,531,651
Less portion classified as current 3,425,625 2,827,006
------------ ------------
$ 4,732,167 $ 5,704,645
------------ ------------
------------ ------------
</TABLE>
The notes payable and the revolving credit agreement with the bank contain
restrictive covenants. The covenants restrict the Partnership from declaring
or paying any distributions to its partners without the prior written consent
of the bank, except for amounts already classified as reinvested
distributions in the balance sheet; limit the level of capital expenditures
the Partnership may make in any fiscal year and require the Partnership to
maintain certain financial ratios. In addition, the Partnership must
maintain a monthly average of $100,000 on deposit with the bank as a
compensating balance.
The revolving credit agreement permits borrowing of up to $2,600,000.
Long-term debt and borrowing under the revolving credit agreement are
collateralized by substantially all of the Partnership's property and
equipment, inventory and accounts receivable.
The aggregate annual maturities on the long-term debt for the Partnership
for the three years subsequent to 1998 are: $683,430, $675,756, and
$3,372,981.
F-7
<PAGE>
During 1997, 1996 and 1995, the weighted average interest rate on
short-term borrowing was 9.1%, 9.1% and 9.4% respectively, while the weighted
average month end amount outstanding was $3,179,441, $3,145,390 and
$2,812,838 respectively. The largest outstanding month end balance was
$3,425,625 in 1997, $3,285,690 during 1996 and $3,245,938 during 1995.
NOTE E - LEASES
LEASE COMMITMENTS. The Partnership's leases, buildings and equipment,
are under various noncancelable operating lease agreements. Lease rental
expense for 1997, 1996 and 1995 was $724,984, $749,132 and $375,963,
respectively. The future minimum lease payments under the leases are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 736,430
1999 705,662
2000 673,821
2001 554,064
Thereafter 189,538
----------
$2,859,515
</TABLE>
NOTE F - EMPLOYEE BENEFIT PLAN
The Partnership has a 401K Plan which covers substantially all employees
who have completed one year of service. The Partnership matches a percentage
up to 25% of the participant's contributions up to 6% of employee eligible
compensation. Contributions to the Plan were $24,368 in 1997, $12,152 in
1996, and $10,900 in 1995.
NOTE G - MAJOR CUSTOMERS
Whiteford's facility, located in Versailles, Ohio, operates as a further
processor and distributor of beef products to major fast food restaurants and
regional chains. Whiteford's principal products are fresh frozen hamburger
patties; precooked and uncooked ground beef taco meat and roast beef,
marinated beef entrees; and other items processed to the customers'
specifications. Major food chains served include Burger King, Rally's and
Cracker Barrel.
Sales of meat products to major customers are summarized as follows for the
fiscal years ended December 31, 1997, and 1996.
<TABLE>
<CAPTION>
CUSTOMER 1997 1996
-------- ----------- -----------
<S> <C> <C>
A $12,933,020 $12,280,924
B 11,958,749 11,163,393
C 10,550,602 9,133,022
D 7,048,837 8,307,416
E 7,010,712 8,140,374
F 3,629,905 1,893,490
----------- -----------
$53,131,825 $50,918,619
----------- -----------
----------- -----------
</TABLE>
The total amounts receivable from these customers on December 31, 1997, and
1996, were $3,112,082 and $2,460,860, respectively.
F-8
<PAGE>
[LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
Limited and General Partners
Whiteford Partners, L.P.
We have audited the accompanying consolidated balance sheets of Whiteford
Partners, L.P. (a Delaware limited partnership) and subsidiary as of December
31, 1997 and 1996 and the related consolidated statements of operations,
changes in partners' capital, and cash flows for each of the three years in
the period ended December 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Whiteford Partners, L.P. and subsidiary at December 31, 1997 and 1996 and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
March 20, 1998
<PAGE>
INDEX TO ATTACHED EXHIBITS
EXHIBIT
- -------- ---------------------------------------------------------
3. & 4. Limited Partnership Agreement of the Partnership
incorporated by reference to Exhibit "A" to
Prospectus (pages A 1 - A 40) included in the
Partnership's Registration Statement on Form S-1 (File
No. 33-15962).
10.1 Consulting Agreement between the Partnership and
Granada Acquisitions, Inc. incorporated by reference
to Exhibit 10.2 to the Partnership's Registration
Statement on Form S-1 (File No. 33-15962).
10.2 Asset Purchase Agreement between Granada/Whiteford
Foods Venture, L.P., Whiteford's Inc. and Albert D.
Greenaway, incorporated by reference to Exhibit 2 to
the Partnership's Form 8-K filing dated May 10, 1990,
as amended (File No. 33-15962).
10.3 Services Agreement between Granada/Whiteford Foods
Venture, L.P., Granada Cincinnati Multifoods, Inc. and
Greenaway Consultants, Inc. to engage Greenaway
Consultants, Inc. to perform management services for
the operations of Granada/Whiteford Foods Venture,
L.P. and CMF, a joint venture, incorporated by
reference to Exhibit 10.3 to the Partnership's Annual
Report on Form 10K for the year ended December 31,
1990.
10.4 Agreement of Limited Partnership dated March 27, 1990,
between the Registrant as limited partner, and G/W
Foods, Inc. as General Partner, to acquire the assets,
certain liabilities, and meat purveying operations of
Whiteford's Inc., incorporated by reference to Exhibit
10.4 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1990.
10.5 Joint Venture Agreement dated July 1, 1990, between
Granada/Whiteford Foods Venture, L.P., North American
Agrisystems, Inc. and Cincinnati Multifoods, Inc. for
the formation of a joint venture for Granada/Whiteford
Foods Venture, L.P. to operate meat production
facilities of North American Agrisystems, Inc.,
incorporated by reference to Exhibit 10.5 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1990.
10.6 Promissory Note payable by Granada/Whiteford Foods
Venture to Fifth Third Bank of Miami Valley, N.A. in
the face amount of $3,000,000, dated July 19, 1991,
together with Hypothecation Agreement, incorporated by
reference to Exhibit 10.6 to the Partnership's Annual
Report on Form 10K for the year ended December 31,
1990.
10.7 Promissory Note payable by Granada/Whiteford Foods
Venture to Fifth Third Bank of Miami Valley, N.A. in
the face amount of $280,000 dated June 21, 1991,
together with Hypothecation Agreement, incorporated by
reference to Exhibit 10.7 to the Partnership's Annual
Report on form 10K for the year ended December 31,
1990.
10.8 Agreement dated November 6, 1991, between G/W Foods,
Inc. and Fifth Third Bank of Miami Valley, N.A.
amending terms of Promissory Note dated July 19, 1991,
incorporated by reference to Exhibit 10.8 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1990.
F-10
<PAGE>
INDEX TO ATTACHED EXHIBITS (CONT.)
10.9 Memorandum of Agreement -- Dissolution of CMF (a Texas
joint venture) effective October 1, 1991, stipulating
terms and conditions of dissolution and wind-up of
operations of CMF., incorporated by reference to
Exhibit 10.9 to the Partnership's Annual Report on
Form 10K for the year ended December 31, 1990.
10.10 Amendment to Certificate of Limited Partnership of
Granada/Whiteford Foods Venture, L.P., State of Ohio
Certificate of Amendment of Foreign Limited
Partnership and Trade Name Registration, all dated
April 30, 1992, and amending Name of Granada/Whiteford
Foods Venture, L.P. to Whiteford Foods Venture, L.P.,
incorporated by reference to Exhibit 10.10 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1990.
10.11 Loan Agreement dated May 5, 1992, between Greenaway
Consultant, Inc. and Whiteford Foods Venture, L.P.,
providing for $750,000 revolving credit facility,
incorporated by reference to Exhibit 10.11 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1990.
10.12 Stock Purchase Agreement and Assignment of Partnership
Interest dated May 4, 1992, by and between Granada
Management Corporation and Gannon Group, Inc.,
incorporated by reference to Exhibit 10.12 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1990.
10.13 Loan Agreement dated December 23, 1992 between
Whiteford Foods Venture, L.P. and The Fifth Third Bank
of Western Ohio, N.A. for a credit facility of
$2,300,000, incorporated by reference to Exhibit 10.13
to the Partnership's Annual Report on Form 10K for the
year ended December 31, 1992.
10.14 Letter of Agreement dated February 23, 1993 by and
between Greenaway Consultants, Inc. and Whiteford
Foods Venture, L.P., proceeding for (i) the
termination of the revolving credit facility, (ii) the
issuance of a term promissory note in the amount of
$750,000, (iii) the termination of the Services
Agreement between Whiteford Partners, L.P. and
Greenaway Consultants, Inc., and (iv) an agreement
regarding a new Services Agreement, incorporated by
reference to Exhibit 10.14 to the Partnership's Annual
Report on Form 10K for the year ended December 31,
1993.
10.15 Loan Agreement dated August 27, 1993 between Whiteford
Foods Venture, L.P. and PNC Bank, Ohio, N.A.,
incorporated by reference to Exhibit 10.15 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1993.
10.16 Services Agreement dated October 1, 1993 between
Whiteford Foods Venture, L.P., Greenaway Consultant,
Inc. and Albert D. Greenaway to engage Greenaway
Consultant, Inc., to perform management services for
the operation of Whiteford Foods Venture, L.P.,
incorporated by reference to Exhibit 10.16 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1993.
10.17 Loan Agreement dated October 1, 1993 between Whiteford
Foods Venture, L.P. and Greenaway Consultant, Inc.
authorizing November 8, 1993 promissory note and
certain security therefor, incorporated by reference
to Exhibit 10.17 to the Partnership's Annual Report on
Form 10K for the year ended December 31, 1993.
F-11
<PAGE>
INDEX TO ATTACHED EXHIBITS (CONT.)
10.18 Promissory note dated November 8, 1993 between
Greenaway Consultant, Inc. and Whiteford Foods
Venture, L.P., incorporated by reference to Exhibit
10.18 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1993.
10.19 Credit agreement dated June 13, 1994 between Whiteford
Foods Venture, L.P. and PNC Bank, Ohio, National
Association and Fifth Third Bank of Western Ohio,
incorporated by reference to Exhibit 10.19 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1994.
10.20 Construction loan agreement dated June 13, 1994
between Whiteford Foods Venture, L.P. and PNC Bank,
Ohio, National Association, incorporated by reference
to Exhibit 10.20 to the Partnership's Annual Report on
Form 10K for the year ended December 31, 1994.
10.21 Lease agreement dated December 15, 1994 between
Whiteford Foods Venture, L.P. and Star Bank, National
Association, incorporated by reference to Exhibit
10.21 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1994.
10.22 Term note B dated April 14, 1995, between Whiteford
Foods Venture, L.P. and PNC Bank, Ohio, National
Association, incorporated by reference to Exhibit
10.22 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1995.
10.23 Note payable dated September 18, 1995, between
Whiteford Foods Venture, L.P. and PNC Bank, Ohio,
National Association, incorporated by reference to
Exhibit 10.23 to the Partnership's Annual Report on
Form 10K for the year ended December 31, 1995.
10.24 Second amendment to Revolving Note dated July 11,
1995, incorporated by reference to Exhibit 10.24 to
the Partnership's Annual Report on Form 10K for the
year ended December 31, 1995.
10.25 Second amendment to Credit agreement dated July 11,
1995, incorporated by reference to Exhibit 10.25 to
the Partnership's Annual Report on Form 10K for the
year ended December 31, 1995.
10.26 Third amendment to Credit agreement dated July 11,
1995, incorporated by reference to Exhibit 10.26 to
the Partnership's Annual Report on Form 10K for the
year ended December 31, 1995.
10.27 Guarantee Compensation agreement dated September 18,
1995 between Whiteford Foods Venture, L.P. and Albert
D. Greenaway, incorporated by reference to Exhibit
10.27 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1995.
10.28 Mortgage granted to Albert D. Greenaway by Whiteford
Foods Venture, L.P., incorporated by reference to
Exhibit 10.28 to the Partnership's Annual Report on
Form 10K for the year ended December 31, 1995.
F-12
<PAGE>
INDEX TO ATTACHED EXHIBITS (CONT.)
10.29 Mortgage granted to Albert D. Greenaway by Whiteford
Foods Venture, L.P., incorporated by reference to
Exhibit 10.29 to the Partnership's Annual Report on
Form 10K for the year ended December 31, 1995.
10.30 Security agreement dated September 18, 1995 between
Whiteford Foods Venture, L.P. and Albert D. Greenaway,
incorporated by reference to Exhibit 10.30 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1995.
10.31 Fifth Amendment to Credit Agreement dated May 9, 1996,
incorporated by reference to Exhibit 10.31 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1996.
10.32 Lease agreement dated October 8, 1996 between
Whiteford Foods Venture, L.P. and Fifth Third Leasing,
incorporated by reference to Exhibit 10.32 to the
Partnership's Annual Report on Form 10K for the year
ended December 31, 1996.
10.33 Lease agreement dated November 1, 1996 between
Whiteford Foods Venture, L.P. and PNC Leasing
Corporation, incorporated by reference to Exhibit
10.33 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1996.
10.34 Second Amendment to Term Note dated March 31, 1997.
10.35 Sixth Amendment to Credit Agreement dated June 30,
1997.
10.36 Lease agreement dated December 22, 1997 between
Whiteford Foods Venture, L.P. and PNC Leasing.
13. 1990 Annual Report to Limited Partners, incorporated
by reference to Exhibit 13 to the Partnership's Annual
Report on Form 10K for the year ended December 31,
1990.
F-13
<PAGE>
EXHIBIT 10.34
SECOND AMENDMENT TO TERM NOTE-COGNOVIT
Cincinnati, Ohio March 31, 1997
On September 18, 1995, the undersigned, WHITEFORD FOODS VENTURE, L.P.,
executed and delivered a Term Note-Cognovit to PNC BANK, OHIO, NATIONAL
ASSOCIATION in the principal amount of $385,000, which was subsequently amended
as of December 31, 1996 pursuant to an Amendment to Term Note-Cognovit
(collectively, the "Note").
By this Second Amendment to Term Note-Cognovit, the Note hereby is amended
as follows:
The second full paragraph of the Note is deleted in its entirety and the
following substituted therefor:
The principal and interest due hereunder will be payable as follows:
principal payments in the amount of $27,500 plus accrued interest
thereon will be due and payable commencing on June 30, 1997 and on
each September 30, December 31, March 31 and June 30 thereafter until
paid in full. Any outstanding but unpaid principal and any accrued
but unpaid interest will be paid in full on January 31, 1999 (the
"Expiration Date"), or such later date as may be designated by Bank by
written notice from Bank to Borrower (it being understood that in no
event will Bank be under any obligation to extend or renew this Note
beyond the initial or any extended Expiration Date).
The paragraph on the second page of the Note entitled "VARIABLE RATE" is
amended to change the first sentence from "one percent (1%)" to "one-half of one
percent (0.5%)".
Except as expressly modified hereby, all terms and conditions of the Note
remain in full force and effect, and Borrower hereby expressly reaffirms the
confession of judgment provision found in the Note as follows:
Borrower hereby irrevocably authorizes any attorney-at-law, including an
attorney employed by or retained by Bank, to appear in any court of record in or
of the State of Ohio, or in any other state or territory of the United States,
at any time after the indebtedness evidenced by this Note becomes due, whether
by acceleration or otherwise, to waive the issuing and service of process and to
confess a judgment against Borrower in favor of Bank, for the amount of
principal and interest and expenses then appearing due from Borrower under this
Note, together with costs of suit and thereupon to release all errors and waive
all right of appeal or stays of execution in any court of record. Borrower
hereby expressly acknowledges that an attorney-at-law employed or retained by
Bank may confess judgment against Borrower, and further expressly consents to
the
<PAGE>
payment of legal fees of such attorney-at-law by Bank.
- ------------------------------------------------------------------------------
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 POWER 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.
- ------------------------------------------------------------------------------
WHITEFORD FOODS VENTURE, L.P.
By:/s/ Albert D. Greenaway
--------------------------------------
Print Name: Albert D. Greenaway
---------------------------
Title: President
-------------------------------
ACCEPTED:
PNC BANK, OHIO, NATIONAL ASSOCIATION
By:/s/ Timothy E. Reilly
- ---------------------------------
Print Name: Timothy E. Reilly
----------------------
Title: Vice President
--------------------------
-2-
<PAGE>
SECOND AMENDMENT TO TERM NOTE-COGNOVIT
Cincinnati, Ohio March 31, 1997
On September 18, 1995, the undersigned, WHITEFORD FOODS VENTURE, L.P.,
executed and delivered a Term Note-Cognovit to THE FIFTH THIRD BANK OF WESTERN
OHIO, N.A. in the principal amount of $315,000, which was subsequently amended
as of December 31, 1996 pursuant to an Amendment to Term Note-Cognovit
(collectively, the "Note").
By this Second Amendment to Term Note-Cognovit, the Note hereby is amended
as follows:
The second full paragraph of the Note is deleted in its entirety and the
following substituted therefor:
The principal and interest due hereunder will be payable as follows:
principal payments in the amount of $22,500 plus accrued interest
thereon will be due and payable commencing on June 30, 1997 and on
each September 30, December 31, March 31 and June 30 thereafter until
paid in full. Any outstanding but unpaid principal and any accrued
but unpaid interest will be paid in full on January 31, 1999 (the
"Expiration Date"), or such later date as may be designated by Bank by
written notice from Bank to Borrower (it being understood that in no
event will Bank be under any obligation to extend or renew this Note
beyond the initial or any extended Expiration Date).
The paragraph on the second page of the Note entitled "VARIABLE RATE" is
amended to change the first sentence from "one percent (1%)" to "one-half of one
percent (0.5%)".
Except as expressly modified hereby, all terms and conditions of the Note
remain in full force and effect, and Borrower hereby expressly reaffirms the
confession of judgment provision found in the Note as follows:
Borrower hereby irrevocably authorizes any attorney-at-law, including an
attorney employed by or retained by Bank, to appear in any court of record in or
of the State of Ohio, or in any other state or territory of the United States,
at any time after the indebtedness evidenced by this Note becomes due, whether
by acceleration or otherwise, to waive the issuing and service of process and to
confess a judgment against Borrower in favor of Bank, for the amount of
principal and interest and expenses then appearing due from Borrower under this
Note, together with costs of suit and thereupon to release all errors and waive
all right of appeal or stays of execution in any court of record. Borrower
hereby expressly acknowledges that an attorney-at-law employed or
<PAGE>
retained by Bank may confess judgment against Borrower, and further expressly
consents to the payment of legal fees of such attorney-at-law by Bank.
- -------------------------------------------------------------------------------
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 POWER 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.
- -------------------------------------------------------------------------------
WHITEFORD FOODS VENTURE, L.P.
By:/s/ Albert D. Greenaway
--------------------------------------
Print Name: Albert D. Greenaway
--------------------------
Title: President
-------------------------------
ACCEPTED:
THE FIFTH THIRD BANK OF WESTERN OHIO, N.A.
By:/s/ Ronald T. Senci
- ---------------------------------
Print Name: RONALD T. SENCI
Title: SENIOR VICE PRESIDENT
-2-
<PAGE>
EXHIBIT 10.35
SIXTH AMENDMENT TO CREDIT AGREEMENT
WHITEFORD FOODS VENTURE, L.P., a Texas limited partnership with an address
at 770 N. Center Street, Versailles, Ohio 45380 (the "Borrower"), PNC BANK,
OHIO, NATIONAL ASSOCIATION, a national banking association (the "Agent"), THE
FIFTH THIRD BANK OF WESTERN OHIO, an Ohio state banking corporation (previously
incorrectly identified as a national banking association) with offices located
at 123 Market Street, Piqua, Ohio 45356, and PNC BANK, OHIO, NATIONAL
ASSOCIATION, a national banking association with offices located at 201 East
Fifth Street, Cincinnati, Ohio 45202 (each individually a "Lender" and
collectively "Lenders"), agree as follows, as of June 30, 1997 (the "Effective
Date"):
1. RECITALS.
1.1 The Borrower, the Agent and the Lenders entered into a Credit
Agreement dated June 13, 1994, which was amended by an Amendment to Credit
Agreement dated March 31, 1995, a Second Amendment to Credit Agreement dated
April 20, 1995, a Third Amendment to Credit Agreement dated July 11, 1995, a
Fourth Amendment to Credit Agreement dated November 7, 1995 and a Fifth
Amendment and Waiver Agreement dated May 9, 1996 (collectively, the "Credit
Agreement"). Capitalized terms used herein shall have the meanings given such
terms in the Credit Agreement.
1.2 The Borrower, the Agent and the Lenders desire to amend the
Credit Agreement.
2. AMENDMENT.
2.1 The first sentence of Section 2.1(e) of the Credit Agreement is
deleted in its entirety and the following substituted in its place:
The terms of the Facility shall expire and any outstanding but unpaid
principal and any accrued but unpaid interest shall be paid in full on July
1, 1998 (the "Expiration Date"), or such later date as may be designated by
the Lenders by a written notice from the Lenders to the Borrower (it being
understood that in no event will the Lenders be under any obligation to
extend or renew this Facility beyond the initial or any extended Expiration
Date).
3. REPRESENTATIONS AND WARRANTIES. To induce the Lender to enter into
this Amendment to Credit Agreement (this "Amendment"), the Borrower represents
and warrants as follows:
3.1 The representations and warranties of the Borrower contained in
Section 3 of the Credit Agreement are deemed to have been made again on and as
of the date of execution of this Amendment and will apply to this Sixth
Amendment to Credit Agreement.
<PAGE>
3.2 No Event of Default (as such term is defined in Section 8 of the
Credit Agreement) or event or condition which with the lapse of time or giving
of notice or both would constitute an Event of Default exists on the date
hereof.
3.3 The person executing this Agreement is a duly elected and acting
officer of the Borrower and is duly authorized by the Board of Directors of the
Borrower to execute and deliver this Amendment on behalf of the Borrower.
4. CONDITIONS. The Agent's and Lenders' consent to this Amendment is
subject to the following conditions:
4.1 The Lender shall have been furnished copies, certified by the
Secretary or Assistant Secretary of the Borrower, of resolutions of the Board of
Directors of the Borrower authorizing the execution of this Amendment, the
Exhibits hereto and all other documents executed in connection herewith.
4.2 The representations and warranties of the Borrower in Section 3
herein shall be true.
5. CLAIMS AND RELEASE OF CLAIMS BY THE BORROWER AND THE GUARANTORS. The
Borrower and each of the Guarantors represent and warrant that neither the
Borrower nor any of the Guarantors has any claims, counterclaims, setoffs,
actions or causes of actions, damages or liabilities of any kind or nature
whatsoever whether at law or in equity, in contract or in tort, whether now
accrued or hereafter maturing (collectively, "Claims") against the Lender, its
direct or indirect parent corporation or any direct or indirect affiliates of
such parent corporation, or any of the foregoing's respective directors,
officers, employees, agents, attorneys and legal representatives, or the heirs,
administrators, successors or assigns of any of them (collectively, "Lender
Parties") that directly or indirectly arise out of, are based upon or are in any
manner connected with any Prior Related Event. As an inducement to the Lender
to enter into this Agreement, the Borrower and each of the Guarantors jointly
and severally, on behalf of themselves, and all of their respective heirs,
administrators, successors and assigns hereby knowingly and voluntarily release
and discharge all Lender Parties from any and all Claims, whether known or
unknown, that directly or indirectly arise out of, are based upon or are in any
manner connected with any Prior Related Event. As used herein, the term "Prior
Related Event" means any transaction, event, circumstance, action, failure to
act, occurrence of any sort or type, whether known or unknown, which occurred,
existed, was taken, permitted or begun at any time prior to the Effective Date
or occurred, existed, was taken, was permitted or begun in accordance with,
pursuant to or by virtue of any of the terms of the Loan Agreement, the Note or
any documents executed in connection with the Loan Agreement or which was
related to or connected in any manner, directly or indirectly to the Loan.
6. GENERAL.
6.1 Except as expressly modified herein, the Credit Agreement, as
amended,
2
<PAGE>
is and remains in full force and effect.
6.2 Except as provided for in Section 3 above, nothing contained
herein will be construed as waiving any default or Event of Default under the
Credit Agreement or will affect or impair any right, power or remedy of the
Lender under or with respect to the Loan, the Credit Agreement, as amended, the
Revolving Notes, as amended or any agreement or instrument guaranteeing,
securing or otherwise relating to the Revolving Notes.
6.3 This Amendment will be binding and inure to the benefit of the
Borrower and the Lenders and their respective successors and assigns.
6.4 All representations, warranties and covenants made by the
Borrower herein will survive the execution and delivery of this Amendment.
6.5 This Amendment will in all respects be governed and construed in
accordance with the laws of the State of Ohio.
Executed as of the Effective Date.
WHITEFORD FOODS VENTURE, L.P.,
a Texas limited partnership
By: G/W FOODS, INC., a general partner,
a Texas corporation
By: /s/ Albert D. Greenaway
--------------------------------
Print Name: Albert D. Greenaway
---------------------
Title: President
-------------------------
PNC BANK, OHIO, NATIONAL ASSOCIATION, as Agent,
a national banking association
By: /s/ Timothy E. Reilly
- --------------------------------
Print Name: Timothy E. Reilly
---------------------
Title: Vice President
-------------------------
3
<PAGE>
THE FIFTH THIRD BANK OF WESTERN OHIO,
an Ohio state banking corporation
By: /s/ K. Douglas Compton
- ---------------------------------
Print Name: K. Douglas Compton
----------------------
Title: Vice President
--------------------------
PNC BANK, OHIO, NATIONAL ASSOCIATION
a national banking association
By: /s/ Timothy E. Reilly
- -----------------------------------
Print Name: Timothy E. Reilly
-----------------------
Title: Vice President
----------------------------
STATE OF OHIO )
) SS:
COUNTY OF MONTGOMERY)
The foregoing instrument was acknowledged before me this 30th day of June,
1997 by Albert D. Greenaway, President of G/W Foods, Inc., a Texas corporation,
on behalf of the corporation as general partner of Whiteford Foods Venture,
L.P., a Texas Limited Partnership.
/s/ David E. Hummel, JR.
------------------------------------
Notary Public: David E. Hummel, Jr.
Notary Public, State of Ohio
My Commission Expires Nov. 17, 1997
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of
______, 1997 by K. Douglas Compton of The Fifth Third Bank of Western Ohio, an
Ohio state banking corporation, on behalf of the banking corporation.
/s/
------------------------------------
Notary Public: David E. Hummel, Jr.
Notary Public, State of Ohio
My Commission Expires Nov. 17, 1997
-4-
<PAGE>
EXHIBIT 10.36
PNC LEASING CORP PNCBANK
Pittsburgh, Pennsylvania
SCHEDULE OF LEASED EQUIPMENT Schedule Number: 00931-002
(First Amendment Tax Lease) Master Lease Agreement No.: 931
Master Lease Agreement Date: October 11, 1996
LESSEE: Whiteford Foods Venture, L.P. SUPPLIER: Various-
770 North Center Refer to Supplement to
Versailles, OH 45380 Schedule of Leased
Equipment attached
hereto and made a part
hereof.
1. SCHEDULE. This Schedule of Lease Equipment ("Schedule") is hereby made a
part of the Lease referenced above between the undersigned Lessor and the
undersigned Lessee. All terms and conditions of said Lease are
incorporated herein by reference.
2. EQUIPMENT. The Equipment which is subject to the Lease is described on the
supplement attached hereto and incorporated herein ("Supplement"), and
includes all cash and non-cash proceeds and products (including without
limitation insurance proceeds) of the Equipment, and all additions and
accessions thereto, substitutions therefor and replacements thereto.
3. TITLE OF EQUIPMENT. At Lessee's request, Lessor has purchased the
Equipment as a buyer in the ordinary course of business for value. Title
to the Equipment leased hereunder shall remain with the Lessor at all
times. Lessee shall have no right, title or interest in or to Equipment
except as expressly set forth in the Lease.
4. EQUIPMENT LOCATION. The Equipment shall be located at the address stated
in Supplement and shall not be removed without Lessor's prior written
consent.
5. INTERIM RENTAL TERM. The interim rental term of the Lease as respects the
Equipment described herein shall commence on the date of Lessor's first
advance of funds for the purchase of the Equipment and shall terminate on
the day before the commencement of the base lease term.
6. INTERIM RENT. Interim rent shall be calculated at the Bank's Prime Rate of
interest on the amount funded by Lessor from time to time, for the number
of days outstanding from each funding date until the lease commencement
date ("Interim Rent"), plus applicable taxes, if any. Interim Rent shall
be due and payable monthly during the interim rental term, upon receipt by
Lessee of Lessor's invoice therefor.
7. LEASE TERM. The base term of the Lease as respects the Equipment is set
forth in the Supplement.
8. RENT. The Lessee agrees to pay basic rent for the Equipment in the amount
and on the dates set forth in Supplement, plus applicable taxes, if any.
9. DEPRECIATION RECOVERY PERIOD. For purposes of Sections 168(e)(3) and
168(c) of the Code (as defined hereafter), the Equipment constitutes five
(5) year recovery property.
10. TAX INDEMNIFICATION.
(a) TAX ASSUMPTIONS. This Lease has been entered into on the basis that
Lessor is entitled to such federal, state and local income tax deductions,
credits and other benefits (the "Tax Benefits") as are provided to an owner
of property including, without limitation: (A) the Recovery Deductions (as
defined herein); and (B) the interest deduction under the Internal Revenue
Code of 1986, as amended (the "Code") in the full amount of any interest
paid or accrued by Lessor, using Lessor's method of tax accounting, for any
indebtedness incurred by Lessor in financing its purchase of the Equipment
(the "Interest Deductions").
Page 1 of 4
<PAGE>
(b) TAX REPRESENTATIONS. Lessee represents and warrants to Lessor (the
"Tax Representations") that: (A) for purposes of Sections 168(e)(3) and
168(c) of the Code, each Item of Equipment constitutes an asset described
in the "property class" and "applicable recovery period" as designated
herein in paragraph 9; (B) the Lessor shall be entitled to claim federal,
state and local depreciation deductions (the "Recovery Deductions") which
are based upon, and will fully recover, the total cost of each Item of
Equipment, including, for federal income tax purposes, modified accelerated
cost recovery system deductions computed pursuant to Code Section
168(b)(1)(A) and (B) and 168(e)(3) based upon 100% of Lessor's original
cost of each Item of Equipment; (C) each Item of Equipment is not "limited
use property" within the meaning of Revenue Procedure 76-30 (1976-2 Cum.
Bull. 647), and no improvements, changes, additions, or alterations made by
or at the request of Lessee will cause such Item of Equipment to be
"limited use property"; (D) this Lease, including any and all Schedules,
constitutes a "true lease" for federal, state and local income tax purposes
and Lessor will be the "true owner" of each Item of Equipment entitled to
claim the Recovery Deductions and other Tax Benefits anticipated by Lessor
hereunder; (E) each Item of Equipment is reasonably estimated to have an
economic useful life of at least 125% of the initial term of the Lease and
have an economic value of at least 20% of Lessor's original cost of the
Item of Equipment at the expiration of the lease term; (F) each Item of
Equipment does not and will not require any improvements, modifications,
alterations or additions in order to render it complete for its intended
use by Lessee; (G) Lessor will not realize any taxable income as a result
of any improvements, modifications, alterations or additions to the
Equipment or any Item of Equipment made by anyone other than Lessor; (H)
all amounts includable in the gross income of Lessor with respect to each
Item of Equipment and all deductions allowable to Lessor with respect to
each Item of Equipment will be treated as derived from, or allocable to,
sources within the United States; and (I) Lessee will maintain sufficient
records to verify such use which records will be furnished to Lessor within
30 days after receipt of a demand therefor.
(c) TAX INDEMNITY. If for any reason whatsoever, including, without
limitation, the falsehood or inaccuracy of any Tax Representation
(excluding only a failure of Lessor to claim properly or timely the
Recovery Deductions or Interest Deductions for the appropriate year, or the
failure of Lessor to have sufficient taxable income to benefit from the
Recovery Deductions or Interest Deductions): (A) Lessor shall lose, shall
not have or shall lose the right to claim or there shall be disallowed,
eliminated, reduced, or recaptured with respect to Lessor, for federal,
state or local income tax purposes, all or any portion of the Tax Benefits
with respect to an Item of Equipment; or (B) the Lessor's anticipated net
after-tax economic and accounting yields and periodic net after-tax cash
flows over the term of the applicable Schedule (based upon the same
assumptions used by Lessor in originally evaluating the Lease and
applicable Schedule at the commencement of the term of the applicable
Schedule) (the Lessor's "Anticipated Economics") is adversely affected due
to (i) any income or deductions with respect to any Item of Equipment being
treated as derived from, or allocable to, sources without the United
States, or (ii) enactments of new income tax legislation or amendments and
other changes to the Code or any other state or local income tax law,
including the promulgation of regulations and judicial or administrative
rulings with respect thereto; or (C) the Lessor shall be required to
include any amount in its taxable income as a result of any improvements,
modifications, alterations or additions to any Item of Equipment made by
anyone other than Lessor (an occurrence of an event under (A), (B) and/or
(C) being referred to individually or collectively as a "Loss"); then, at
the option of the Lessor, (x) the rent over the remainder of the term of
the applicable Schedule shall, on and after the next succeeding rent
payment date, after written notice to Lessee by Lessor that a Loss has
occurred, be increased by such amount which, in the sole opinion of Lessor,
after deduction of all taxes owed by Lessor to any governmental or taxing
authority as a result of such increase in rent, will cause Lessor's actual
net after-tax economic and accounting yields and periodic net after-tax
cash flows over the term of the applicable Schedule (the Lessor's "Actual
Economics") to equal the Lessor's Anticipated Economics that would have
been available if such Loss had not occurred, and Lessee shall forthwith
pay to Lessor, on demand, an amount which, after deduction of all taxes
owed by Lessor to any governmental or taxing authority as a result of the
receipt of such amount, shall be equal to the amount of any penalties,
interest or additions to tax which may be assessed by any governmental or
taxing authority against Lessor attributable to the Loss, or (y) after
written notice to Lessee by Lessor that a Loss has occurred, Lessee shall
pay to Lessor, upon demand, in a lump sum, an amount which, after deduction
of all taxes owed to any governmental or taxing authority by Lessor as a
result of the receipt of such lump sum payment, will cause Lessor's Actual
Economics to be equal to the Lessor's Anticipated Economics that would have
been available if such Loss had not occurred plus an amount which, after
deduction of all taxes owed by Lessor to any governmental taxing authority
as a result of the receipt of such amount, shall be equal to the amount of
any penalties, interest, or additions to tax which may be assessed by any
governmental or taxing authority against Lessor attributable to the Loss.
(d) CALCULATIONS. All calculations of Lessor's Actual Economics with
respect to a Loss shall be determined on the basis of the assumption that
Lessor will be subject to federal, state and local corporate income tax
rates at the maximum statutory rate. Any written notice that any Loss has
occurred pursuant to this paragraph 10 shall be accompanied by a written
statement from Lessor
Page 2 of 4
<PAGE>
describing in reasonable detail such Loss and the computations of the
amounts payable, either in a lump sum or revised rent payments as set forth
above, which computation shall be binding and conclusive upon Lessee,
absent manifest error.
(e) INTEREST. Upon failure to pay any indemnification amount when due, by
demand or otherwise, such unpaid obligation shall bear interest at a per
annum rate equal to the prime rate of interest as announced, from time to
time, by the Bank.
(f) CONSOLIDATED RETURN. As used in this paragraph 10, the term "Lessor"
shall include any successor or assign of Lessor and any member of an
affiliated group of which Lessor is, or may become, a member if
consolidated, joint or combined returns are filed for such affiliated group
for federal, state or local income tax purposes.
(g) SURVIVAL. The indemnities and assumptions of liabilities and
obligations provided for in this paragraph 10 shall continue in full force
and effect notwithstanding the expiration or other termination of this
Lease.
11. END OF TERM OPTIONS.
(a) Provided that no Event of Default will have occurred and is continuing,
on the expiration of the base lease term, at its option, Lessee may
purchase all of the Lessor's right, title and interest in and to all, but
not less than all of the Equipment described in this Schedule. On the last
day of the base lease term, the Lessee shall pay to the Lessor an amount
equal to the greater of (i) the fair market value of the Equipment
determined in accordance with the provisions of paragraph 11(b), or (ii)
the percent of the Equipment Cost stated in the Supplement hereto. In
order to exercise its option, Lessee shall notify Lessor in writing of its
intention to exercise such option at least 180 days prior to the expiration
of the base lease term. Lessee will deliver to the Lessor, on or before
the expiration of the base lease term, an appraisal of the Equipment as
described in subparagraph 11(b), together with the payment of the purchase
price in immediately available funds. Thereupon, the Lessor shall convey
the Equipment to the Lessee on an as-is, where-is basis without
representation or warranty whatsoever, except that the Equipment shall be
conveyed free and clear of any liens or encumbrances created due to or
through the acts or omissions of the Lessor.
(b) As used in paragraph 11(a), "fair market value" of the Equipment shall
be the value of the Equipment as of the last day of the base term of the
Lease, as determined by an independent appraiser Selected by the Lessee
and retained at Lessee's expense. The report of the appraiser shall be in
writing and delivered to the Lessor on or before the expiration of the base
lease term.
(c) In the event that the Lessee does not purchase the Equipment in
accordance with paragraph 11(a) above, then (i) Lessee shall continue to
pay rent for the remainder of the base lease term in the amount set forth
in the Supplement hereto, and (ii) this Schedule shall automatically be
extended for an additional term (the "Renewal Term") as stated in the
Supplement hereto, without further action on the part of the Lessor or the
Lessee. At the expiration of the Renewal Term and conditioned that no
Event of Default shall have occurred and be continuing, the Lessee may
either (i) purchase the Equipment at the fair market value as of the last
day of the Renewal Term as determined in accordance with paragraph 13
herein, or (ii) return the Equipment to the Lessor in accordance with
paragraph 12 herein.
12. RETURN OF EQUIPMENT. Lessee shall give Lessor written notice a minimum
of six (6) months prior to the expiration of this Lease of its intent to
return the Equipment. Upon the expiration or earlier termination of
this Lease, Lessee shall return each Item of Equipment, freight and
insurance prepaid, to Lessor (or Lessor's nominee) at a location
designated by Lessor. If requested by Lessor, Lessee will provide 180
days free storage at the Equipment's location at the expiration of the
term. During the storage period, Lessee shall maintain the Equipment in
operating condition for the purpose of on-site inspections by
prospective buyers and shall keep the Equipment insured in accordance
with paragraph 18 of the Lease. The Equipment and all parts thereto
shall be free and clear of all liens (other than Lessor liens), and
shall be free of all advertising or insignia and residual materials,
cleaned, painted, complete with no missing components or attachments,
and fully operational and able to perform its described task
effectively, without repair or overhaul, within the original tolerances
and specifications set by the manufacturer. Any and all costs of
dismantling, packing, and removing of the Equipment shall also be paid
by Lessee. If the Equipment is returned in a condition other than that
described, Lessor may commission an independent appraiser, licensed
professional engineer, or manufacturer technical representative,
obtained by Lessor at Lessee's cost and expense, to determine the extent
of costs to return the Equipment to the condition required herein.
Lessee shall promptly advance payment for all necessary repairs.
Lessee's obligations to pay for repairs shall be reduced by any proceeds
of insurance which Lessor has received due to the damage to the
Equipment. If Lessee fails to provide timely notice of return or fails
to return the Equipment at the end of the base lease term or any renewal
thereof to the designated location, and does not exercise the renewal or
purchase options provided for herein (if
Page 3 of 4
<PAGE>
any), then this Lease, at Lessor's option, will be deemed extended on a
month-to-month basis for a minimum renewal term of three (3) months, with
rent due on the first of each month at the rate applicable during the base
lease or renewal term just ended.
13. FAIR MARKET VALUE AND ESTIMATED USEFUL LIFE. In all circumstances, except
where Lessee has elected to purchase the Equipment pursuant to paragraph
11(a), fair market value, fair market rental value and estimated useful
life of the Equipment shall be determined by an appraiser of recognized
standing selected by mutual agreement of the Lessor and Lessee. The
appraiser shall determine the fair market value of the Equipment on its in
place value without reduction or consideration of the cost of dismantling,
preparation for shipping or transportation of the Equipment. The
appraiser's decision shall be binding on the parties. If the Lessor and
Lessee are not able to agree on an appraiser, then each party shall select
an appraiser, and the two appraisers shall select a third appraiser. The
two appraisals which are closest in dollar amount and/or estimated life, as
the case may be, shall be averaged to determine the fair market value or
rental or the estimated useful life, as the case may be, which
determination shall be binding upon the parties. If Lessee has given
Lessor notice of Lessee's intentions to exercise its purchase or renewal
option, and the parties have obtained an appraisal of the Equipment as
provided for herein, Lessee shall be bound by the appraisal and shall
purchase the Equipment, or renew the Lease, as the case may be, at the
value determined by the appraisal. If Lessee fails or refuses to cooperate
in the appointment of an appraiser, the value determined by the appraiser
chosen by the Lessor shall be final and binding. The cost of the
appraisal(s) shall be borne by the Lessee.
14. MARKING OF EQUIPMENT. At Lessor's request, Lessee shall mark the Equipment
in a distinct and conspicuous manner with the name of the Lessor followed
by the words "Owner and Lessor" or other appropriate words designated by
Lessor. Lessee shall not alter, deface or remove any of Lessor's ownership
identification plates or markings on the Equipment and, upon Lessor's
request, Lessee shall affix or re-affix such identification.
15. INSURANCE. In addition to the requirements contained in paragraph 18 of
the Lease, the following insurance requirements shall apply:
LIABILITY COVERAGE:
(a) General liability including/comprehensive form:
premises/operations; products/completed operations; contractual
liability; independent contractors; broad form property damage;
personal injury; and collapse hazard.
(b) Bodily injury and Property Damage Combined Single Limit Per
Occurrence: $1,000,000.00.
(c) Fire-legal liability-custody, care or control, each occurrence:
$100,000.00.
PROPERTY COVERAGE:
(a) All risk of physical loss; Equipment must be insured for at least
the total original cost.
16. COVENANTS. By executing and delivering to Lessor, the Lease Acceptance
Certificate, Lessee warrants, covenants and agrees that (a) Lessee has
received all of the Equipment described in this Schedule at the location
described in paragraph 4 hereof; (b) Lessee has duly inspected and accepts
such Equipment without reservation; (c) Lessee is unconditionally bound to
pay to Lessor the total rent and other payments due under the Lease,
whether or not the Equipment described herein may now or hereafter become
unsatisfactory in any respect; and (d) notwithstanding anything contained
herein, Lessor and Lessee shall continue to have all rights which either of
them might otherwise have with respect to the Equipment described herein
against any manufacturer or seller of the Equipment or any part thereof.
17. ADDITIONAL PROVISIONS. (a) This Supplement is incorporated herein by
reference; (b) Lessee grants Lessor the right to insert the Equipment
description and payment dates, amounts, and terms in the Supplement at the
time of commencement of the basic lease term.
WITNESS the due execution hereof with the intent to be legally bound this 22nd
day of December, 1997.
LESSOR: PNC LEASING CORP LESSEE: WHITEFORD FOODS VENTURE, L.P.
BY: G/W FOODS, INC., IT'S GENERAL PARTNER
By: By: /s/ Albert D. Greenaway
---------------------------- ------------------------------
Title: Title: President
--------------------------- ---------------------------
Page 4 of 4
<PAGE>
PNC LEASING CORP PNCBANK
ASSIGNMENT OF EQUIPMENT PURCHASE AGREEMENTS
THIS Assignment of Equipment Purchase Agreements (hereinafter called
"Assignment") is made this 22nd day of December, 1997 by and between Whiteford
Foods Venture, L.P. ("Assignor"), and PNC Leasing Corp., a wholly owned
subsidiary of PNC Bank, National Association ("Assignee").
WITNESSETH:
WHEREAS, Assignor has entered into certain Equipment Purchase Agreements
("Purchase Agreements") with the suppliers or manufacturers ("Vendors") of
certain equipment, pursuant to which the Vendors agreed to sell to Assignor the
equipment described in the Purchase Agreements ("Equipment") upon the terms and
conditions set forth in the Purchase Agreements;
WHEREAS, Assignor and Assignee have agreed that Assignee will purchase the
Equipment directly from the Vendors and will thereupon lease the same to
Assignor pursuant to a certain Master Lease Agreement ("Lease") entered into
between Assignor and Assignee dated October 11, 1996; and
WHEREAS, in order for Assignee to purchase the Equipment from the Vendors, it
will be necessary for Assignor to assign its right, title and interest in and to
the Purchase Agreement to Assignee.
NOW, THEREFORE, in consideration of the foregoing, in consideration of the
promises and mutual covenants and agreements hereinafter set forth, and with the
intent to be legally bound hereby, Assignor and Assignee do hereby mutually
covenant and agree as follows:
1. Assignor hereby sells, assigns, transfers, and sets over unto Assignee all
of Assignor's right, title and interest under, in, to and in respect to the
Purchase Agreements, including (without limitation) the right (i) to accept
and (ii) to take title to the Equipment and be named as "buyer" in any
documents of title, bills of sale, invoices, or similar documents to be
delivered by Vendors in respect of the Equipment under the respective
Purchase Agreements.
2. In the event that any of the Vendors hereafter require the making of any
down payments, progress payments or other advances, same shall be made by
Assignor, unless it is otherwise agreed to in writing by Assignee and
Assignor. Any such payments and/or advances shall be reimbursed to
Assignor when and if Assignee is required to make payment of the Purchase
Price therefore pursuant to the Lease including all schedules and
attachments thereto.
3. Assignee hereby accepts this Assignment of Assignor's right, title and
interest in and to the Purchase Agreements, and by this acceptance, agrees
to (a) purchase the Equipment directly from the Vendors and (b) pay the
balance of all payments due Vendors, at the time Assignee is required to
make payment of the Purchase Price to Vendors, pursuant to the Purchase
Agreements, provided, that there has been satisfactory compliance with the
terms and conditions contained in the Lease relating to the purchase by
Assignee of the Equipment; and provided further, that the Lease is in full
force and effect and no default hereunder has occurred.
4. Notwithstanding the foregoing Assignment, Assignee hereby designates
Assignor to perform all obligations and duties of Assignee under the
Purchase Agreement except (i) the purchase of the Equipment and (ii) the
payment of monies due the Vendors under the Purchase Agreements as of the
time of the completion of delivery and acceptance of the Equipment;
provided, however, the Assignor may not enter into any field orders, change
orders, or other amendments, modifications or supplements to any Purchase
Agreement without the written consent or countersignature of the Assignee,
noted thereon if such field orders, amendments or modifications would
(i) change the number of items of Equipment which the Assignee is obligated
to purchase under any Purchase Agreement; (ii) increase the aggregate
purchase price of the Equipment to an amount in excess of $259,998.66;
(iii) postpone beyond ___________ the time for delivery of the Equipment
and successful completion of the initial tests prior to acceptance of the
Equipment pursuant to the Purchase Agreements; (iv) change or modify in any
material way the performance standards or other requirements for the
Equipment referred to in any Purchase Agreement or related documents; or
(v) result in any recision, cancellation or termination of any Purchase
Agreement. Assignor agrees to such designation and agrees to perform such
obligations. The obligations of Assignor assumed hereby shall continue
until termination of the Lease or until Assignee declares a default
thereunder.
5. It is expressly agreed that, anything herein contained to the contrary
notwithstanding (a) the Assignor shall at all times remain liable to the
Vendors under the Purchase Agreements to perform all of the duties and
obligations of Buyer thereunder to the same extent as if this Assignment
had not been executed; (b) the exercise by the Assignee of any rights
assigned hereunder shall not release the Assignor from any of its duties or
obligations to any Vendor under any Purchase Agreement except to the extent
that such exercise by the Assignee shall constitute performance of such
duties and obligations, and (c) Assignee shall have no obligation or
liability under any Purchase Agreement by reason of or arising out of this
Agreement or be obligated to perform any obligation or duty of Assignor
under the Purchase Agreements or to make any payments (other than the
obligation of Assignee to pay the purchase price for the Equipment) or to
make any inquiry as to the sufficiency of any payment received by any
Vendor or to present or file any claim or to take any other action to
collect or enforce any claims for any payment assigned hereunder.
Page 1 of 2
<PAGE>
6. In the event that Assignor notifies Assignee that Assignor has determined
not to lease any of said Equipment from Assignee (whether because of breach
of contract on the part of the Vendor or otherwise). Assignee hereby
automatically reassigns to Assignor, without recourse and without
representation or warrant of any kind whatsoever, the appropriate contract
rights and Purchase Agreements and releases Assignee's interests therein.
Assignee shall thereupon have no further obligations, responsibilities or
liabilities in connection with said contract rights, Purchase Agreements
and/or Equipment and Assignor hereby agrees to indemnify Assignee and hold
Assignee harmless from and against any and all claims, demands, actions or
proceedings arising out of or in any way relating to said contract rights,
Purchase Agreements and/or the Equipment by whomsoever asserted, and any
and all losses, damage, obligations, liabilities, costs or expenses
(including attorneys' fees) suffered, paid or incurred by Assignee in
connection therewith.
7. Assignor does hereby constitute, effective as of the time Assignee has
declared the Lease to be in default, the Assignee, its successors and
assigns, the Assignor's true and lawful attorney, irrevocably, with full
power in the name of the Assignor or otherwise, to ask, require, demand,
receive, compound and give acquittance for any and all monies and claims
for money due and to become due under, or arise out of, any Purchase
Agreement, to endorse any checks or other instruments or orders in
connection therewith, or to file any claim or to take any action or
institute any proceedings which the Assignee may deem to be reasonably
necessary or advisable.
8. Assignor does hereby represent and warrant that the Purchase Agreements
are, or will be, in full force and effect and enforceable in accordance
with their terms, except as limited by bankruptcy, insolvency,
reorganization and other similar laws affecting the enforcement of
creditors' rights, and the Assignor is not, or will not be, in default
thereunder. Assignor does hereby further represent and warrant that the
Assignor has not assigned or pledged any interest in any Purchase Agreement
to any entities or individuals other than the Assignee, and hereby
covenants that it will not assign or pledge, so long as this Agreement
shall remain in effect, the whole or any part of the rights hereby assigned
to any entity or individual other than the Assignee.
9. Assignor agrees that at any time and from time to time, upon written
request of the Assignee, Assignor shall promptly and duly execute and
deliver any and all such further instruments and documents and take such
further action as the Assignee may reasonably request in order that
Assignee obtain the full benefits of this Agreement.
10. All notices, requests, demands or other communications to or upon the
Assignee and Assignor shall be deemed to have been given or made when
deposited in the mails, postage for certified airmail prepaid or in the
case of telegraphic notice, when delivered to the telegraph company,
addressed to respective addresses contained in the Lease.
11. Neither this Assignment nor any provision hereby may be changed, waived,
discharged or terminated orally, but only by an instrument in writing by
the party against whom enforcement of the change, waiver discharge or
termination is sought.
12. This Assignment shall be binding upon the Assignor and its successors and
assigns and shall be binding upon and inure to the benefit of the Assignee
and its successors and assigns.
13. This Assignment and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly
executed with the intent to be legally bound.
ASSIGNEE: PNC LEASING CORP ASSIGNOR: WHITEFORD FOODS VENTURE, L.P.
By: G/W FOODS, INC., IT'S GENERAL PARTNER
By: By: /s/ Albert D. Greenaway
- --------------------------- --------------------------------
Title: Title: President
--------------------- ------------------------------
Page 2 of 2
<PAGE>
PNC LEASING CORP PNCBANK
LESSEE ACCEPTANCE CERTIFICATE
LESSEE: WHITEFORD FOODS VENTURE, L.P. SUPPLIER: VARIOUS-REFER TO
770 NORTH CENTER SUPPLEMENT TO SCHEDULE
VERSAILLES, OH 45380 OF LEASED EQUIPMENT
1. LESSEE ACCEPTANCE CERTIFICATE. This Lessee Acceptance Certificate
("Acceptance") is hereby made a part of that certain Master Lease Agreement
dated October 11, 1996, and that certain Schedule of Leased Equipment dated
December 22, 1997, both between Lessor and the undersigned Lessee. All
terms and conditions of said Lease and Schedule are incorporated herein by
reference.
2. ACCEPTANCE DATE. Lessee hereby agrees that if the base term of the Lease
has not commenced by the Lessee on or before ____________, 199__ for any
reason whatsoever, then upon written demand by the Lessor, the Lessee will
immediately reimburse Lessor for the total amount set forth in this
Acceptance Certificate ("Cost"), plus interest thereon at PNC Bank,
National Association's Prime Rate, in effect as of the date of funding,
plus two percent (2%) per annum, for the period from the date of funding by
Lessor of said Cost to the payment date to Lessor of said Cost.
3. EQUIPMENT. The Equipment subject to the Lease is described below and
includes all cash and non-cash proceeds and products (including without
limitation insurance proceeds) of the foregoing, and all additions and
accessions thereto, substitutions therefor and replacements thereto:
- --------|----------------------------------------------------------|------------
QUANTITY| DESCRIPTION | COST
- --------|----------------------------------------------------------|------------
| Refer to invoices attached hereto and made a part hereof.| $259,998.66
- --------|----------------------------------------------------------|------------
The Total Equipment Cost including taxes levied at the time of sale, if
any, is: $259,998.66
4. EQUIPMENT LOCATION. The Equipment shall be located at the following
address and shall not be removed without Lessor's prior written consent,
which consent shall not be unreasonably withheld.
770 North Center Street Versailles Darke OH 45380
- --------------------------------------------------------------------------------
Street City County State Zip Code
- --------------------------------------------------------------------------------
PNC LEASING CORP Date: December 22, 1997
Pittsburgh, PA
Gentlemen:
All of the Equipment listed above was received by us and is in good order
and condition, installed to our satisfaction and acceptable to us.
We approve the payment of the invoice(s) covering the Equipment for the
amount(s) shown thereon.
Lessee represents and warrants (a) that the representations and warranties
as set forth in paragraph 25 of the Lease are true and correct as of the date
hereof; (b) that Lessee has satisfied or complied with all requirements set
forth in the Lease to be satisfied or complied with on or prior to the date
hereof; and (c) that no Event of Default under the Lease has occurred and is
continuing on the date hereof.
Date Equipment was first placed in service:____________________
LESSEE: WHITEFORD FOODS VENTURE, L.P.
BY: G/W FOODS, INC., IT'S GENERAL PARTNER
By: /s/ Albert D. Greenaway
---------------------------------------
Title: President
---------------------------------------
<PAGE>
PNC LEASING CORP PNCBANK
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS THAT Whiteford Foods Venture, L.P.,
(hereinafter referred to as "Seller"), with its principal place of business at
770 North Center Street, Versailles, Ohio 45380 for and in consideration of the
sum of Two hundred and fifty nine thousand nine hundred and ninety eight Dollars
and 66/100 ($259,998.66) paid to it by PNC Leasing Corp. (hereinafter referred
to as "Purchaser") with an address at Pittsburgh, Pennsylvania 15265, has
granted, bargained, sold, conveyed, transferred, assigned and delivered, and by
these presents does grant, bargain, sell, convey, transfer, assign and deliver
unto Purchaser, its successors and assigns, all of its right, title and interest
in certain equipment (herein called "the Equipment"), which is described on
Exhibit A attached hereto and made apart hereof.
TO HAVE AND TO HOLD all singular the Equipment by these presents bargained,
sold and confirmed unto the Purchaser, its successors and assigns, forever.
AND, Seller, for itself, its successors and assigns, does hereby covenant
with Purchaser that at the time of this sale, Seller had legal title to the
Equipment, and at the time of delivery of the Equipment to the Purchaser, the
Seller's title to the Equipment was free and clear of all liens, claims and
encumbrances of any nature whatsoever.
IN WITNESS WHEREOF, Seller has caused this instrument to be executed in its
name by an authorized officer as of this 22nd day of December, 1997.
ATTEST: SELLER: WHITEFORD FOODS VENTURE, L.P.
By: G/W FOODS, INC., IT'S GENERAL PARTNER
By: /s/ Albert D. Greenaway
- ----------------------- ----------------------------
Title: President
----------------------------
<PAGE>
PNC LEASING CORP PNCBANK
SUPPLEMENT TO SCHEDULE OF LEASED EQUIPMENT NO. 00931-002, DATED DECEMBER 22,
1997
(First Amendment Tax Lease)
1. SUPPLEMENT: This Supplement is attached to and made and part of that
certain Schedule of Leased Equipment as described above between PNC LEASING
CORP as Lessor and WHITEFORD FOODS VENTURE, L.P. as Lessee, which Schedule
is incorporated in and made a part of the Master Lease Agreement between
the Lessor and Lessee, which is herein referred to as the "Lease."
2. EQUIPMENT DESCRIPTION:
- --------|----------------------------------------------------------|------------
QUANTITY| EQUIPMENT DESCRIPTION | COST
- --------|----------------------------------------------------------|------------
| Refer to invoices attached hereto and made a part hereof.| $259,998.66
- --------|----------------------------------------------------------|------------
3. EQUIPMENT LOCATION: 770 North Center Street Versailles Darke OH 45380
------------------------------------------------------
Street City County State Zip Code
4. BASE LEASE TERM: The base term of the Lease as to the Equipment described
in this Supplement is sixty (60) months, commencing on ____________, and
terminating on _________________, unless sooner terminated under the terms
of the Lease.
5. RENT: Total rent of $________, plus applicable taxes, if any, is due and
payable as follows:
- -----------------|---------------|----------|----------|---------|--------------
NUMBER AND TYPE | DATE PAYMENTS | AMOUNT OF| TAX ON | TOTAL | DATE PAYMENTS
OF PAYMENTS | COMMENCE | PAYMENT | PAYMENT | PAYMENT | TERMINATE
- ---------------------------------|----------|----------|---------|--------------
Sixty (60) | | | | |
Monthly | | | | |
Payments | | | | |
- --------------------------------------------------------------------------------
6. PURCHASE OPTION: In accordance with subparagraph 11(a) of the Schedule,
Lessee may purchase all, but not less than all, of the Equipment described
herein, by paying to Lessor on the last day of the base term of the Lease,
an amount equal to the greater of (i) the fair market value of the
Equipment determined as provided in subparagraph 11(b) of the Schedule, or
(ii) twenty percent (20%) of the Equipment cost.
7. RENEWAL TERM: In accordance with subparagraph 11(c) of the Schedule,
Lessee may extend the Lease for a Renewal Term of twelve (12) months with a
monthly rent equal to __________ percent of the Equipment cost, plus
applicable taxes, with the first such rent being due and payable by Lessee
on_________________________.
WITNESS the due execution hereof with the intent to be legally bound this 22nd
day of December, 1997.
PNC LEASING CORP, LESSOR WHITEFORD FOODS VENTURE, L.P., LESSEE
By: G/W FOODS, INC., IT'S GENERAL PARTNER
By: By: /s/ Albert D. Greenaway
--------------------------- --------------------------------
Title: Title: President
--------------------------- --------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1997 JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 264,247 121,163 488,247
<SECURITIES> 0 0 0
<RECEIVABLES> 3,558,557 3,196,376 2,545,169
<ALLOWANCES> 0 0 0
<INVENTORY> 3,024,597 2,612,515 2,419,466
<CURRENT-ASSETS> 6,935,442 6,409,085 6,208,397
<PP&E> 17,234,988 16,352,328 16,299,675
<DEPRECIATION> (5,205,058) (4,154,597) (3,315,265)
<TOTAL-ASSETS> 21,798,022 21,566,960 22,280,444
<CURRENT-LIABILITIES> 7,333,308 6,252,152 6,733,434
<BONDS> 4,732,169 5,704,645 6,754,525
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 9,732,547 9,610,163 8,792,485
<TOTAL-LIABILITY-AND-EQUITY> 21,798,022 21,566,960 22,280,444
<SALES> 62,224,110 59,026,632 57,667,240
<TOTAL-REVENUES> 62,480,526 59,366,563 57,826,771
<CGS> 57,846,006 54,188,228 53,757,014
<TOTAL-COSTS> 62,226,145 58,548,885 59,806,227
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 727,861 839,198 799,494
<INCOME-PRETAX> 0 0 0
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 254,381 817,678 20,544
<EPS-PRIMARY> 0.19 0.63 0.02
<EPS-DILUTED> 0 0 0
</TABLE>
