UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 1996
Commission File No.: 0-22192
PERFORMANCE FOOD GROUP COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Tennessee 54-0402940
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
6800 Paragon Place, Suite 500
Richmond, Virginia 23230
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number, Including Area Code (804) 285-7340
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X] Yes [ ] No
As of November 8, 1996, 11,663,015 shares of the Registrant's Common Stock
were outstanding.
<PAGE>
Independent Auditor's Review Report
The Board of Directors and Shareholders
Performance Food Group Company:
We have reviewed the accompanying condensed consolidated balance sheet of
Performance Food Group Company and subsidiaries as of September 28, 1996,
and the related condensed consolidated statements of earnings for the
three-month and nine-month periods ended September 28, 1996 and September 30,
1995, and the condensed consolidated statements of cash flows for the
nine-month periods ended September 28, 1996 and September 30, 1995. These
condensed consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Performance Food Group Company
and subsidiaries as of December 30, 1995, and the related consolidated
statements of earnings, shareholder's equity and cash flows for the year then
ended (not presented herein); and in our report dated February 7, 1996, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 30, 1995 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which
it has been derived.
KPMG PEAT MARWICK LLP
Richmond, Virginia
October 25, 1996
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PERFORMANCE FOOD GROUP COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
September 28, December 30,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 4,037 $ 4,235
Trade accounts and notes receivable, net 48,729 44,264
Inventories 45,914 37,844
Other current assets 3,223 3,184
Total current assets 101,903 89,527
Property, plant and equipment, net 55,177 51,640
Intangible assets, net 12,905 13,213
Other assets 926 754
Total assets $ 170,911 $ 155,134
Liabilities and Shareholders' Equity
Current Liabilities:
Outstanding checks in excess of deposits $ 13,681 $ 13,791
Current installments of long-term debt 641 3,210
Accounts payable 37,337 31,943
Other current liabilities 11,291 10,284
Total current liabilities 62,950 59,228
Long-term debt, excluding current installments 3,808 31,766
Note payable to bank 2,726 5,243
Deferred income taxes 3,106 3,106
Total liabilities 72,590 99,343
Shareholders' equity 98,321 55,791
Total liabilities and shareholders' equity $ 170,911 $ 155,134
<FN>
See accompanying notes to unaudited condensed consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
PERFORMANCE FOOD GROUP COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 202,401 $ 169,481 $ 567,911 $ 491,242
Cost of good sold 173,896 145,494 487,392 420,368
Gross profit 28,505 23,987 80,519 70,874
Operating expenses 23,266 19,619 66,892 59,300
Operating profit 5,239 4,368 13,627 11,574
Other income (expense):
Interest expense (82) (671) (516) (2,124)
Interest income - 1 - 6
Other, net 59 70 126 (25)
Other expense, net (23) (600) (390) (2,143)
Earnings before income
taxes 5,216 3,768 13,237 9,431
Income tax expense 2,057 1,476 5,227 3,690
Net earnings $ 3,159 $ 2,292 $ 8,010 $ 5,741
Net earnings per common
share $ .26 $ .23 $ .69 $ .60
Weighted average common
shares and common share
equivalents outstanding 12,083 9,763 11,567 9,645
<FN>
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PERFORMANCE FOOD GROUP COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended
September 28, September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,010 $ 5,741
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,141 3,975
ESOP contributionsapplied to principal of
ESOP debt 303 269
Gain on disposal of property, plant and
equipment (49) (94)
Changes in operating assets and liabilities,
net of effects of companies purchased (6,173) (3,538)
Net cash provided by operating activities 6,232 6,353
Cash flows from investing activities
Purchases of property, plant and equipment (7,301) (8,011)
Proceeds from sale of property, plant and
equipement 128 350
Net cash paid for acquisitions - (22,378)
Increase in intangibles and other assets (320) (211)
Net cash used by investing activities (7,493) (30,250)
Cash flows from financing activities:
Increase in outstanding checks in excess of
deposits (110) 833
Net payments on note payable to banks (2,517) 1,396
Principal payments on long-term debt (30,527) (588)
Proceeds from issuance of long-term debt - 22,715
Proceeds from issuance of common stock 33,329 -
Stock option, incentive and employee stock
purchase plans 888 706
Net cash provided by financing activities 1,063 25,062
Net increase (decrease) in cash (198) 1,165
Cash at beginning of period 4,235 1,638
Cash at end of period $ 4,037 $ 2,803
<FN>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
</TABLE>
PERFORMANCE FOOD GROUP COMPANY AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 28, 1996 and September 30, 1995
1. Basis of Presentation
The accompanying condensed consolidated financial statements of Performance
Food Group Company and subsidiaries (the "Company") are unaudited, with the
exception of the December 30, 1995 condensed consolidated balance sheet, which
was derived from the audited consolidated balance sheet in the Company's latest
annual report on Form 10-K. The unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial reporting, and in accordance with Rule 10-01
of Regulation S-X. Certain amounts in the prior year have been reclassified
to conform to the current year's presentation.
In the opinion of management, the unaudited condensed consolidated
financial statements contained in this report reflect all adjustments,
consisting of only normal recurring accruals, which are necessary for a fair
presentation of the financial position and the results of operations for the
interim periods presented. The results of operations for any interim period
are not necessarily indicative of results for the full year.
These unaudited condensed consolidated financial statements, note
disclosures and other information should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
latest annual report on Form 10-K.
2. Business Combinations
On January 3, 1995, the Company purchased all of the outstanding capital
stock of Milton's Foodservice, Inc. ("Milton's"), a Georgia corporation.
Milton's, a broadline distributor located in Oakwood, Georgia, now operates as
a wholly-owned subsidiary of the Company. Milton's had 1994 net sales of
approximately $72.0 million. The aggregate consideration paid by the Company
for Milton's was $22.5 million in cash plus the assumption of $7.3 million of
indebtedness. On June 15, 1995, the Company acquired certain assets of Cannon
Foodservice, Inc. ("Cannon") for approximately $643,000. Cannon, a broadline
distributor located in Asheville, North Carolina, had 1994 net sales of
approximately $9.0 million. The operations of Cannon have been combined with
the operations of Milton's and all operations are being conducted through
Milton's distribution facility in Oakwood, Georgia.
These acquisitions have been accounted for using the purchase method
and, accordingly, the acquired assets and liabilities have been recorded at
their fair values at the dates of acquisition. The excess of the purchase
price over the fair value of tangible net assets acquired related to these
acquisitions was approximately $13.1 million. The Company's intangible assets
related to these acquisitions are being amortized on a straight-line basis
ranging from 5 to 40 years. The goodwill component is being amortized
over 40 years, which reflects management's best estimate of the appropriate
period over which to amortize the goodwill associated with these acquisitions
and is consistent with current industry practice. The cost allocated to
non-competition agreements is being amortized over their contractual lives,
which range from five to six years. Cost allocated to customer lists is
being amortized over 15 years.
3. Shareholders' Equity
In March 1996, the Company completed a secondary offering of 1,944,549
shares of common stock, of which the Company sold 1,503,637 shares with the
remaining shares sold by selling shareholders. Net proceeds of the offering
were approximately $33.3 million which were used to repay a $30.0 million
term loan and approximately $3.3 million outstanding under the Company's line
of credit.
<PAGE>
On June 13, 1996, the Company's Board of Directors declared a three-
for-two stock split effected in the form of a 50% stock dividend paid on July
15, 1996 to shareholders of record on July 1, 1996. The split resulted in the
issuance of 3,874,807 shares of common stock in July 1996. All references in
these financial statements to earnings per share and weighted average shares
have been restated to reflect the split.
4. Net Earnings per Common Share
Net earnings per common share are computed using the weighted average
number of common shares outstanding during each period, including common stock
equivalents, consisting of stock options, and calculated using the treasury
stock method, when dilutive.
As discussed in Note 3, the Company repaid a $30.0 million term loan with
the proceeds of its secondary offering of common stock completed in March 1996.
Pro forma net earnings per share for the nine month period ended September 28,
1996, assuming the offering was completed at the beginning of the period, would
have been $0.66 per share.
5. Note Payable to Bank
On July 8, 1996, the Company entered into a $50.0 million revolving credit
agreement (the "Credit Facility") with a commercial bank, of which approximately
$2,726,000 was outstanding at September 28, 1996. The Credit Facility bears
interest at LIBOR plus a spread over LIBOR, which varies based on the ratio of
funded debt to total capital. At September 28, 1996, interest on the Credit
Facility was 5.56%. The facility expires in July 1999. Additionally, the
Credit Facility requires the maintenance of certain financial ratios, as
defined, regarding debt to tangible net worth, cash flow coverage and current
assets to current liabilities.
6. Supplemental Cash Flow Information
<TABLE>
Nine Months Ended
September 28, September 30,
1996 1995
<S> <C> <C>
Cash paid during the period for:
Interest $ 705 $ 2,139
Income taxes $ 4,151 $ 3,499
Effects of purchase of companies:
Fair value of assets acquired, inclusive
of goodwill of $12,164 $ - $ 31,811
Liabilities assumed - (9,433)
Net cash paid for acquisitions $ - $ 22,378
</TABLE>
<PAGE>
7. Subsequent Events
On October 23, 1996, the Company entered into a definitive agreement
to purchase certain net assets of McLane Foodservice, a division of McLane
Company, Inc., based in Temple, Texas. The purchase price is approximately
$30 million, subject to certain closing adjustments, which will be financed
with an existing credit facility. McLane Foodservice operates distribution
centers in Temple and Victoria, Texas and provides products and services to
traditional foodservice customers as well as quick-service restaurants, health
care providers and vending customers. McLane Foodservice should generate
approximately $180 million in annualized sales.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
Performance Food Group Company and subsidiaries (the "Company") derives
its revenues primarily from the sale of food and food-related products to
individual, quick-service, and multi-unit restaurant chains and other
institutional customers. The principal components of expenses
include cost of goods sold, which represents the amount paid to
manufacturers and growers for products sold, operating expenses, which
primarily include labor-related expenses, delivery costs and occupancy
expenses, and interest expense.
Results of Operations
The following table sets forth, for the periods indicated, the
components of the condensed consolidated statements of earnings expressed as a
percentage of net sales:
<TABLE>
Three Months Ended Nine Months Ended
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold 85.9 85.8 85.8 85.6
Gross profit 14.1 14.2 14.2 14.4
Operating expenses 11.5 11.6 11.8 12.1
Operating profit 2.6 2.6 2.4 2.3
Other expense, net 0.0 0.4 0.1 0.4
Earnings before income
taxes 2.6 2.2 2.3 1.9
Income tax expense 1.0 0.8 0.9 0.7
Net earnings 1.6 % 1.4 % 1.4 % 1.2 %
<FN>
Comparison of Periods Ended September 28, 1996 to September 30, 1995.
</TABLE>
<PAGE>
Net sales increased to $202.4 million for the three months ended
September 28, 1996 (the "1996 quarter") from $169.5 million for the three months
ended September 30, 1995 (the "1995 quarter"). Net sales increased to $567.9
million for the nine months ended September 28, 1996 (the "1996 period")
compared to $491.2 million for the nine months ended September 30, 1995 (the
"1995 period"). Net sales for the 1996 period were negatively impacted by
severe weather throughout the Eastern and Midwestern United States experienced
during February and March 1996. Additionally, net sales for the 1996 period
vs. 1995 included approximately 2% of deflation as lettuce prices returned to
more "normal" levels after the increase caused by flooding in California during
the second quarter of 1995. Despite the impacts of the weather, net sales
increased 19.4% for the 1996 quarter compared to the 1995 quarter and 15.6% for
the 1996 period compared to a year earlier. Substantially all of the increase
in net sales during the 1996 quarter and period was attributable to internal
growth. Inflation amounted to approximately 2.5% for the 1996 quarter and
1.0% for the 1996 period.
The Company's customer, Cracker Barrel Old Country Stores, Inc.
("Cracker Barrel"), is in the process of soliciting bids for long-term contracts
relating to the distribution of food service products and gift shop merchandise
to Cracker Barrel's restaurants. The Company expects that Cracker Barrel will
select a single supplier for all its restaurants. For the nine months ended
September 28, 1996, sales to Cracker Barrel accounted for approximately 30% of
the Company's net sales. Because of higher volumes and lower margins
associated with sales to large accounts, the impact of a potential loss of
Cracker Barrel business on the Company's gross margin and operating income
would be less than the impact on the Company's net sales. To address the risks
associated with the potential loss of the Cracker Barrel business, the Company
has expanded its business through acquisitions, such as the acquisition of
Milton's and the proposed acquisition of McLane Foodsevice, and the Company has
sought and obtained additional large customized distribution customers. The
Company was recently selected as the provider of customized distribution
services for two new customers that are anticipated to account for approximately
$40 million in incremental annualized sales. The Company intends to continue
to diversify its business to further reduce its dependence on any single
customer.
Gross profit increased 18.8% to $28.5 million in the 1996 quarter from
$24.0 million in the 1995 quarter. Gross profit increased 13.6% to $80.5 million
for the 1996 period from $70.9 million in the 1995 period. Gross profit margin
decreased to 14.1% in the 1996 quarter compared to 14.2% in the 1995 quarter and
decreased to 14.2% from 14.4% for the 1996 and 1995 periods, respectively.
The decline in gross profit margin was primarily due to increased sales during
1996 in the Company's customized distribution operations. Customized
distribution sales are generally higher-volume, lower margin sales, which
require fewer, but larger deliveries than other types of customers. Customized
sales allow for a more efficient use of trucks and personnel, and typically
result in decreased operating expenses as a percentage of sales which generally
offsets the lower gross margins. Gross margins during the 1995 period were
also adversely impacted by the inflated cost of lettuce. During the second
quarter of 1995, California experienced adverse weather conditions which
created significant fluctuations in the price and availability of lettuce and,
as a result, lettuce prices during April and May of 1995 inflated four to five
times their "normal" cost per pound. The Company was able to maintain a
steady, consistent supply of lettuce from California and was generally able to
pass along the increased cost to its customers. Although the Company was able
to successfully pass these higher costs on to its customers, the gross profit
dollars per pound remained relatively comparable to normal conditions. Thus,
although produce processing sales increased significantly during the 1995
period, gross margins did not increase proportionately.
<PAGE>
Operating expenses increased 18.6% to $23.3 million in the 1996 quarter
compared with $19.6 million in the 1995 quarter and increased 12.8% to $66.9
million from $59.3 million for the 1996 and 1995 periods, respectively. As a
percentage of net sales, operating expenses declined to 11.5% in the 1996
quarter from 11.6% in the 1995 quarter and declined to 11.8% for the 1996
period from 12.1% for the 1995 period. The decrease in operating expenses as
a percent of sales reflects better use of the Company's facilities at the
increased level of sales. These improvments in utilization were offset in part
by increased costs related to the severe weather experienced in the East and
Midwest during the first quarter of 1996. In addition, the Company completed
construction of a 75,000 square foot customized distribution center in
McKinney, Texas (a suburb of Dallas) which became operational in February 1996.
The Company incurred certain start-up expenses for the McKinney facility during
the 1996 period, which partially offset the improved operating efficiencies
gained in the Company's other operations. The expanded customized distribution
centers should give the Company the capacity to efficiently service this
rapidly growing division of the business. The Company anticipates opening a
new distribution center in the Mid-Atlantic region to service the Mid-Atlantic
and Northeastern United States within the next year.
Operating profit increased 19.9% to $5.2 million in the 1996 quarter
from $4.4 million in the 1995 quarter. Additionally, operating profit increased
17.7% to $13.6 million for the 1996 period from $11.6 million in the 1995
period. Operating profit margin remained flat at 2.6% for both the 1996 and 1995
quarters and 2.4% for the 1996 period vs. 2.3% for the 1995 period.
Other expense decreased to $23,000 in the 1996 quarter from $600,000
in the 1995 quarter and to $390,000 in the 1996 period from $2.1 million in
the 1995 period. Other expense includes interest expense, which decreased to
$82,000 in the 1996 quarter from $671,000 in the 1995 quarter. Interest expense
decreased to $516,000 for the 1996 period from $2.1 million for the 1995 period.
The decrease in interest expense is due to reduced debt levels as a result of
the Company's secondary stock offering completed in March 1996.
Income tax expense increased to $2.1 million in the 1996 quarter from
$1.5 million in the 1995 quarter and increased to $5.2 million in the 1996
period from $3.7 million for the 1995 period, as a result of higher pre-tax
earnings. As a percentage of earnings before income taxes, the provision for
income taxes was 39.4% and 39.2% for the 1996 and 1995 quarters, respectively,
and 39.5% and 39.1% for the 1996 and 1995 periods, respectively.
Net earnings increased 37.8% to $3.2 million in the 1996 quarter
compared to $2.3 million in the 1995 quarter. Net earnings increased 39.5% to
$8.0 million for the 1996 period from $5.7 million for the 1995 period. As a
percentage of sales, net earnings increased to 1.6% in the 1996 quarter versus
1.4% in the 1995 quarter and 1.4% in the 1996 period from 1.2% in the 1995
period.
Liquidity and Capital Resources
The Company has historically financed its operations and growth
primarily with cash flow from operations, borrowings under its credit facility,
operating leases, normal trade credit terms and the sale of the Company's common
stock. Despite the Company's large sales volume, working capital needs are
minimized because the Company's investment in inventory is financed principally
with accounts payable.
<PAGE>
Cash provided by operating activities was $6.2 million and $6.4 million
for the 1996 and 1995 periods, respectively. The increase in cash generated by
higher net earnings was substantially offset by increased levels of receivables
and inventory net of payables.
Cash used by investing activities was $7.5 million and $30.3 million
for the 1996 and 1995 periods, respectively. Investing activities consist of
additions to and disposals of property, plant and equipment and the acquisition
of businesses. The Company's total capital expenditures for the 1996 period
were $7.3 million including approximately $1.9 million for expansion of the
broadline distribution center in Oakwood, Georgia, and approximately $1.9
million for construction of the customized distribution center in McKinney,
Texas. The Company anticipates that its total capital expenditures, other than
for acquisitions, for the remainder of fiscal 1996 and early 1997 will be
approximately $2.5 million. Investing activities during the 1995 period
included the $22.4 million for the acquisition of businesses, net of cash on
hand at the acquired companies.
In March 1996, the Company completed a secondary offering of 1.9 million
shares of common stock, of which the Company sold 1.5 million shares with the
remainder sold by selling shareholders. The net proceeds to the Company from
the offering were approximately $33.3 million which was used to repay the $30.0
million term loan used to finance the acquisition of Milton's and to repay
approximately $3.3 million outstanding on the Company's line of credit.
On July 8, 1996, the Company entered into a $50.0 million revolving
credit agreement (the "Credit Facility") with a commercial bank, of which
approximately $47.3 million remained unused at September 28, 1996. The Credit
Facility bears interest at LIBOR plus a spread over LIBOR, which varies based
on the ratio of funded debt to total capital. At September 28, 1996, the Credit
Facility bore interest at 5.56%. The facility expires in July 1999.
Additionally, the Credit Facility requires the maintenance of certain financial
ratios, as defined, regarding debt to tangible net worth, cash flow coverage
and current assets to current liabilities.
On October 23, 1996, the Company entered into a definitive agreement
to purchase certain net assets of McLane Foodservice, a division of McLane
Company, Inc., based in Temple, Texas. The purchase price is approximately
$30 million, subject to certain closing adjustments, which will be financed
with borrowings under the Credit Facility.
The Company believes that cash flows from operations and borrowings
under its Credit Facility will be sufficient to finance its operations and
anticipated growth for the foreseeable future.
Recently Issued Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of," and SFAS No. 123, "Accounting for Stock-Based Compensation," have been
adopted by the Company for the fiscal year ending December 28, 1996. The
adoption of these accounting standards did not have a material impact on the
Company's financial position or results of operations.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
quarter ended September 28, 1996.
Item 6. Exhibits and Reports on Form 8-K.
(a.) Exhibits:
10.53 Revolving Credit Agreement dated as of July 8,
1996 between Performance Food Group Company and
First Union National Bank of Virginia.
15 Letter regarding unaudited financial information
from KPMG Peat Marwick LLP.
27 Article 5 Financial Data Schedule for 3rd Qtr 10-Q.
( b.) No reports on Form 8-K were filed during the quarter
ended September 28, 1996.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PERFORMANCE FOOD GROUP COMPANY
(Registrant)
By: /s/ Roger L. Boeve
Roger L. Boeve
Executive Vice President &
Chief Financial Officer
Date: November 12, 1996
REVOLVING CREDIT AGREEMENT
THIS AGREEMENT, dated as of July _8_, 1996, by and among PERFORMANCE
FOOD GROUP COMPANY, a Tennessee corporation, whose mailing address is 6800
Paragon Place, Suite 500, Richmond, Virginia 23230 and FIRST UNION NATIONAL
BANK OF VIRGINIA, a Virginia corporation, as Administrative Agent and as a
Lender, whose mailing address is P.O. Box 26944, Richmond, Virginia 23261,
provides:
1. Definitions. As used herein, the following terms, when initial
capital letters are used, shall have the respective meanings set forth
below. In addition, all terms defined in the Uniform Commercial Code as
enacted in the Commonwealth of Virginia (the "UCC"), whether or not
capitalized, shall have the meanings given therein unless otherwise
defined herein. Unless the context requires otherwise, all personal
pronouns used in this Agreement shall include all other genders; the
singular shall include the plural and the plural shall include the
singular. Titles of sections of this Agreement are for convenience
only, and neither limit nor amplify the provisions of this Agreement.
1.1 "Accounts Receivable" means all accounts, contract
rights, instruments, documents and chattel paper, whether secured or
unsecured, now owned or hereafter acquired by the Borrower.
1.2 "Administrative Agent" means First Union National Bank
of Virginia in its capacity as agent for the Lenders under this
Agreement, and its successors and permitted assigns in such capacity.
1.3 "Affiliate" means, with respect to any specified Person,
any other Person which, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common
control with, such specified Person. The term "control" means
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of a Person, whether through
ownership of common stock, by contract or otherwise.
1.4 "Agreement" means this Revolving Credit Agreement, as
the same may be amended, modified or supplemented from time to time.
1.5 "Borrower" means Performance Food Group Company, a
Tennessee corporation.
1.6 "Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks are authorized or
required to close under the laws of the Commonwealth of Virginia.
1.7 "Capital Stock" means any nonredeemable capital stock of
the Borrower or any Subsidiary, whether common or preferred.
1.8 "Cash Flow Coverage Ratio" means at any date EBITDA
divided by the sum of (i) Interest Expense, (ii) CMLTD and
(iii) Unfinanced Capital Expenditures.
<PAGE>
1.9 "CMLTD" means at any date the aggregate of all principal
payments on any Funded Indebtedness (excluding the Revolving Loans) of
the Borrower during the previous 12 month's period (or during such
shorter period that would be applicable under Section 4.14) determined
on a consolidated basis at such date.
1.10 "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor code enacted subsequent to
the date of this Agreement as a successor thereto.
1.11 [Reserved]
1.12 "Consolidated Current Ratio" means the ratio of the
Borrower's consolidated current assets to its consolidated current
liabilities.
1.13 "Consolidated Subsidiary" means, at any date, any
Subsidiary or other entity the accounts of which, in accordance with
GAAP, would be consolidated with those of the Borrower in its
consolidated financial statements as of such date.
1.14 "Consolidated Total Capital" means, at any time, the
sum of Stockholders' Equity and Funded Indebtedness.
1.15 "Debt" means at any date the total of all indebtedness
and liabilities of the Borrower of every kind determined in accordance
with GAAP on a consolidated basis at such date.
1.16 "Debtor" means the account debtor with respect to any of
the Borrower's Receivables and/or the prospective purchaser with
respect to any contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with the
Borrower pursuant to which the Borrower is to deliver any personal
property or perform any service.
1.17 "EBITDA" means, at any date and as applied to the
Borrower and its Consolidated Subsidiaries, earnings before interest
expense, total income taxes, and depreciation and amortization expense
during the prior 12 month's period (or during such shorter period that
would be applicable under Section 4.14), with each component
determined in accordance with GAAP on a consolidated basis at such
date, and with earnings determined on a non-tax affected FIFO basis.
1.18 "Equipment" means all equipment now owned or hereafter
acquired by the Borrower, including, without limitation, all items of
machinery, equipment, furniture, furnishings and fixtures of every
kind, whether affixed to real property or not, as well as all trucks
and vehicles of every description, trailers and handling and delivery
equipment, and all parts, replacements, additions, attachments and
accessories now or hereafter installed in, placed on or affixed to any
of the foregoing, and all other items of personal property now owned
or hereafter acquired by the Borrower or in which the Borrower has
granted or may grant in the future a security interest to the Lender
hereunder or in any amendment or supplement hereto or otherwise.
<PAGE>
1.19 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and any law enacted
subsequent to the date of this Agreement as a successor thereto.
1.20 "Event of Default" means any event described in Section
8.1.
1.21 "Fair Labor Standards Act" means the Fair Labor
Standards Act, as amended, 29 U.S.C. 201-209, any applicable
regulations and interpretations issued pursuant thereto, and any
amendments to any of the foregoing.
1.22 "Fiscal Year" means the twelve-month period ending on
the Saturday closest to the 31st day of December of each year.
1.23 "Funded Indebtedness" means at any date all indebtedness
of the Borrower and its Consolidated Subsidiaries determined in
accordance with GAAP on a consolidated basis which by its terms (i)
matures more than one year after the date of its inception, including
any payments required to be made on such indebtedness within one year,
and (ii) any such indebtedness maturing within one year from such date
which is renewable or extendible at the option of any obligor to a
date more than one year from such date.
1.24 "GAAP" means generally accepted accounting principles,
consistently applied.
1.25 "General Intangibles" means all general intangibles now
owned or hereafter acquired by the Borrower, including, without
limitation, choses of action, causes of action and all other
intangible property of every kind and nature, including, without
limitation, corporate or other business records, inventions, designs,
blueprints, plans, patents, patent applications, trademarks, trademark
applications, trade names, trade secrets, goodwill, registrations,
copyrights, copyright applications, servicemarks, logos, licenses,
franshises, customer lists, tax refunds, tax refund claims, insurance
policies on the lives of key employees payable to the Borrower, any
letter of credit on which the Borrower is a beneficiary, rights or
claims against carriers and shippers, leases and rights to
indemnification.
1.26 "Interest Determination Date" means, initially the date
of Closing of the Loans and, thereafter the last business day of the
month preceding the month for which interest is calculated.
<PAGE>
1.27 "Interest Rate Period" means the initial Interest Rate
Period and each one, two or three-month period of time thereafter
during which one of the interest rate options described in Section
2.2(f) is in effect with respect to the Loans, provided that, each
Interest Rate Period (other than the initial Interest Rate Period)
shall commence on the first and end on the last day of a calendar
month.
1.28 "Inventory" means all inventory now owned or hereafter
acquired by the Borrower, including, without limitation (a) all goods
which are held for sale or lease by the Borrower or are furnished or
to be furnished by the Borrower under contracts for service, (b) all
raw materials, work in process, finished goods, materials and supplies
of every kind used or consumed in connection with the manufacture,
packing, shipping, advertising or sale of such goods, and (c) all
proceeds and products from the sale or other disposition of such
goods, including all goods returned or repossessed, or acquired by
the Borrower by the way of substitution or replacement, and all
additions and accessions thereto, and all documents and instruments
covering such goods.
1.29 "Lenders" means the banks or other financial
institutions committing to make Loans under this Agreement, and their
respective successors and assigns, and "Lender" means any one of such
Lenders.
1.30 "L/C Subline Loans" means Revolving Loans in an amount
equal to the aggregate amount drawn or available to be drawn under
irrevocable letters of credit issued by the Administrative Agent for
the account of the Borrower under the terms and conditions of Section
2.3 of this Agreement.
1.31 "LIBOR" means a fixed rate equal to the rate obtainable
by the Lender in the London Interbank Market for deposits with a
maturity of one month, two months or three months (as selected by
the Borrower as provided in Section 2.2(f)), as quoted by the Lender
for 11:00 a.m. (Charlotte, North Carolina time) on the Interest
Determination Date, adjusted for Federal Reserve Board reserve
requirements imposed on the Lender from time to time.
1.32 "Lien" means any mortgage, deed or trust, pledge,
security interest, hypothecation, assignment, deposit arrangement,
encumbrance, Lien (statutory or other), or preference, priority or
other security agreement, or preferential arrangement, charge or
encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any capitalized lease and the filing of any financing statement under
the UCC or comparable law of any jurisdiction to evidence any of the
foregoing).
1.33 "Loans" means the Revolving Loans, the L/C Subline Loans
and all other loans and extensions of credit by the Lender to the
Borrower under this Agreement or any other agreement.
1.34 "Loan Documents" means this Agreement, the Revolving
Line of Credit Note and any other documents now or hereafter executed
or delivered in connection with the Obligations in evidence thereof
or as security therefor, including without limitation, any life
insurance assignment, pledge agreement, security assignment, deed of
trust, mortgage, promissory note, or subordination agreement.
<PAGE>
1.35 "Material Adverse Effect" means, with respect to any
event, act, condition or occurrence of whatever nature (including any
adverse determination in any litigation, arbitration or governmental
investigation or proceeding), whether singly or in conjunction with
any other event or events, act or acts, condition or conditions,
occurrence or occurrences, whether or not related, a material adverse
change in, or a material adverse effect upon, any of (a) the financial
condition, operations, business or properties of the Borrower and its
Consolidated Subsidiaries taken as a whole, (b) the rights and
remedies of the Administrative Agent or the Lenders under the Loan
Documents, (c) the ability of the Borrower to perform the Obligations
and its other obligations under the Loan Documents or (d) the
legality, validity or enforceability of any Loan Document.
1.36 "Maximum Line" means $50,000,000.00.
1.37 "Maximum L/C Subline" means at any time an aggregate of
$3,000,000.00 drawn or available to be drawn under irrevocable
standby letters of credit issued by the Administrative Agent for the
Borrower's account.
1.38 "Net Worth" means at any date the total stockholder's
equity of the Borrower and its Consolidated Subsidiaries determined
in accordance with GAAP at such date with Inventory being valued on
a non-tax affected FIFO basis.
1.39 "Obligations" means, without limitation, the Loans and
all other indebtedness and liabilities of the Borrower to the
Administrative Agent and the Lenders under this Agreement and the
other Loan Documents including any overdrafts in any deposit account
maintained by the Borrower with the Administrative Agent, all
obligations of the Borrower with respect to letters of credit issued
by the Administrative Agent or any Lender for the account of the
Borrower, all obligations of the Borrower with respect to any
foreign exchange contract between the Administrative Agent or any
Lender and the Borrower, any indebtedness of the Borrower that is
assigned to the Administrative Agent or any Lender and any
indebtedness of the Borrower to any assignee of this Agreement.
Obligations shall also include all interest, Facility Fees and other
charges chargeable to the Borrower or due from the Borrower and
payable to the Administrative Agent from time to time and all costs
and expenses referred to in Sections 10 and 11 and all renewals,
extensions and moidifications of the indebtedness referenced to in
this section or any part thereof.
1.40 "Payment" means any check, note, draft, bill of
exchange, acceptance, money order, legal tender or other form of
payment or evidence of indebtedness in total or partial payment of
the amount due on any Receivable.
<PAGE>
1.41 "Person" means an individual, partnership, corporation,
business trust, joint stock company, limited liability company,
trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
1.42 "Prime Rate" means the fluctuating rate of interest
established from time to time by the Administrative Agent and
announced to the public in Richmond, Virginia as its prime rate.
The Borrower hereby acknowledges and agrees that the Prime Rate is
a reference used in determining interest rates on certain loans by
the Lender and is not intended to be the lowest rate of interest
charged on any extension of interest to any customer.
1.43 "Receivables" means the Accounts Receivable and the
General Intangibles.
1.44 "Revolving Line of Credit Note" means the promissory
note of even date herewith, as the same may be renewed, modified or
extended from time to time, evidencing the obligation of the
Borrower to pay the Lender the principal amount of the Revolving
Loans, including the L/C Subline Loans, together with interest
thereon, in the manner provided in Section 2 of this Agreement.
1.45 "Revolving Loans" means the revolving line of credit
loans described in Section 2 of this Agreement.
1.46 "Stockholders' Equity" means, at any time, the
shareholders' equity of the Borrower and its Consolidated
Subsidiaries, as set forth or reflected on the most recent
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries prepared in accordance with GAAP. Stockholders'
Equity generally would include, but not be limited to, (i) the par
or stated value of all outstanding Capital Stock, (ii) capital
surplus, (iii) retained earnings and (iv) various deductions such
as (A) purchases of treasury stock, (B) valuation allowances, (C)
receivables due from an employee stock ownership plan, (D) employee
stock ownership plan debt guarantees (to the extent not duplicative
of (C)), and (E) translation adjustments for foreign currency
transactions.
<PAGE>
1.47 "Subsidiary" means any corporation or other entity of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned or controlled by the Borrower.
1.48 "Tangible Net Worth" means at any date Net Worth minus
goodwill and other similar intangible assets of the Borrower and its
Consolidated Subsidiaries determined in accordance with GAAP on a
consolidated basis at such date.
1.49 "Unfinanced Capital Expenditures" means at any date the
total cost of fixed assets purchased during the prior 12-month
period less the total amount of term debt obtained from lending
institutions the proceeds of which were used to purchased such fixed
assets.
2. Revolving Loans.
2.1 Subject to the terms and conditions of this Agreement
and the Commitment Letter (provided that if the terms of this
Agreement differ from or conflict with the terms of the Commitment
Letter, the terms of this Agreement shall control), the Lenders
agree to make Revolving Loans from time to time to the Borrower.
2.2 The Revolving Loans will be made on the following terms
and conditions:
(a) The Revolving Loans shall be used for
refinancing the Borrower's existing line of credit, for working
capital and/or for the acquisition of assets for corporate
purposes.
(b) In the aggregate, the outstanding principal
amount of Loans, including Revolving Loans, shall not exceed the
Maximum Line at any time. If at any time the outstanding principal
amount of the Loans is in excess of the Maximum Line, the Borrower
shall immediately repay the amount of such excess to the
Administrative Agent upon demand.
(c) The Revolving Loans shall be evidenced by the
Revolving Line of Credit Note and by entries upon certain books and
records designated by the Administrative Agent.
(d) The Revolving Loans, other than the L/C Subline
Loans, shall accrue interest on the daily outstanding balance
thereof at an annual rate (the "Interest Rate") equal to LIBOR plus
a Spread Over LIBOR ("Spread Over LIBOR"). Any increase or decrease
in LIBOR shall be effective as of the first day of the month
following the expiration of the LIBOR Interest Rate Period then in
effect. "Spread Over LIBOR" means the percentage calculated as
follows, based upon the ratio of the Borrower's Funded Indebtedness
to the Borrower's Consolitated Total Capital at the end of the
preceding Fiscal Year quarter. The Spread Over LIBOR, when added to
LIBOR, becomes the Interest Rate.
<PAGE>
Funded Indebtedness/Consolidated
Total Capital Spread Over LIBOR (%)
Debt/Capital < .2 to 1.0 0.125%
Debt/Capital > .2 to 1.0 and < .4 to 1.0 0.175%
Debt/Capital > .4 to 1.0 0.250%
(e) After the occurrence and during the continuation
of an Event of Default, the Revolving Loans shall accrue interest on
the daily unpaid balance thereof at an Interest Rate that is 3%
above the Interest Rate then accruing on the Revolving Loans.
(f) The Spread Over LIBOR will adjust effective as
of the first day of each Fiscal Year quarter of the Borrower
("Adjustment Date"), based on the Borrower's Funded Debt to Total
Capital ratio at the end of the preceding Fiscal Year quarter. The
applicable adjustments will be based on the table set forth above.
The Borrower shall make the ratio calculation under the Table,
notify the Administrative Agent of any applicable adjustment as a
result of such calculations and furnish the Administrative Agent
with a copy of its calculations.
(g) Accrued interest shall be payable to the
Administrative Agent monthly. The Interest Rate Period shall be
one month, two months or three months (as selected from time to
time by the Borrower), subject to availability. All interest will
be computed daily, calculated for the actual number of days elapsed
(including the first day but excluding the last day) on the basis
of a 360-day year, and will be debited from the Borrower's loan
account on the date it is due and payable. The Administrative Agent
shall provide the Borrower with a monthly statment of its loan
account.
(h) The Borrower shall pay to the Administrative
Agent an annual facility fee in an amount equal to one hundred and
twenty-five one-thousandths percent (0.125%) of the Maximum Line
(the "Facility Fee"). The Facility Fee shall accrue daily from and
including the date of Closing under this Agreement to and including
the end of the term of this Agreement. In each year of the term of
this Agreement, the Facility Fee for such year shall be payable
quarterly in arrears; provided, however, that should this Agreement
for any reason be terminated prior to the Termination Date, the
accrued and unpaid portion of the Facility Fee earned through the
date of such termination shall be paid in full on the date of such
termination.
<PAGE>
(i) If any payments due on the Revolving Loans
(whether by acceleration or otherwise) are not paid within 10 days
after the date on which due, the Borrower will pay to the
Administrative Agent a late charge equal to 5% of the amount due.
(j) All payments of principal and interest shall be
made by the Borrower to the Administrative Agent in immediately
available funds of the United States of America at its principal
office in Richmond, Virginia, or at such other place as the
Administrative Agent may designate in writing. If any payment of
principal or interest is due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and
any such period of extension shall be included in computing the
interest to be paid in connection with said payment. All payments
received by the Administrative Agent may be credited to the payment
of any of the Obligations or to the Borrower's loan account, at the
election of the Administrative Agent.
(k) The Revolving Loans shall terminate three (3)
years from the date of Closing under this Agreement (the
"Termination Date."). Prior to the Termination Date, the
Administrative Agent may, in its discretion, by written notice
provided to the Borrower extend the Termination Date for a period
of three (3) years from the date of such notice.
2.3 L/C Subline Loans; Reimbursement.
(a) Subject to the conditions in this Agreement,
the Administrative Agent agrees to issue on the Borrower's demand
and for its account the Administrative Agent's irrevocable standby
letters of credit to be used by the Borrower to facilitate its
acquisition of goods and services for use in its business
operations. No such letter of credit may have an expiration
date later than the Termination Date; provided, however, that the
Administrative Agent may, in its sole discretion, consent to a
later expiration date, in which case the terms and conditions of
this Agreement shall continue to govern the rights and
responsibilities of the parties notwithstanding the Agreement's
termination.
(b) The Borrower may request the Administrative
Agent to issue a letter of credit by delivering a duly executed
application (which may be delivered by telecopier if a facsimile
agreement executed by an authorized officer of the Borrower is in
effect) not later than 11:00 a.m. (Eastern Time) at least two (2)
business days before the requested date of issuance to the
Administrative Agent's International Banking Division, Charlotte,
North Carolina, Attention: Glenda Adams, facsimile telephone
number (704) 383-6984, or at such other address as the
Administrative Agent may from time to time specify for the
purpose of such notices. Not later than 2:00 p.m. (Eastern Time)
on the date so specified, the Administrative Agent shall (unless
it determines that any applicable condition specified in this
Agreement has not been satisfied) send a letter of credit
conforming to the terms specified in the related application to
the Borrower or, if so instructed by the Borrower, send a letter
of credit or an authorized written advice of its issuance to the
beneficiary named therein.
<PAGE>
(c) Each application of the Borrower for the
issuance of a letter of credit shall include the Borrower's
certification that (i) the representations, warranties and
covenants of the Borrower contained in this Agreement are correct
as of the date of such request and after giving effect to the
issuance of the letter of credit, (ii) no Event of Default (or
event or condition which would, with the giving of notice or the
lapse of time or both, would become an Event of Default) shall
have occurred and be continuing or would result from the issuance
of the letter of credit and (iii) the request has been duly
authorized and executed by the Borrower.
(d) In the event of a draw on any such letter of
credit, the Borrower agrees to pay to the Administrative Agent on
the date of such drawing (i) a sum equal to the amount drawn, (ii)
all reasonable and actual charges and expenses which the
Administrative Agent may pay or incur relative to such draw, and
(iii) interest on the foregoing at an annual rate equal to the
Prime Rate until all amounts owed by the Borrower to the
Administrative Agent as a result of the draw have been paid in
full.
(e) In the aggregate, the outstanding principal
amount of L/C Subline Loans shall not exceed the Maximum L/C
Subline at any time. If at any time the outstanding principal
amount of the L/C Subline Loans is in excess of the Maximum L/C
Subline, the Borrower shall immediately repay the amount of such
excess to the Administrative Agent upon demand.
(f) The Borrower shall pay to the
Administrative Agent an annual fee equal to thirty-five one-
hundreths percent (0.35%) of the maximum amount available to be
drawn under each letter of credit issued by the Administrative
Agent for the Borrower's account (the "L/C Fee"). As to each
letter of credit issued, the L/C Fee shall be payable in equal
quarterly installments on the first day of each quarter of the
Fiscal Year. As to any letter of credit whose term is for a
period of less than one (1) year, the annual L/C Fee shall be
prorated for such period and shall be paid in equal installments
on the first day of each quarter of the Fiscal Year during such
term. Each payment of the L/C Fee shall be deemed earned by the
Administrative Agent upon receipt, and there shall be no refund of
any postion of such fee by reason of the expiration, reduction,
modification, termination or prepayment of any letter of credit
subsequent to the date of receipt of the L/C Fee by the
Administrative Agent.
<PAGE>
(g) If at any time the Administrative Agent
determines that any change in any law or regulation or in their
interpretation by any court or administrative or governmental
authority charged with their administration shall either (i)
impose, modify or deem applicable any reserve, special deposit,
insurance premium or similar requirement against letters of credit
issued by the Administrative Agent, (ii) impose on the
Administrative Agent any other condition regarding this Agreement
or the letters of credit to be issued hereunder or (iii) alter the
Administrative Agent's capital adequacy requirements, and if the
result of any such event shall be to increase the cost to the
Administrative Agent of issuing or maintaining the letters of
credit, then, upon the demand of the Administrative Agent, the
Borrower shall pay to the Administrative Agent, within thirty (30)
days of such demand, additional amounts which shall be sufficient
to reimburse the Adminsitrative Agent on an after-tax basis for
its increased costs relating to the letters of credit. A
certificate as to such increased cost incurred by the
Administrative Agent, submitted to the Borrower and setting forth
the basis for the calculation of such increased cost, shall be
conclusive as to the amount thereof, absent manifest error, and
such certificate shall include a statement by the Administrative
Agent that such increased cost is being assessed against all of
its customers for whose account letters of credit have been
issued and are outstanding as a matter of general policy.
(h) The Borrower at all times shall protect,
indemnify and save harmless the Administrative Agent from and
against all liabilities, obligations, claims, damages, penalties,
fines, losses, brokerage commissions, costs or expenses
(including, without limitation, reasonable attorneys' fees) which
the Administrative Agent may incur or which may be claimed against
the Administrative Agent by an person or entity (i) by reason of
or in connection with the execution and delivery or transfer of,
or payment or failure to pay under any letter of credit issued
for the Borrower's account; provided, however, that the Borrower
shall not be required to indemnify the Adminsitrative Agent in
respect of any such matters to the extent, but only to the
extent, they arise out of the willful misconduct, or gross
negligence of the Administrative Agent. If any action, suit or
proceeding is brought against the Administrative Agent for any
loss or damage for which the Borrower is required to provide
indemnification, the Borrower, upon request, at its expense shall
defend such action, suit or proceeding, or cause it be defended
by counsel designated by the Borrower and approved by the
Administrative Agent, which approval shall not be unreasonably
withheld. The obligations of the Borrower to indemnify the
Administrative Agent under this section shall survive payment in
full of the Obligations.
(i) The obligations of the Borrower under
this Agreement and with respect to letters of credit issued for
its account by the Administrative Agent are absolute,
unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and the Borrower's
related applications for issuance of letters of credit under all
circumstances whatsoever, including, without limitation (i) any
letter of credit or any other agreement or instrument relating
thereto (collectively, the "Related Docuemnts") proving to be
forged, fraudelent, invalid, unenforceable or insufficient in
any respect; (ii) any amendment of waiver of, or any consent to
departure from, all or any of the Related Documents; (iii) the
existence of any claim, set-off, defense or other rights which
the Borrower may have at any time against the Administrative
Agent, any Lender or any beneficiary or transferee of any other
letter of credit, whether in connection with this Agreement, the
Related Documents or any unrelated transaction or dispute; (iv)
any document presented under any letter of credit (or any
endorsement thereon) proving to be forged, fraudulent, invalid,
unenforceable or insufficient in any respect or any statement
therein being inaccurate in any respect whatsoever; (v) payment
by the Administrative Agent under any letter of credit issued for
the Borrower's account against presentation of a sight draft or
certificate which does not comply with the terms of such letter of
credit, including, without limitation, the circumstances referred
to in clause (iv) above or the failure of any document to bear
reference or to bear adequate reference to such letter of credit;
provided, however, that such payment shall not have constituted
gross negligence or willful misconduct of the Administrative
Agent; or (vi) any use to which such a letter of credit may be
put.
<PAGE>
3. Representations and Warranties. The Borrower hereby represents
and warrants to the Lenders that:
3.1 (a) The Borrower is and at all times during the term of
this Agreement shall be a corporation duly organized, validly
existing and in good standing under the laws of the State of
Tennessee and has the corporate power and authority to conduct its
business as now conducted and as proposed to be conducted while
this Agreement is in effect; (b) the execution and delivery of
this Agreement and the other Loan Documents to which it is a
party and the performance of the transactions contemplated hereby
and thereby to be performed by the Borrower are within the
corporate authority of the Borrower and have been duly authorized
by all proper and necessary corporate action; (c) the execution
and delivery of this Ageement and the other Loan Documents to
which it is a party and the performance of the transactions
contemplated hereby and thereby to be performed by the Borrower
will not violate or contravene any provisions of law or the
articles of incorporation or bylaws of the Borrower, or result
in a breach or default in respect to the terms of any other
agreement to which the Borrower is a party or by which it is
bound, which breach or default would result in the creation,
imposition or enforcement of any Lien against any of the
Borrower's assets, or would have a material adverse effect on
the conduct of the Borrower's business as it is now being
conducted and proposed to be conducted while this Agreement is in
effect; and (d) the Borrower is duly qualififed and authorized to
do business, and is in good standing, in each jurisdiction in
which failure to qualify would have a material adverse effect on
its business, properties or financial condition.
3.2 This Agreement and the other Loan Documents to which it
is a party are valid and legally binding agreements of the
Borrower enforceable against the Borrower in accordance with their
respective terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect affecting the rights of
creditors generally and by equitable principles of general
applicability (regardless of whether such enforceability is
considered in a proceeding in equity or at law.)
3.3 The execution and delivery of this Agreement and the
other Loan Documents to which it is a party and the performance of
the transactions contemplated hereby and thereby to be performed
by the Borrower do not require the approval or consent of any
governmental agency or authority, the stockholders of the
Borrower, or any other Person.
3.4 The Borrower has delivered to the Administrative Agent
copies of its audited, consolidated financial statements as of and
for the year ended December 30, 1995, audited by KPMG Peat
Marwick, L.L.P., certified public accountants, and unaudited
interim, consolidated financial statements for the period ended
March 31, 1996 (the "Ending Date"), prepared by the Borrower's
Chief Financial Officer (collectively, the "Financial
Statements"). The Financial Statements are true and correct, are
in accordance with GAAP, and fairly present the financial
position of the Borrower as of the Ending Date and the results of
its operations and its cash flows for such period, except as to
the unaudited interim, consolidated financial statements which do
not contain footnotes and are subject to normal year-end
adjustments.
<PAGE>
3.5 Since the Ending Date, there has been no change in the
assets, liabilities, financial condition or operation of the
Borrower, other than changes in the ordinary course of business,
which has had a Material Adverse Effect.
3.6 Except to the extent reflected in the Financial
Statements, the Borrower, as of the date of this Agreement, does
not know or have reasonable grounds to know of any basis for the
assertion against it of any liabilities or obligations of any
nature, direct or indirect, accrued, absolute or contingent,
including, without limitation, liabilities for taxes then due or
to become due whether incurred in respect of or measured by the
income of the Borrower for any period prior to the date of this
Agreement or arising out of transactions entered into, or any
state of facts exisiting prior thereto.
3.7 The Borrower has filed all federal, state, local and
other tax returns and reports required to be filed by it, and such
returns and reports are true and correct. The Borrower has paid
all taxes, assessments and other governmental charges lawfully
levied or imposed on or against it or its properties, other than
those presently payable without penalty or interest or being
contested in good faith by appropriate proceedings and those set
forth on Schedule 3.7.
3.8 There is no litigation or proceeding or governmental
investigation pending or, to the knowledge of the Borrower,
threatened against or relating to the Borrower, its properties or
business other than ordinary course rent, detinue and accounts
receivable collection proceedings, litigation involving amounts
that do not exceed $500,000.00 in each instance, and as set forth
on Schedule 3.8.
3.9 The Borrower is not in violation of or default under any
statute, regulation, license, permit, order, writ, injunction or
decree of any government, governmental department, commission,
board, bureau, agency, instrumentality or court, which violation
or default would have a Material Adverse Effect.
3.10 To the best of the Borrower's knowledge, the Borrower is
not in violation or default of any requirement imposed by any law,
rule, regulation or order of any federal, state or local
executive, legislative, judicial, regulatory or administrative
agency, board or authority which relate to (a) noise; (b)
pollution or protection of the air, surface water, ground water
or land; (c) solid, gaseous or liquid waste generation,
treatment, storage, disposal or transportation; (d) exposure to
hazardous or toxic substances; (e) the safety or health of
employees or (f) regulation of the manufacture, processing,
distribution in commerce, use, or storage of chemical substances,
which violation or default would have a Material Adverse Effect.
3.11 The Borrower has not terminated any employee pension
benefit plan subject to Title IV of ERISA ("Plan") since January
1, 1988 and is not in the process of terminating any Plan, and no
fact, including, without limitation, any reportable event
("Reportable Event") described in Section 4043 of ERISA exists in
connection with any Plan of the Borrower which might constitute
grounds for (i) the termination of any Plan by the Pension
Benefit Guaranty Corporation or (ii) the appointment by the
appropriate United States District Court of a trustee to
administer any Plan.
<PAGE>
3.12 Except as disclosed in the Financial Statements, the
Borrower has fulfilled its obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with the provisions of
ERISA and the Code presently applicable to each Plan, and has made
all contributions to each Plan required by the terms thereof.
3.13 Except as disclosed in the Financial Statements and on
Schedule 3.13, the Borrower is not in default under a material
contract, which default would have a Material Adverse Effect, and
no holder of any indebtedness of the Borrower has given notice of
any asserted default thereunder which has not been cured, and no
liquidation or dissolution of the Borrower and no receivership,
insolvency, bankruptcy, reorganization or other similar
proceedings relative to the Borrower or its properties is pending
or, to the knowledge of the Borrower, is threatened against it.
3.14 The Borrower's principal executive office, places of
business and the place where its books of account and records are
kept are located at the addresses set forth on Schedule 3.14.
3.15 All Inventory will be produced in compliance with the
Fair Labor Standards Act.
3.16 After giving effect to the transactions contemplated by
this Agreement and the other Loan Documents to which it is a party
the Borrower (a) will have capital and assets sufficient to carry
on all businesses in which it is engaged or about to be engaged,
(b) will be solvent and able to pay its debts and other
liabilities, whether fixed or contingent, as they mature, (c) will
own property the present fair saleable value of which on a going
concern basis (assuming an orderly liquidation) is greater than
the amount required to pay its debts and other liabilities,
whether fixed or contingent; and the Borrower does not intend to
incur, and does not believe that it is incurring obligations
beyond its ability to pay as they mature.
3.17 No portion of the Loans shall be used, directly or
indirectly, to purchase or carry any "Margin Security" or
"Margin Stock" as such terms are used in Regulations G, T, U and X
of the Board of Governors of the Federal Reserve System, 12 C.F.R.
207, 221 and 224.
<PAGE>
3.18 Except as disclosed on Schedule 3.14, no franchises,
licenses, trademarks, trade names, copyrights or patents are owned
or licensed by, or registered in the name of, or have been applied
for by the Borrower, and no such rights or agreements are
necessary to the conduct of the present business of the Borrower.
The Borrower has no knowledge and has not received any notice to
the effect that any product it manufactures or sells, or any
service it renders, or any process, method, know-how, trade
secret, part or material it employs in the manufacture of any
product it makes or sells or any service it renders, or the
marketing or use by it or another of any such product or service,
may infringe any trademark, trade name, copyright, patent, trade
secret or legally protectable right of any other person or entity.
3.19 Except as disclosed on Schedule 3.14, the Borrower
utilizes no tradenames in the conduct of its business, and has not
changed its name, been the surviving entity in a merger or
acquired any business.
3.20 There are no strikes, work stoppages, material grievance
proceedings or other material controversies pending or, to the
best of Borrower's knowledge, overtly threatened between the
Borrower and any employees engaged in the business of the Borrower
or any union or other collective bargaining unit representing such
employees. The Borrower has substantially complied with all laws
relating to the employment of labor, including, without
limitation, provisions relating to wages, hours, collective
bargaining, occupational safety and health, equal employment
opportunities and the withholding of income taxes and social
security contributions, the non-compliance with which might have
a Material Adverse Effect.
3.21 The foregoing representations and warranties are made by
the Borrower with the knowledge and intention that the Lender will
rely thereon, and shall survive the execution and delivery of this
Agreement and the making and renewal of all Loans hereunder.
4. Affirmative Covenants. The Borrower covenants and agrees that
until all of the Obligations have been paid in full, unless the Lenders
shall otherwise consent in writing, it shall:
4.1 Maintain complete and accurate books of account and
records (collectively, the "Records") pertaining to the operations
of the Borrower, and the Records shall be kept and maintained at
the Borrower's principal executive office and other places of
business set forth on Schedule 3.14. The Borrower shall not move
the Records without giving the Lender at least 30 days' prior
notice. The Records and all financial statements and reports
furnished to the Administrative Agent shall be maintained and
prepared in accordance with GAAP.
4.2 During normal business hours and upon reasonable notice,
grant the Administrative Agent, or its representatives, full and
complete access to the Records, correspondence and other papers
relating to the Borrower's business and the right to inspect,
examine, verify and make abstracts from and copies of the Records,
correspondence and papers, and to investigate such other
activities and business of the Borrower as they may reasonably
deem necessary or appropriate at the time.
<PAGE>
4.3 Deliver to the Administrative Agent:
(a) Within 45 days after the end of each quarter of
each Fiscal Year, unaudited consolidated financial statements,
including a balance sheet and related profit and loss statement,
for such quarter prepared by the Borrower and certified to be
accurate and complete in all material respects by its Chairman or
Chief Financial Officer, subject to normal recurring year-end
audit adjustments.
(b) Within 45 days after the end of each quarter of
each Fiscal Year quarter, a covenant compliance report detailing
compliance with each of the financial covenants set forth in
Sections 4.13 through 4.15 of this Agreement, certified to be
accurate and complete in all material respects by its Chairman or
Chief Financial Officer.
(c) Within 90 days after the end of each Fiscal
Year, audited, consolidated financial statements, including a
balance sheet, statement of earnings and statement of cash flows
for such year audited by independent certified public accountants
acceptable to the Administrative Agent, who shall give their
unqualified opinion with respect thereto.
4.4 Deliver to the Administrative Agent such other financial
and operating information and reports in form and substance
satisfactory to the Administrative Agent as and when the
Administrative Agent may from time to time reasonably request.
4.5 While this Agreement remains in effect and until the
Obligations have been paid in full, (a) maintain its corporate
existence in good standing; (b) make no material change in the
nature or character of its business or engage in any business in
which it was not engaged on the date of this Agreement; and (c)
maintain and keep in full force and effect all licenses and
permits necessary to the proper conduct of its business.
4.6 (a) Maintain and keep all of its properties, real
and personal, in good working order, condition and repair, normal
wear and tear excepted, (b) insure and keep insured all such
properties at all times against loss or damage by fire, theft, and
all such other risks and hazards as are customarily insured
against by businesses in similar circumstances, or as the
Administrative Agent may specify from time to time, in the amount
of their full replacement cost without reduction for depreciation,
(c) maintain insurance against loss or damage from business
interruption on account of fire or other casualty covering a
period of at least 12 months and (d) maintain insurance against
liability imposed by workers' compensation laws. Such policies
of insurance will be issued by an insurance company or
companies acceptable to the Administrative Agent. If the Borrower
fails to do so, the Administrative Agent may obtain (but shall
be under no obligation to do so) such insurance and charge the
cost thereof to the Borrower and add it to the Obligations.
<PAGE>
4.7 Comply at all times with the material provisions of all
leases to which the Borrower is a party or under which it occupies
property, so as to prevent any loss or forfeiture thereof or
thereunder, provided that the Borrower may cancel, surrender or
modify any lease or contest in good faith any provisions thereof
if such action is deemed advantageous to its business and if no
forfeiture, other than reasonable settlement payments in
connection with such surrenders and forfeitures, under any such
lease results therefrom.
4.8 Pay all taxes, assessments and governmental charges
lawfully levied or imposed on or against it or its properties
prior to the date when such taxes, assessments or charges shall
become delinquent, unless the Borrower shall contest the validity
thereof in good faith and shall post any bond or other security
required by applicable law or by the Lender against the payment
thereof.
4.9 Substantially comply with all federal, state and local
laws which relate to (a) noise; (b) pollution or protection of the
air, surface water, ground water or land; (c) solid, gaseous or
liquid waste generation, treatment, storage, disposal or
transportation; (d) exposure to hazardous or toxic substances;
(e) the safety or health of employees or (f) regulation of the
manufacture, processing, distribution in commerce, use, or
storage of chemical substances, including, without limitation,
all laws for which noncompliance would have a Material Adverse
Effect, whether now in effect or hereafter enacted, and upon
request of the Administrative Agent, provide the Administrative
Agent with such evidence of substantial compliance as it may
reasonably request.
4.10 Open and maintain all of its checking and other
depository accounts with the Administrative Agent in all locations
where the Administrative Agent has a branch reasonably convenient
to the Borrower's location and deposit with the Administrative
Agent, when due, all FICA and withholding taxes and such other
taxes as the Administrative Agent may from time to time require,
and comply with all requirements of the Administrative Agent with
respect thereto.
4.11 At the request of the Administrative Agent, qualify as a
foreign corporation and obtain all requisite licenses and permits
in each state in which failure to qualify would have a Material
Adverse Effect.
<PAGE>
4.12 Immediately notify the Administrative Agent of any change
in the location of any of the Borrower's places of business or the
opening of any new place of business.
4.13 Maintain a maximum Debt to Tangible Net Worth ratio as
of the ending dates of each quarter of each Fiscal Year of not
more than 3.0 to 1.0.
4.14 Maintain a minimum Cash Flow Coverage Ratio at the
ending dates of each Fiscal Year of not less than 1.2 to 1.0. The
Cash Flow Coverage Ratio will be calculated quarterly based on a
rolling 12-months calculation beginning with the first quarter of
the Fiscal Year beginning December 31, 1995 and ending December
28, 1996. This quarter will be the first quarter for the rolling
12-Months calculation, i.e., the calculation of the Cash Flow
Coverage Ratio for the first quarter of this Fiscal Year will be
a one-quarter calculation consisting of the first three months of
such period annualized, the calculation of the Cash Flow Coverage
Ratio for the second quarter of this Fiscal Year will be a two-
quarters calculation consisting of the first six months of such
period annualized, the calculation of the Cash Flow Coverage Ratio
for the third quarter of this Fiscal Year will be a three-
quarters calculation consisting of the first nine months of such
period and the calculation of the Cash Flow Coverage Ratio for
the fourth quarter of this Fiscal Year will be a four-quarters
calculation consisting of the entire twelve months of such period.
Thereafter, the Cash Flow Coverage Ratio calculation will be made
quarterly on a continuous rolling twelve-months basis for each
successive Fiscal year.
4.15 Maintain at all times a minimum Current Ratio of not less
than 1.4 to 1.0.
5. Negative Covenants. The Borrower covenants and agrees that until
the Obligations have been paid in full, unless the Administrative Agent
shall consent in advance in writing, the Borrower shall not:
5.1 Sell, assign or grant a Lien on all or any material part
of its personal property, tangible or intangible, whether now
owned or hereafter acquired, in favor of any Person other than the
Lenders, or permit any Lien to attach to any such assets, except
in favor of the Lenders, other than:
(a) Liens for taxes, fees, assessments and other
governmental charges which are not delinquent to the extent that
payment of the same may be postponed or is not required in
accordance with the provisions of this Agreement;
<PAGE>
(b) Landlords' Liens in respect of rent not in
default or when any such claimed default is being contested in
good faith or Liens in respect of pledges or deposits under
workers' compensation, unemployment insurance, social security
laws or similar legislation or in connection with appeal and
similar bonds incidental to litigation, mechanics', laborers' and
materialmens' and similar Liens, if the obligations secured by
such Liens are not then delinquent or, if delinquent, are being
contested in good faith, the Liens securing the performance of
bids, tenders, contracts (other than for the payment of money)
and statutory obligations incidental to the conduct of the
business of the Borrower and which do not in the aggregate
materially detract from the value of the property of the
Borrower, or materially impair the use thereof in the operation
of its business;
(c) Zoning restrictions, easements, rights of way or
other restrictions on the use of real property or minor
irregularities in the title thereto;
(d) Judgment Liens not in excess of $100,000.00 or
which shall not have been in existence for a period longer than 60
days after the creation thereof, or, if a stay of execution shall
have been obtained, for a period longer than 30 days after the
expiration of such stay.
(e) Liens set forth on Schedule 5.1.
(f) Liens to secure indebtedness or obligations
permitted pursuant to Sections 5.12(iii), 5.12(iv) or 5.6 of this
Agreement.
5.2 Sell, encumber or place a Lien on any unencumbered real
property now owned or hereafter acquired by the Borrower.
5.3 Make any payments, other than interest, on any existing
loans made to it by its stockholders, officers, directors,
employees, or any Person other than the Lenders unless permitted
by the terms of a valid subordination agreement in favor of the
Lenders, except the loans set forth on Schedule 5.3 so long as no
Event of Default has occurred and is continuing under this
Agreement.
5.4 Change its name, do business under an assumed or trade
name, open a new office or move any of its personal property to a
location not shown in Schedule 3.14 without, in each case, giving
the Administrative Agent at least 30 days' prior written notice
thereof.
<PAGE>
5.5 Except for or as to loans set forth on Schedule 5.3, (a)
Lend or advance money (other than routine travel advances to
employees), credit, or property to any Person or Affiliate; (b)
engage in any material transactions (including, without
limitation, investments and the like, but excluding transactions
in accordance with Section 5.8) with any Person which are not in
the ordinary course of its business; (c) guarantee, assume,
endorse, or otherwise become responsible for (directly or
indirectly or by any instrument having the effect of assuring any
Person's payment or performance) the indebtedness, performance,
obligations, stock or dividends of any Person or Affiliate; or (d)
agree to do any of the foregoing except (i) endorsement of
negotiable instruments for deposit or collection in the ordinary
course of business and (ii) investments representing the
indebtedness of any Person owing as a result of the sale by the
Borrower in the ordinary course of business of products or
services or tangible personal property no longer required in its
business.
5.6 Incur, create, assume, or permit to exist, rental
obligations or other commitments under leases of real or personal
property other than leases in effect on the date of this Agreement
and leases (including without limitation capital and operating
leases) entered into in the ordinary course of owning and
operating the Borrower's business, including the Borrower's
existing real estate properties, for their intended purposes.
5.7 Without the prior consent of the Administrative Agent,
change its fiscal year.
5.8 Dissolve, liquidate or become a party to any merger or
consolidation, unless the Borrower shall be the surviving entity
to such merger or consolidation, and, after giving effect thereto,
the Borrower shall be in full compliance with the terms of this
Agreement and the Borrower's management shall remain substantially
unchanged.
5.9 Sell, assign, pledge or otherwise transfer more than 50%
of its outstanding voting Capital Stock in a single transaction or
series of transactions.
5.10 Materially alter its business or operations.
5.11 [Reserved]
<PAGE>
5.12 Incur, create or assume, or permit any of its
Consolidated Subsidiaries to incur, create or assume, any
indebtedness, except (i) loans or advances made to such
subsidiaries by the Borrower, (ii) indebtedness to trade creditors
in the ordinary course of business of the Borrower or such
subsidiaries, (iii) indebtedness in an aggregate amount not to
exceed $500,000.00 on a consolidated basis or (iv) indebtedness
set forth on Schedule 5.3.
6. Conditions Precedent to Closing. Prior to or simultaneously
with the closing of the Revolving Loans and the first advance of funds
to the Borrower (the "Closing"), the Borrower shall deliver or cause to
be delivered to the Administrative Agent the following:
6.1 This Agreement fully executed.
6.3 The executed Revolving Line of Credit Note.
6.4 Certificate of Good Standing for the Borrower issued by
the Tennessee Secretary of State, and a Certificate of Authority
to Transact Business issued by the Virginia State Corporation
Commission.
6.5 A certificate of the Chief Financial Officer of the
Borrower certifying to such matters as the Administrative Agent
may request as of the date of the Closing, in form and substance
satisfactory to the Administrative Agent.
6.6 A certificate of the Secretary of the Borrower
certifying to the incumbency of the Borrower's officers and that
the copies attached thereto of the Borrower's (a) bylaws, (b)
articles of incorporation and other charter documents and (c)
resolutions of the board of directors authorizing the execution,
delivery and performance of this Agreement and the transactions
contemplated thereby are true and correct copies of same as of
the date of the Closing.
6.7 The opinion of the Borrower's counsel in form and
substance satisfactory to the Administrative Agent and its
counsel.
6.8 All such other information, documents, receipts,
certificates and instruments as the Administrative Agent and its
counsel may request.
7. Conditions Precedent to Future Advances. All future advances to
the Borrower under this Agreement shall be subject to the following
conditions having been satisfied at the time of each such advance.
<PAGE>
7.1 The Borrower shall be in compliance with all terms,
covenants and conditions of this Agreement.
7.2 There shall exist no Event of Default and no event
which, upon notice or lapse of time or both, would constitute
an Event of Default.
7.3 The representations and warranties contained in this
Agreement shall be true and correct in all material respects.
7.4 In the good faith opinion of the Administrative Agent,
a material adverse change has not occurred in the total financial
condition of the Borrower from the financial condition of the
Borrower as set forth in the most recent financial statements
furnished to the Administrative Agent pursuant to this Agreement
or from the financial condition of the Borrower previously
disclosed to the Administrative Agent in any other manner.
8. Events of Default, Remedies and Waiver of Notice.
8.1 The following shall constitute Events of Default under
this Agreement:
(a) The failure of the Borrower to pay when due any
of the Obligations.
(b) The failure of the Borrower to pay when due any
other obligation to any other Person for the payment of money;
provided, however, that as to such unpaid obligations totaling in
the aggregate less than $500,000.00 at any one time, it shall not
be an Event of Default if the Borrower's failure to pay is cured
within ten (10) days of the date such payment is due.
(c) The failure to reimburse the Administrative
Agent for any amounts drawn under letters of credit issued by the
Administrative Agent for the Borrower's account within ten (10)
days of any such draw.
(d) The failure of the Borrower to deliver to the
Administrative Agent, within thirty (30) days of the date it is
due, any report required by the terms of this Agreement.
(e) The failure of the Borrower to observe or
perform any other covenant or agreement contained in this
Agreement or in any other agreement between the Borrower and the
Lenders, which failure remains uncured for a period of more than
thirty (30) days following the giving of notice thereof by the
Administrative Agent or any Lender to the Borrower.
<PAGE>
(f) The discovery that any material representation
or warranty at any time made by the Borrower to the Lenders in
this Agreement or in any other agreement between the Borrower and
the Lenders, or in any document or instrument delivered to the
Administrative Agent pursuant to this Agreement or any such other
agreement, was materially false at the time it was made.
(g) The acceleration of the maturity of any of the
Obligations.
(h) The Borrower's discontinuance of its business or
sale of a material part of its assets, provided that the Borrower
may sell in the ordinary course of business and for a full
consideration of money or money's worth, any Inventory, product
merchandise or service produced, marketed or furnished by it, or
any obsolete or redundant equipment.
(i) Any of the Loan documents shall cease to be
legal, valid and binding agreements enforceable against any party
executing the same in accordance with the respective terms thereof
or shall in any way be terminated or become or be declared
ineffective or inoperative or shall in any way whatsoever cease to
give or provide the respective liens, security interests, rights,
titles, interests, remedies, powers or privileges intended to be
created thereby.
(j) The acquisition or purchase by it for investment
purposes of any equity or interest in any other Person, including
shares of stock or indebtedness of corporations, except (i)
investments in direct obligations of the United States Government
and certificates of deposit of United States commercial banks
having a tier 1 capital ratio of not less than 6%, and then only
in an amount not exceeding 10% of the issuing bank's unimpaired
capital and surplus and (ii) corporate repurchase agreements with
respect to which the obligors are (Y) United States commercial
banks each having combned capital, surplus and undivided profits
of not less than $500,000,000.00 or (Z) broker-dealers having a
rating of "A" or better by a nationally-recognized rating agency;
provided, that at any date the aggregate amount invested by the
Borrower in such repurchase agreements shall not exceed
$10,000,000.00 for any one such agreement or $2,000,000.00 for
any one such bank or broker-dealer.
(k) Any material (in the good faith opinion of the
Administrative Agent) misrepresentation by the Borrower, orally or
in writing, to the Administrative Agent for the purpose of
obtaining credit or an extension of credit.
<PAGE>
(l) The suspension by the Borrower of the operation
of its present business or a material adverse change (in the good
faith opinion of the Administrative Agent) in the nature of its
business; the admission in writing by the Borrower of its
inability to pay its debts as they mature; the permitting of a
receiver or trustee to be appointed for all or substantially all
of its assets and, if appointed without its consent, the failure
to cause such receiver or trustee to be discharged within 60 days;
the instituting by the Borrower of proceedings under any law,
state or federal, relating to bankruptcy, insolvency or any
reorganization or arrangement for the relief of debtors or, if any
such proceedings are instituted against it, the failure to cause
such proceedings to be dismissed or stayed within 60 days; the
expiration of 10 days after the Administrative Agent has given
the Borrower notice of the Administrative Agent's good faith
determination that (i) the Administrative Agent deems itself
insecure or (ii) a material adverse change in the financial
condition of the Borrower has occurred since the date hereof, or
(iii) the Lender's prospect of payment hereunder has been impaired
or the suspicion (in the good faith opinion of the Administrative
Agent) that one or more Events of Default have occurred and the
failure of the Borrower, within said 10-day period, to provide
reasonably satisfactory evidence to the Administrative Agent that
the Event(s) specified in said notice has not in fact occurred.
(m) The validity or enforceability of this Agreement
shall be contested by the Borrower or the Borrower shall deny that
it has any liability or obligation hereunder.
(n) The filing against the Borrower of formal
charges under any federal or state law for which forfeiture of any
material part or all of its assets is a part of the potential
penalty and such charges are not dismissed within 90 days of the
date of filing thereof.
(o) The Borrower incurs loss, theft, damage or
destruction of any material part of its assets for which there is
either no insurance coverage or, in the Lender's opinion,
inadequate coverage.
8.2 In addition to the foregoing, it is expressly understood
and agreed between the Borrower and the Administrative Agent that
default (which shall include any failure by the Borrower to pay
on demand any Obligation payable by it to the Administrative
Agent on demand) by the Borrower, beyond any applicable grace
period of the Borrower to the Administrative Agent or any
Lender, now existing or hereafter arising, regardless of how
they arise or by what contract, agreement or instrument they
may be evidenced, or whether evidenced by any contract,
agreement or instrument, shall, at the Administrative Agent's
option, constitute an Event of Default hereunder and a default
on all such indebtedness, liabilities or other obligations of
the Borrower to the Administrative Agent and the Lenders.
<PAGE>
8.3 Upon the occurrence of an Event of Default described in
Section 8.1 or 8.2, the Administrative Agent at its option may:
(a) Make no further advances under the Loans; and
(b) Terminate this Agreement and declare all Obligations
of the Borrower immediately due and payable and exercise all of
its rights and remedies against the Borrower.
8.4 The rights, options and remedies of the Administrative
Agent shall be cumulative and no failure or delay by the
Administrative Agent in exercising any right, option or remedy
shall be deemed a waiver thereof or of any other right, option or
remedy, or a waiver of any Event of Default hereunder.
8.5 To the extent that any of the Borrower's Obligations to
the Lenders are now or hereafter secured by property or by the
guaranty, endorsement or property of any other person, firm,
corporation or other entity, then the Administrative Agent shall
have the right to proceed against such other property, guaranty,
or endorsement upon the Borrower's default in the payment of any
Obligation or in any of the terms, covenants or conditions
contained herein, and the Administrative Agent shall have the
right in its sole discretion to determine which rights, security,
Liens, or remedies the Administrative Agent shall at any time
pursue, relinquish, subordinate, modify or take any other action
with respect thereto, without in any way modifying or affecting
any of them or any of the Lenders' rights hereunder.
8.6 Upon the occurrence of an Event of Default described in
Section 8.1, the Administrative Agent at its option may, without
notice to the Borrower (any such notice being expressly waived by
the Borrower), setoff and apply any deposit (general or special,
time or demand, provisional or final) at any time held, including
any certificate of deposit, and other indebtedness at any time
owed by the Administrative Agent, whether or not any such deposit
or indebtedness is then due, to or for the credit of the account
of the Borrower against any and all of the Obligations.
9. Destruction of Documents. Any documents, schedules, invoices or
other papers delivered to the Administrative Agent by the Borrower may
be destroyed or otherwise disposed of by the Administrative Agent three
months after they are delivered to or received by the Administrative
Agent, unless the Borrower requests prior to delivery, in writing,
the return of said documents, schedules, invoices or other papers and
makes arrangements, at the Borrower's expense, for their delivery to
the Borrower.
<PAGE>
10. Collection Costs. All reasonable costs and expenses, including,
without limitation, reasonable attorneys' fee and legal expenses,
incurred by the Administrative Agent in connection with obtaining or
enforcing payment of any of the Obligations, whether through judicial
proceedings or otherwise, or in collecting, enforcing or protecting its
interests under this Agreement, or under any other instruments or
documents delivered pursuant hereto, or in defending or prosecuting
any actions or proceedings arising out of or relating to the Lenders'
transactions with the Borrower, shall be paid by the Borrower to the
Administrative Agent, upon demand, and the Administrative Agent may
take judgment against the Borrower for all such costs, expenses and
fees in addition to all other amounts due from Borrower hereunder.
11. Expenses. The Borrower shall pay to the Administrative Agent all
reasonable expenses of the Administrative Agent incurred in connection
with the preparation of this Agreement and all other documents,
instruments and certificates contemplated herein (including all
exhibits and any and all amendments or modifications hereto and thereto)
and the closing, making and administration of the Loans, including
reasonable fees and expenses of the Administrative Agent's counsel.
12. Releases. The Borrower and each endorser, guarantor and surety
for any of the Obligations hereby releases the Administrative Agent and
the Lenders from all claims for loss or damage caused by any act or
failure to act on the part of the Administrative Agent or the Lenders,
their respective officers, attorneys, agents and employees, except any
such act or failure to act which arises out of the gross negligence or
willful misconduct of the Administrative Agent or the Lender, their
respective officers, attorneys, agents and employees.
13. Miscellaneous.
13.1 Notices. All notices, consents, requests, demands or
other communications provided for in this Agreement shall be in
writing and shall be delivered by hand, sent prepaid by Federal
Express (or a comparable overnight delivery service) or sent by
the United States mail, certified, postage prepaid, return
receipt requested, to the Administrative Agent or the Borrower,
as the case may be, at their respective addresses set forth at
the beginning of this Agreement, to the Attention of Corporate
Banking Division in the case of the Administrative Agent and to
the Attention of Roger L. Boeve, Chief Financial Officer, in case
of the Borrower, with copies to:
<PAGE>
If to the Administrative Agent:
Christian & Barton, L.L.P.
909 East Main Street
1200 Mutual Building
Richmond, Virginia 23219
Attention: Andrew J. Dolson
Fax: (804) 697-4112
If to the Borrower:
Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238-2700
Attention: F. Mitchell Walker, Jr.
Fax: (615) 742-6293
Any notice, request, demand or other communication delivered or sent in the
foregoing manner shall be deemed given or made (as the case may be) upon the
earliest of (a) the date it is actually received, (b) on the Business Day after
the day on which it is delivered by hand, (c) on the Business Day after the day
on which it is properly delivered to Federal Express (or a comparable overnight
delivery service), or (d) on the third Business Day after the day on which it
is deposited in the United States mail. The Borrower or the Administrative Agent
may change its address by notifying the other party of the new address in any
manner permitted herein. Rejection or other refusal to accept or the inability
to deliver because of a changed address of which no notice was given shall not
affect the date of such notice, election or demand sent in accordance with the
foregoing provisions.
13.2 Release of Claims. All claims, liabilities and
obligations of the parties arising out of or in connection with
the Obligations and the transactions contemplated by this
Agreement shall be fully and finally released and extinguished
upon payment in full of all of the Borrower's Obligations
hereunder.
13.3 Reinstatement. If, at any time after payment in full
by the Borrower of all Obligations, any payments on the
Obligations previously made by the Borrower or any other Person
must be disgorged by the Lenders for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy, or
reorganization of the Borrower or such other Person), this
Agreement shall be reinstated as to all disgorged payments as
though such payments had not been made, and the Borrower shall
sign and deliver to the Administrative Agent all documents and
do all things necessary to effect such reinstatement.
<PAGE>
13.4 Termination of Loans. The termination of the Loans
shall not affect the rights of any party to this Agreement or the
Borrower's obligations hereunder arising prior to the effective
date of such termination, and the provisions hereof shall continue
in full force and effect, notwithstanding the fact that the
Borrower's account may from time to time temporarily have a credit
balance, until all of the Obligations and other liabilities of the
Borrower, including, without limitation, the Borrower's liability
for FICA and withholding taxes, have been paid in full or the
Borrower has furnished the Administrative Agent with an
indemnification satisfactory to it with respect thereto. All
representations, warranties, covenants, waivers, and agreements
contained herein shall survive the termination hereof unless
otherwise provided.
13.5 Entire Agreement, Modification, Benefit. This Agreement
shall constitute the entire agreement of the parties and no
provision of this Agreement, including the provisions of this
Section, may be modified, deleted or amended in any manner except
by agreement in writing executed by the parties. All terms of this
Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective successors
and assigns, provided, however, that the Borrower shall not assign
or transfer its rights powers, duties or obligations hereunder
without the prior written consent of the Administrative Agent.
13.6 Construction. This Agreement is executed and delivered
in Richmond, Virginia, and shall be construed and enforced in
accordance with the laws of the Commonwealth of Virginia without
regard to its rules with respect to conflicts of laws.
13.7 Consents and Discretion. Wherever in this Agreement the
consent of the Administrative Agent or the Lenders is required, or
the Administrative Agent may take action in its discretion (which
shall include its sole and absolute discretion), such consent will
not be unreasonably withheld by the Administrative Agents or the
Lenders, as the case may be, and such discretion will be
reasonably exercised.
13.8 Counterparts. This Agreement may be executed in more
than one counterpart, each of which shall be deemed an original.
14. Jurisdiction, Venue, and Waiver of Jury Trial.
<PAGE>
14.1 Jurisdiction and Venue. The forum having the proper
jurisdiction and venue to adjudicate any claim, dispute or default
which may arise out of the execution, delivery and performance of
this Agreement or any other Loan Document and the transactions
contemplated hereby or thereby shall be the Circuit Court of the
City of Richmond, Virginia and the proper appellate courts of the
Commonwealth of Virginia. The Borrower expressly submits and
consents to such jurisdiction and venue and specifically waives
any and all rights it may have to contest the jurisdiction and/or
venue of the above mentioned forums and to demand any other forum.
14.2 Waiver of Jury Trial. THE BORROWER AND THE LENDERS EACH
WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANOTHER ON ANY MATTER
ARISING OUT OF THIS AGREEMENT OR OUT OF ANY AGREEMENT, INSTRUMENT
OR DOCUMENT DELIVERED, OR WHICH MAY IN THE FUTURE BE DELIVERED, IN
CONNECTION HEREWITH AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
THE BORROWER REPRESENTS THAT IT HAS BEEN REPRESENTED IN THE
EXECUTION OF THIS AGREEMENT AND THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND
THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.
The Borrower and the Lenders have caused this Agreement to be
duly executed and delivered by their proper and duly authorized
representatives as of the day and year first above written.
PERFORMANCE FOOD GROUP COMPANY
By: /s/ Roger L. Boeve
Roger L. Boeve,
Executive Vice President
and Chief Financial Officer
FIRST UNION NATIONAL BANK OF VIRGINIA
By /s/ Bonnie A. Banks
Its Vice President
Performance Food Group Company
Richmond, Virginia
Gentlemen:
Re: Registration Statement No. 33-72400
With respect to the subject registration statement, we acknowledge our awareness
of the use therein of our report dated October 25, 1996 related to our review
of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
Very truly yours,
KPMG PEAT MARWICK LLP
Richmond, Virginia
November 5, 1996
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-28-1996
<CASH> 4037
<SECURITIES> 0
<RECEIVABLES> 51528
<ALLOWANCES> 2799
<INVENTORY> 45914
<CURRENT-ASSETS> 101903
<PP&E> 87100
<DEPRECIATION> 31923
<TOTAL-ASSETS> 170911
<CURRENT-LIABILITIES> 62950
<BONDS> 6534
0
0
<COMMON> 117
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 170911
<SALES> 567911
<TOTAL-REVENUES> 567911
<CGS> 487392
<TOTAL-COSTS> 487392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 516
<INCOME-PRETAX> 13237
<INCOME-TAX> 5227
<INCOME-CONTINUING> 8010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8010
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
