SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-23048
LINCOLN SNACKS COMPANY
(exact name of registrant as specified in its charter)
Delaware 47-0758569
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
4 High Ridge Park, Stamford, Connecticut 06905
(Address of principal executive offices) (zip code)
(Registrant's telephone number, including area code) (203) 329-4545
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of the issuer's Common Stock, $.01 par value, outstanding
on May 6, 1998 was 6,331,790 shares.
<PAGE>
LINCOLN SNACKS COMPANY
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
<S> <C> <C>
PAGE
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets as of March 31, 1998
and June 30, 1997 3-4
Statements of Operations for the
three months ended March 31, 1998
and March 31, 1997 5
Statements of Operations for the
nine months ended March 31, 1998
and March 31, 1997 6
Statements of Changes in Stockholders'
Equity for the nine months ended
March 31, 1998 and March 31, 1997 7
Statements of Cash Flows for the
nine months ended March 31, 1998
and March 31, 1997 8
Notes to Financial Statements 9-11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 12-16
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK 16
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 17
Item 2. CHANGES IN SECURITIES 17
Item 3. DEFAULTS UPON SENIOR SECURITIES 17
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 17
Item 5. OTHER INFORMATION 17
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
</TABLE>
- 2 -
<PAGE>
LINCOLN SNACKS COMPANY
BALANCE SHEETS
ASSETS
AS OF MARCH 31, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ------------
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 4,141,233 $ 1,606,357
Accounts receivable (net of allowance
for doubtful accounts and cash discounts
of $331,518 and $237,778 respectively) 1,757,859 1,951,937
Inventories 2,604,786 1,680,253
Prepaid and other current assets 39,331 29,023
------------ ------------
Total current assets 8,543,209 5,267,570
PROPERTY, PLANT AND EQUIPMENT:
Land 370,000 370,000
Building and leasehold improvements 1,780,742 1,526,705
Machinery and equipment 4,881,709 4,800,284
Construction in process 122,030 122,319
------------ ------------
7,154,481 6,819,308
Less: accumulated depreciation
and amortization (2,712,281) (2,263,689)
------------ ------------
4,442,200 4,555,619
INTANGIBLE AND OTHER ASSETS,
net of accumulated amortization of
$777,003 and $667,111 3,956,479 3,466,371
------------ ------------
TOTAL ASSETS $ 16,941,888 $ 13,289,560
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
- 3 -
<PAGE>
LINCOLN SNACKS COMPANY
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
AS OF MARCH 31, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Short term note $ 458,333 $ 0
Accounts payable 1,400,007 1,357,170
Accrued expenses 1,181,779 1,178,601
Accrued trade promotions 1,399,260 675,585
Deferred gain-short term 13,434 13,434
------------ ------------
Total current liabilities 4,452,813 3,224,790
Deferred Gain 106,093 115,784
------------ ------------
TOTAL LIABILITIES 4,558,906 3,340,574
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value,
20,000,000 shares authorized,
6,450,090 shares issued at
March 31, 1998 and June 30, 1997 64,501 64,501
Special stock, $0.01 par value, 300,000
shares authorized, none outstanding 0 0
Additional paid-in capital 18,010,637 18,010,637
Accumulated deficit ( 5,666,130) ( 8,100,126)
Less: cost of common stock in
treasury 118,300 shares (26,026) (26,026)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 12,382,982 9,948,986
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 16,941,888 $ 13,289,560
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
- 4 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 4,623,716 $ 4,309,514
COST OF SALES 3,386,474 3,396,964
------------ ------------
Gross profit 1,237,242 912,550
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,632,009 870,563
------------ ------------
Income (loss) from operations (394,767) 41,987
Interest (Income) Expense (51,605) 16,292
Other Income 0 (1,554)
------------ ------------
Income (loss) before provision
for income taxes (343,162) 27,249
PROVISION FOR INCOME TAXES 10,000 10,000
------------ ------------
Net income (loss) $ (353,162) $ 17,249
============ ============
BASIC AND DILUTED
NET INCOME (LOSS) PER SHARE $ (0.06) $ 0.003
============ =============
BASIC AND DILUTED
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,331,790 6,331,790
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
- 5 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 17,495,477 $ 18,424,690
COST OF SALES 10,532,280 12,658,925
------------ ------------
Gross profit 6,963,197 5,765,765
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,873,073 4,390,220
------------ ------------
Income from operations 1,090,124 1,375,545
Net Planters Other Income (1,376,000) 0
Interest (Income) Expense (87,313) 124,786
Other (Income) Expense 19,441 (1,554)
------------ ------------
Income before provision
for income taxes 2,533,996 1,252,313
PROVISION FOR INCOME TAXES 100,000 30,000
------------ ------------
Net income $ 2,433,996 $ 1,222,313
============ ============
BASIC AND DILUTED
NET INCOME PER SHARE $ 0.38 $ 0.19
============ ============
BASIC AND DILUTED
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,331,790 6,331,790
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
- 6 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Common Special Paid In Accumulated Treasury
Stock Stock Capital Deficit Stock
<S> <C> <C> <C> <C> <C>
June 30, 1996 $64,501 $0 $18,010,637 ($9,542,721) ($26,026)
Net income 1,222,313
------- ------- ----------- ----------- ----------
March 31, 1997 $64,501 $0 $18,010,637 $( 8,320,408) $(26,026)
======= ======= =========== ============ ==========
June 30, 1997 $64,501 $0 $18,010,637 ($ 8,100,126) ($26,026)
Net income 2,433,996
------- ------- ----------- ------------ ----------
March 31, 1998 $64,501 $0 $18,010,637 $( 5,666,130) $(26,026)
======= ======= =========== ============ ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
- 7 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------- ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 2,433,996 $ 1,222,313
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 558,484 617,584
Allowance for doubtful accounts and
cash discounts, net 48,207 43,740
Changes in Assets and Liabilities:
Decrease in accounts receivable 623,179 370,644
(Increase) decrease in inventories (701,681) 254,732
(Increase) decrease in prepaid and
other current assets (10,308) 35,741
Increase (decrease) in accounts
payable and accrued expenses 759,999 (722,076)
------------ ------------
Net cash provided by
operating activities 3,711,876 1,822,678
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (335,173) (148,071)
Proceeds from sale of land 0 369,218
Acquisition (net of cash) (800,160) 0
------------ ------------
Net cash provided by (used in)
investing activities (1,135,333) 221,147
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) under
revolver, net 0 (556,115)
Repayments under term loan 0 (859,703)
Repayments under short term note (41,667) 0
------------- ------------
Net cash used in
financing activities (41,667) (1,415,818)
------------- ------------
Net increase in cash 2,534,876 628,007
CASH, beginning of period 1,606,357 58,538
------------- ------------
CASH, end of period $ 4,141,233 $ 686,545
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 0 $ 114,941
============ ============
Income taxes paid $ 80,715 $ 17,751
============ ============
</TABLE>
- 8 -
<PAGE>
LINCOLN SNACKS COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(Unaudited)
(1) The Company:
------------
Lincoln Snacks Company ("Lincoln" or the "Company"), formerly Lincoln
Foods Inc., is a Delaware corporation and is a majority-owned subsidiary
of Noel Group, Inc. (the "Parent"). Lincoln is engaged in the
manufacture and marketing of caramelized pre-popped popcorn and glazed
popcorn/nut mixes. Sales of the Company's products are subject to
seasonal trends with a significant portion of sales occurring in the
last four months of the calendar year.
(2) Basis of Presentation:
----------------------
The balance sheet as of March 31, 1998, and the related statements of
operations for the three and nine months ended March 31, 1998 and March
31, 1997, changes in stockholders' equity and cash flows for the three
and nine months ended March 31, 1998 and March 31, 1997, have been
prepared by the Company without audit. In the opinion of management,
all adjustments necessary to present fairly the financial position,
results of operations and cash flows at March 31, 1998 and March 31,
1997 have been made. During the interim periods reported on, the
accounting policies followed are in conformity with generally accepted
accounting principles and are consistent with those applied for annual
periods and described in the Company's Annual Report on Form 10-K for
the twelve months ended June 30, 1997 filed with the Securities and
Exchange Commission on September 15, 1997 (the "Annual Report").
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial
statements included in the Annual Report. The results of operations for
the three and nine months ending March 31, 1998 and March 31, 1997 are
not necessarily indicative of the operating results for the full year.
(3) Acquisition:
------------
On March 17, 1998, the Company acquired certain assets of Iroquois
Popcorn Company ("Iroquois"), a private label manufacturer of caramelized
popcorn, for approximately $1,300,000, of which $800,000 was paid in
cash and $500,000 is a non-interest bearing note to be paid in equal
monthly installments over a twelve month period commencing March 31,
1998. A contingent payment of up to $350,000 may be paid in the future
if the Company maintains 70% of the volume of Iroquois' largest customer.
The acquisition was accounted for as a purchase with the assets acquired
recorded at their fair values at the date of acquisition. The excess of
purchase price over net assets acquired is being amortized over a period
of 10 years. The purchase price has been allocated as follows:
<TABLE>
<S> <C>
Accounts receivable $ 477,000
Inventory 223,000
Excess of purchase price over
net assets acquired 600,000
</TABLE>
The following is proforma information as if the Company's acquisition of
Iroquois had occurred at the beginning of the respective fiscal periods.
The incremental revenue reflected below consists primarily of sales to
one customer. These results may not be indicative of what the actual
results would have been or may be in the future.
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
March 31, March 31,
1998 1997
-------------- -------------
<S> <C> <C>
Net sales $ 21,077,411 $ 21,118,706
Net income 3,251,210 1,616,433
Net income per share $ 0.51 $ 0.26
</TABLE>
(4) New Accounting Pronouncement:
-----------------------------
As required, during the interim period ended December 31, 1997, the
Company adopted the provisions of Statement of Financial Accounting
Standards No. 128 ("SFAS No. 128"). This statement establishes standards
for computing and presenting basic and diluted earnings per share.
Options to purchase 662,550 shares of common stock were outstanding at
March 31, 1998 but were not included in the computation of diluted
earnings per share because the options' exercise price was greater than
the average market price of the common shares.
(5) Credit Facility:
----------------
The Company has a revolving credit facility, as amended, which provides
for up to $4.0 million in revolver borrowings. No amounts were
outstanding under the revolver as of March 31, 1998. This facility is
collateralized by substantially all of the Company's assets. A term
loan facility was extinguished upon the Company's final term loan payment
in fiscal 1997.
(6) Inventory:
----------
Inventory consists of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ------------
<S> <C> <C>
Raw materials and supplies $ 1,383,122 $ 1,293,280
Finished goods 1,221,664 386,973
----------- ------------
$ 2,604,786 $ 1,680,253
=========== ============
</TABLE>
(7) Significant Customer:
---------------------
On July 17, 1995, Planters Company, a unit of Nabisco, Inc.
("Planters"), began exclusively distributing the Company's Fiddle Faddle
and Screaming Yellow Zonkers products (the "Products") pursuant to a
distribution agreement dated June 6, 1995 (the "Distribution Agreement")
for an initial term which was originally scheduled to expire on June 30,
1997 unless renewed for additional one year periods. The Distribution
Agreement required Planters to purchase an annual minimum number of
equivalent cases of the Products during the initial term.
On February 28, 1997, the Company and Planters entered into an amendment
to the Distribution Agreement (the "Amendment"), which was further
modified on May 9, 1997 (the "Letter Agreement"), pursuant to which the
exclusive distribution arrangement with respect to the Company's Fiddle
Faddle product was extended for an additional six month period expiring
on December 31, 1997, at which time the arrangement terminated.
Effective January 1, 1998 and May 1, 1997, Planters ceased, and the
Company resumed, marketing and distributing the Company's Fiddle Faddle
and Screaming Yellow Zonkers products, respectively.
The Amendment and Letter Agreement required Planters to purchase a
specified number of manufactured cases of the Products and for Planters
to compensate the Company for the remaining contract minimums for the
twelve month period ended June 30, 1997. The Amendment and Letter
Agreement required Planters to compensate the Company for contract
minimums for the six month period ended December 31, 1997 (six month
minimums). Planters compensated the Company in the six months ended
December 31, 1997 for contract minimums, which were 27% less than case
sales made to Planters for the six month period ended December 31, 1996.
The Amendment also required Planters to compensate the Company in the
event that certain sales levels were not achieved during the calendar
year ending December 31, 1997. These sales levels were not achieved
during the calendar year ending December 31, 1997 resulting in Planters
compensating the Company $1.88 million which is partially offset on the
Company's Statement of Operations by approximately $500,000 in
non-recurring charges associated with initial efforts to rebuild the
Fiddle Faddle brand ("Net Planters Other Income").
Although the Amendment contains provisions designed to effect a smooth
transfer of the distribution business back to the Company, there can be
no assurance as to the long term effects of the transition.
In July and October, 1997, the Company entered into five year Trademark
License Agreements with Nabisco, Inc. granting the Company, subject to
the terms of the License Agreements, the right to use, commencing
January 1, 1998, the Planters' trademarks in connection with the sales
and marketing of the Company's Fiddle Faddle products in the United
States and Canada.
There were no sales to Planters for the three months ended March 31,
1998. Net sales to Planters were 68% of net sales for the three months
ended March 31, 1997. Net sales to Planters were 12% and 47% of net
sales for the nine months period ended March 31, 1998 and March 31,
1997, respectively. Sales to Planters during the six months period
ended December 31, 1997 represented payments, in lieu of manufactured
cases, at predetermined rates which are lower than the rates Planters
paid for manufactured cases. Sales to Planters during the quarter and
the nine month period ended March 31, 1997 represented manufactured
cases.
- 11 -
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (UNAUDITED)
Results of Operations:
- ----------------------
Introduction
- ------------
The Company's net sales are subject to significant seasonal variation,
consequently, results from operations will fluctuate due to these trends. The
Company's business is seasonal due to customers' buying patterns of Poppycock
and nut products during the traditional holiday season. As a result, third and
fourth calendar quarter sales account for a significant portion of the
Company's annual sales.
On July 17, 1995, Planters Company, a unit of Nabisco, Inc. ("Planters"),
began exclusively distributing the Company's Fiddle Faddle and Screaming Yellow
Zonkers products (the "Products") pursuant to a distribution agreement dated
June 6, 1995 (the "Distribution Agreement") for an initial term which was
originally scheduled to expire on June 30, 1997 unless renewed for additional
one year periods. The Distribution Agreement required Planters to purchase an
annual minimum number of equivalent cases of the Products during the initial
term.
On February 28, 1997, the Company and Planters entered into an amendment
to the Distribution Agreement (the "Amendment"), which was further modified on
May 9, 1997 (the "Letter Agreement"), pursuant to which the exclusive
distribution arrangement with respect to the Company's Fiddle Faddle product
was extended for an additional six month period expiring on December 31, 1997,
at which time the arrangement terminated. Effective January 1, 1998 and May
1, 1997, Planters ceased, and the Company resumed, marketing and distributing
the Company's Fiddle Faddle and Screaming Yellow Zonkers products,
respectively.
The Amendment and Letter Agreement required Planters to purchase a
specified number of manufactured cases of the Products and for Planters to
compensate the Company for the remaining contract minimums for the twelve month
period ended June 30, 1997. The Amendment and Letter Agreement required
Planters to compensate the Company for contract minimums for the six month
period ended December 31, 1997 (six month minimums). Planters has compensated
the Company for contract minimums, which were 24% and 27% less than case sales
made to Planters for the quarter and the six month period ended December 31,
1996, respectively.
The Amendment also required Planters to compensate the Company in the
event that certain sales levels were not achieved during the calendar year
ending December 31, 1997. These sales levels were not achieved during the
calendar year ending December 31, 1997 resulting in Planters compensating the
Company $1.88 million which is partially offset on the Company's Statement of
Operations by approximately $500,000 in non-recurring charges associated with
initial efforts to rebuild the Fiddle Faddle brand ("Net Planters Other
Income").
Although the Amendment contains provisions designed to effect a smooth
transfer of the distribution business back to the Company, there can be no
assurance as to the long term effects of the transition.
In July and October, 1997, the Company entered into five year Trademark
License Agreements with Nabisco, Inc. granting the Company, subject to the
terms of the License Agreements, the right to use, commencing January 1, 1998,
the Planters' trademarks in connection with the sales and marketing of the
Company's Fiddle Faddle products in the United States and Canada.
There were no sales to Planters for the three months ended March 31,
1998. Net sales to Planters were 68% for the three months ended March 31,
1997. Net sales to Planters were 12% and 47% of net sales for the nine months
period ended March 31, 1998 and March 31, 1997, respectively. Sales to
Planters during the six months period ended December 31, 1997 represented
payments, in lieu of manufactured cases, at predetermined rates which are
lower than the rates Planters paid for manufactured cases. Sales to Planters
during the quarter and the nine month period ended March 31, 1997 represented
manufactured cases.
Under the Agreement, which required Planters to purchase a minimum number
of cases during the fiscal year, the Company sold the Products to Planters at
a selling price which was reduced from the Company's historical customer
selling prices. Planters in turn was responsible for the sales and
distribution of the Products to its customers, therefore, the Company did not
have any selling, marketing or distribution costs associated with these
Products. The financial impact of the Agreement versus historical results was
reflected in reductions in revenue and gross profit which were offset by
reduced selling, marketing and distribution costs.
Three months ended March 31, 1998 versus March 31, 1997
- -------------------------------------------------------
Overall net sales increased 7% or $.31 million to $4.62 million for the
quarter ended March 31, 1998 versus $4.31 million in the corresponding period
of 1997. There were no sales to Planters for the three months ended March 31,
1998. Net sales to Planters were 68% of net sales for the three months ended
March 31, 1997. The decrease in sales to Planters was offset by the Company's
sales of Fiddle Faddle and newly secured copack and private label business.
The Company resumed distribution of Fiddle Faddle on January 1, 1998 and made
initial efforts during the quarter to reestablish distribution of Fiddle
Faddle. The Company sold approximately half of the cases of Fiddle Faddle to
its customers than the amount of cases sold to Planters under the Planters
Agreement in the corresponding quarter of Fiscal 1997.
Gross profit increased 36% or $.32 million to $1.24 million for the
quarter ended March 31, 1998 versus $.91 million in the corresponding period
of 1997. Gross profit increased due to new copacking business and increased
selling prices to historical levels resulting from the Company resuming
distribution of Fiddle Faddle. These increases were partially offset by
decreased profits relating to the decline in Fiddle Faddle case volume.
Selling, general and administrative expenses increased 87% or $.76
million to $1.63 million in the quarter ended March 31, 1998 versus $.87
million the same period in 1997. These expenses increased as a result of the
Company resuming the marketing and distribution of Fiddle Faddle.
The increase in gross profit was offset by the increase in selling,
general and administrative expenses and resulted in a decrease in net income
of $.37 million to a $.35 million net loss for the quarter ended March 31, 1998
versus a $.02 million net income in the corresponding period in 1997.
Nine months ended March 31, 1998 versus March 31, 1997
- ------------------------------------------------------
Overall net sales decreased 5% or $.93 million to $17.50 million for the
nine months ended March 31, 1998 versus $18.42 million in the corresponding
period of 1997. Sales to Planters, excluding Net Planters Other Income,
represented 12% and 47% of net sales for the nine months ended March 31, 1998
and 1997, respectively, due to the reduced minimums for the six month period
ended December 31, 1997 and the termination of the Planters Agreement on
December 31, 1997. The decrease in sales to Planters was partially offset by
the Company's sales of Fiddle Faddle and newly secured copack and private label
business. The Company resumed distribution of Fiddle Faddle on January 1, 1998
and made initial efforts during the quarter to reestablish distribution of
Fiddle Faddle. The Company sold approximately a third less cases of Fiddle
Faddle to its customers and Planters in the nine months ended March 31, 1998
than the amount of cases sold to Planters under the Planters Agreement a year
ago. Under the Planters Agreement for the six months ended December 31, 1997,
Planters compensated the Company for lower minimums than the same period a year
ago. Sales to Planters during the six months period ended December 31, 1997
represented payments, in lieu of manufactured cases, at predetermined rates
which are lower than the rates Planters paid for manufactured cases. Sales to
Planters during the six months period ended December 31, 1996 represented
manufactured cases.
Gross profit increased 21% or $1.20 million to $6.96 million for the nine
months ended March 31, 1998 versus $5.77 million in the corresponding period
of 1997. Gross profit increased due to new copacking business, increased
selling prices to historical levels resulting from the Company resuming
distribution of Fiddle Faddle and Screaming Yellow Zonkers, and lower raw
material costs. These increases were partially offset by decreased Planters
gross profits resulting from decreased case volume.
Selling, general and administrative expenses increased 34% or $1.48
million to $5.87 million for the nine months ended March 31, 1998 versus $4.39
million for the same period in 1997. These expenses primarily increased during
this period due to the Company resuming the marketing and distribution of the
Fiddle Faddle and Screaming Yellow Zonkers business. In addition, expenses
increased relating to consumer promotions for the Company's other branded
products.
Net Planters Other Income of $1.38 million represents Planters
compensation of $1.88 million to the Company for failing to achieve certain
sales levels during the calendar year ending December 31, 1997 which was
partially offset by approximately $.50 million in non-recurring charges
associated with initial efforts to rebuild the Fiddle Faddle brand.
The increase in gross profit coupled with Net Planters Other Income and
the decrease in interest expense was partially offset by the increase in
selling, general and administrative expenses and resulted in an increase in the
net income of $1.21 million to $2.43 million for the nine months ended March
31, 1998 versus $1.22 million in the corresponding period in 1997.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1998, the Company had working capital of $4.09 million
compared to a working capital of $2.04 million at June 30, 1997 (the Company's
fiscal year end), an increase in working capital of $2.05 million. The
increase in working capital is primarily attributable to the Company's net
profit of $2.43 million for the nine months ended March 31, 1998.
The Company currently meets its short-term liquidity needs from its
revolving credit facility which facility is secured by a first priority,
perfected security interest in substantially all of the Company's existing and
after-acquired assets. The Company presently believes that this facility is
adequate to meet its needs for the next twelve months.
Management continues to focus on increasing product distribution and
continues to review all operating costs with the objective of increasing
profitability and ensuring future liquidity. However, there can be no
assurance that any of these objectives will be achieved in future periods.
Although the Amendment contained provisions designed to effect a smooth
transfer of the distribution of the Fiddle Faddle business back to the Company,
there can be no assurance as to the long term effects of the transition.
Management has secured new copack and private label business which partially
offsets the decrease in Fiddle Faddle sales, however, there can be no assurance
that this business will continue.
The Company's short term liquidity is affected by seasonal increases in
inventory and accounts receivable levels, payment terms in excess of 60 days
granted in some situations during certain months of the year, and seasonality
of sales. Inventory and accounts receivable levels increase substantially
during the latter part of the third calendar quarter and during the remainder
of the calendar year.
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
March 31, March 31,
1998 1997
--------- ---------
(in thousands)
<S> <C> <C>
Net cash provided by operating
activities $ 3,712 $ 1,823
Net cash provided by (used in)
investing activities (1,135) 221
Net cash used in financing activities (42) (1,416)
</TABLE>
Net cash provided by operating activities increased to $3.71 million
during the nine months ended March 31, 1998 compared to $1.82 million in 1997.
The increase is primarily due to an increase in net income of $1.21 million for
the nine months ended March 31, 1998 versus March 31, 1997. The increase in
net cash provided by operating activities also increased due to decreases in
accounts receivables and increases in inventories due to the timing of sales
coupled with an increase in accounts payable due to the timing of expenses.
Net cash used in investing activities of $1.14 million for the nine
months ended March 31, 1998 is comprised of the $.80 million acquisition of
certain assets of Iroquois and $.33 million in capital expenditures. Net cash
provided by investing activities of $.22 million during the nine months ended
March 31, 1997 represents proceeds from the sale of land and is partially
offset by capital expenditures.
Net cash used in financing activities for the period ended March 31, 1998
represents payments under the short term note. Net cash used in financing
activities for the period ended March 31, 1997 was $1.42 million, which
consisted of revolver repayments under its credit agreement of $.56 million and
term loan repayments of $.86 million.
Cautionary Statements
- ---------------------
This Quarterly Report on Form 10-Q contains, in addition to historical
information, certain forward-looking statements regarding future financial
condition and results of operations. The words "expect," "estimate,"
"anticipate," "predict," "believe," and similar expressions are intended to
identify forward-looking statements. Such statements involve certain risks and
uncertainties. Should one or more of these risks or uncertainties materialize,
actual outcomes may vary materially from those indicated.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
- 16 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Defaults Upon Senior Securities Not Applicable
Item 4. Submission of Matters
to a Vote of Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a Exhibits
(2) Not Applicable
(3) Articles of Incorporation and By-Laws
(a) Certificate of Incorporation, as amended and as
currently in effect (Incorporated by reference
to Exhibit 3(A), filed by the Company with the
Registration Statement on Form S-1 (33-71432)).
(b) By-Laws as currently in effect (Incorporated by
reference to Exhibit 3(B) filed by the Company
with the Registration Statement on Form S-1
(33-71432)).
(4) Not Applicable
(10) (a) Amendment No. 9 dated March 11, 1998 To
Revolving Credit, Term Loan and Security
Agreement.
(11) Statement regarding computation of per share earnings
is not required because the relevant computation can
be determined from the material contained in the
Financial Statements included herein.
(15) Not Applicable
(18) Not Applicable
(19) Not Applicable
(22) Not Applicable
(23) Not Applicable
(24) Not Applicable
(27) Financial Data Schedule
(99) Not Applicable
b Reports on Form 8-K Not Applicable
- 17 -
<PAGE>
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.
May 11, 1998 Lincoln Snacks Company
(Registrant)
By: /s/Karen Brenner
Name: Karen Brenner
Title: Chairman of the Board and
Chief Executive Officer; Director
(Principal Executive Officer)
By: /s/Kristine A. Crabs
Name: Kristine A. Crabs
Title: Vice President and Chief Financial
Officer, Secretary and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
- 18 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from Lincoln Snacks Company financial statements
and is qualified in its entirety by reference to such
financial statements.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> APR-04-1998
<CASH> 4,141,233
<SECURITIES> 0
<RECEIVABLES> 2,089,377
<ALLOWANCES> 331,518
<INVENTORY> 2,604,786
<CURRENT-ASSETS> 39,331
<PP&E> 7,154,481
<DEPRECIATION> 2,712,281
<TOTAL-ASSETS> 16,941,888
<CURRENT-LIABILITIES> 4,452,813
<BONDS> 0
0
0
<COMMON> 64,501
<OTHER-SE> 12,318,481
<TOTAL-LIABILITY-AND-EQUITY> 16,941,888
<SALES> 17,495,477
<TOTAL-REVENUES> 17,495,477
<CGS> 10,532,280
<TOTAL-COSTS> 10,532,280
<OTHER-EXPENSES> 5,873,073
<LOSS-PROVISION> 46,000
<INTEREST-EXPENSE> (87,313)
<INCOME-PRETAX> 2,533,996
<INCOME-TAX> 100,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,433,996 <F1>
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
<FN>
<F1> Net income includes $1,376,000 of Net Planters Other Income, see
financial statements.
</FN>
</TABLE>
EXHIBIT 10(A)
AMENDMENT NO. 9
TO
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 9 ("Amendment") is entered into as of March 11,
1998, by and between Lincoln Snacks Company, a Delaware corporation,
having its principal place of business at 4 High Ridge Park, Stamford,
Connecticut 06905 ("Borrower") and BNY Financial Corporation, as
successor-in-interest to The Bank of New York Commercial Corporation,
having offices at 1290 Avenue of the Americas, New York, New York 10104
("Lender").
BACKGROUND
------------
Borrower and Lender are parties to a Revolving Credit, Term Loan
and Security Agreement dated December 3, 1993, as amended by Amendment
No. 1 to Revolving Credit, Term Loan and Security Agreement dated as of
March 24, 1994, Amendment No. 2 to Revolving Credit, Term Loan and
Security Agreement dated as of September 14, 1994, Amendment No. 3 to
Revolving Credit, Term Loan and Security Agreement dated as of March 31,
1995, Amendment No. 4 to Revolving Credit, Term Loan and Security
Agreement dated as of June 29, 1995, Amendment No. 5 to Revolving
Credit, Term Loan and Security Agreement dated as of November 7, 1995,
Amendment No. 6 to Revolving Credit, Term Loan and Security Agreement
dated as of May 8, 1996, Amendment No. 7 to Revolving Credit, Term Loan
and Security Agreement dated as of October 8, 1996 and Amendment No. 8
to Revolving Credit, Term Loan and Security Agreement dated as of
January 13, 1998 (as further amended, restated, supplemented or
otherwise modified from time to time, the "Loan Agreement") pursuant to
which Lender provided Borrower with certain financial accommodations.
Borrower has requested that Lender amend the Loan Agreement and
Lender is willing to do so on the terms and conditions hereafter set
forth.
NOW, THEREFORE, in consideration of any loan or advance or grant
of credit heretofore or hereafter made to or for the account of Borrower
by Lender, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the
conditions precedent set forth in Section 3 below, the Loan Agreement is
hereby amended as follows:
(a) The following defined term is added to Section 1.2 of the
Loan Agreement in the appropriate alphabetical order to provide as
follows:
""BNY Letters of Credit" shall have the meaning set forth in
Section 2.12 hereof."
(b) New Sections 2.12, 2.13 and 2.14 are added to the Loan
Agreement and provide as follows:
"2.12 Letters of Credit. Subject to the terms and
conditions hereof, Lender shall issue or cause the issuance of
letters of credit ("BNY Letters of Credit") provided, however,
that Lender will not be required to issue or cause to be issued
any BNY Letters of Credit to the extent that the face amount of
such BNY Letters of Credit would then cause the sum of the
outstanding Revolving Advances plus outstanding BNY Letters of
Credit to exceed the lesser of (x) the Maximum Revolving Advance
Amount minus the FX Reserve or (y) the Formula Amount. All
disbursements or payments related to BNY Letters of Credit shall
be deemed to be Revolving Advances and shall bear interest at the
Revolving Interest Rate. BNY Letters of Credit that have not been
drawn upon shall not bear interest. BNY Letters of Credit shall
be subject to the terms and conditions set forth in the Letter of
Credit Financing Supplement attached hereto as Exhibit 2.12."
"2.13 Issuance of BNY Letters of Credit.
(a) Borrower may request Lender to issue or cause the
issuance of a BNY Letter of Credit by delivering to Lender at the
Payment Office, Lender's standard form of Letter of Credit
Financing Supplement and the Lender's or the Bank's standard form
of Letter of Credit Application (collectively, the "Letter of
Credit Application") completed to the satisfaction of Lender,
together with such other certificates, documents and other papers
and information as Lender may reasonably request.
(b) Each BNY Letter of Credit shall, among other things,
(i) provide for the payment of sight drafts when presented for
honor thereunder in accordance with the terms thereof and when
accompanied by the documents described therein and (ii) have an
expiry date not later than twelve months after such BNY Letter of
Credit's date of issuance and in no event later than the last day
of the Term. Each Letter of Credit Application and each BNY
Letter of Credit shall be subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, and any amendments or
revisions thereof and, to the extent not inconsistent therewith,
the laws of the State of New York."
"2.14 Requirements for Issuance of BNY Letters of Credit.
(a) In connection with the issuance or creation of any BNY
Letter of Credit, Borrower shall indemnify, save and hold Lender
harmless from any loss, cost, expense or liability, including,
without limitation, payments made by Lender, and expenses and
reasonable attorneys' fees incurred by Lender arising out of, or
in connection with, any BNY Letter of Credit to be issued or
created for Borrower. Borrower shall be bound by Lender's or any
issuing or accepting bank's regulations and good faith
interpretations of any BNY Letter of Credit issued or created for
Borrower's account, although this interpretation may be different
from Borrower's own; and neither Lender nor any of its
correspondents shall be liable for any error, negligence, or
mistake, whether by omission or commission, in following
Borrower's instructions or those contained in any BNY Letter of
Credit or of any modifications, amendments or supplements thereto
or in creating or paying any BNY Letter of Credit, except for
Lender's or such correspondent's willful misconduct.
(b) Borrower shall authorize and direct any bank which
issues a BNY Letter of Credit to name Borrower as the "Account
Party" therein and to deliver to Lender all instruments,
documents, and other writings and property received by the bank
pursuant to the BNY Letter of Credit or in connection with any
acceptance and to accept and rely upon Lender's instructions and
agreements with respect to all matters arising in connection with
the BNY Letter of Credit, the application therefor or any
acceptance therefor.
(c) In connection with all BNY Letters of Credit issued or
created by Lender under this Agreement, Borrower hereby appoints
Lender, or its designee, as its attorney, with full power and
authority (a) to sign and/or endorse Borrower's name upon any
warehouse or other receipts, letter of credit applications and
acceptances; (b) to sign Borrower's name on bills of lading; (c)
to clear Inventory through Customs in the name of Borrower or
Lender or Lender's designee, and to sign and deliver to Customs
Officials powers of attorney in the name of Borrower for such
purpose; and (d) to complete in Borrower's or Lender's name, or in
the name of Lender's designee, any order, sale or transaction,
obtain the necessary documents in connection therewith, and
collect the proceeds thereof. Neither Lender nor its attorneys
will be liable for any acts or omissions nor for any error of
judgement or mistakes of fact or law, except for Lender's or its
attorneys' willful misconduct. This power, being coupled with an
interest, is irrevocable as long as any BNY Letters of Credit
remain outstanding."
(c) A new Section 3.2(d) is added to the Loan Agreement and
provides as follows:
"(d) Letter of Credit Fees. Borrower shall pay Lender (i)
for issuing or causing the issuance of a BNY Letter of Credit, a
fee equal to one-quarter of one percent (0.25%) per month on the
outstanding amount thereof from time to time (such fees being
referred to as "Letter of Credit Fees") and (ii) any bank's other
customary charges payable in connection with BNY Letters of Credit
as in effect from time to time (which charges shall be furnished
to Borrower by Lender upon request). Borrower shall also pay in
connection with the issuance of a BNY Letter of Credit the fees
and charges specified in the Letter of Credit Financing Supplement
to this Agreement. Such fees and charges shall be payable (i) in
the case of any BNY Letter of Credit, on its opening, (ii) in the
case of a standby BNY Letter of Credit, (A) monthly thereafter in
advance and (B) upon each increase in the outstanding amount
thereof, and (iii) in the case of any BNY Letter of Credit that is
not a standby BNY Letter of Credit, at the time of each increase
in the face amount thereof. Any such charge in effect at the time
of a particular transaction shall be the charge for that
transaction, notwithstanding any subsequent change in the Bank's
prevailing charges for that type of transaction. All Letter of
Credit Fees payable hereunder shall be deemed earned in full on
the date when the same are due and payable hereunder and shall not
be subject to rebate or proration upon the termination of this
Agreement for any reason."
3. Conditions of Effectiveness. This Amendment shall become
effective upon receipt by Lender of four (4) copies of this Amendment
executed by Borrower.
4. Representations and Warranties. Borrower hereby represents
and warrants as follows:
(a) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of Borrower and
are enforceable against Borrower in accordance with their respective
terms.
(b) No Event of Default has occurred and is continuing or
would exist after giving effect to this Amendment.
(c) Borrower has no defense, counterclaim or offset with
respect to the Loan Agreement or the Obligations thereunder.
5. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof, each
reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a reference
to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements executed
and/or delivered in connection therewith, shall remain in full force and
effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of
Lender, nor constitute a waiver of any provision of the Loan Agreement,
or any other documents, instruments or agreements executed and/or
delivered under or in connection therewith.
6. Governing Law. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns and shall be governed by and construed in
accordance with the laws of the State of New York.
7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part
of this Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an
original and all of which taken together shall be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, this Amendment No. 9 has been duly executed as
of the day and year first written above.
LINCOLN SNACKS COMPANY
By: /s/ Kristine A. Crabs
Name: Kristine A. Crabs
Title: Chief Financial Officer
BNY FINANCIAL CORPORATION
By: /s/ Carl Giordano
Name: Carl Giordano
Title: Assistant Vice President
<PAGE>
EXHIBIT 2.12
BNY FINANCIAL CORPORATION LETTERHEAD
BNY FINANCIAL CORPORATION
1290 Avenue of the Americas
New York, NY 10104
212-408-7000
Date: March 11, 1998
Lincoln Snacks Company
4 High Ridge Park
Stamford, Connecticut 06905
Re: LETTER OF CREDIT FINANCING SUPPLEMENT TO REVOLVING
CREDIT, TERM LOAN AND SECURITY AGREEMENT
Gentlemen:
Reference is made to the Revolving Credit, Term Loan and Security
Agreement between us dated December 3,1993, as supplemented and amended
(the "Agreement"). Capitalized terms hereinafter appearing but not
otherwise defined herein shall have the meanings given in the Agreement.
From time to time, in order to assist you in establishing or
opening Letters of Credit with a bank or trust company (herein the
"Bank") to cover the importation of goods or inventory or for other
purposes, you may request us to join in the applications for such
Letters of Credit, and/or guarantee payment or performance of such
Letters and any drafts or acceptances thereunder, thereby lending our
credit to you. These arrangements shall be handled by us subject to the
following terms and conditions.
A. Our assistance in this matter shall at all times and in all
respects be in our sole discretion. The amount and extent of the
Letters of Credit and the terms and conditions thereof and of any drafts
or acceptances thereunder, shall in all respect be determined solely by
us and shall be subject to change, modification and revision by us, at
any time and from time to time.
B. Any indebtedness, liability or obligation of any sort
whatsoever, arising or incurred in connection with any Letters of
Credit, guarantees, drafts or acceptances thereunder or otherwise,
including without limitation all amounts due or which may become due
under said Letters of Credit, guarantees or any drafts or acceptances
thereunder; all amounts charged or chargeable to you or to us by any
Bank, other financial institutions or correspondent bank which opens,
issues or is involved with such Letters of Credit; any other bank
charges; fees and commissions; duties and taxes; costs of insurance; all
such other charges and expenses which may pertain either directly or
indirectly to such Letters of Credit, drafts, acceptances, guarantees or
to the goods or documents relating thereto, and our charges as herein
provided, shall be incurred solely as an accommodation to you and for
your account, shall constitute Obligations as defined in the Agreement,
may be charged by us to your account thereunder at any time without
notice to you, shall be secured by all collateral in which you have
heretofore granted to us or hereafter grant to us a security interest
(including without limitation all inventory acquired under the Letters
of Credit, all documents evidencing such inventory, and the proceeds
thereof), shall bear interest at the rate provided in the Agreement, and
shall be repayable to us on demand. All Obligations are to be repaid to
us solely in United States currency.
C. You warrant and represent that any Letters of Credit opened
hereunder in connection with the importation of goods and inventory
shall cover actual goods and inventory imported solely for your account,
and said goods and inventory will not be sold or transferred, other than
to customers in the ordinary course of business, without our specific,
prior written consent.
D. You unconditionally agree to indemnify us and hold us harmless
from and against any and all loss, claim or liability arising from any
transactions, occurrences, errors or omissions relating to Letters of
Credit established or opened for your account; the goods acquired
thereunder (the "Goods"); the documents evidencing the Goods (the
"Documents"); any discrepant or nonconforming provisions thereof;
steamship or airway guaranties, releases, indemnities or delivery orders
or similar documents; any drafts or acceptances; and all Obligations
hereunder, including, but not limited to, any such loss, claim or
liability due to any action errors or omissions attributable to any
Bank, us, any other entity, or any other cause. Your unconditional
obligation to us hereunder shall not be modified or diminished for any
reason or in any manner whatsoever. You agree that any charges made by
us for your account by the Bank shall be conclusive on us and may be
charged to your account.
E. We shall not be responsible for: the existence, character,
quality, quantity, condition, packing, value or delivery of the goods
purporting to be represented by any documents; any difference or
variation in the character, quality, quantity, condition, packing, value
or delivery of the goods from that expressed in the documents; the
validity, sufficiency, or genuineness of any documents or of any
endorsements thereon, even if such documents should in fact provide to
be in any or all respects invalid, insufficient, fraudulent or forged;
any discrepant or nonconforming provisions in any Documents; the time,
place, manner or order in which shipment is made; partial or incomplete
shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else
in connection with the Goods or the shipping thereof; or any breach of
contract between the shipper or vendors and yourselves. Furthermore,
without being limited by the foregoing, we shall not be responsible for
any act or omission with respect to or in connection with any of the
Goods or the Documents.
F. You agree that any action taken by us, or any action taken by
any Bank if taken in good faith, under or in connection with the Letters
of Credit, the guarantees, the drafts or acceptances, or the Goods or
the Documents, shall be binding on you and shall not put us in any
resulting liability to you. In furtherance thereof, we shall have the
full right and authority to take any of the following actions in our
name or yours (and you agree that you shall not have the right to take
any such action without our express written endorsement in writing): to
clear and resolve any questions of non-compliance of documents; to give
any instructions as to acceptance or rejection of any documents or
goods; to execute any and all applications for steamship or airways
guarantees, releases, indemnities or delivery orders or similar
documents; to grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents;
and to agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances, all in our sole
name; and the Bank shall be entitled to comply with and honor any and
all such documents or instructions executed by or received solely from
us, all without any notice to or any consent from you.
G. You agree that any necessary import, export or other licenses
or certificates for the import or handling of the Goods will have been
promptly procured; all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Goods, or
the financing thereof will have been promptly and fully complied with;
and any certificates in that regard that we may at any time request will
be promptly furnished. In this connection, you warrant and represent
that any Letters of Credit established or opened hereunder shall be in
full compliance with the governmental laws and regulations of all
countries involved and are not prohibited by any such laws and
regulations, and that all shipments made under any such Letters of
Credit are in accordance with the governmental laws and regulations of
the countries in which the shipments originate and terminate, and are
not prohibited by any such laws and regulations. You assume all risk,
liability for, and agree to pay and discharge, all present and further
local, state, federal or foreign taxes, duties or levies. Any embargo,
restriction, laws, customs or regulations of any country, state, city or
other political subdivision, where the Goods are or may be located, or
wherein payments are to be made, or wherein drafts may be drawn,
negotiated, accepted, or paid, shall be solely your risk, liability and
responsibility.
H. Any rights, remedies, duties or obligations granted or
undertaken by you to any Bank in any application for Letters of Credit,
or any standing agreement relating to Letters of Credit or otherwise,
shall be deemed to have been granted to us and apply in all respects to
us and shall be in addition to any rights, remedies, duties or
obligations container herein.
I. You hereby agree that prior to your repayment of all
Obligations to us, we may be deemed to be the absolute owner of, with
unqualified rights to possession and disposition of, the Goods and the
Documents, all of which may be held by us as security as herein
provided. Should possession of any Goods or Documents be transferred to
you, they shall continue to serve as security as herein provided, and
may be sold, transferred or disposed of only as hereinabove provided.
J. The terms and provisions of all agreements executed by you in
our favor granting collateral security for the Obligations shall apply
with equal force to the Goods and the Documents, including without
limitation provisions relating to the insurance, maintenance and
surrender or other dispositions of any such collateral, and the proceeds
thereof.
K. On breach by you of any of the terms or provisions of this
agreement, the Agreement or any other agreement or arrangement now or
hereafter entered into between us, or on the non-payment when due of any
Obligations, we shall have all of the rights and remedies of a Secured
Party under the Uniform Commercial Code or granted to us under the
Agreement or any of such other agreements.
L. In addition to any charges, fees or expenses charged to us for
your account by any Bank in connection with these transactions (all of
which will be charged to your account and when made by the Bank shall be
conclusive on us), we shall be entitled to charge your account for our
services hereunder with the following:
1. UCC filing and search fees.
2. A commission at the Applicable Rate, as set forth below
(minimum fee in any event $75). However, where "time" drafts
are involved, we shall be entitled to the Applicable Rate
herein described for the term of such drafts remaining unpaid
beyond the expiry date of the Letter of Credit. The Applicable
Rate shall be one quarter of one percent (1/4%) per month on
the face amount of each Letter of Credit, either opened or
amended (as to expiry date or dollar amount) for the entire
term of said Letter of Credit.
3. Upon and after the occurrence of an Event of Default, and
during the continuation thereof a commission of one sixth
percent (1/6%) in excess of the Applicable Rate.
For the purpose of the preceding subdivision 2, Letters of Credit
will be deemed to include not only Letters of Credit established or
opened for you with our assistance as hereinabove provided, but also
other letters of credit established or opened for you by other
institutions with respect to which we are or hereafter become obligated
to indemnify such institutions.
This agreement, which is subject to modification only in writing,
is supplementary to, and is to be considered as a part of, the Agreement
and shall take effect when dated, accepted and signed in New York State
by one of our officers. If the foregoing is in accordance with your
understanding, please so indicate by signing and returning the enclosed
copies of this letter, after which we will return a fully executed copy
to you for your files.
Very truly yours,
BNY FINANCIAL CORPORATION
By: /s/ Carl Giordano
Title: Assistant Vice President
READ AND AGREED TO:
LINCOLN SNACKS COMPANY
By: /s/ Kristine A. Crabs
Title: Chief Financial Officer
Accepted as of March 11, 1998, at New York, New York
BNY FINANCIAL CORPORATION
By: /s/ Carl Giordano
Title: Assistant Vice President
