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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 29, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey 22-1935537
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
6000 Central Highway
Pennsauken, New Jersey 08109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
including area code:(856-665-9533)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value: None None
(Title of each class) (Name of each exchange
on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K [ ].
As of November 30, 2001, the latest practicable date, 8,650,458
shares of the Registrant's common stock were issued and outstanding.
The aggregate market value of shares held by non-affiliates of the
Registrant on such date was $147,768,227 based on the last price on
that date of $23.90 per share, which is an average of bid and asked
prices.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's 2001 Annual Report to Shareholders for the
fiscal year ended September 29, 2001 and Proxy Statement for its
Annual Meeting of Shareholders to be held on February 5, 2002 are
incorporated herein by reference into Parts I, II, III and IV as set
forth herein.
J & J SNACK FOODS CORP.
2001 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page
Item 1 Business . . . . . . . . . . . . . . . . . . . 1
Item 2 Properties . . . . . . . . . . . . . . . . . . 8
Item 3 Legal Proceedings. . . . . . . . . . . . . . . 9
Item 4 Submission Of Matters To A Vote Of Security
Holders. . . . . . . . . . . . . . . . . . . . 9
Executive Officers Of The Registrant . . . . . 10
PART II
Item 5 Market For Registrant's Common Stock And
Related Stockholder Matters. . . . . . . . . . 11
Item 6 Selected Financial Data. . . . . . . . . . . . 11
Item 7 Management's Discussion And Analysis Of Finan-
cial Condition And Results Of Operations . . . 11
Item 7a Quantitative And Qualitative Disclosures
About Market Risk. . . . . . . . . . . . . . . 12
Item 8 Financial Statements And Supplementary Data. . 13
Item 9 Changes In And Disagreements With Accountants
On Accounting And Financial Disclosure . . . . 13
PART III
Item 10 Directors And Executive Officers Of The
Registrant . . . . . . . . . . . . . . . . . . 14
Item 11 Executive Compensation . . . . . . . . . . . . 14
Item 12 Security Ownership Of Certain Beneficial
Owners And Management. . . . . . . . . . . . . 14
Item 13 Certain Relationships And Related Transactions 14
PART IV
Item 14 Exhibits, Financial Statement Schedules And
Reports On Form 8-K. . . . . . . . . . . . . . 15
Item 1. Business
General
J & J Snack Foods Corp. (the "Company" or "J & J") manufactures
nutritional snack foods and distributes frozen beverages which it
markets nationally to the food service and retail supermarket
industries. Its principal snack food products are soft pretzels
marketed primarily under the brand name SUPERPRETZEL and frozen juice
treats and desserts marketed primarily under the LUIGI'S, ICEE and
MINUTE MAID* brand names. J & J believes it is the largest
manufacturer of soft pretzels in the United States. The Company
markets frozen beverages to the food service industry under the brand
names ICEE and ARCTIC BLAST in the United States, Mexico and Canada.
Other snack food products include churros (an Hispanic pastry),
funnel cake, popcorn and bakery products.
The Company's sales are made primarily to food service customers
including snack bar and food stand locations in leading chain,
department, discount, warehouse club and convenience stores; malls
and shopping centers; fast food outlets; stadiums and sports arenas;
leisure and theme parks; movie theatres; independent retailers; and
schools, colleges and other institutions. The Company's retail
supermarket customers are primarily supermarket chains. The
Company's restaurant group sells direct to the public through its
chains of specialty snack food retail outlets, BAVARIAN PRETZEL
BAKERY and PRETZEL GOURMET, located primarily in the Mid-Atlantic
States.
The Company was incorporated in 1971 under the laws of the State
of New Jersey.
The Company operates in two business segments: snack foods and
frozen beverages.
Products in the Snack Foods Segment
Soft Pretzels
The Company's soft pretzels are sold under many brand names; some of
which are: SUPERPRETZEL, MR. TWISTER, SOFT PRETZEL BITES, SOFTSTIX,
SOFT PRETZEL BUNS, HOT KNOTS, DUTCH TWIST, TEXAS TWIST and SANDWICH
TWIST and; to a lesser extent, under private labels. The Company
sells its soft pretzels to the food service and the retail
supermarket industries and direct to the public through its
restaurant group, which operates BAVARIAN PRETZEL BAKERY and PRETZEL
GOURMET, our chain of specialty snack food retail outlets. The
Company's soft pretzels qualify under USDA regulations as the
nutritional equivalent of bread for purposes of the USDA school lunch
* Minute Maid is a registered trademark of The Coca-Cola Company
1
program, thereby enabling a participating school to obtain partial
reimbursement of the cost of the Company's soft pretzels from the
USDA. Soft pretzel sales, including those sold through the Company's
retail stores, amounted to 27% and 29% of theCompany's revenue in
fiscals 2001 and 2000, respectively.
The Company's soft pretzels are manufactured according to a
proprietary formula. Soft pretzels, ranging in size from one to ten
through the Company's retail stores, amounted to 27% and 29% of the
Company's revenue in fiscals 2001 and 2000, respectively.ounces in
weight are shaped and formed by the Company's proprietary twister
machines. These soft pretzel tying machines are automated, high
speed machines for twisting dough into the traditional pretzel shape.
Soft pretzels in customized shapes and sizes and with fillings and
toppings are extruded or shaped by hand. Soft pretzels, after
processing, are primarily quick-frozen in either raw or baked form
and packaged for delivery.
The Company's food service marketing program includes supplying
ovens, mobil merchandisers, display cases, warmers and similar
merchandising equipment to the retailer to prepare and promote the
sale of soft pretzels. Some of this equipment is proprietary,
including combination warmer and display cases that reconstitute
frozen soft pretzels while displaying them, thus eliminating the need
for an oven. The Company retains ownership of the equipment placed
in customer locations and, as a result, customers are not required to
make an investment in equipment.
Frozen Juice Treats and Desserts
The Company's frozen juice treats and desserts are marketed
under the LUIGI'S, ICEE, MINUTE MAID, HI-C* , SHAPE-UPS, and MAMA
TISH'S brand names to the food service and to the retail supermarket
industries. Frozen juice treat and dessert sales were 20% and 17% of
the Company's revenue in fiscal years 2001 and 2000, respectively.
The Company's SHAPE-UPS, MINUTE MAID and HI-C frozen juice and
fruit bars are manufactured from an apple or pear juice base to which
water, sweeteners, coloring (in some cases) and flavorings are added.
The juice bars contain two to three ounces of apple or pear juice and
the minimum daily requirement of vitamin C, and qualify as
reimbursable items under the USDA school lunch program. The juice
bars are produced in various flavors and are packaged in a sealed
push-up paper container referred to as the Milliken M-pak, which the
Company believes has certain sanitary and safety advantages.
LUIGI'S Real Italian Ice and MAMA TISH'S Italian Ice and
Sorbets are sold to the foodservice and to the retail supermarket
* Hi-C is a registered trademark of The Coca-Cola Company
2
industries. They are manufactured from water, sweeteners and fruit
juice concentrates in various flavors and are packaged in plastic
cups and in squeeze up tubes.
ICEE Squeeze Tubes are sold to the foodservice and to the retail
supermarket industries. Designed to capture the carbonated frozen
taste of a traditional ICEE drink, they are packaged in three and
four ounce squeeze up tubes.
MINUTE MAID soft frozen lemonade is sold to the foodservice and
to the retail supermarket industries and is packaged in squeeze up
tubes and cups.
Churros
The Company sells frozen churros under the TIO PEPE'S brand name
to both the food service and retail supermarket industries. Churro
sales were 4% of the Company's sales in both fiscals 2001 and 2000,
respectively. Churros are Hispanic donuts in stick form which the
Company produces in several sizes according to a proprietary formula.
The churros are deep fried, frozen and packaged. At food service
point-of-sale they are reheated and topped with a cinnamon sugar
mixture. The Company also sells fruit and creme filled churros. The
Company supplies churro merchandising equipment similar to that used
for its soft pretzels.
Baked Goods
The Company has a contract and private label bakery business
which manufactures cookies, muffins, donuts and other baked goods for
third parties. In addition, the Company produces and markets these
products under its own brand names, including MRS. GOODCOOKIE, CAMDEN
CREEK BAKERY and PRETZELCOOKIE. Baked goods sales amounted to 16%
and 13% of the Company's sales in fiscals 2001 and 2000,
respectively.
Other Products
The Company also markets to the food service industry and direct
to the public other products including soft drinks, funnel cakes sold
under the FUNNEL CAKE FACTORY brand name, popcorn sold under the
AIRPOPT brand name, as well as smaller amounts of various other food
products.
Products in the Frozen Beverage Segment
Frozen Beverages
The Company markets frozen beverages to the food service
industry primarily under the names ICEE and ARCTIC BLAST in the
United States, Mexico and Canada. The Company sells direct to the
3
public through its restaurant group, which operates BAVARIAN PRETZEL
BAKERY and PRETZEL GOURMET, our chain of specialty snack food retail
outlets. Frozen beverage business sales amounted to 30% of revenue in
fiscal 2001 and 33% of revenue in fiscal 2000. Under the Company's
marketing program, it installs frozen beverage dispensers at customer
locations and thereafter services the machines, arranges to supply
customers with ingredients required for production of the frozen
beverages, and supports customer retail sales efforts with in-store
promotions and point-of-sale materials. In most cases, the Company
retains ownership of its dispensers and, as a result, customers are
not required to make an investment in equipment or arrange for the
ingredients and supplies necessary to produce and market the frozen
beverages. In fiscal 1999 the Company began providing installation
and maintenance service only to a large quick service restaurant and
others, which resulted in the increase of Customer Owned beverage
dispensers beginning in 1999.
Each new customer location requires a frozen beverage dispenser
supplied by the Company or by the customer. Company supplied
dispensers are purchased from outside vendors, built new or rebuilt
by the Company at an approximate cost of $6,000 each. The following
shows the number of Company owned and customer owned frozen beverage
dispensers at customer locations at the dates indicated:
Company Owned Customer Owned Total
September 25, 1999 18,100 4,300 22,400
September 30, 2000 19,500 9,400 28,900
September 29, 2001 20,600 10,000 30,600
The Company has the rights to market and distribute frozen
beverages under the name ICEE to all of the Continental United
States, except for portions of eleven states.
Customers
The Company sells its products to two principal customer groups:
food service and retail supermarkets. The primary products sold to
the food service group are soft pretzels, frozen beverages, frozen
juice treats and desserts, churros and baked goods. The primary
products sold to the retail supermarket industry are soft pretzels
and frozen juice treats and desserts. Additionally, the Company
sells soft pretzels, frozen beverages and various other food products
direct to the public through its restaurant group, which operates
BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, our chain of specialty
snack food retail outlets.
The Company's customers in the food service industry include
snack bars and food stands in chain, department and discount stores
such as Kmart, Wal-Mart and Target; malls and shopping centers; fast
food outlets; stadiums and sports arenas; leisure and theme parks
4
such as Disneyland, Walt Disney World, Opryland, Universal Studios,
Sea World, Six Flags, Hershey Park and Busch Gardens; convenience
stores such as 7-Eleven, Circle K, AM/PM, White Hen Pantry and Wawa;
movie theatres; warehouse club stores such as Sam's Club, Costco and
B.J.'s; schools, colleges and other institutions; and independent
retailers such as Mrs. Fields. Food service concessionaires
purchasing soft pretzels and other products from the Company for use
in sports arenas and for institutional meal services include ARAMARK,
Volume Services America and Sportservice. Machines and machine
parts are sold to other food and beverage companies. Within the food
service industry, the Company's products are purchased by the
consumer primarily for consumption at the point-of-sale.
The Company sells its products to over 90% of supermarkets in
the United States. Products sold to retail supermarket customers are
primarily soft pretzel products, including SUPERPRETZEL, LUIGI'S Real
Italian Ice and MAMA TISH'S Italian Ice and sorbets, MINUTE MAID
Juice Bars and Soft Frozen Lemonade, ICEE Squeeze Up Tubes and TIO
PEPE'S churros. Within the retail supermarket industry, the Company's
frozen and prepackaged products are purchased by the consumer for
consumption at home.
Marketing and Distribution
The Company has developed a national marketing program for its
products. For food service customers, this marketing program includes
providing ovens, mobile merchandisers, display cases, warmers, frozen
beverage dispensers and other merchandising equipment for the
individual customer's requirements and point-of-sale materials as
well as participating in trade shows and in-store demonstrations.
The Company's ongoing advertising and promotional campaigns for its
retail supermarket products include trade shows, newspaper
advertisements with coupons, in-store demonstrations, billboards and,
periodically, television advertisements.
The Company's products are sold through a network of about 130
food brokers and over 1,000 independent sales distributors and the
Company's own direct sales force. For its snack food products, the
Company maintains warehouse and distribution facilities in
Pennsauken, Bellmawr and Bridgeport, New Jersey; Vernon (Los Angeles)
California; Scranton, Pittsburgh, Hatfield and Lancaster,
Pennsylvania; Carrollton (Dallas), Texas; and Solon, Ohio. Frozen
beverages are distributed from 96 Company managed warehouse and
distribution facilities located in 41 states, Mexico and Canada which
allow the Company to directly service its customers in the
surrounding areas. The Company's products are shipped in
refrigerated and other vehicles from the Company's manufacturing and
warehouse facilities on a fleet of Company operated tractor-trailers,
trucks and vans, as well as by independent carriers.
5
Seasonality
The Company's sales are seasonal because frozen beverage sales
and frozen juice treats and desserts sales are generally higher
during the warmer months and sales of the Company's retail stores are
generally higher in the Company's first quarter during the holiday
shopping season.
Trademarks and Patents
The Company has numerous trademarks, the most important of which
are SUPERPRETZEL, DUTCH TWIST, TEXAS TWIST, MR. TWISTER, SOFT PRETZEL
BITES and SOFTSTIX for its soft pretzel products; FROSTAR, SHAPE-UPS,
MAZZONE'S, MAMA TISH'S and LUIGI'S for its frozen juice treats and
desserts; TIO PEPE'S for its churros; ARCTIC BLAST for its frozen
beverages; FUNNEL CAKE FACTORY for its funnel cake products, and MRS.
GOODCOOKIE and CAMDEN CREEK for its baked goods. The trademarks, when
renewed and continuously used, have an indefinite term and are
considered important to the Company as a means of identifying its
products.
The Company markets frozen beverages under the trademark ICEE in
all of the continental United States, except for portions of eleven
states, and in Mexico and Canada. Additionally, the Company has the
international rights to the trademark ICEE.
The Company has numerous patents related to the manufacturing
and marketing of its products.
Supplies
The Company's manufactured products are produced from raw
materials which are readily available from numerous sources. With
the exception of the Company's soft pretzel twisting equipment and
funnel cake production equipment, which are made for J & J by
independent third parties, and certain specialized packaging
equipment, the Company's manufacturing equipment is readily available
from various sources. Syrup for frozen beverages is purchased from
The Coca-Cola Company, the Pepsi Cola Company, and Western Syrup
Company. Cups, straws and lids are readily available from various
suppliers. Parts for frozen beverage dispensing machines are
manufactured internally and purchased from other sources. Frozen
beverage dispensers are purchased from IMI Cornelius, Inc.
Competition
Snack food and baked goods markets are highly competitive. The
Company's principal products compete against similar and different
food products manufactured and sold by numerous other companies,
some of which are substantially larger and have greater resources
than the Company. As the soft pretzel, frozen juice treat and
6
dessert, baked goods and related markets grow, additional competitors
and new competing products may enter the markets. Competitive factors
in these markets include product quality, customer service, taste,
price, identity and brand name awareness, method of distribution and
sales promotions.
The Company believes it is the only national distributor of soft
pretzels. However, there are numerous regional and local
manufacturers of food service and retail supermarket soft pretzels.
Competition is also increasing in that there are several chains of
retail pretzel stores that have aggressively expanded over the past
several years. These chains compete with the Company's products.
In Frozen Beverages the Company competes directly with other
frozen beverage companies. These include several companies which
have the right to use the ICEE name in portions of eleven states.
There are many other regional frozen beverage competitors throughout
the country and one large retail chain which uses its own frozen
beverage brand.
The Company competes with large soft drink manufacturers for
counter and floor space for its frozen beverage dispensing machines
at retail locations and with products which are more widely known
than the ICEE and ARCTIC BLAST frozen beverages.
The Company competes with a number of other companies in the
frozen juice treat and dessert and baked goods markets.
Employees
The Company had approximately 2,200 full and part time employees as
of September 29, 2001. Certain production and distribution
employees at the Pennsauken, New Jersey plant are covered by a
collective bargaining agreement which expires in September 2002. The
Company considers its employee relations to be good.
7
Item 2. Properties
The Company's primary east coast manufacturing facility is
located in Pennsauken, New Jersey in a 70,000 square foot building on
a two acre lot. Soft pretzels and churros are manufactured at this
company-owned facility which also serves as the Company's corporate
headquarters. This facility operates at approximately 80% of
capacity. The Company leases a 101,200 square foot building adjacent
to its manufacturing facility in Pennsauken, New Jersey through March
2012. The Company has constructed a large freezer within this
facility for warehousing and distribution purposes. The warehouse
has a utilization rate of 60-90% depending on product demand. The
Company also leases through September 2011 16,000 square feet of
office and warehouse space located next to the Pennsauken, New Jersey
plant.
The Company owns a 150,000 square foot building on eight acres
in Bellmawr, New Jersey. Approximately 30% of the facility is leased
to a third party. The remainder is used by the Company to
manufacture some of its products including funnel cake, pretzels and
cookies.
The Company's primary west coast manufacturing facility is
located in Vernon (Los Angeles), California. It consists of a
137,000 square foot facility in which soft pretzels, churros and
various lines of baked goods are produced and warehoused. Included
in the 137,000 square foot facility is a 30,000 square foot freezer
used for warehousing and distribution purposes which was constructed
in 1996. The facility is leased through November 2010. The Company
leases an additional 15,000 square feet of warehouse space, adjacent
to its manufacturing facility, through May 2002. The manufacturing
facility operates at approximately 60% of capacity.
The Company owns a 52,700 square foot building located on five
acres in Chicago Heights, Illinois which is presently for sale or
lease.
The Company owns a 46,000 square foot frozen juice treat and
dessert manufacturing facility located on three acres in Scranton,
Pennsylvania. The facility, which was expanded from 26,000 square
feet in 1998, operates at approximately 60% of capacity.
The Company leases a 29,635 square foot soft pretzel
manufacturing facility located in Hatfield, Pennsylvania. The lease
runs through June 2017. The facility operates at approximately two
thirds of capacity.
The Company leases a 19,200 square foot soft pretzel
manufacturing facility located in Carrollton, Texas. The lease
runs through April 2004. The facility operates at less than 50% of
capacity.
8
The Company's fresh bakery products manufacturing facility and
offices are located in Bridgeport, New Jersey in two buildings
totaling 94,320 square feet. The buildings are leased through
December 2011. The manufacturing facility operates at approximately
50% of capacity.
The Company's Bavarian Pretzel Bakery headquarters and warehouse
and distribution facilities are located in a 11,000 square foot owned
building in Lancaster, Pennsylvania.
The Company owns a 25,000 square foot facility located on 11
acres in Hatfield, Pennsylvania which is leased to a third party.
The Company also leases approximately 100 warehouse and
distribution facilities in 41 states, Mexico and Canada.
Item 3. Legal Proceedings
The Company has no material pending legal proceedings, other
than ordinary routine litigation incidental to the business, to which
the Company or any of its subsidiaries is a party or of which any of
their property is subject.
Item 4. Submission Of Matters To A Vote Of Security Holders
None.
9
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the executive officers of the Company
and their principal past occupations or employment. All such persons
serve at the pleasure of the Board of Directors and have been elected
to serve until the Annual Meeting of Shareholders on February 5, 2002
or until their successors are duly elected.
Name Age Position
Gerald B. Shreiber 60 Chairman of the Board, President,
Chief Executive Officer and
Director
Dennis G. Moore 46 Senior Vice President, Chief
Financial Officer, Secretary,
Treasurer and Director
Robert M. Radano 52 Senior Vice President, Sales,
Chief Operating Officer and
Director
Dan Fachner 41 President of The ICEE Company
Subsidiary
Gerald B. Shreiber is the founder of the Company and has served
as its Chairman of the Board, President, and Chief Executive Officer
since its inception in 1971. His term as a director expires in 2005.
Dennis G. Moore joined the Company in 1984. He served in
various controllership functions prior to becoming the Chief
Financial Officer in June 1992. His term as a director expires in
2002.
Robert M. Radano joined the Company in 1972 and in May 1996 was
named Chief Operating Officer of the Company. Prior to becoming
Chief Operating Officer, he was Senior Vice President, Sales
responsible for national foodservice sales of J & J. His term as a
director expires in 2005.
Dan Fachner has been an employee of ICEE-USA Corp., which was
acquired by the Company in May 1987, since 1979. He was named Senior
Vice President of The ICEE Company in April 1994 and became President
in May 1997.
10
PART II
Item 5. Market For Registrant's Common Stock And
Related Stockholder Matters
The Company's common stock is traded on the over-the-counter
market on the NASDAQ National Market System under the symbol JJSF.
The following table sets forth the high and low final sale price
quotations as reported by NASDAQ for the common stock for each
quarter of the years ended September 30, 2000 and September 29, 2001.
High Low
Fiscal 2000
First quarter 22.75 15.50
Second quarter 21.88 16.81
Third quarter 20.50 14.00
Fourth quarter 19.00 12.50
Fiscal 2001
First quarter 18.50 12.50
Second quarter 17.88 15.00
Third quarter 23.79 16.50
Fourth quarter 24.10 14.82
On November 30, 2001, there were 8,650,458 shares of common
stock outstanding. Those shares were held by approximately 2,200
beneficial shareholders and shareholders of record.
The Company has never paid a cash dividend on its common stock
and does not anticipate paying cash dividends in the foreseeable
future.
Item 6. Selected Financial Data
The information set forth under the caption "Financial
Highlights" of the 2001 Annual Report to Shareholders is incorporated
herein by reference.
Item 7. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
The information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" of the 2001 Annual Report to Shareholders is incorporated
herein by reference.
11
Item 7a. Quantitative And Qualitative Disclosures
About Market Risk
The following is the Company's quantitative and qualitative
analysis of its financial market risk:
Interest Rate Sensitivity
The table below provides information about the Company's
derivative financial instruments and other financial instruments
as of September 29, 2001 that are sensitive to changes in interest
rates. These instruments include debt obligations and interest
rate swaps. For debt obligations, the table presents principal
cash flows and related weighted-average interest rates by expected
maturity dates. For interest rate swaps, the table presents
notional amounts and weighted-average interest rates by expected
(contractual) maturity dates. The notional amounts are used to
calculate the contractual payments to be exchanged under the swap
contract. Weighted-average variable rates are based on implied
forward rates in the yield curve at the reporting date.
Expected Maturity Date
($ in thousands)
There Fair
2002 2003 2004 2005 2006 after Total Value
Liabilities
Long-term debt
Fixed rate $ 115 $ 368 $ - $ - $ - $ - $ 483 $ 483
Average interest
rate 9.50% 9.27% - - - - 9.32%
Variable rate - - - $28,000 - - $28,000 $28,000
Average interest
rate - - - 3.00% - - 3.00%
Interest Rate Swaps
Receive variable/pay
fixed $ 8,000 $2,000 $ - $ - $ - $ - $10,000 $ -
Average pay rate 3.58% 3.58% - - - - 3.58%
Average receive
rate 6.11% 6.11% - - - - 6.11%
Interest Rate Risk
The Company holds long-term debt with variable interest rates
indexed to LIBOR, which exposes it to the risk of increased
interest costs if interest rates rise. To reduce the risk related
to unfavorable interest rate movements, the Company enters into
interest rate swap contracts to pay a fixed rate and receive a
variable rate that is indexed to LIBOR. The ratio of the swap
notional amount to the principal amount of variable rate debt
issued changes periodically based on the Company's ongoing
assessment of the future trend in interest rate movements. At
September 29, 2001, this ratio was 25 percent and no change in the
ratio is expected at the current time. The percentage of variable
rate debt fixed under interest rate swap contracts is expected to
decrease as scheduled debt payments are made.
12
The Company's most significant raw material requirements include
flour, shortening, corn syrup, chocolate, and macadamia nuts. The
Company attempts to minimize the effect of future price fluctuations
related to the purchase of raw materials primarily through forward
purchasing to cover future manufacturing requirements, generally for
periods from 1 to 24 months. Futures contracts are not used in
combination with forward purchasing of these raw materials. The
Company's procurement practices are intended to reduce the risk of
future price increases, but also may potentially limit the ability to
benefit from possible price decreases.
Foreign Exchange Rate Risk
The Company has not entered into any forward exchange contracts
to hedge its foreign currency rate risk as of September 29, 2001
because it does not believe its foreign exchange exposure is
significant.
Item 8. Financial Statements And Supplementary Data
The following consolidated financial statements of the Company
set forth in the 2001 Annual Report to Shareholders are incorporated
herein by reference:
Consolidated Balance Sheets as of September 29, 2001 and
September 30, 2000
Consolidated Statements of Earnings for the fiscal years ended
September 29, 2001, September 30, 2000 and September 25,
1999
Consolidated Statement of Stockholders' Equity for the three
fiscal years ended September 29, 2001
Consolidated Statements of Cash Flows for the fiscal years
ended September 29, 2001, September 30, 2000 and September
25, 1999
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Item 9. Changes In And Disagreements With Accountants On
Accounting And Financial Disclosure
None.
13
PART III
Item 10. Directors And Executive Officers Of The Registrant
Information concerning directors, appearing under the captions
"Information Concerning Nominee For Election To Board" and
"Information Concerning Continuing Directors And Executive Officers"
in the Company's Proxy Statement filed with the Securities and
Exchange Commission in connection with the Annual Meeting of
Shareholders to be held on February 8, 2002, is incorporated herein
by reference. Information concerning the executive officers is
included on page 10 following Item 4 in Part I hereof.
Item 11. Executive Compensation
Information concerning executive compensation appearing in the
Company's Proxy Statement under the caption "Management Remuneration"
is incorporated herein by reference.
Item 12. Security Ownership Of Certain Beneficial Owners And
Management
Information concerning the security ownership of certain
beneficial owners and management appearing in the Company's Proxy
Statement under the caption "Principal Shareholders" is incorporated
herein by reference.
Item 13. Certain Relationships And Related Transactions
Not applicable.
14
PART IV
Item 14. Exhibits, Financial Statement Schedules And
Reports On Form 8-K
(a) Financial Statements
The following are incorporated by reference in Part II of this
report:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of September 29, 2001 and
September 30, 2000
Consolidated Statements of Earnings for the fiscal years ended
September 29, 2001, September 30, 2000 and September 25,
1999
Consolidated Statement of Stockholders' Equity for the three
fiscal years ended September 29, 2001
Consolidated Statements of Cash Flows for the fiscal years ended
September 29, 2001, September 30, 2000 and September 25,
1999
Notes to Consolidated Financial Statements
Financial Statement Schedule
The following are included in Part IV of this report:
Page
Report of Independent Certified Public
Accountants on Schedule 19
Schedule:
II. Value and Qualifying Accounts 20
All other schedules are omitted either because they are not
applicable or because the information required is contained in the
financial statements or notes thereto.
Exhibits
3.1 Amended and Restated Certificate of Incorporation filed
February 28, 1990. (Incorporated by reference from the
Company's Form 10-Q dated May 4, 1990.)
3.2 Amended and Restated Bylaws adopted May 15, 1990.
(Incorporated by reference from the Company's Form 10-Q
dated August 3, 1990.)
15
4.3 Loan Agreement dated as of December 4, 2001 by and
among J & J Snack Foods Corp. and Certain of its
Subsidiaries and Citizens Bank of Pennsylvania, as
Agent. (Page 21.)
10.1 Proprietary Exclusive Manufacturing Agreement dated
July 17, 1984 between J & J Snack Foods Corp. and Wisco
Industries, Inc.(Incorporated by reference from the
Company's Form S-1 dated February 4, 1986, file no. 33-
2296).
10.2*J & J Snack Foods Corp. Stock Option Plan.
(Incorporated by reference from the Company's Form S-8
dated July 24, 1992, file no. 33-50036.)
10.3*J & J Snack Foods Corp. 401(k) Profit Sharing Plan, As
Amended, Effective January 1, 1989. (Incorporated by
reference from the Company's 10-K dated December 18,
1992.)
10.4*First, Second and Third Amendments to the J & J Snack
Foods Corp. 401(k) Profit Sharing Plan. (Incorporated
by reference from the Company's 10-K dated December 19,
1996).
10.6 Lease dated September 24, 1991 between J & J Snack
Foods Corp. of New Jersey and A & H Bloom Construction
Co. for the 101,200 square foot building next to the
Company's manufacturing facility in Pennsauken, New
Jersey. (Incorporated by reference from the Company's
Form 10-K dated December 17, 1991).
10.7 Lease dated August 29, 1995 between J & J Snack Foods
Corp. and 5353 Downey Associated Ltd for the lease of
the Vernon, CA facility. (Incorporated by reference
from the Company's Form 10-K dated December 21, 1995).
10.8*J & J Snack Foods Corp. Employee Stock Purchase Plan
(Incorporated by reference from the Company's Form S-8
dated May 16, 1996).
10.9*Amendments to the J & J Snack Foods Corp. Stock Option
Plan and the J & J Snack Foods Corp. Non-Statutory
Stock Option Plan for Non-Employee Directors and Chief
Executive Officer. (Incorporated by reference from the
Company's Definitive Proxy Statement dated December 15,
1999.)
13.1 Company's 2001 Annual Report to Shareholders (except
for the captions and information thereof expressly
incorporated by reference in this Form 10-K, the Annual
16
Report to Shareholders is provided solely for the
information of the Securities and Exchange Commission
and is not deemed "filed" as part of the Form 10-K.)
(Page 105.)
22.1 Subsidiaries of J & J Snack Foods Corp. (Page 138.)
24.1 Consent of Independent Certified Public Accountants.
(Page 139.)
*Compensatory Plan
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the
last quarter of the period covered by this report.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
J & J SNACK FOODS CORP.
December 21, 2001 By /s/ Gerald B. Shreiber
Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
December 21, 2001 /s/ Robert M. Radano
Robert M. Radano, Senior Vice
President, Sales, Chief Operating
Officer and Director
December 21, 2001 /s/ Dennis G. Moore
Dennis G. Moore, Senior Vice
President, Chief Financial
Officer and Director
December 21, 2001 /s/ Stephen N. Frankel
Stephen N. Frankel, Director
December 21, 2001 /s/ Peter G. Stanley
Peter G. Stanley, Director
December 21, 2001 /s/ Leonard M. Lodish
Leonard M. Lodish, Director
18
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ON SCHEDULE
Board of Directors
J & J Snack Foods Corp.
In connection with our audit of the consolidated financial
statements of J & J Snack Foods Corp. and Subsidiaries referred to in
our report dated November 6, 2001 which is included in the Annual
Report to Shareholders and incorporated by reference in Part II of
this form, we have also audited Schedule II for each of the three
fiscal years in the period ended September 29, 2001 (52 weeks, 53
weeks and 52 weeks). In our opinion, this schedule presents fairly,
in all material respects, the information required to be set forth
therein.
GRANT THORNTON LLP
Philadelphia, Pennsylvania
November 6, 2001
19
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Opening Charged to Closing
Year Description balance expense Deduction Balance
2001 Allowance for doubtful accounts $1,573,000 $438,000 $339,000(1) $1,672,000
2000 Allowance for doubtful accounts 806,000 1,384,000 617,000(1) 1,573,000
1999 Allowance for doubtful accounts 597,000 321,000 112,000(1) 806,000
(1) Write-off uncollectible accounts receivable.
20
EXHIBIT 4.3
LOAN AGREEMENT
BY AND AMONG
J & J SNACK FOODS CORP.,
THE SUBSIDIARIES OF J & J SNACK FOODS CORP. SIGNATORY HERETO
THE BANKS SIGNATORY HERETO
AND
CITIZENS BANK OF PENNSYLVANIA
AS AGENT FOR SUCH BANKS
DECEMBER 4, 2001
LOAN AGREEMENT
AGREEMENT, made this 4th day of December, 2001, by and
among:
J & J SNACK FOODS CORP., a New Jersey corporation;
The Subsidiary Borrowers of Parent that have executed the
signature pages hereto; and
The Banks that have executed the signature pages hereto;
and
CITIZENS BANK OF PENNSYLVANIA, a Pennsylvania state-
chartered bank, as Agent for the Banks;
W I T N E S S E T H:
WHEREAS, Parent and the Subsidiary Borrowers wish to obtain
loans from the Banks in the aggregate principal sum of up to
Fifty Million and 00/100 ($50,000,000.00) Dollars, and the Banks
are willing to make such loans to Parent and the Subsidiary
Borrowers in an aggregate principal amount of up to such sum on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, terms defined in the recitals
hereto shall have the meanings therein defined and the following
terms shall have the following meanings:
ABR Loans: Loans that bear interest at a rate based
upon the Alternate Base Rate.
Acquisition: any acquisition by any Borrower of all
or a substantial portion of the Capital Stock, assets and/or
properties of another Person, pursuant to and in accordance with
the terms of an Acquisition Agreement.
Acquisition Agreement: any agreement by and between a
Borrower and another Person with respect to such Borrower's
acquisition of all or a substantial portion of the assets and/or
properties of such other Person and/or all or a substantial
portion of the issued and outstanding Capital Stock of another
Person owned by such other Person, including all exhibits,
annexes and schedules thereto, and all amendments, modifications
and supplements thereof
Acquisition Cost: with respect to any otherwise
Permitted Acquisition, the sum of (i) all cash consideration
paid or agreed to be paid by the acquiror to make such
Acquisition (inclusive of payments of such person of the
seller's professional fees and expenses and other out-of-pocket
expenses in connection therewith), plus (ii) the fair market
value of all non-cash consideration paid of such acquiror in
connection therewith, plus (iii) an amount equal to the
principal or stated amount of all liabilities assumed or
incurred by such acquiror in connection therewith, plus (iv) any
optional or mandatory capital contributions made to such entity
by such acquiror. The principal or stated amount of any
liability assumed or incurred by an acquiror in connection with
an Acquisition which is a contingent liability shall be an
amount equal to the stated amount of such liability or, if the
same is not stated, the maximum reasonably anticipated amount
payable by such acquiror in respect thereof as determined by
such acquiror in good faith.
Additional Costs: as defined in subsection 2.22(b)
hereof.
Affected Loans: as defined in Section 2.25 hereof.
Affected Type: as defined in Section 2.25 hereof.
Affiliate: as to any Person, any other Person that
directly or indirectly controls, or is under common control
with, or is controlled by, such Person. As used in this
definition, control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause
the direction of management or policies (whether through
ownership of securities or partnership or other ownership
interests, by contract or otherwise), provided that, in any
event: (i) any Person that owns directly or indirectly 5% or
more of the securities having ordinary voting power for the
election of directors or other governing body of a corporation
or 5% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other
Person; and (ii) each controlling shareholder, director and
officer of a Borrower shall be deemed to be an Affiliate of the
Borrowers.
3
Affiliate Advances: as to any Borrower, all loans,
advances and other distributions to and Investments in any
officer, director, employee, Affiliate and/or Subsidiary of such
Borrower, excluding salary, bonuses and benefits paid to
employees of such Borrower in the ordinary course of such
Borrower's business.
Agency Fee: as defined in subsection 2.7(c) hereof.
Agent: Citizens Bank of Pennsylvania, in its capacity
as Agent for the Banks, together with its successors in such
capacity.
Alternate Base Rate: the higher of (i) the Prime Rate
and (ii) the Federal Funds Rate plus 0.50%.
Applicable Lending Office: with respect to each Bank,
with respect to each type of Loan, the Lending Office as
designated for such type of Loan below its name on the signature
pages hereof or such other office of such Bank or of an
affiliate of such Bank as such Bank may from time to time
specify to the Agent and the Parent as the office at which its
Loans of such type are to be made and maintained.
Applicable Margin: with respect to the unpaid
principal balance of ABR Loans and LIBOR Loans, and the face
amount of all outstanding Letters of Credit, in each case at all
times during which the applicable Pricing Level set forth below
is in effect, the percentage set forth below next to such
Pricing Level and under the applicable column
Applicable Applicable Applicable
Margin for Margin for Margin for
Pricing ABR Loans LIBOR Loans Letters of
Level Credit
Pricing 0.125 0.500 0.500
Level I
Pricing 0.125 0.625 0.625
Level II
Pricing 0.125 0.750 0.750
Level III
Pricing 0.375 0.875 0.875
Level IV
In each case, the determination of the Applicable Margin
pursuant to the table set forth above shall be made on a
quarterly basis based on an examination of the financial
statements of the Borrowers delivered pursuant to and in
compliance with Section 5.1 or Section 5.2 hereof, which
4
financial statements, whether annual or quarterly, shall be (A)
audited in the case of financial statements furnished pursuant
to Section 5.1 and (B) certified by the chief financial officer
of Parent in the case of financial statements furnished pursuant
to Section 5.2 and shall indicate that there exists no Default
or Event of Default hereunder. Each determination of the
Applicable Margin shall be effective five days following the
date on which the financial statements on which such
determination was based were received by the Agent. In the
event that financial statements for the four full fiscal
quarters most recently completed prior to such date of
determination either: (i) have not been delivered to the Agent
in compliance with Section 5.1 or 5.2 hereof, or (ii) if
delivered, do not comply in form or substance with Section 5.1
or 5.2 hereof (in the sole judgment of the Agent), then the
Agent may determine, in its reasonable judgment, the ratio
referred to above that would have been in effect as at such
date, and, consequently, the Applicable Margin in effect for the
period commencing on such date.
Applicable Period: as defined in Section 7.15 hereof.
Assignment and Acceptance: an agreement in the form
of Exhibit B hereto.
Bank and Banks: the banks and other financial
institutions that have executed the signature pages hereto
together with each bank and any other financial institution that
becomes a Bank pursuant to the terms of this Agreement.
Borrower: Parent or any Subsidiary Borrower.
Borrowers: Parent and the Subsidiary Borrowers
collectively.
Borrowing Notice: as defined in Section 2.2 hereof.
Business Day: any day other than Saturday, Sunday or
any other day on which commercial banks in Pennsylvania are
authorized or required to close under the laws of the
Commonwealth of Pennsylvania.
Capital Expenditures: for any period, the aggregate
amount of all payments made during such period by any Borrower
directly or indirectly for the purpose of acquiring,
constructing or maintaining fixed assets, real property or
equipment that, in accordance with GAAP, would be added as a
debit to the fixed asset account of such Borrower, including,
without limitation, all amounts paid or payable during such
period with respect to Capitalized Lease Obligations and
interest that are required to be capitalized in accordance with
GAAP.
5
Capitalized Lease: any lease, the obligations to pay
rent or other amounts under which, constitute Capitalized Lease
Obligations.
Capitalized Lease Obligations: as to any Borrower,
the obligations of such Borrower to pay rent or other amounts
under a lease of (or other agreement conveying the right to use)
real and/or personal property which obligations are required to
be classified and accounted for as a capital lease on a balance
sheet of such Borrower under GAAP and, for purposes of this
Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
Capital Stock: as to any Borrower, all shares,
interests, partnership interests, limited liability company
interests, participations, rights in or other equivalents
(however designated) of such Borrower's equity (however
designated) and any rights, warrants or options exchangeable for
or convertible into such shares, interests, participations,
rights or other equity.
Cash: as to any Borrower, such Borrower's cash and
cash equivalents, as defined in accordance with GAAP.
CERCLA: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601, et seq.
Citizens: Citizens Bank of Pennsylvania, a
Pennsylvania state-chartered bank, in its capacity as a Bank
hereunder.
Code: the Internal Revenue Code of 1986, as it may be
amended from time to time.
Commitment: as to each Bank, the amount set forth
opposite such Bank's name on the signature pages hereof under
the caption "Commitment" as such amount is subject to reduction
in accordance with the terms hereof.
Commitment Fee: as defined in subsection 2.7(a)
hereof.
Commitment Termination Date: December 1, 2004,
subject to earlier termination as provided in this Agreement.
Compliance Certificate: a certificate executed by the
president and chief financial or accounting officer of Parent to
the effect that: (i) as of the effective date of the
certificate, no Default or Event of Default under this Agreement
exists or would exist after giving effect to the action intended
to be taken by the Borrowers as described in such certificate,
including, without limitation, that the covenants set forth in
Section 6.9 hereof would not be breached after giving effect to
6
such action, together with a calculation in reasonable detail,
and in form satisfactory to the Agent, of such compliance, and
(ii) the representations and warranties contained in Article 3
hereof are true and with the same effect as though such
representations and warranties were made on the date of such
certificate, except for changes in the ordinary course of
business none of which, either singly or in the aggregate, have
had a Material Adverse Effect.
Controlled Group: all members of a controlled group
of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the
Borrowers, are treated as a single employer under Section
414(b), 414(c) or 414(m) of the
Code and Section 4001 (a)(2) of ERISA.
Credit Period: the period commencing on the date of
this Agreement and ending on the Commitment Termination Date.
Debt Instrument: as defined in subsection 8.4(a)
hereof.
Default: an event which with notice or lapse of time,
or both, would constitute an Event of Default.
Defined Contribution Plan: a plan which is not covered
by Title IV of ERISA or subject to the minimum funding standards
of Section 412 of the Code and which provides for an individual
account for each participant and for benefits based solely on
the amount contributed to the participant's account, and any
income, expenses, gains and losses, and any forfeitures of
accounts of other participants which may be allocated to such
participant's account.
Disposal: the discharge, deposit, injection, dumping,
spilling, leaking or placing of any hazardous materials into or
on any land or water so that such hazardous materials or
constituent thereof may enter the environment or be emitted into
the air or discharged into any waters, including ground waters.
Dollars and $: lawful money of the United States of
America.
Domestic Subsidiary: each direct and indirect
Subsidiary of Parent organized under the laws of the United
States of America or a state thereof.
Drawing Date: as defined in Section 2.15(c) hereof.
EBIT: the sum of the net income of Parent and its
Subsidiaries on a consolidated basis (as determined in
accordance with GAAP), plus, to the extent subtracted in
7
determining such net income, the provision for income tax
expense and the Interest Expense.
EBITDA: with respect to Parent and its Subsidiaries
on a consolidated basis for any period, the sum of (i) net
income (as determined in accordance with GAAP), (ii) Interest
Expense, (iii) depreciation and amortization, and (iv) Federal,
state and local income taxes, in each case of the Borrower and
its Subsidiaries on a consolidated basis for such period,
computed in accordance with GAAP.
Eligible Assignee: a commercial bank or other
financial institution organized under the laws of the United
States of America or any state and having a combined capital and
surplus of at least $500,000,000.
Employee Benefit Plan: any employee benefit plan
within the meaning of Section 3(3) of ERISA which (a) is
maintained for employees of the Borrowers or any of its ERISA
Affiliates or (b) has at any time within the preceding six (6)
years been maintained for employees of any Loan Party or any
current or former ERISA Affiliate.
Employee Welfare Benefit Plan: any employee benefit
plan within the meaning of Section 3(l) of ERISA.
Environmental Laws and Regulations: all federal,
state and local environmental, health and safety laws,
regulations, ordinances, orders, judgments and decrees
applicable to any Borrower or any other Loan Party, or any of
their respective assets or properties.
Environmental Liability: any liability under any
applicable Environmental Laws and Regulations for any disposal,
release or threatened release of a Hazardous Substance pollutant
or contaminant as those terms are defined under CERCLA, and any
liability which would require a removal, remedial or response
action, as those terms are defined under CERCLA, by any Person
or any environmental regulatory body having jurisdiction over
any Borrower or any other Loan Party and/or any liability
arising under any Environmental Laws and Regulations for any
Borrower's or any other Loan Party's failure to comply with such
laws and regulations, including without limitation, the failure
to comply with or obtain any applicable environmental permit.
Environmental Proceeding: any judgment, action,
proceeding or investigation pending before any court or
governmental authority, with respect to any Borrower or any
other Loan Party and arising under or relating to any
Environmental Laws and Regulations.
8
ERISA: the Employee Retirement Income Security Act of
1974, as it may be amended from time to time, and the
regulations promulgated thereunder.
ERISA Affiliate: with respect to any Loan Party, any
corporation, person or trade or business which is a member of a
group which is under common control with any Loan Party, who
together with any Loan Party, is treated as a single employer
within the meaning of Sections 414(b) - (o) of the Code and, if
applicable, Sections 4001(a)(14) and (b) of ERISA.
Event of Default: as defined in Article 8 hereof.
Facility Usage: shall mean at any time the sum of the
Loans outstanding and Letter of Credit Outstandings.
Federal Funds Rate: for any day, the weighted average
of the rates on overnight federal funds transactions with member
banks of the Federal Reserve System arranged by federal funds
brokers as published by the Federal Reserve Bank of New York for
such day, or if such day is not a Business Day, for the next
preceding Business Day (or, if such rate is not so published for
any such day, the average rate charged to the Agent on such day
on such transactions as reasonably determined by the Agent).
Fee(s): as defined in subsection 2.7(d) hereof.
Financial Statements: with respect to Parent, its
consolidated: (i) audited Balance Sheet as at September 30,
2000, together with the related audited Income Statement and
Statement of Changes in Financial Position Cash Flow for the
fiscal year then ended, and (ii) unaudited Balance Sheet as at
June 30, 2001, together with the related unaudited Income
Statement and Statement of Changes in Financial Position Cash
Flow for the nine-month period then ended; provided that to the
extent such financial statements are not the most recent
financial statements furnished by the Borrowers pursuant to
Section 5.1 or 5.2 of this Agreement, "Financial Statements"
shall mean the most recent of the applicable consolidated and/or
consolidating financial statements furnished by the Borrowers
pursuant to such Section 5.1 or 5.2.
Fixed Base Rate: with respect to any LIBOR Loan for
any Interest Period therefor, LIBOR, as reasonably determined by
the Agent.
Fixed Charge Coverage Ratio: as at any time of
determination, the ratio of the following for the most recently
completed four fiscal quarters of Parent: (i) EBIT to (ii)
Interest Expense, each with respect to such most recently
completed four fiscal quarters of Parent.
9
Fixed Rate: for any LIBOR Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Agent
to be equal to (i) the Fixed Base Rate for such Loan for such
Interest Period; divided by (ii) 1.00 minus the Reserve
Requirement, if any, for such Loan for such Interest Period.
The Agent shall use its best efforts to advise Parent of the
Fixed Rate as soon as practicable after each change in the Fixed
Rate; provided however, that the failure of the Agent to so
advise Parent on any one or more occasions shall not affect the
rights of the Banks or the Agent or the obligations of the
Borrowers hereunder.
Foreign Subsidiary: each direct and indirect
Subsidiary of Parent that is not a Domestic Subsidiary.
Frontage Fee: as defined in Section 2.7(c) hereof.
GAAP: generally accepted accounting principles,
consistently applied.
Governmental Acts: as defined in Section 2.15(k)
hereof.
Hazardous Materials: any toxic chemical, Hazardous
Substances, contaminants or pollutants, medical wastes,
infectious wastes, or hazardous wastes.
Hazardous Substance: as set forth in Section 101(14)
of CERCLA or comparable provisions of state or local law.
Hazardous Waste: as set forth in the Resource
Conservation and Recovery Act, 42 U.S.C. 9603(5), and the
Environmental Protection Agency's implementing regulations, or
state or local law.
Indebtedness: with respect to any Borrower, all: (i)
liabilities or obligations, direct and contingent, which in
accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of
such Borrower at the date as of which Indebtedness is to be
determined, including, without limitation, contingent
liabilities that in accordance with such principles, would be
set forth in a specific Dollar amount on the liability side of
such balance sheet, and Capitalized Lease Obligations of such
Borrower; (ii) liabilities or obligations of others for which
such Borrower is directly or indirectly liable, by way of
guaranty (whether by direct guaranty, suretyship, discount,
endorsement, agreement to purchase or advance or keep in funds
or other agreement having the effect of a guaranty) or
otherwise; (iii) liabilities or obligations secured by Liens on
any assets of such Borrower, whether or not such liabilities or
obligations shall have been assumed by it; and (iv) liabilities
or obligations of such Borrower, direct or contingent, with
10
respect to letters of credit issued for the account of such
Borrower and bankers acceptances created for such Borrower.
Insolvency Proceeding: with respect to any Person, (a)
any case, action or proceeding with respect to such Person (i)
before any court or any other Official Body under any
bankruptcy, insolvency, reorganization or other similar Law now
or hereafter in effect, or (ii) for the appointment of a
receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of such Person
or otherwise relating to liquidation, dissolution, winding-up or
relief of such Person, or (b) any general assignment for the
benefit of creditors, composition, marshaling of assets for
creditors, or other, similar arrangement in respect of such
Person's creditors generally or any substantial portion of its
creditors; undertaken under any Law.
Interest Expense: with respect to Parent and its
Subsidiaries for the applicable period of determination thereof,
the interest expense of Parent and its Subsidiaries during such
period determined on a consolidated basis in accordance with
GAAP.
Interest Period: with respect to any LIBOR Loan, each
period commencing on the date such Loan is made or converted
from a Loan or Loans of another type, or the last day of the
next preceding Interest Period with respect to such Loan, and
ending on the same day in the first, second, third or sixth
calendar month thereafter, as the Borrowers may select as
provided in Section 2.2 hereof, except that each such Interest
Period that commences on the last LIBOR Business Day of a
calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month)
shall end on the last LIBOR Business Day of the appropriate
subsequent calendar month.
Notwithstanding the foregoing: (i) each Interest
Period that would otherwise end on a day that is not a LIBOR
Business Day shall end on the next succeeding LIBOR Business Day
or, if such next succeeding LIBOR Business Day falls in the
next succeeding calendar month, on the next preceding LIBOR
Business Day); (ii) no more than seven Interest Periods shall be
in effect at the same time; (iii) notwithstanding clause (iv)
below, any Interest Period for any type of Loan that commences
before the Commitment Termination Date shall end no later than
the Commitment Termination Date; and (iv) no Interest Period
shall have a duration of less than one month. In the event that
the Borrowers fail to select the duration of any Interest Period
for any Loan within the time period and otherwise as provided in
Section 2.2 hereof, such Loan will be automatically converted
into an ABR Loan on the last day of the preceding Interest
Period for such Loan.
11
Interest Rate Contracts: interest rate swap
agreements, interest rate cap agreements, interest rate collar
agreements, interest rate insurance and other agreements or
arrangements designed to provide protection against fluctuation
in interest rates, in each case, in form and substance
satisfactory to the Agent and, in each case, with counter-
parties satisfactory to the Agent.
Investment: by any Borrower:
(a) the amount paid or committed to be paid, or the
value of property or services contributed or committed to be
contributed, by such Borrower for or in connection with the
acquisition by such Borrower of any stock, bonds, notes,
debentures, partnership or other ownership interests or other
securities of any other Person; and
(b) the amount of any advance, loan or extension of
credit by such Borrower, to any other Person, or guaranty or
other similar obligation of such Borrower with respect to any
Indebtedness of such other Person, and (without duplication) any
amount committed to be advanced, loaned, or extended by such
Borrower to any other Person, or any amount the payment of which
is committed to be assured by a guaranty or similar obligation
by such Borrower for the benefit of, such other Person.
IRS: Internal Revenue Service.
Joinder: an agreement in the form of Exhibit C hereto.
Latest Balance Sheet: as defined in subsection 3.9(a)
hereof.
Law: any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, opinion, release,
ruling, order, injunction, writ, decree or award of any Official
Body.
Leases: leases and subleases (other than Capitalized
Leases), licenses for the use of real property, easements,
grants, and other attachment rights and similar instruments
under which a Borrower has the right to use real or personal
property or rights of way.
Letter of Credit: as defined in Section 2.15 hereof.
Letter of Credit Borrowing: an extension of credit
resulting from a drawing under any Letter of Credit which shall
not have been reimbursed on the date when made and shall not
have been converted into an ABR Loan under Section 2.15(c).
Letter of Credit Fee: as defined in Section 2.7(c)
hereof.
12
Letter of Credit Outstandings: at any time the sum of
(i) the aggregate undrawn face amount of all then outstanding
Letters of Credit and (ii) the aggregate amount of all unpaid
and then outstanding Reimbursement Obligations.
Leverage Ratio: the ratio of (i) the Borrowers' Total
Funded Debt as at the time of determination, to (ii) the
Borrowers' EBITDA with respect to the most recently completed
four fiscal quarters of Parent, each measured on a consolidated
basis.
LIBOR: shall mean for any day during each Interest
Period the per annum rate of interest (computed on a basis of a
year of 360 days and actual days elapsed) estimated in good
faith by the Agent in accordance with its usual procedures
(which determination shall be conclusive) to be the average of
the rate per annum for deposits, in an amount of U.S. Dollars
comparable to the amount of principal relating to such Interest
Period and having maturities comparable to such Interest Period,
offered to major money center banks in the London interbank
market at or about 11:00 a.m., London time, two (2) London
business days prior to such Interest Period.
LIBOR Business Day: a Business Day on which dealings
in Dollar deposits are carried out in the London interbank
market.
LIBOR Loans: all Loans the interest on which is
calculated on the basis of the rate referred to in the
definition of Fixed Base Rate.
Lien: any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or
other title retention agreement, any lease in the nature of any
of the foregoing, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any
jurisdiction.
Loan(s): as defined in Section 2.1 hereof and
including, without limitation, all ABR Loans made by the Banks
pursuant to Section 2.15(c) hereof and all Letter of Credit
Borrowings made pursuant to Section 2.15(e) hereof. Loans of
different types made or converted from Loans of other types on
the same day (or of the same type but having different Interest
Periods) shall be deemed to be separate Loans for all purposes
of this Agreement.
Loan Documents: this Agreement, the Notes and all
other documents executed and delivered in connection herewith or
therewith, including all amendments, modifications and
supplements of or to all such documents.
13
Loan Party: each Borrower, any Domestic Subsidiary of
a Borrower that has not yet become a Borrower pursuant to
Section 7.13 hereof, and any other Person (other than the Banks
and the Agent) which now or hereafter executes and delivers to
any Bank or the Agent any
Loan Document.
Material Adverse Effect: a material adverse effect
on: (i) the business, condition (financial or otherwise),
assets, liabilities or operations of the Borrowers taken as a
whole, (ii) the ability of the Borrowers (taken as a whole) to
perform their obligations under any Loan Document to which the
Borrowers are a party, or (iii) the validity or enforceability
of this Agreement or the other Loan Documents or the rights or
remedies of the Banks and/or the Agent hereunder or thereunder.
Multiemployer Plan: a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which any Loan Party or any
ERISA Affiliate is making, or is accruing an obligation to make,
contributions or has made, or been obligated to make,
contributions within the preceding six (6) years.
New Type Loans: as defined in Section 2.25 hereof.
Non-Material Office: an office maintained by a
Subsidiary of Parent that is utilized primarily as a sales
office.
Note(s): as defined in Section 2.4 hereof.
Obligations: collectively, all of the Indebtedness,
liabilities and obligations of the Borrowers to the Banks and
the Agent, whether now existing or hereafter arising, whether or
not currently contemplated, including, without limitation, those
arising under the Loan
Documents.
Official Body: any national, federal, state, local or
other government or political subdivision or any agency,
authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
Parent: J & J Snack Foods Corp., a New Jersey
corporation.
Participation Advance: with respect to any Bank, such
Bank's payment in respect of its participation in a Letter of
Credit Borrowing according to its Ratable Share pursuant to
Section 2.15(e) hereof.
Payor: as defined in Section 2.19 hereof
14
PBGC: Pension Benefit Guaranty Corporation.
Pension Plan: at any time an employee pension benefit
plan that is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and is
maintained either: (i) by a Borrower or any ERISA Affiliate for
employees of such Borrower, or by such Borrower for any ERISA
Affiliate, or (ii) pursuant to a collective bargaining agreement
or any other arrangement under which more than one employer
makes contributions and to which such Borrower or any ERISA
Affiliate is then making or accruing an obligation to make
contributions or has within the preceding five (5) plan years
made contributions.
Permitted Acquisition: an Acquisition that satisfies
each of the following
conditions:(i) the entire business or assets acquired or
business of the entity whose Capital Stock is acquired shall be
substantially similar to a Borrower's line of business as
conducted on the date hereof; (ii) the Acquisition Cost with
respect to any one Acquisition shall not exceed $5,000,000;
(iii) the Acquisition Cost of all Acquisitions the aggregate in
any fiscal year of Parent which but for this clause would be
Permitted Acquisitions shall not exceed $10,000,000; (iv) at the
time of such Acquisition no Default or Event of Default exists
and no Default or Event of Default would occur after giving
effect to such Acquisition; (v) the Acquisition shall have the
approval of the target company's board of directors (or similar
governing body); (vi) the applicable Borrower shall have
complied with any applicable state takeover law and any
applicable super majority charter provisions; (vii) all
governmental and third-party consents and approvals necessary in
connection with each aspect of the Acquisition shall have been
obtained (without the imposition of any unreasonable conditions)
and shall remain in effect, except where the failure to obtain
same could not reasonably be expected to have a Material Adverse
Effect, all applicable waiting periods shall have expired or
been terminated or waived without any material adverse action
being taken by any authority having jurisdiction; and no law or
regulation shall be applicable that restrains, prevents or
imposes material adverse conditions upon any aspect of the
Acquisition; and (viii) the Borrowers shall have delivered to
the Agent, not less than 10 days prior to the consummation of
such Acquisition, a certificate of a financial officer of the
Borrower, in all respects reasonably satisfactory to the Agent
and dated the date of such consummation, attaching a pro-forma
compliance certificate (in a format satisfactory to the Bank)
evidencing compliance with Section 6.9 of this Agreement (as the
same may be amended from time to time) after giving effect to
such Acquisition and based on the most recent financial
statements delivered to the Bank pursuant to this Agreement;
provided, that, as to such financial covenants (and any other
15
financial covenants now or hereafter applying to the facilities
described in this Agreement), all of such covenants shall be
deemed amended to require compliance as to the Borrowers with
the entity acquired in the Acquisition.
Permitted Liens: as to any Borrower: (i) pledges or
deposits by such Borrower under workers' compensation laws,
unemployment insurance laws, social security laws, or similar
legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness
of such Borrower), or leases to which such Borrower is a party,
or deposits to secure public or statutory obligations of such
Borrower or deposits of Cash or United States Government Bonds
to secure surety, appeal, performance or other similar bonds to
which such Borrower is a party, or deposits as security for
contested taxes or import duties or for the payment of rent;
(ii) Liens imposed by law, such as carriers', warehousemen's,
materialmen's and mechanics' liens, or Liens arising out of
judgments or awards against such Borrower with respect to which
such Borrower at the time shall currently be prosecuting an
appeal or proceedings for review; (iii) Liens for taxes not yet
subject to penalties for non-payment and Liens for taxes the
payment of which is being contested as permitted by Section 6.6
hereof; (iv) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of, others for rights of
way, highways and railroad crossings, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties;
and (v) Liens incidental to the conduct of the business of such
Borrower or to the ownership of such Borrower's property that
were not incurred in connection with Indebtedness of such
Borrower, all of which Liens referred to in the preceding clause
(v) do not in the aggregate materially detract from the value of
the properties to which they relate or materially impair their
use in the operation of the business taken as a whole of such
Borrower, and as to all the foregoing only to the extent arising
and continuing in the ordinary course of business.
Person: an individual, a corporation, a limited
liability company, a partnership, a joint venture, a trust or
unincorporated organization, a joint stock company or other
similar organization, a government or any political subdivision
thereof, a court, or any other legal entity, whether acting in
an individual, fiduciary or other capacity.
Plan: at any time an employee pension benefit plan
that is covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code and is either:
(i) maintained by a Borrower or any member of the Controlled
Group for employees of a Borrower, or by a Borrower for any
other member of such Controlled Group, or (ii) maintained
pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes
contributions and to which a Borrower or any member of the
16
Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years
made contributions.
Post-Default Rate: (i) in respect of any Loans a rate
per annum equal to: (x) if such Loans are ABR Loans, 2% above
the Alternate Base Rate as in effect from time to time plus the
Applicable Margin for ABR Loans (but in no event less than the
interest rate in effect on the due date), or (y) if such Loans
are LIBOR Loans, 2% above the rate of interest in effect thereon
at the time of the Event of Default that resulted in the Post-
Default Rate being instituted until the end of the then current
Interest Period therefor and, thereafter, 2% above the Alternate
Base Rate as in effect from time to time plus the Applicable
Margin for ABR Loans (but in no event less than the interest
rate in effect on the due date); and (ii) in respect of other
amounts payable by the Borrowers hereunder (other than interest)
not paid when due (whether at stated maturity, by acceleration
or otherwise), a rate per annum during the period commencing on
the due date until such other amounts are paid in full equal to
2% above the Alternate Base Rate as in effect from time to time
plus the Applicable Margin for ABR Loans (but in no event less
than the interest rate in effect on the due date).
Pricing Level: Pricing Level I, Pricing Level II,
Pricing Level III, or Pricing Level IV, as applicable.
Pricing Level I: the applicable Pricing Level at any
time when the Leverage Ratio is less than or equal to 0.75 to
l.00.
Pricing Level II: the applicable Pricing Level at any
time when the Leverage Ratio is greater than 0.75 to 1.00 but
less than or equal to 1.25 to 1.00.
Pricing Level III: the applicable Pricing Level at
any time when the Leverage Ratio is greater than 1.25 to 1.00
but less than or equal to 1.75 to 1.00.
Pricing Level IV: the applicable Pricing Level at any
time when the Leverage Ratio is greater than 1.75 to 1.00 but
less than or equal to 2.25 to 1.00.
Primary Subsidiary Borrowers: the Subsidiary
Borrowers listed on Schedule
3.1hereto as "Primary Subsidiary Borrowers".
Prime Rate: the variable per annum rate of interest,
calculated on the basis of a 360 day basis but charged on the
actual number of days elapsed, equal to the rate of interest
announced from time to time by Citizens as its prime rate of
interest at the Principal Office. The Prime Rate is a reference
rate and does not necessarily represent the lowest or best rate
17
being charged by Citizens to any borrower. Each Borrower
acknowledges that Citizens may regularly make domestic
commercial loans at rates of interest less than the rate of
interest referred to in the preceding sentence. Each change in
any interest rate provided for herein based upon the Prime Rate
resulting from a change in the Prime Rate shall take effect as
of the effective date of such change in the Prime Rate.
Principal Office: the principal office of Citizens
presently located at Mellon Gateway Center, 3025 Chemical Road,
Suite 300, Plymouth Meeting, Pennsylvania 19462-1739.
Projections: consolidated projections of Parent and
its subsidiaries (in a format reasonably satisfactory to the
Agent) prepared on the basis of the assumptions accompanying
them and reflect as of the date thereof Parent's good faith
projections, after reasonable analysis, of the matters set forth
therein, based on such assumptions.
Purchase Money Security Interest: as defined in
subsection 7.2(c) hereof
Quarterly Dates: the first day of each January,
April, July and October, the first of which shall be the first
such day after the date of this Agreement, provided that, if any
such date is not a LIBOR Business Day, the relevant Quarterly
Date shall be the next succeeding LIBOR Business Day (or, if the
next succeeding LIBOR Business Day falls in the next succeeding
calendar month, then on the next preceding LIBOR Business Day).
Ratable Share: the proportion that a Bank's Commitment
bears to the Commitments of all of the Banks.
Regulation D: Regulation D of the Board of Governors
of the Federal Reserve System, as the same may be amended or
supplemented from time to time.
Regulatory Change: as to any Bank, any change after
the date of this Agreement in United States federal, state or
foreign laws or regulations (including Regulation D and the laws
or regulations that designate any assessment rate relating to
certificates of deposit or otherwise (including the "Assessment
Rate" if applicable to any Loan)) or the adoption or making
after such date of any interpretations, directives or requests
applying to a class of banks, including such Bank, of or under
any United States federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or
governmental or monetary authority charged with the
interpretation or administration thereof.
Reimbursement Obligation: as defined in Section
2.15(c) hereof.
18
Release: as set forth in Section 101(22) of CERCLA
or state or local law.
Required Banks: at any time while no Loans are
outstanding hereunder, Banks having at least 51 % of the
aggregate amount of the Commitments and, at any time while Loans
are outstanding hereunder, Banks holding at least 51% of the
outstanding aggregate principal amount of the Loans hereunder.
Required Payment: as defined in Section 2.19 hereof.
Reserve Requirement: for any LIBOR Loans for any
quarterly period (or, as the case may be, shorter period) as to
which interest is payable hereunder, the rate (rounded upward to
the nearest 1/100 of 1%), as determined in good faith by the
Agent (which determination shall be conclusive), as representing
for such period the maximum effective percentage (or if more
than one such percentage shall be applicable for such period,
the daily average of such percentages for those days in such
period during which any such percentage shall be so applicable)
as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve
requirements (including without limitation supplemental,
marginal and emergency reserve requirements) for the Banks with
respect to liabilities or assets consisting of or including
"Eurocurrency Liabilities" (as such term is defined in
Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time). Without limiting the
effect of the foregoing, the Reserve Requirement shall reflect
any other reserves required to be maintained by such depository
institutions by reason of any Regulatory Change against: (i) any
category of liabilities that includes deposits by references to
which the Fixed Base Rate for LIBOR Loans is to be determined as
provided in the definition of "Fixed Base Rate" in this Article
1, or (ii) any category of extensions of credit or other assets
that include LIBOR Loans.
Standby Letter of Credit: a Letter of Credit issued to
support obligations of one or more of the Borrowers, contingent
or otherwise, which finance the working capital and business
needs of such Borrower(s) incurred in the ordinary course of
business.
Subordinated Debt: unsecured Indebtedness for money
borrowed in an amount satisfactory to the Required Banks which
does not permit any payment or prepayment of the principal
amount thereof or any interest accrued thereon prior to the
payment in full of the Obligations and that is subordinated to
such prior payment and is otherwise subordinated thereto under
terms satisfactory in form and substance to the Required Banks,
as evidenced by the Agent's written consent thereto given prior
to the creation of such Indebtedness.
19
Subsidiary: with respect to any Person, any
corporation, partnership or joint venture whether now existing
or hereafter organized or acquired: (i) in the case of a
corporation, of which a majority of the securities having
ordinary voting power for the election of directors (other than
securities having such power only by reason of the happening of
a contingency) are at the time owned by such Person and/or one
or more Subsidiaries of such Person, or (ii) in the case of a
partnership or joint venture in which such Person is a general
partner or joint venturer or of which a majority of the
partnership or other ownership interests are at the time owned
by such Person and/or one or more of its Subsidiaries. Unless
the context otherwise requires, references in this Agreement to
"Subsidiary" or "Subsidiaries" shall be deemed to be references
to a direct or indirect Subsidiary or Subsidiaries of Parent.
Subsidiary Borrower and Subsidiary Borrowers: the
Domestic Subsidiaries that have executed the signature pages
hereto together with each Domestic Subsidiary that becomes a
Borrower pursuant to the terms of this Agreement.
Tangible Net Worth: the sum of capital surplus,
earned surplus, Subordinated Debt and capital stock, minus
deferred charges, intangibles, Affiliate Advances and treasury
stock, all as determined in accordance with GAAP.
Termination Event: any one of the following:
(a) a "Reportable Event" described in Section 4043 of
ERISA and the regulations issued thereunder;
(b) the withdrawal of any Loan Party or any ERISA
Affiliate from a Pension Plan during a plan year in which it was
a "substantial employer" as defined in Section 4001(a)(2) of
ERISA or was deemed such under Section 4068(f) of ERISA; or
(c) the termination of a Pension Plan, the filing of
a notice of intent to terminate a Pension Plan or the treatment
of a Pension Plan amendment as a termination under Section 4041
of ERISA;
(d) the institution of proceedings to terminate a
Pension Plan by the PBGC;
(e) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer,
any Pension Plan;
(f) the partial or complete withdrawal of any Loan
Party or any ERISA Affiliate from a Multiemployer Plan;
20
(g) the imposition of a Lien pursuant to Section 412
of the Code or Section 302 of ERISA;
(h) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under
Section 4241 or Section 4245 of ERISA, respectively; or
(i) any event or condition which results in the
termination of a Multiemployer Plan under Section 4041A of ERISA
or the institution by the PBGC of proceedings to terminate a
Multiemployer Plan under Section 4042 of ERISA.
Total Commitment: the aggregate obligation of the
Banks to make Loans hereunder not exceeding Fifty Million and
00/100 ($50,000,000.00) Dollars, as the same shall and/or may be
increased or reduced pursuant to Sections 2.1, 2.2 and 2.8
hereof.
Total Funded Debt: at any date of determination, the
aggregate funded Indebtedness (as determined in accordance with
GAAP) and Capitalized Lease Obligations of Parent and its
Subsidiaries on a consolidated basis in accordance with GAAP, on
such date.
Unused Commitment: as at any date, for each Bank, the
difference, if any, between: (i) the amount of such Bank's
Commitment as in effect on such date, and (ii) the sum of (A)
the then aggregate outstanding principal amount of all Loans
made by such Bank and (B) such Bank's Ratable Share of all
Letter of Credit Outstandings.
Any accounting terms used in this Agreement that are not
specifically defined herein shall have the meanings customarily
given to them in accordance with GAAP as in effect on the date
of this Agreement, except that references in Article 5 to such
principles shall be deemed to refer to such principles as in
effect on the date of the financial statements delivered
pursuant thereto.
ARTICLE 2Commitments; Loans
Section 2.1 Loans .
Each Bank hereby severally agrees, on the terms and subject
to the conditions of this Agreement, to make loans (individually
a "Loan" and, collectively, the "Loans") to the Borrowers during
the Credit Period to and including the Commitment Termination
Date in an aggregate principal amount at any one time
outstanding up to, but not exceeding, the Commitment of such
Bank as then in effect less such Bank's Ratable Share of Letter
of Credit Outstandings. Subject to the terms of this Agreement,
during the Credit Period the Borrowers may borrow, repay (
provided that repayment of LIBOR Loans shall be subject to the
21
provisions of Section 2.26 hereof and the term of any such LIBOR
Loan shall be one, two, three or six months) and reborrow up to
the amount of the Total Commitment (after giving effect to the
mandatory and voluntary reductions required and permitted
herein) by means of ABR Loans or LIBOR Loans, and during such
period and thereafter until the date of the payment in full of
all of the Loans, the Borrowers may convert Loans of one type
into Loans of another type (as provided in Section 2.21 hereof).
22
Section 2.2 Notices Relating to Loans .
A Borrower shall give the Agent written notice of each
termination or reduction of the Commitments, each borrowing,
conversion and prepayment of each Loan and of the duration of
each Interest Period applicable to each LIBOR Loan (in each
case, a "Borrowing Notice"). Each such written notice shall be
irrevocable and shall be effective only if received by the Agent
not later than 11 a.m., New Jersey time, on the date that is:
(a) In the case of each notice of termination or
reduction, three Business Days prior to the date of the related
termination or reduction.
(b) In the case of each notice of borrowing or
prepayment of, or conversion into, ABR Loans, one Business Day
prior to the date of the related termination, reduction,
borrowing, prepayment or conversion; and
(c) In the case of each notice of borrowing or
prepayment of, or conversion into, LIBOR Loans, or the duration
of an Interest Period for LIBOR Loans, two LIBOR Business Days
prior to the date of the related borrowing, prepayment, or
conversion or the first day of such Interest Period.
Each such notice of termination or reduction shall specify the
amount thereof. Each such notice of borrowing, conversion or
prepayment shall specify the amount (subject to Section 2.1
hereof) and type of Loans to be borrowed, converted or prepaid
(and, in the case of a conversion, the type of Loans to result
from such conversion), the date of borrowing, conversion or
prepayment (which shall be: (x) a Business Day in the case of
each borrowing or prepayment of ABR Loans, and (y) a LIBOR
Business Day in the case of each borrowing or prepayment of
LIBOR Loans and each conversion of or into a LIBOR Loan). Each
such notice of the duration of an Interest Period shall specify
the Loans to which such Interest Period is to relate. The Agent
shall notify the Banks of the content of each such Borrowing
Notice promptly after its receipt thereof.
Section 2.3 Disbursement of Loan Proceeds .
The Borrowers shall give the Agent notice of each borrowing
hereunder as provided in Section 2.2 hereof. Not later than
11:00 a.m., Pennsylvania time, on the date specified for each
borrowing hereunder, each Bank shall transfer to the Agent, by
wire transfer or otherwise, but in any event in immediately
available funds, the amount of the Loan to be made by it on such
date, and the Agent, upon its receipt thereof, shall disburse
such sum to the Borrowers by depositing the amount thereof in an
account of any Borrower maintained with the Agent.
Section 2.4 Notes .
23
(a) The Loans made by each Bank shall be evidenced by
a single promissory note of the Borrowers, payable on a joint
and several basis, in substantially the form of Exhibit A hereto
(each, a "Note" and collectively, the "Notes"). Each Note shall
be dated the date of the initial borrowing of the Loans under
this Agreement, shall be payable to the order of such Bank in a
principal amount equal to such Bank's Commitment as originally
in effect, and shall otherwise be duly completed. The Notes
shall be payable as provided in Sections 2.1 and 2.5 hereof.
(b) Each Bank shall enter on a schedule attached to
its Note a notation with respect to each Loan made hereunder of
(i) the date and principal amount thereof, (ii) each payment and
prepayment of principal thereof, (iii) whether the interest rate
is initially to be determined in accordance with subsection
2.6(a)(i) or 2.6(a)(ii) hereof, and (iv) the Interest Period, if
applicable. The failure of any Bank to make a notation on the
schedule to its Note as aforesaid shall not limit or otherwise
affect the obligation of the Borrowers to repay the Loans in
accordance with their respective terms as set forth herein.
Section 2.5 Payment Applications .
(a) The Loans: (i) shall be repaid as and when
necessary to cause the aggregate principal amount of the Loans
outstanding not to exceed each Bank's Commitment, as reduced
pursuant to Section 2.8 hereof, and (ii) may be repaid at any
time and from time to time, in whole or in part, without premium
or penalty, upon prior written notice to the Agent as provided
in Section 2.2 hereof, in integral multiples of $500,000 and any
amount so repaid may, subject to the terms and conditions
hereof, including the borrowing limitation imposed by the
Commitments, be reborrowed hereunder during the Credit Period;
provided however, that: (A) LIBOR Loans repaid prior to the last
day of an Interest Period for such Loans shall be subject to the
payment of any yield maintenance fee required by Section 2.26
hereof, and (B) all repayments of Loans or any portion thereof
shall be made together with payment of all interest accrued on
the amount repaid through the date of such repayment.
(b) Except as set forth in Sections 2.22, 2.23 and
2.25 hereof, all payments and repayments made pursuant to the
terms hereof shall be applied first to ABR Loans, and shall be
applied to LIBOR Loans only to the extent any such payment
exceeds the principal amount of ABR Loans outstanding at the
time of such payment.
(c) The Borrower may request a LIBOR Loan only if
same would not result in the Interest Period with respect to
such LIBOR Loan extending beyond the Commitment Termination
Date.
24
Section 2.6 Interest .
(a) The Borrowers shall pay to the Agent for the
account of each Bank interest on the unpaid principal amount of
each Loan made by such Bank for the period commencing on the
date of such Loan until such Loan shall be paid in full, at the
following rates per annum:
25
(i) During such periods that such Loan is a ABR
Loan, the Alternate
Base Rate plus the Applicable Margin; and
(ii) During such periods that such Loan is a
LIBOR Loan, for each Interest Period relating thereto, the Fixed
Rate for such Loan for such Interest Period plus the Applicable
Margin for such Loan.
(b) Notwithstanding the foregoing, whenever an Event
of Default has occurred and is continuing, the Borrowers shall
pay interest on any Loan, and on any other amount payable by the
Borrower hereunder (to the extent permitted by law) for the
period commencing on the occurrence of such Event of Default
until such Event of Default has been cured or waived as
acknowledged in writing by the Agent at the applicable Post-
Default Rate.
(c) Except as provided in the next sentence, accrued
interest on each Loan shall
be payable: (i) in the case of an ABR Loan, monthly on the first
day of each month commencing
with the first such date occurring after the date of each such
Loan, (ii) in the case of a LIBOR Loan, on the last day of each
Interest Period for such Loan (and, if such Interest Period
exceeds three months' duration, quarterly, commencing on the
first quarterly anniversary of the first day of such Interest
Period), and (iii) in the case of any Loan, upon the payment or
prepayment thereof or the conversion thereof into a Loan of
another type (but only on the principal so paid, prepaid or
converted). Interest that is payable at the Post-Default Rate
shall be payable from time to time on demand of the Agent.
Promptly after the establishment of any interest rate provided
for herein or any change therein, the Agent will notify the
Banks and a Borrower thereof; provided, however, the failure of
the Agent to so notify a Borrower or the Banks shall not affect
the obligations of the Borrowers hereunder or under any of the
Notes in any respect.
Section 2.7 Fees .
(a) The Borrowers shall, jointly and severally, pay
to the Agent for the account of each Bank a commitment fee (the
"Commitment Fee") on the daily average amount of such Bank's
Unused Commitment, for the period from the date hereof to and
including the earlier of the date such Bank's Commitment is
terminated or the Commitment Termination Date, in an amount
equal to the total Unused Commitment for such Bank multiplied by
a rate per annum equal to 0.25%. The accrued Commitment Fee
shall be payable quarterly on the Quarterly Dates and on the
earlier of the date the Commitments are terminated or the
Commitment Termination Date, and, in the event the Borrowers
26
reduce the Commitment as provided in Section 2.8 hereof, on the
effective date of such reduction.
(b) The Borrowers shall, jointly and severally, pay
to the Agent an agency fee (the "Agency Fee") for services
rendered by the Agent in its capacity as Agent hereunder in the
amount and in the manner provided in that certain letter
agreement between Parent and the Agent dated November 15, 2001
(as such letter agreement may be amended, modified, replaced or
supplemented from time to time).
(c) The Borrowers shall, jointly and severally, pay
(i) to the Agent for the ratable account of the Banks a fee (the
"Letter of Credit Fee") equal to the Applicable Margin for
Letters of Credit as calculated under Section 4.1.1(ii), and
(ii) to the Agent for its own account a fronting fee (the
"Frontage Fee") equal to 1/8% per annum, which fees shall be
computed on the daily average Letters of Credit Outstanding
based on a year of 360 days and shall be payable quarterly in
arrears commencing with the first Business Day of each January,
April, July and October following issuance of each Letter of
Credit and on the Commitment Termination Date. The Borrowers
shall also, jointly and severally, pay to the Agent for the
Agent's sole account the Agent's then in effect customary fees
and administrative expenses payable with respect to the Letters
of Credit as the Agent may generally charge or incur from time
to time in connection with the issuance, maintenance,
modification (if any), assignment or transfer (if any),
negotiation, and administration of Letters of Credit.
(d) The Commitment Fee, the Agency Fee, the Frontage
Fee and the Letter of Credit Fee are hereinafter sometimes
referred to individually as a "Fee" and collectively as the
"Fees".
Section 2.8 Changes in Commitment .
The Borrowers shall be entitled to terminate or reduce the
Commitments provided that Parent shall give notice of such
termination or reduction to the Banks as provided in Section 2.2
hereof and that any partial reduction of the Commitments shall
be in an aggregate amount equal to $5,000,000 or an integral
multiple of $1,000,000 for amounts in excess thereof. Any such
termination or reduction shall be permanent and irrevocable.
Any reduction of the Total Commitment pursuant to this Section
2.8 shall reduce permanently, on a pro rata basis, the amount of
each Bank's Commitment then in effect, and (ii) shall be
accompanied by a prepayment of the Loans outstanding and/or a
termination and/or payment of the Letter of Credit Outstandings
(as applicable) to the extent, if any, that the Facility Usage
exceeds the amount of the Total Commitment as then reduced,
together with payment in full of all accrued interest on the
amount so prepaid to and including the dates of each such
27
prepayment, and payment in full of any amounts payable pursuant
to Section 2.26 in connection therewith, and the payment in full
of any unpaid Fees then accrued hereunder. Any termination of
the Total Commitment shall be accompanied by a prepayment in
full of the Loans outstanding and a termination and/or payment
in full of all Letter of Credit Outstandings (as applicable),
together with payment in full of all accrued interest thereon to
and including the date of prepayment, payment in full of any
amounts payable pursuant to Section 2.26 in connection
therewith, and payment in full of any unpaid Fees then accrued
hereunder.
Section 2.9 Use of Proceeds of Loans .
The proceeds of the Loans hereunder may be used by the
Borrowers to refinance existing Indebtedness owing to Fleet
National Bank, National City Bank and Mellon Bank, N.A. and to
provide availability for general corporate purposes, including
working capital, capital expenditures, Permitted Acquisitions
and permitted stock repurchases.
Section 2.10 Computations .
Interest on all Loans and each Fee shall be computed on the
basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last) occurring in the period
for
which payable.
Section 2.11 Minimum Amounts of Borrowings, Conversions,
Prepayments and Interest Periods .
Except for borrowings, conversions and prepayments that
exhaust the full remaining amount of the Commitments (in the
case of borrowings) or result in the conversion or prepayment of
all Loans of a particular type (in the case of conversions or
prepayments) or conversions made pursuant to Section 2.21,
subsection 2.22(b) or Section 2.24 hereof, each borrowing from
each Bank, each conversion of Loans of one type into Loans of
another type and each prepayment of principal of Loans hereunder
shall be in an amount at least equal to $100,000 in the case of
ABR Loans or in integral multiples of $100,000 for amounts in
excess thereof and $500,000 in the case of LIBOR Loans or in
integral multiples of $100,000 for amounts in excess thereof
(borrowings, conversions and prepayments of different types of
Loans at the same time hereunder to be deemed separate
borrowings, conversions and prepayments for purposes of the
foregoing, one for each type).
28
Section 2.12 Time and Method of Payments .
All payments of principal, interest, Fees and other amounts
(including indemnities) payable by the Borrowers hereunder shall
be made in Dollars, in immediately available funds, to the Agent
at the Principal Office not later than 11:00 a.m., New Jersey
time, on the date on which such payment shall become due (and
the Agent or any Bank for whose account any such payment is to
be made may, but shall not be obligated to, debit the amount of
any such payment that is not made by such time to any ordinary
deposit account of any Borrower with the Agent or such Bank, as
the case may be). Additional provisions relating to payments
are set forth in Section 10.3 hereof. Each payment received by
the Agent hereunder for the account of a Bank shall be paid
promptly to such Bank, in like funds, for the account of such
Bank's Applicable Lending Office for the Loan in respect of
which such payment is made.
Section 2.13 Lending Offices .
The Loans of each type made by each Bank shall be made and
maintained at such Bank's Applicable Lending Office for Loans of
such type.
29
Section 2.14 Several Obligations .
The failure of any Bank to make any Loan to be made by it
on the date specified therefor shall not relieve the other Banks
of their respective obligations to make their Loans on such
date, but no Bank shall be responsible for the failure of the
other Banks to make Loans to be made by
such other Banks.
Section 2.15 Letter of Credit Subfacility.
(a) A Borrower may request the issuance of a letter
of credit (each a "Letter of Credit") on behalf of itself or
another Borrower by delivering to the Agent a completed
application and agreement for letter of credit in such form as
the Agent may specify from time to time by no later than 10:00
a.m., Philadelphia time, at least three (3) Business Days, or
such shorter period as may be agreed to by the Agent, in advance
of the proposed date of issuance. Each Letter of Credit shall
be a Standby Letter of Credit. Subject to the terms and
conditions hereof and in reliance on the agreements of the other
Banks set forth in this Section 2.15, the Agent will issue a
Letter of Credit provided that each Letter of Credit shall (i)
have a maximum maturity of twelve (12) months from the date of
issuance, and (ii) in no event expire later than one Business
Day prior to the Commitment Termination Date and providing that
in no event shall (i) the Letter of Credit Outstandings exceed,
at any one time, $5,000,000 or (ii) the Facility Usage exceed,
at any one time, the aggregate Commitments of the Banks then in
effect.
(b) Immediately upon the issuance of each Letter of
Credit, each Bank shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Agent a
participation in such Letter of Credit and each drawing
thereunder in an amount equal to such Bank's Ratable Share of
the maximum amount available to be drawn under such Letter of
Credit and the amount of such drawing, respectively.
(c) In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the
Agent will promptly notify the Borrowers. The Borrowers shall,
jointly and severally, reimburse (such obligation to reimburse
the Agent shall sometimes be referred to as a "Reimbursement
Obligation") the Agent prior to 12:00 noon, Philadelphia time on
each date that an amount is paid by the Agent under any Letter
of Credit (each such date, an "Drawing Date") in an amount equal
to the amount so paid by the Agent. In the event the Borrowers
fail to reimburse the Agent for the full amount of any drawing
under any Letter of Credit by 11:00 a.m., Philadelphia time, on
the Drawing Date, the Agent will promptly notify each Bank
thereof, and the Borrowers shall be deemed to have requested
that an ABR Loan be made by the Banks pursuant to Section 2.1
30
hereof in the full amount of the Reimbursement Obligation then
outstanding, to be disbursed on the Drawing Date under such
Letter of Credit, subject to the amount of the unutilized
portion of the aggregate Commitments of the Banks then in effect
and subject to the conditions set forth in Section 4.2 hereof
other than any notice requirements. Any notice given by the
Agent pursuant to this Section 2.15(c) may be oral if
immediately confirmed in writing; provided that the lack of such
an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.
(d) Each Bank shall upon any notice pursuant to
Section 2.15(c) make available to the Agent an amount in
immediately available funds equal to its Ratable Share of the
amount of the drawing, whereupon the participating Banks shall
(subject to Section 2.15(e) each be deemed to have made an ABR
Loan to the Borrowers in that amount. If any Bank so notified
fails to make available to the Agent for the account of the
Agent the amount of such Bank's Ratable Share of such drawing by
2:00 p.m., Philadelphia time on the Drawing Date, then interest
shall accrue on such Bank's obligation to make such payment,
from the Drawing Date to the date on which such Bank makes such
payment, at a rate per annum equal to the Federal Funds Rate in
effect from time to time during such period. The Agent will
promptly give notice of the occurrence of the Drawing Date, but
failure of the Agent to give any such notice on the Drawing Date
or in sufficient time to enable any Bank to effect such payment
on such date shall not relieve such Bank from its obligation
under this Section 2.15(d) (other than interest during the
period it was not aware of such drawing).
(e) With respect to any Reimbursement Obligation that
is not converted into an ABR Loan to the Borrowers in whole or
in part as contemplated by Section 2.15(c) because of the
Borrowers' failure to satisfy the conditions set forth in
Section 4.2 (other than any notice requirements) or for any
other reason, the Borrowers shall be deemed to have incurred
from the Agent a Letter of Credit Borrowing in the amount of
such drawing. Such Letter of Credit Borrowing shall be due and
payable on demand (together with interest) and shall bear
interest at the rate per annum applicable to the ABR Loans or,
if applicable, the Default Rate. Each Bank's payment to the
Agent pursuant to Section 2.15(d) shall be deemed to be a
payment in respect of its participation in such Letter of Credit
Borrowing and shall constitute a Participation Advance from such
Bank in satisfaction of its participation obligation under this
Section 2.15.
(f) Upon (and only upon) receipt by the Agent for its
account of immediately available funds from the Borrowers (i) in
reimbursement of any payment made by the Agent under the Letter
of Credit with respect to which any Bank has made a
Participation Advance to the Agent, or (ii) in payment of
31
interest on such a payment made by the Agent under such a Letter
of Credit, the Agent will pay to each Bank, in the same funds as
those received by the Agent, the amount of such Bank's Ratable
Share of such funds, except the Agent shall retain the amount of
the Ratable Share of such funds of any Bank that did not make a
Participation Advance in respect of such payment by Agent.
(g) If the Agent is required at any time to return to
any Borrower, or to a trustee, receiver, liquidator, custodian,
or any official in any Insolvency Proceeding, any portion of the
payments made by any Borrower to the Agent pursuant to Section
2.15(f) in reimbursement of a payment made under the Letter of
Credit or interest or fee thereon, each Bank shall, on demand of
the Agent, forthwith return to the Agent the amount of its
Ratable Share of any amounts so returned by the Agent plus
interest thereon from the date such demand is made to the date
such amounts are returned by such Bank to the Agent, at a rate
per annum equal to the Federal Funds Rate in effect from time to
time.
(h) Each Borrower agrees to be bound by the terms of
the Agent's application and agreement for letters of credit and
the Agent's written regulations and customary practices relating
to letters of credit, though such interpretation may be
different from the such Borrower's own. In the event of a
conflict between such application or agreement and this
Agreement, this Agreement shall govern. It is understood and
agreed that, except in the case of gross negligence or willful
misconduct, the Agent shall not be liable for any error,
negligence and/or mistakes, whether of omission or commission,
in following any Borrower's instructions or those contained in
the Letters of Credit or any modifications, amendments or
supplements thereto.
(i) In determining whether to honor any request for
drawing under any Letter of Credit by the beneficiary thereof,
the Agent shall be responsible only to determine that the
documents and certificates required to be delivered under such
Letter of Credit have been delivered and that they comply on
their face with the requirements of such Letter of Credit.
(j) Each Bank's obligation in accordance with this
Agreement to make the ABR Loans or Participation Advances, as
contemplated by this Section 2.15, as a result of a drawing
under a Letter of Credit, and the Obligations of the Borrowers
to reimburse the Agent upon a draw under a Letter of Credit,
shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Section
2.15 under all circumstances, including the following
circumstances:
(i) any set-off, counterclaim, recoupment,
defense or other right which such Bank may
32
have against the Agent, the Borrowers or any
other Person for any reason whatsoever;
(ii) the failure of any Borrower or any other
Person to comply, in connection with a
Letter of Credit Borrowing, with the
conditions set forth in this Agreement for
the making of an ABR Loan hereunder, it
being acknowledged that such conditions are
not required for the making of a Letter of
Credit Borrowing and the obligation of the
Banks to make Participation Advances under
this Section 2.15;
(iii) any lack of validity or
enforceability of any Letter of Credit;
iv) the existence of any claim, set-off, defense
or other right which any Borrower or any
Bank may have at any time against a
beneficiary or any transferee of any Letter
of Credit (or any Persons for whom any such
transferee may be acting), the Agent or any
Bank or any other Person or, whether in
connection with this Agreement, the
transactions contemplated herein or any
unrelated transaction (including any
underlying transaction between any Borrower
or Subsidiaries of a Borrower and the
beneficiary for which any Letter of Credit
was procured);
(v) any draft, demand, certificate or other
document presented under any Letter of
Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or
any statement therein being untrue or
inaccurate in any respect even if the Agent
has been notified thereof,
(vi) payment by the Agent under any Letter
of Credit against presentation of a demand,
draft or certificate or other document which
does not comply with the terms of such
Letter of Credit;
(vii) any adverse change in the
business, operations, properties, assets,
condition (financial or otherwise) or
prospects of any Borrower or Subsidiaries of
a Borrower;
33
(viii) any breach of this Agreement or
any other Loan Document by any party
thereto;
(ix) the occurrence or continuance of an
Insolvency Proceeding with respect to any
Borrower;
(x) the fact that an Event of Default or a
Default shall have occurred and be
continuing;
(xi) the fact that the Commitment
Termination Date shall have passed or this
Agreement or the Commitments hereunder shall
have been terminated; and
(xii) any other circumstance or
happening whatsoever, whether or not similar
to any of the foregoing; provided that each
Bank's obligation to make ABR Loans under
this Section 2.15 is subject to the
conditions set forth in Section 4.2.
(k) In addition to amounts payable as provided in
Article 10 hereof, the Borrowers hereby, jointly and severally,
agree to protect, indemnify, pay and save harmless the Agent and
the Banks from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses
(including reasonable fees, expenses and disbursements of
counsel and allocated costs of internal counsel) which the Agent
or the Banks may incur or be subject to as a consequence, direct
or indirect, of (i) the issuance of any Letter of Credit, other
than as a result of (A) the gross negligence or willful
misconduct of the Agent as determined by a final judgment of a
court of competent jurisdiction or (B) subject to the following
clause (ii), the wrongful dishonor by the Agent of a proper
demand for payment made under any Letter of Credit (except upon
the request of the Borrowers), or (ii) the failure of the Agent
to honor a drawing under any such Letter of Credit as a result
of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or governmental
authority (all such acts or omissions herein called
"Governmental Acts").
(l) (i) As between any Borrower and the Agent, such
Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation
of the foregoing, the Agent shall not be responsible for: (A)
the form, validity, sufficiency, accuracy, genuineness or legal
effect of any document submitted by any party in connection with
the application for an issuance of any such Letter of Credit,
34
even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged (even if
the Agent shall have been notified thereof); (B) the validity or
sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any
reason; (C) the failure of the beneficiary of any such Letter of
Credit, or any other party to which such Letter of Credit may be
transferred, to comply fully with any conditions required in
order to draw upon such Letter of Credit or any other claim of
any Borrower against any beneficiary of such Letter of Credit,
or any such transferee, or any dispute between or among any
Borrower and any beneficiary of any Letter of Credit or any such
transferee; (D) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher;
(E) errors in interpretation of technical terms; (F) any loss or
delay in the transmission or otherwise of any document required
in order to make a drawing under any such Letter of Credit or of
the proceeds thereof; (G) the misapplication by the beneficiary
of any such Letter of Credit of the proceeds of any drawing
under such Letter of Credit; or (H) any consequences arising
from causes beyond the control of the Agent, including any
Governmental Acts, and none of the above shall affect or impair,
or prevent the vesting of, any of the Agent's rights or powers
hereunder.
(ii) In furtherance and extension and not in
limitation of the specific provisions set forth above, any
action taken or omitted by the Agent under or in connection with
the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good
faith, shall not put the Agent under any resulting liability to
the Borrowers or any Bank.
Section 2.16 Intentionally Omitted .
Section 2.17 Intentionally Omitted .
Section 2.18 Pro Rata Treatment Among Banks .
Except as otherwise provided herein: (i) each borrowing
from the Banks under Section 2.1 hereof will be made from the
Banks and each payment of each Fee (other than the Agency Fee
and the Frontage Fee) shall be made for the account of the Banks
pro rata according to their respective Unused Commitments; (ii)
each partial reduction of the Total Commitment shall be applied
to the Commitments of the Banks pro rata according to each
Bank's respective Commitment; (iii) each conversion of Loans of
a particular type under Section 2.21 hereof (other than
conversions provided for by Section 2.24 or 2.25 hereof) will be
made pro rata among the Banks holding Loans of such type
35
according to the respective principal amounts of such Loans held
by such Banks; (iv) each payment and prepayment of principal of
or interest on Loans of a particular type will be made to the
Agent for the account of the Banks holding Loans of such type
pro rata in accordance with the respective unpaid principal
amounts of such Loans held by such Banks; and (v) Interest
Periods for Loans of a particular type shall be allocated among
the Banks holding Loans of such type pro rata according to the
respective principal amounts of such Loans held by such Banks.
Section 2.19 Non-Receipt of Funds by the Agent .
Unless the Agent shall have been notified by a Bank or a
Borrower (the "Payor") prior to the date on which such Bank is
to make payment to the Agent of the proceeds of a Loan to be
made by it hereunder or the Borrowers are to make a payment to
the Agent for the account of one or more of the Banks, as the
case may be (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that
the Payor does not intend to make the Required Payment to the
Agent, the Agent may assume that the Required Payment has been
made and may, in reliance upon such assumption (but shall not be
required to), make the amount thereof available to the intended
recipient on such date and, if the Payor has not in fact made
the Required Payment to the Agent, the recipient of such payment
shall, on demand, repay to the Agent the amount made available
to it together with interest thereon in respect of each day
during the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for
such day (when the recipient is a Bank) or equal to the rate of
interest applicable to such Loan (when the recipient is a
Borrower).
Section 2.20 Sharing of Payments and Set-Off Among Banks
.
If a Bank shall effect payment of any principal of or
interest on Loans held by it under this Agreement through the
exercise of any right of set-off (including without limitation
pursuant to Section 10.5 hereof), banker's lien, counterclaim or
similar right, it shall promptly purchase from the other Banks
participations in the Loans held by the other Banks in such
amounts, and make such other adjustments from time to time as
shall be equitable, to the end that all the Banks shall share
the benefit of such payment pro rata in accordance with the
unpaid principal and interest on the Loans held by each of them.
To such end all the Banks shall make appropriate adjustments
among themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be
restored. Each Borrower agrees that any Bank so purchasing a
participation in the Loans held by the other Banks may exercise
all rights of set-off, banker's lien, counterclaim or similar
36
rights with respect to such participation as fully as if such
Bank were a direct holder of Loans in the amount of such
participation. Nothing contained herein shall require any Bank
to exercise any such right or shall affect the right of any Bank
to exercise and retain the benefits of exercising, any such
right with respect to any other indebtedness or obligation of
the Borrowers.
Section 2.21 Conversions of Loans .
The Borrowers shall have the right to convert Loans of one
type into Loans of another type from time to time, provided
that: (i) a Borrower shall give the Agent notice of each such
conversion as provided in Section 2.2 hereof; (ii) LIBOR Loans
may be converted only on the last day of an Interest Period for
such Loans; and (iii) except as required by Sections 2.22 or
2.25 hereof, no ABR Loan may be converted into a LIBOR Loan if
on the proposed date of conversion a Default or an Event of
Default exists. The Agent shall use its best efforts to notify
a Borrower of the effectiveness of such conversion, and the new
interest rate to which the converted Loans are subject, as soon
as practicable after the conversion; provided, however, that any
failure to give such notice shall not affect the Borrowers'
obligations, or the Agent's or the Banks' rights and remedies,
hereunder in any way whatsoever.
Section 2.22 Additional Costs; Capital Requirements .
(a) In the event that any existing or future law or
regulation, guideline or interpretation thereof, by any court or
administrative or governmental authority (foreign or domestic)
charged with the administration thereof, or compliance by any
Bank with any request or directive (whether or not having the
force of law) of any such authority shall impose, modify or deem
applicable or result in the application of, any capital
maintenance, capital ratio or similar requirement against loan
commitments made by any Bank hereunder, and the result of any
event referred to above is to impose upon any Bank or increase
any capital requirement applicable as a result of the making or
maintenance of, such Bank's Commitment or the obligation of the
Borrowers hereunder with respect to such Commitment (which
imposition of capital requirements may be determined by each
Bank's reasonable allocation of the aggregate of such capital
increases or impositions), then, upon demand made by such Bank
as promptly as practicable after it obtains knowledge that such
law, regulation, guideline, interpretation, request or directive
exists and determines to make such demand, the Borrowers shall
immediately pay to such Bank from time to time as specified by
such Bank additional amounts which shall be sufficient to
compensate such Bank for such imposition of or increase in
capital requirements together with interest on each such amount
at a rate per annum during the period (x) commencing on the date
demanded until ten days thereafter equal to the Alternate Base
37
Rate as in effect from time to time plus the Applicable Margin
for ABR Loans and (y) commencing on the date that is ten days
after the date demanded until payment in full thereof at the
Post-Default Rate. A certificate setting forth in reasonable
detail the amount necessary to compensate such Bank as a result
of an imposition of or increase in capital requirements
submitted by such Bank to a Borrower shall be conclusive, absent
manifest error, as to the amount thereof. For purposes of this
Section 2.22, all references to any "Bank" shall be deemed to
include any participant in such Bank's Commitment.
(b) In the event that any Regulatory Change shall:
(i) change the basis of taxation of any amounts payable to any
Bank under this Agreement or the Notes in respect of any Loans
including, without limitation, LIBOR Loans (other than taxes
imposed on the overall net income of such Bank for any such
Loans by the United States of America or the jurisdiction in
which such Bank has its principal office); or (ii) impose or
modify any reserve, Federal Deposit Insurance Corporation
premium or assessment, special deposit or similar requirements
relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Bank (including any
of such Loans or any deposits referred to in the definition of
"Fixed Base Rate" in Article I hereof); or (iii) impose any
other conditions affecting this Agreement in respect of Loans,
including, without limitation, LIBOR Loans (or any of such
extensions of credit, assets, deposits or liabilities); and the
result of any event referred to in clause (i), (ii) or (iii)
above shall be to increase such Bank's costs of making or
maintaining any Loans, including, without limitation, LIBOR
Loans, or its Commitment, or to reduce any amount receivable by
such Bank hereunder in respect of any of its LIBOR Loans, or its
Commitment (such increases in costs and reductions in amounts
receivable are hereinafter referred to as "Additional Costs")
in each case, only to the extent that such Additional Costs are
not included in the Fixed Base Rate applicable to such LIBOR
Loans, then, upon demand made by such Bank as promptly as
practicable after it obtains knowledge that such a Regulatory
Change exists and determines to make such demand (a copy of
which demand shall be delivered to the Agent), the Borrowers
shall pay to such Bank from time to time as specified by such
Bank, additional amounts which shall be sufficient to compensate
such Bank for such increased cost or reduction in amounts
receivable by such Bank from the date of such change, together
with interest on each such amount at a rate per annum during the
period (x) commencing on the date demanded until ten days
thereafter equal to the Alternate Base Rate as in effect from
time to time plus the Applicable Margin for ABR Loans and (y)
commencing on the date that is ten days after the date demanded
until payment in full thereof at the Post-Default Rate. All
references to any "Bank" shall be deemed to include any
participant in such Bank's Commitment.
38
(c) Without limiting the effect of the foregoing
provisions of this Section 2.22, in the event that, by reason of
any Regulatory Change, any Bank either: (i) incurs Additional
Costs based on or measured by the excess above a specified level
of the amount of a category of deposits or other liabilities of
such Bank which includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this
Agreement or a category of extensions of credit or other assets
of such Bank which includes LIBOR Loans, or (ii) becomes subject
to restrictions on the amount of such a category of liabilities
or assets that it may hold, then, if such Bank so elects by
notice to a Borrower (with a copy to the Agent), the obligation
of such Bank to make, and to convert Loans of any other type
into, LIBOR Loans hereunder shall be suspended until the date
such Regulatory Change ceases to be in effect (and all Loans of
such type then outstanding shall be converted into ABR Loans in
accordance with Sections 2.21 and 2.25 hereof).
(d) Determinations by any Bank for purposes of this
Section 2.22 of the effect of any Regulatory Change on its costs
of making or maintaining Loans or on amounts receivable by it in
respect of Loans, and of the additional amounts required to
compensate such Bank in respect of any Additional Costs, shall
be set forth in writing in reasonable detail and shall be
conclusive, absent manifest error.
Section 2.23 Limitation on Types of Loans .
Anything herein to the contrary notwithstanding, if, on or
prior to the determination of an interest rate for any LIBOR
Loans for any Interest Period therefor, the Required Banks
reasonably determine (which determination shall be conclusive):
(a) by reason of any event affecting the money
markets in the United States of America or the London interbank
market, quotations of interest rates for the relevant deposits
are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the rate of
interest for such Loans under this Agreement; or
(b) the rates of interest referred to in the
definition of "Fixed Base Rate" in Article I hereof upon the
basis of which the rate of interest on any LIBOR Loans for such
period is determined, do not accurately reflect the cost to the
Banks of making or maintaining such
Loans for such period, then the Agent shall give a Borrower and
each Bank prompt notice thereof (and shall thereafter give a
Borrower and each Bank prompt notice of the cessation, if any,
of such condition), and so long as such condition remains in
effect, the Banks shall be under no obligation to make LIBOR
Loans or to convert any ABR Loans into LIBOR Loans and the
Borrowers shall, on the last day(s) of the then current Interest
Period(s) for the outstanding LIBOR Loans affected, either
39
prepay such LIBOR Loans in accordance with Section 2.11 hereof
or convert such LIBOR Loans into ABR Loans in accordance with
Section 2.21 hereof.
Section 2.24 Illegality .
Notwithstanding any other provision in this Agreement, in
the event that it becomes unlawful for any Bank or its
Applicable Lending Office to: (i) honor its obligation to make
LIBOR Loans hereunder, or (ii) maintain LIBOR Loans hereunder,
then such Bank shall promptly notify a Borrower thereof (with a
copy to the Agent), describing such illegality in reasonable
detail (and shall thereafter promptly notify a Borrower and the
Agent of the cessation, if any, of such illegality), and such
Bank's obligation to make LIBOR Loans and to convert other types
of Loans into LIBOR Loans hereunder shall, upon written notice
given by such Bank to a Borrower, be suspended until such time
as such Bank may again make and maintain LIBOR Loans and such
Bank's outstanding LIBOR Loans shall be converted into ABR Loans
in accordance with Sections 2.21 and 2.25 hereof.
Section 2.25 Certain Conversions pursuant to Sections
2.22 and 2.24.
If the Loans of any Bank of a particular type (Loans of
such type are hereinafter referred to as "Affected Loans" and
such type is hereinafter referred to as the "Affected Type") are
to be converted pursuant to Section 2.22 or 2.24 hereof, such
Bank's Affected Loans shall be converted into ABR Loans, or
LIBOR Loans, as the case may be (the "New Type Loans") on the
last day(s) of the then current Interest Period(s) for the
Affected Loans (or, in the case of a conversion required by
subsection 2.22(b) or Section 2.24 hereof, on such earlier date
as such Bank may specify to a Borrower with a copy to the Agent)
and, until such Bank gives notice as provided below that the
circumstances specified in Section 2.22 or 2.24 hereof that gave
rise to such conversion no longer exist:
(a) to the extent that such Bank's Affected Loans
have been so converted, all payments and prepayments of
principal that would otherwise be applied to such Affected Loans
shall be applied instead to its New Type Loans;
(b) all Loans that would otherwise be made by such
Bank as Loans of the Affected Type shall be made instead as New
Type Loans and all Loans of such Bank that would otherwise be
converted into Loans of the Affected Type shall be converted
instead into (or shall remain as) New Type Loans; and
(c) if Loans of any of the Banks other than such Bank
that are the same type as the Affected Type are subsequently
converted into Loans of another type (which type is other than
New Type Loans), then such Bank's New Type Loans shall be
40
automatically converted on the conversion date into Loans of
such other type to the extent necessary so that, after giving
effect thereto, all Loans held by such Bank and the Banks whose
Loans are so converted are held pro rata (as to principal
amounts, types and, to the extent applicable, Interest Periods)
in accordance with their respective Commitments.
Section 2.26 Yield Maintenance .
The Borrowers shall pay to the Agent for the account
of each Bank, upon the request of such Bank through the Agent,
such amount or amounts as shall be sufficient (in the reasonable
opinion of such Bank) to compensate it for any loss, cost, or
expense incurred as a result of. (i) any payment of a LIBOR Loan
on a date other than the last day of the Interest Period for
such Loan; (ii) any failure by a Borrower to borrow a LIBOR Loan
on the date specified by a Borrower's written notice; or (iii)
any failure of a Borrower to pay a LIBOR Loan on the date for
payment specified in a Borrower's written notice. Without
limiting the foregoing, the Borrowers shall pay to the Agent for
the account of each such Bank, a "yield maintenance fee" in an
amount computed as follows: The current rate for United States
Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to
the term chosen pursuant to the Fixed Rate Election as to which
the prepayment is made, shall be subtracted from the Fixed Rate
in effect at the time of prepayment. If the result is zero or a
negative number, there shall be no yield maintenance fee. If
the result is a positive number, then the resulting percentage
shall be multiplied by the amount of the principal balance being
prepaid. The resulting amount shall be divided by 360 and
multiplied by the number of days remaining in the term chosen
pursuant to the Fixed Rate Election as to which the prepayment
is made. Said amount shall be reduced to present value
calculated by using the above referenced United States Treasury
securities rate and the number of days remaining in the term
chosen pursuant to the Fixed Rate Election as to which
prepayment is made. The resulting amount shall be the yield
maintenance fee due to each such Bank upon the payment of a
LIBOR Loan. Each reference in this paragraph to "Fixed Rate
Election" shall mean the election by a Borrower of a Loan to
bear interest based on the Fixed Rate. If by reason of an Event
of Default, the Agent and/or the Banks elect to declare the
Loans and/or the Notes to be immediately due and payable, then
any yield maintenance fee with respect to a LIBOR Loan shall
become due and payable in the same manner as though the
Borrowers have exercised such right of prepayment.
ARTICLE 3Representations and Warranties
Each Borrower hereby represents and warrants to the Banks
and the Agent that:
41
Section 3.1 Organization .
(a) Each Borrower and each other Loan Party is duly
organized and validly existing under the laws of its state of
organization and has the power to own its assets and to transact
the business in which it is presently engaged and in which it
proposes to be engaged. Schedule 3.1 hereto accurately and
completely lists, as to each Borrower and each Subsidiary and
each other Loan Party: (i) the state of incorporation or
organization of each such entity, and the type of legal entity
that each of them is, (ii) as to each of them that is a
corporation, the classes and number of authorized and
outstanding shares of capital stock of each such corporation,
and the owners of such outstanding shares of capital stock,
(iii) as to each of them that is a legal entity other than a
corporation (but not a natural person), the type and amount of
equity interests authorized and outstanding of each such entity,
and the owners of such equity interests, and (iv) the business
in which each of such entities is engaged. All of the foregoing
shares or other equity interests that are issued and outstanding
have been duly and validly issued and are fully paid and non-
assessable, and are owned by the Borrowers referred to on
Schedule 3.1, free and clear of any Lien except as otherwise
provided for herein. Except as set forth on Schedule 3.1, there
are no outstanding warrants, options, contracts or commitments
of any kind entitling any Person to purchase or otherwise
acquire any shares of Capital Stock or other equity interests of
any Borrower or any Subsidiary or any other Loan Party nor are
there outstanding any securities that are convertible into or
exchangeable for any shares of capital stock or other equity
interests of any Borrower or any Subsidiary or any other Loan
Party. Except as set forth on Schedule 3.1, neither any
Borrower nor any Subsidiary nor any other Loan Party has any
Subsidiary. Each Subsidiary Borrower is a wholly owned
Subsidiary of J&J Snack Foods Investment Corp. and J&J Snack
Foods Investment Corp. is a wholly owned Subsidiary of Parent.
Schedule 3.1 hereto accurately and completely lists each of the
Primary Subsidiary Borrowers, which are those Subsidiary
Borrowers that together with Parent accounted for not less than
90% of Parent's consolidated net income (as determined in
accordance with GAAP) for Parent's fiscal year ending September
30, 2001.
(b) Each Borrower and each other Loan Party is in
good standing in its state of organization and in each state in
which it is qualified to do business. There are no
jurisdictions other than as set forth on Schedule 3.1 hereto in
which the character of the properties owned or proposed to be
owned by any Borrower or any Subsidiary or any other Loan Party
or in which the transaction of the business of any Borrower or
any Subsidiary or any other Loan Party as now conducted or as
proposed to be conducted requires or will require any Borrower
or any Subsidiary or any other Loan Party to qualify to do
42
business and as to which failure so to qualify could have a
Material Adverse Effect.
(c) With respect to each Foreign Subsidiary, (i) each
office maintained by each such Foreign Subsidiary is a Non-
Material Office, (ii) such Foreign Subsidiaries do not own real
and/or personal property that has a fair market value in excess
of $750,000 with respect to all such property owned by such
Foreign Subsidiaries in the aggregate, and (iii) such Foreign
Subsidiaries do not in the aggregate account for more than 5% of
Parent's consolidated net income (as determined in accordance
with GAAP) for Parent's fiscal year ending September 30, 2001.
Section 3.2 Power, Authority, Consents .
Each Borrower and each other Loan Party has the power to
execute, deliver and perform the Loan Documents to be executed
by it. Each Borrower has the power to borrow hereunder and has
taken all necessary corporate action to authorize the borrowing
hereunder on the terms and conditions of this Agreement. Each
Borrower and each other Loan Party has taken all necessary
action, corporate or otherwise, to authorize the execution,
delivery and performance of the Loan Documents to be executed by
it. No consent or approval of any Person (including, without
limitation, any stockholder of any corporate Loan Party or any
partner in any partnership Loan Party), no consent or approval
of any landlord or mortgagee, no waiver of any Lien or right of
distraint or other similar right and no consent, license,
certificate of need, approval, authorization or declaration of
any governmental authority, bureau or agency, is or will be
required in connection with the execution, delivery or
performance by any Borrower or any other Loan Party, or the
validity, enforcement or priority, of the Loan Documents, except
as set forth on Schedule 3.2 hereto, each of which either has
been duly and validly obtained on or prior to the date hereof
and is now in full force and effect, or is designated on
Schedule 3.2 as waived by the Required Banks.
Section 3.3 No Violation of Law or Agreements .
The execution and delivery by each Borrower and each other
Loan Party of each Loan Document to which it is a party and
performance by it hereunder and thereunder, will not violate any
provision of law and will not, except as set forth on Schedule
3.2 hereto, conflict with or result in a breach of any order,
writ, injunction, ordinance, resolution, decree, or other
similar document or instrument of any court or governmental
authority, bureau or agency, domestic or foreign, or any
certificate of incorporation or by-laws of any Borrower or any
other corporate Loan Party or partnership agreement or other
organizational document or instrument of any Loan Party that is
not a corporation, or create (with or without the giving of
notice or lapse of time, or both) a default under or breach of
43
any agreement, bond, note or indenture to which any Borrower or
any other Loan Party is a party, or by which any of them is
bound or any of their respective properties or assets is
affected, or result in the imposition of any Lien of any nature
whatsoever upon any of the properties or assets owned by or used
in connection with the business of any Borrower or any other
Loan Party.
Section 3.4 Due Execution, Validity, Enforceability .
This Agreement and each other Loan Document to which any
Loan Party is a party has been duly executed and delivered by
the Loan Party that is a party thereto and each constitutes the
valid and legally binding obligation of such Borrower or such
other Loan Party that is a party thereto, enforceable in
accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws, now or hereafter in effect,
relating to or affecting the enforcement of creditors' rights
generally and except that the remedy of specific performance and
other equitable remedies are subject to judicial discretion.
Section 3.5 Properties .
All of the properties and assets owned by each Borrower and
each Subsidiary and each other Loan Party are owned by each of
them, respectively, free and clear of any Lien of any nature
whatsoever, except as permitted by Section 7.2 hereof.
Section 3.6 Judgements, Actions, Proceedings .
Except as set forth on Schedule 3.6 hereto, there are no
outstanding judgments, actions or proceedings, including,
without limitation, any Environmental Proceeding, pending before
any court or governmental authority, bureau or agency, with
respect to or, to the best of each Borrower's knowledge,
threatened against or affecting any Borrower or any Subsidiary
or any other Loan Party, involving, in the case of any court
proceeding, a claim in excess of $250,000, nor, to the best of
each Borrower's knowledge, is there any reasonable basis for the
institution of any such action or proceeding that is probable of
assertion, nor are there any such actions or proceedings in
which any Borrower or any Subsidiary or any other Loan Party is
a plaintiff or complainant.
Section 3.7 No Defaults, Compliance With Laws .
Except as set forth on Schedule 3.7 hereto, no Borrower nor
any Subsidiary nor any other Loan Party is in default under any
agreement, ordinance, resolution, decree, bond, note, indenture,
order or judgment to which it is a party or by which it is
bound, or any other agreement or other instrument by which any
of the properties or assets owned by it or used in the conduct
44
of its business is affected, which default could have a Material
Adverse Effect. Each Borrower and each Subsidiary has complied
and is in compliance in all respects with all applicable laws,
ordinances and regulations, resolutions, ordinances, decrees and
other similar documents and instruments of all courts and
governmental authorities, bureaus and agencies, domestic and
foreign, including, without limitation, all applicable
provisions of the Americans with Disabilities Act (42 U.S.C.
12101-12213) and the regulations issued thereunder and all
applicable Environmental Laws and Regulations, non-compliance
with which could have a Material Adverse Effect.
Section 3.8 Burdensome Documents .
Except as set forth on Schedule 3.8 hereto, no Borrower nor
any of the other Loan Parties is a party to or bound by, nor are
any of the properties or assets owned by any Borrower or any
other Loan Party used in the conduct of their respective
businesses affected by, any agreement, ordinance, resolution,
decree, bond, note, indenture, order or judgment, including,
without limitation, any of the foregoing relating to any
Environmental Liability, that materially and adversely affects
their respective businesses, assets or conditions, financial or
otherwise.
Section 3.9 Financial Statements; Projections .
(a) Each of the Financial Statements is correct and
complete and presents fairly the consolidated financial position
of Parent and its Subsidiaries taken as a whole, and each other
entity to which it relates, as at its date, and has been
prepared in accordance with GAAP. No Borrower nor any of the
Subsidiaries, nor any other entity to which any of the Financial
Statements relates, has any material obligation, liability or
commitment, direct or contingent (including, without limitation,
any Environmental Liability), that is not reflected in the
Financial Statements and if it were reflected in the Financial
Statements would result in a Material Adverse Effect. There has
been no change in the financial position or operations of Parent
or any of its Subsidiaries or any other entity to which any of
the Financial Statements relates since the date of the latest
balance sheet included in the Financial Statements (the "Latest
Balance Sheet") that has resulted or may result in a Material
Adverse Effect. Parent's fiscal year is the twelve-month period
ending on September 30th in each year.
(b) The Projections have been prepared on the basis
of the assumptions accompanying them and reflect as of the date
thereof Parent's good faith projections, after reasonable
analysis, of the matters set forth therein, based on such
assumptions.
Section 3.10 Tax Returns .
45
Each Borrower and each Subsidiary has filed all federal,
state and local tax returns required to be filed by it and has
not failed to pay any taxes, or interest and penalties relating
thereto, on or before the due dates thereof. Except to the
extent that reserves therefor are reflected in the Financial
Statements: (i) there are no material federal, state or local
tax liabilities of Parent or any Subsidiary due or to become due
for any tax year ended on or prior to the date of the Latest
Balance Sheet relating to such entity, whether incurred in
respect of or measured by the income of such entity, that are
not properly reflected in the Latest Balance Sheet relating to
such entity, and (ii) there are no material claims pending or,
to the knowledge of any Borrower, proposed or threatened against
any Borrower or any Subsidiary for past federal, state or local
taxes, except those, if any, as to which proper reserves are
reflected in the Financial Statements.
Section 3.11 Intangible Assets .
Each Borrower possesses all patents, trademarks, service
marks, trade names, and copyrights, and rights with respect to
the foregoing, necessary to conduct its business as now
conducted and as proposed to be conducted, without any conflict
with the patents, trademarks, service marks, trade names, and
copyrights and rights with respect to the foregoing, of any
other Person, and each of such patents, trademarks, service
marks, trade names, copyrights and rights with respect thereto,
together with any pending applications therefor, are listed on
Schedule 3.11 hereto.
Section 3.12 Regulation U .
No part of the proceeds received by any Borrower or any
Subsidiary from the Loans will be used directly or indirectly
for: (a) any purpose other than as set forth in Section 2.9
hereof, or (b) the purpose of purchasing or carrying, or for
payment in full or in part of Indebtedness that was incurred for
the purposes of purchasing or carrying, any "margin stock", as
such term is defined in 221.3 of Regulation U of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter 11,
Part 221.
Section 3.13 Intentionally Omitted .
Section 3.14 Full Disclosure .
None of the Financial Statements, the Projections, nor any
certificate, opinion, or any other statement made or furnished
in writing to the Agent or any Bank by or on behalf of any
Borrower or any of the Subsidiaries or any other Loan Party in
connection with this Agreement or the transactions contemplated
herein, contains any untrue statement of a material fact, or
omits to state a material fact necessary in order to make the
46
statements contained therein or herein not misleading, as of the
date such statement was made. There is no fact known to any
Borrower that has, or would in the now foreseeable future have,
a Material Adverse Effect, which fact has not been set forth
herein, in the Financial Statements, the Projections, or any
certificate, opinion or other written statement so made or
furnished to the Agent or the Banks.
Section 3.15 Licenses and Approvals .
Each Borrower and each of the Subsidiaries has all
necessary licenses, permits and governmental authorizations,
including, without limitation, licenses, permits and
authorizations arising under or relating to Environmental Laws
and Regulations, to own and operate its properties and to carry
on its business as now conducted.
Section 3.16 Labor Disputes; Collective Bargaining
Agreements; Employee Grievances .
Except as set forth on Schedule 3.16 hereto: (a) there are
no collective bargaining agreements or other labor contracts
covering any Borrower or any Subsidiary; (b) no such collective
bargaining agreement or other labor contract will expire during
the term of this Agreement; (c) no union or other labor
organization is seeking to organize, or to be recognized as
bargaining representative for, a bargaining unit of employees of
any Borrower or any Subsidiary; (d) there is no pending or
threatened strike, work stoppage, material unfair labor practice
claim or charge, arbitration or other material labor dispute
against or affecting any Borrower or any Subsidiary or their
representative employees; (e) there has not been, during the
five (5) year period prior to the date hereof, a strike, work
stoppage, material unfair labor practice claim or charge,
arbitration or other material labor dispute against or affecting
any Borrower or any
Subsidiary or any of their representative employees, and (f)
there are no actions, suits, charges, demands, claims,
counterclaims or proceedings pending or, to the best of each
Borrower's knowledge, threatened against any Borrower or any of
the Subsidiaries, by or on behalf of, or with, its employees,
other than employee grievances arising in the ordinary course of
business that are not, in the aggregate, material.
Section 3.17 Intentionally Omitted .
Section 3.18 ERISA .
(a) Except as disclosed on Schedule 3.18 hereto, no
Employee Benefit Plan, including without limitation, any
Multiemployer Plan, exists or has ever existed and neither any
Loan Party nor any ERISA Affiliate is a participating employer
in any Employee Benefit Plan in which more than one employer
47
makes contributions as described in Sections 4063 and 4064 of
ERISA. Except as disclosed on Schedule 3.18, no Loan Party nor
any ERISA Affiliate has any contingent liability with respect to
any post-retirement benefit under any Employee Welfare Benefit
Plan which is a welfare plan (as defined in Section 3(l) of
ERISA), other than liability for health plan continuation
coverage described in Part 6 of Title I of ERISA, which together
with any disclosed liability on Schedule 3.18, would not result
in liability to any Loan Party or ERISA Affiliate. The
Borrowers have given to the Agent true and complete copies of
all the following: (i) each Employee Benefit Plan and related
trust agreement (including all amendments and commitments with
respect to such Employee Benefit Plan or trust) which any Loan
Party or ERISA Affiliate maintains or is committed to contribute
to as of the date hereof and the most recent summary plan
description, actuarial report, determination letter issued by
the IRS and Form 5500 filed in respect of each such Employee
Benefit Plan; and (ii) a listing of all of the Multiemployer
Plans to which any Loan Party or ERISA Affiliate contributes or
is committed to contribute and the aggregate amount of the most
recent annual contributions required to be made to each such
Multiemployer Plan, together with any information which has been
provided to any Loan Party or ERISA Affiliate regarding
withdrawal liability under any Multiemployer Plan and the
collective bargaining agreement pursuant to which such
contribution is required to be made.
(b) Each Employee Benefit Plan complies, in both form
and operation in all material respects, with its terms, ERISA
and the Code including, without limitation, Code Section 4980B,
and no condition exists or event has occurred with respect to
any such plan which would result in the incurrence by any Loan
Party or ERISA Affiliate of any material liability, fine or
penalty. No Loan Party nor any ERISA Affiliate has incurred any
liability to the PBGC which remains outstanding other than the
payment of premiums, and there are no premiums which have become
due which are unpaid. No Loan Party nor any ERISA Affiliate has
engaged in any transaction which could subject it to liability
under Section 4069 or Section 4212(c) of ERISA. Each Employee
Benefit Plan. related trust agreement, arrangement and
commitment of each Loan Party and ERISA Affiliate is legally
valid and binding in full force and effect. Each Employee
Benefit Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the IRS to be so
qualified, and each trust related to such plan has been
determined to be exempt under Section 501(a) of the Code. To
the knowledge of any Loan Party, nothing has occurred or is
expected to occur that would adversely affect the qualified
status of the Employee Benefit Plan or any related trust
subsequent to the issuance of such determination letter. No
Employee Benefit Plan is being audited or investigated by any
government agency or subject to any pending or threatened claim
or suit.
48
(c) Each Pension Plan currently meets and always has
met the minimum funding standard of Section 302 of ERISA and
Section 412 of the Code (without regard to any funding waiver).
All contributions or payments due and owing as required by
Section 302 of ERISA, Section 412 of the Code or the terms of
any Pension Plan have been made by the due date for such
contributions or payments. With respect to each Multiemployer
Plan, each Loan Party and each ERISA Affiliate has paid or
accrued all contributions pursuant to the terms of the
applicable collective bargaining agreement required to be paid
or accrued by it. With respect to each Pension Plan, the market
value of assets (exclusive of any contribution due to the
Pension Plan) equals or exceeds the present value of benefit
liabilities as of the latest actuarial valuation date for such
plan (but not prior to 12 months prior to the date hereof),
determined on the basis of a shutdown of the company in
accordance with actuarial assumptions used by the PBGC in
single-employer plan terminations and since its last valuation
date, there have been no amendments to such plan that materially
increased the present value of accrued benefits nor any other
material adverse changes in the funding status of such plan.
Neither any Loan Party nor any ERISA Affiliate is required to
provide security to a Pension Plan pursuant to Section 307 of
ERISA or Section 401(a)(29) of the Code.
(d) Neither any Loan Party nor any ERISA Affiliate
nor any fiduciary of any
Employee Benefit Plan has engaged in a prohibited transaction
under Section 406 of ERISA or
Section 4975 of the Code. The execution, delivery and
performance of the terms of any agreements that are related to
this transaction will not constitute a prohibited transaction
under the aforementioned sections.
49
(e) No Termination Event has occurred or is
reasonably expected to occur.
(f) None of the following "reportable events" are
which subject to the 30-day notice requirement of Section
4043(b) of ERISA in respect of any of the Pension Plans has
occurred: (i) an inability to pay benefits when due, (ii)
bankruptcy or insolvency of the sponsor of the Pension Plan,
(iii) liquidation or dissolution of the sponsor of the Pension
Plan, (iv) a failure to meet the minimum funding standards, or
(v) certain transactions involving a change of employer. No
Loan Party has received any notice from the PBGC that any of the
Pension Plans is being involuntarily terminated or from the
Secretary of the Treasury of the United States of America that
any partial or full termination of any of the Employee Benefit
Plans has occurred and no event shall have occurred, and there
shall exist as of the date hereof no condition or set of
circumstances which present a material risk of the involuntary
termination of any of the Pension Plans.
(g) There are no agreements which will provide
payments to any officer, employee, shareholder or highly
compensated individual which will be "parachute payments" under
Section 28OG of the Code that are nondeductible to any Loan
Party and which will be subject to the tax under Section 4999 of
the Code for which any Loan Party would have a material
withholding liability.
(h) All references to a Borrower or Loan Party in
this Section 3.18 or in any other Section of this Agreement
relating to ERISA shall be deemed to refer to each Borrower or
Loan Party, as applicable, and any other entity which is
considered an ERISA Affiliate.
ARTICLE 4Conditions to the Loans
Section 4.1 Conditions to Initial Loans .
The obligation of each Bank to make the initial Loan to be
made by it hereunder shall be subject to the fulfillment (to the
satisfaction of the Agent) of the following conditions
precedent:
(a) The Borrowers shall have executed and delivered
to each Bank their Note.
(b) The Borrowers shall have paid to the Agent the
Agency Fee.
(c) Blank Rome Comisky & McCauley, counsel to the
Borrowers, shall have
delivered its opinion to, and in form and substance reasonably
satisfactory to, the Agent.
50
(d) The Agent shall have received copies of the
following:
(i) All of the consents, approvals and waivers
refer to on Schedule 3.2 hereto (except only those which, as
stated on Schedule 3.2, shall not be delivered);
(ii) The certificates of incorporation of each
Borrower, certified by the Secretary of State of their
respective states of incorporation;
(iii) The by-laws of each Borrower, certified
by their respective secretaries;
(iv) All corporate action taken by each Borrower
to authorize the execution, delivery and performance of each of
the Loan Documents and the transactions contemplated thereby,
certified by their respective secretaries;
(v) Good standing certificates generally as of
dates not more than twenty (20) days prior to the date of the
initial Loan, with respect to Parent and each Primary Subsidiary
Borrower, from the Secretary of State of their respective states
of incorporation;
(vi) An incumbency certificate (with specimen
signatures) with
respect to each Borrower; and
(vii) Evidence of property and casualty
insurance and liability insurance.
(e) (i) Each Borrower shall have complied and shall
then be in compliance with all of the terms, covenants and
conditions of this Agreement;
(ii) After giving effect to the initial Loan,
there shall exist no Default or Event of Default hereunder;
(iii) The representations and warranties
contained in Article 3 hereof shall be true and correct on the
date hereof; and
(iv) The Agent shall have received a Compliance
Certificate dated the date hereof certifying, inter alia, that
the conditions set forth in this subsection 4.1(e) are satisfied
on such date.
(f) All legal matters incident to the initial Loans
shall be satisfactory to counsel to the Agent.
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Section 4.2 Conditions to Subsequent Loans .
The obligation of each Bank to make each Loan subsequent to
its initial Loan shall be subject to the fulfillment (to the
satisfaction of the Agent) of the following conditions
precedent:
(a) The Agent shall have received a Borrowing Notice
in accordance with Section 2.3 hereof together with a
certification that:
(i) The representations and warranties made by
the Borrowers herein or which are contained in any certificate,
document or financial or other statement furnished at any time
under or in connection herewith, shall be correct on and as of
the borrowing date for such Loan as if made on and as of such
date; and
(ii) No Default or Event of Default shall have
occurred and be continuing on the date a Loan is to be made or
after giving effect to the Loan to be made on such date.
(b) All legal matters incident to such Loan shall be
satisfactory to counsel for the Agent.
ARTICLE 5Delivery of Financial Reports, Documents and Other
Information.
While the Commitments are outstanding, and, in the event
any Loan remains outstanding, so long as any Borrower is
indebted to the Banks or the Agent and until payment in full of
the Notes and full and complete performance of all of their
other obligations arising hereunder, the Borrowers shall deliver
to each Bank:
Section 5.1 Annual Financial Statements and
Projections.
Annually, as soon as available, (i) but in any event within
ninety (90) days after the last day of each of its fiscal years,
a consolidated and consolidating balance sheet of Parent and the
Subsidiaries as at such last day of the fiscal year, and
consolidated and consolidating statements of income and retained
earnings and statements of cash flow, for such fiscal year, each
prepared in accordance with GAAP, in reasonable detail, and
audited and certified without qualification by Grant Thornton,
LLP, or another firm of independent certified public accountants
satisfactory to the Agent, as fairly presenting the financial
position and the results of operations of Parent and the
Subsidiaries as at and for the year ending on its date and as
having been prepared in accordance with GAAP, and (ii) on or
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before each November 15th, Projections for the then upcoming
fiscal year.
Section 5.2 Quarterly Financial Statements .
As soon as available, but in any event within forty-five
(45) days after the end of the Parent's first three fiscal
quarterly periods, a consolidated and consolidating balance
sheet of Parent and the Subsidiaries as of the last day of such
quarter and consolidated and consolidating statements of income
and retained earnings and statements of cash flow, for such
quarter, and on a comparative basis figures for the
corresponding period of the immediately preceding fiscal year,
all in reasonable detail, each such statement to be certified in
a certificate of the chief financial or accounting officer of
Parent as accurately presenting the financial position and the
results of operations of Parent and the Subsidiaries as at its
date and for such quarter and as having been prepared in
accordance with GAAP (subject to year-end audit adjustments).
Section 5.3 Compliance Information.
Promptly after a written request therefor, such other
financial data or information evidencing compliance with the
requirements of this Agreement, the Notes and the other Loan
Documents, as any Bank may reasonably request from time to time.
Section 5.4 No Default Certificate .
At the same time as it delivers the financial statements
required under the provisions of Sections 5.1 and 5.2 hereof, a
certificate of the president and the chief financial or
accounting officer of Parent to the effect that no Event of
Default hereunder and that no default under any other agreement
to which any Borrower or any of the Subsidiaries is a party or
by which it is bound, or by which, to the best knowledge of any
Borrower or any Subsidiary, any of its properties or assets,
taken as a whole, may be materially affected, and no event
which, with the giving of notice or the lapse of time, or both,
would constitute such an Event of Default or default, exists,
or, if such cannot be so certified, specifying in reasonable
detail the exceptions, if any, to such statement. Such
certificate shall be accompanied by a detailed calculation
indicating compliance with the covenants contained in Sections
6.9 and 7.13 hereof.
Section 5.5 Certificate of Accountants .
At the same time as it delivers the financial statements
required under the provisions of Section 5.1 hereof, a
certificate of the independent certified public accountants of
Parent addressed specifically to both Parent and the Agent to
the effect that during the course of their audit of the
operations of Parent and its condition as of the end of the
53
fiscal year, nothing has come to their attention which would
indicate that a Default or an Event of Default hereunder has
occurred or that there was any violation of the covenants of the
Borrowers contained in Section 6.9 or Article 7 of this
Agreement, or, if such cannot be so certified, specifying in
reasonable detail the exceptions, if any, to such statement.
Section 5.6 Accountants' Reports .
Promptly upon receipt thereof, copies of each management
letter and each other written report submitted to any and/or all
of the Borrowers by its independent accountants in connection
with any annual or interim audit or review of the books of
Parent and/or all or any of the Borrowers made by such
accountants.
Section 5.7 Copies of Documents .
Promptly upon their becoming available, and in all events
within ten (10) days of any such filing, copies of any: (i)
financial statements, projections, non-routine reports, notices
(other than routine correspondence), requests for waivers and
proxy statements, in each case, delivered by any Borrower or any
of the Subsidiaries to any lending institution other than the
Banks; (ii) correspondence or notices received by any Borrower
from any federal, state or local governmental authority that
regulates the operations of the Borrowers or any of its
Subsidiaries, relating to an actual or threatened change or
development that would be materially adverse to any Borrower or
any Subsidiary; (iii) registration statements and any amendments
and supplements thereto, and any regular and periodic reports,
if any, filed by any Borrower or any of its Subsidiaries with
any securities exchange or with the Securities and Exchange
Commission or any governmental authority succeeding to any or
all of the functions of the said Commission and (iv) letters of
comment or correspondence sent to any Borrower or any of its
Subsidiaries by any such securities exchange or such Commission
in relation to any Borrower or any of its Subsidiaries.
Section 5.8 Notices of Defaults .
Promptly, notice of the occurrence of any Default or Event
of Default, or any event that would constitute or cause a
material adverse change in the condition, financial or
otherwise, or the operations of any Borrower or any of the
Subsidiaries.
Section 5.9 ERISA Notices and Requests .
Notice of each of the following within ten (10) days after
such event or occurrence:
54
(a) any Loan Party or ERISA Affiliate knowing or
having reason to know that a Termination Event has occurred or
that a Defined Contribution Plan has been terminated or
partially terminated, together with a written statement by the
appropriate chief financial officer setting forth the details of
such event;
(b) the filing of a request for a funding waiver by
any Loan Party or ERISA Affiliate with respect to any Pension
Plan, and a copy of such request and all communications received
by any Loan Party or ERISA Affiliate with respect to such
request;
(c) receipt by any Loan Party or ERISA Affiliate of
a notice of the PBGC's intent to terminate a Pension Plan, and a
copy of such notice;
(d) the failure of any Loan Party or ERISA Affiliate
to make a required installment or payment under Section 302 of
ERISA or Section 412 of the Code by the applicable due date
thereof, together with a written notice of such failure;
(e) any Loan Party or ERISA Affiliate knowing or
having reason to know that a prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code) has
occurred with respect to any Employee Benefit Plan, and a
written statement by the appropriate chief financial officer
setting forth the details of such transaction and the action
taken with respect thereto;
(f) any increase in the benefits of any existing
Employee Benefit Plan or the establishment of any new Employee
Benefit Plan or the commencement of contributions to any
Employee Benefit Plan to which any Loan Party or ERISA Affiliate
had not theretofore been contributing, together with a written
notice of such occurrence;
(g) receipt by any Loan Party or ERISA Affiliate of
any favorable or unfavorable determination letter from the IRS
regarding the qualification of a Pension Plan under Section
401(a) of the Code, together with a copy of such letter;
(h) the filing of an annual report (Form 5500
series), including Schedule B thereto, filed by any Loan Party
or ERISA Affiliate with respect to an Employee Benefit Plan,
together with a copy of such report;
(i) receipt by any Loan Party or ERISA Affiliate of
an actuarial report for any Pension Plan, together with a copy
of such report;
(j) receipt by any Loan Party or ERISA Affiliate of
all correspondence with the PBGC, the Secretary of Labor of the
55
United States of America or any representative of the IRS with
respect to any Employee Benefit Plans, relating to an actual or
threatened change or development which would be materially
adverse to any Borrower or any ERISA Affiliate; and
(k) receipt by any Loan Party or ERISA Affiliate of
any correspondence from a Multiemployer Plan with respect to
withdrawal liability.
Section 5.10 Intentionally Omitted .
Section 5.11 Additional Information .
Such other information regarding the business, affairs and
condition of the Borrowers and the Subsidiaries as the Agent,
may from time to time reasonably request.
ARTICLE 6 Affirmative Covenants.
While the Commitments are outstanding, and, in the event
any Loan remains outstanding, so long as any Borrower is
indebted to the Banks or the Agent, and until payment in full of
the Notes and full and complete performance of all of their
other obligations arising hereunder, the Borrowers shall and
shall cause each Subsidiary to:
Section 6.1 Books and Records .
Keep proper books of record and account in a manner
reasonably satisfactory to the Agent in which full, true and
correct entries shall be made of all dealings or transactions in
relation to its business and activities.
Section 6.2 Inspections and Audits .
Permit the Banks to make or cause to be made (at the
expense of the Banks except that, after the occurrence of and
during the continuance of an Event of Default, at the Borrowers'
expense), inspections and audits of any books, records and
papers of each Borrower and each of the Subsidiaries and to make
extracts therefrom and copies thereof, or to make inspections
and examinations of any properties and facilities of the
Borrowers and the Subsidiaries, on reasonable
notice, at all such reasonable times and as often as any Bank
may reasonably require, in order to assure that the Borrowers
are and will be in compliance with its obligations under the
Loan Documents or to evaluate the Banks' investment in the then
outstanding Notes.
Section 6.3 Maintenance and Repairs .
Maintain in good repair, working order and condition,
subject to normal wear and tear, all
56
material properties and assets from time to time owned by it and
used in or necessary for the operation of its business, and make
all reasonable repairs, replacements, additions and improvements
thereto.
Section 6.4 Continuance of Business .
Do, or cause to be done, all things reasonably necessary to
preserve and keep in full force and effect its corporate
existence and all permits, rights and privileges necessary for
the proper conduct of its business and continue to engage in the
same line of business and comply in all material respects with
all applicable laws, regulations and orders.
Section 6.5 Copies of Corporate Documents .
Subject to the prohibitions set forth in Section 7.12
hereof, promptly deliver to the Agent copies of any amendments
or modifications to its and any Subsidiary's certificate of
incorporation and by-laws, certified with respect to the
certificate of incorporation by the Secretary of State of its
state of incorporation and, with respect to the by-laws, by the
secretary or assistant secretary of such corporation.
Section 6.6 Perform Obligations .
Pay and discharge all of its material obligations and
liabilities, including, without limitation, all taxes,
assessments and governmental charges upon its income and
properties when due, unless and to the extent only that such
obligations, liabilities, taxes, assessments and governmental
charges shall be contested in good faith and by appropriate
proceedings and that, to the extent required by GAAP then in
effect, proper and adequate book reserves relating thereto are
established by the Borrowers, or, as the case may be, by the
appropriate Subsidiary, and then only to the extent that a bond
is filed in cases where the filing of a bond is necessary to
avoid the creation of a Lien against any of its properties.
Section 6.7 Notice of Litigation .
Promptly notify the Agent in writing of any litigation,
legal proceeding or dispute, other than disputes in the ordinary
course of business or, whether or not in the ordinary course of
business, involving amounts in excess of Two Hundred Fifty
Thousand ($250,000) Dollars, affecting any Borrower or any
Subsidiary whether or not fully covered by insurance, and
regardless of the subject matter thereof (excluding, however,
any actions relating to workers' compensation claims or
negligence claims relating to use of motor vehicles, if fully
covered by insurance, subject to deductibles and general
liability claims of less than $5,000,000 fully covered by
insurance).
57
Section 6.8 Insurance .
(i) Maintain with responsible insurance companies
acceptable to the Agent such insurance on such of its
properties, in such amounts and against such risks as is
customarily maintained by similar businesses; (ii) file with the
Agent upon its request a detailed list of the insurance then in
effect, stating the names of the insurance companies, the
amounts and rates of the insurance, the dates of the expiration
thereof and the properties and risks covered thereby and (iii)
carry all insurance available through the PBGC or any private
insurance companies covering its obligations to the PBGC.
Section 6.9 Financial Covenants .
Have or maintain, on a consolidated basis, at all times:
(a) A ratio of total liabilities (as determined in
accordance with GAAP) to Tangible Net Worth of not more than 2.0
to 1.0.
(b) Tangible Net Worth of more than the sum of (i)
$70,000,000, plus (ii) beginning with Parent's fiscal quarter
ending December 31, 2001 and with respect to each fiscal quarter
of Parent thereafter, 50% of the Borrowers' consolidated net
income (determined in accordance with GAAP), on a cumulative
basis and without any reduction for loss for each such fiscal
quarter.
(c) A Leverage Ratio of not more than 2.25 to 1.0.
(d) A Fixed Charge Coverage Ratio of not less than
1.5 to 1.0.
(e) A positive net income (after subtracting Interest
Expense and Federal, state and local income tax expense) for
each fiscal year of the Parent.
58
Section 6.10 Notice of Certain Events .
(a) Promptly notify the Agent in writing of the
occurrence of any Reportable Event, as defined in Section 4043
of ERISA, if a notice of such Reportable Event is required under
ERISA to be delivered to the PBGC within 30 days after the
occurrence thereof, together with a description of such
Reportable Event and a statement of the action the Loan Party or
the ERISA Affiliate intends to take with respect thereto,
together with a copy of the notice thereof given to the PBGC.
(b) Promptly notify the Agent in writing if any Loan
Party or ERISA Affiliate receives an assessment of withdrawal
liability in connection with a complete or partial withdrawal
with respect to any Multiemployer Plan, together with a
statement of the action that such Loan Party or ERISA Affiliate
intends to take with respect thereto.
(c) Promptly notify the Agent in writing if any
Borrower or any other Loan Party
receives: (i) any notice of any violation or administrative or
judicial complaint or order having been filed or about to be
filed against such Borrower or such other Loan Party alleging
violations of any Environmental Law and Regulation, or (ii) any
notice from any governmental body or any other Person alleging
that such Borrower or such other Loan Party is or may be subject
to any Environmental Liability; and promptly upon receipt
thereof, provide the Agent with a copy of such notice together
with a statement of the action such Borrower or such other Loan
Party intends to take with respect thereto.
Section 6.11 Comply with ERISA .
Materially comply with all applicable provisions of ERISA
and the Code now or hereafter in effect.
59
Section 6.12 Environmental Compliance .
Operate all property owned, operated or leased by it in
compliance with all Environmental Laws and Regulations, such
that no material Environmental Liability arises under any
Environmental Laws and Regulations, which would result in a Lien
on any property of any Borrower or any other Loan Party;
provided, however, that in the event that any such claim is made
or any such Environmental Liability arises, the Borrower or such
other Loan Party shall (subject to such Borrower's or such Loan
Party's right to contest such claim in good faith and at its own
expense by appropriate legal proceedings; provided, however,
that during such contest, such Borrower or such other Loan Party
shall, at the option of the Agent, provide security satisfactory
to the Agent, assuring the discharge of such Borrower's or such
Loan Party's obligation thereunder and of any additional
interest charge, penalty or expense arising from or incurred as
a result of such contest), at its own cost and expense, in a
timely manner, immediately satisfy such claim or Environmental
Liability.
60
Section 6.13 Certain Subsidiary Matters .
(a) With respect to each fiscal year of Parent,
ensure that Persons that are the Borrowers account for not less
than 95% of Parent's consolidated net income (as determined in
accordance with GAAP).
(b) With respect to each Foreign Subsidiary, ensure
that (i) each office maintained by each such Foreign Subsidiary
is a Non-Material Office, (ii) such Foreign Subsidiaries do not
own real and/or personal property that has a fair market value
in excess of $750,000 with respect to all such property owned by
such Foreign Subsidiaries in the aggregate and (iii) with
respect to any fiscal year of Parent, such Foreign Subsidiaries
do not in the aggregate account for more than 5% of Parent's
consolidated net income (as determined in accordance with GAAP).
ARTICLE 7 Negative Covenants
While the Commitments are outstanding, and, in the event
any Loan remains outstanding, so long as any Borrower is
indebted to the Banks or the Agent and until payment in full of
the Notes and full and complete performance of all of their
other obligations arising hereunder, no Borrower shall and shall
not permit any of its Subsidiaries to do, agree to do, or permit
to be done, any of the following:
Section 7.1 Indebtedness .
Create, incur, permit to exist or have outstanding any
Indebtedness, except the following Indebtedness (so long as,
after giving effect to the incurrence of such Indebtedness, no
Default or Event of Default would exist):
(a) Indebtedness of the Borrowers to the Banks and
the Agent and under this Agreement and the Notes;
(b) Indebtedness incurred in connection with a
Permitted Acquisition; provided that the amount thereof at any
one time outstanding with respect to all Permitted Acquisitions
in the aggregate shall not exceed $3,000,000;
(c) Taxes, assessments and governmental charges, non-
interest bearing accounts payable and accrued liabilities, in
any case not more than 90 days past due from the original due
date thereof, and non-interest bearing deferred liabilities
other than for borrowed money (e.g., deferred compensation and
deferred taxes), in each case incurred and continuing in the
ordinary course of business;
(d) As set forth on Schedule 7.1 hereto; and
61
(e) Other Indebtedness; provided that the amount
thereof at any one time outstanding with respect to all such
other Indebtedness shall not exceed $1,000,000; provided that,
notwithstanding the foregoing, the aggregate amount of
Indebtedness permitted to be outstanding pursuant to subsection
7.1(b) and this subsection 7.1(e) shall not in the aggregate
exceed $3,000,000.
Section 7.2 Liens .
Create, or assume or permit to exist, any Lien on any of
the properties or assets of any Borrower or any of its
Subsidiaries, whether now owned or hereafter acquired, except:
(a) Permitted Liens;
(b) Purchase money mortgages or security interests,
conditional sale arrangements and other similar security
interests, on motor vehicles and equipment acquired by any
Borrower or any Subsidiary (hereinafter referred to individually
as a "Purchase Money Security Interest") with the proceeds of
the Indebtedness permitted by subsection 7.1(e) hereof;
provided, however, that:
(i) The transaction in which any Purchase Money
Security Interest is proposed to be created is not then
prohibited by this Agreement;
(ii) Any Purchase Money Security Interest shall
attach only to the property or asset acquired in such
transaction and shall not extend to or cover any other assets or
properties of any Borrower or, as the case may be, a Subsidiary;
(iii) The Indebtedness secured or covered by
any Purchase Money Security Interest shall not exceed the lesser
of the cost or fair market value of the property or asset
acquired and shall not be renewed, extended or prepaid from the
proceeds of any borrowing by any Borrower or any Subsidiary; and
(iv) The Indebtedness secured or covered by any
Purchase Money Security Interest shall not exceed the amount of
Indebtedness permitted by subsections 7.1(b) or 7.1(e) hereof
(including the proviso at the end of Section 7.1);
(c) The interests of the lessor under any Capitalized
Lease;
(d) As set forth on Schedule 7.2 hereto; and
(e) With the prior written consent of the Agent and
the Required Banks (which
consent shall not be unreasonably withheld), Liens on property
acquired pursuant to a Permitted Acquisition; provided, however,
that:
62
(i) Any such Lien shall attach only to the
property or asset acquired in such Permitted Acquisition and
shall not extend to or cover any other assets or properties of
any Borrower or, as the case may be, a Subsidiary; and
(ii) The Indebtedness secured or covered by any
such Lien shall not exceed the lesser of the cost or fair market
value of the property or asset acquired and shall not be
renewed, extended or prepaid from the proceeds of any borrowing
by any Borrower or any Subsidiary; and
(iii) The Indebtedness secured or covered by
any such Lien shall not exceed the amount of Indebtedness
permitted by subsection 7.1(b) or Section 7.1(e) hereof
(including the proviso at the end of Section 7.1).
Section 7.3 Guaranties .
Except as set forth on Schedule 7.1 hereto, assume,
endorse, be or become liable for, or guarantee, the obligations
of any Person, except (i) by the endorsement of negotiable
instruments for deposit or collection in the ordinary course of
business; and (ii) guarantees by a Borrower of Indebtedness of
another Borrower permitted by Section 7.1 hereof. For the
purposes hereof, the term "guarantee" shall include any
agreement, whether such agreement is on a contingency or
otherwise, to purchase, repurchase or otherwise acquire
Indebtedness of any other Person, or to purchase, sell or lease,
as lessee or lessor, property or services, in any such case
primarily for the purpose of enabling another Person to make
payment of Indebtedness, or to make any payment (whether as an
advance, capital contribution, purchase of an equity interest or
otherwise) to assure a minimum equity, asset base, working
capital or other balance sheet or financial condition, in
connection with the Indebtedness of another Person, or to supply
funds to or in any manner invest in another Person in connection
with such Person's Indebtedness.
Section 7.4 Mergers, Acquisitions .
Merge or consolidate with any Person (whether or not any
Borrower or any Subsidiary is the surviving entity), or acquire
all or substantially all of the assets or any of the Capital
Stock of any Person except for Permitted Acquisitions.
Section 7.5 Redemptions; Distributions .
(a) At any time a Default or Event of Default has
occurred and is continuing or would result therefrom, purchase,
redeem, retire or otherwise acquire, directly or indirectly, or
make any sinking fund payments with respect to, any shares of
any class of stock of any Borrower or any Subsidiary now or
63
hereafter outstanding or set apart any sum for any such purpose;
or
(b) Declare or pay any dividends or make any
distribution of any kind on any Borrower's outstanding stock, or
set aside any sum for any such purpose, except that (i) a
Subsidiary Borrower may declare or pay any dividend to Parent
and (ii) a Borrower may declare or pay any dividend payable
solely in shares of its common stock; provided, however, that no
Default or Event of Default has occurred and is then continuing
or would result from the declaration or payment of any such
dividend.
Section 7.6 Stock Issuance .
Issue any additional shares or any right or option to
acquire any shares, or any security convertible into any shares,
of preferred stock of any Borrower or any Subsidiary.
Section 7.7 Changes in Business .
Make any material change in its business, or in the nature
of its operation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, assets or
business except dispositions of obsolete equipment and other
dispositions in the ordinary course of business and for a fair
consideration or dispose of any shares of stock or any
Indebtedness, whether now owned or hereafter acquired, or
discount, sell, pledge, hypothecate or otherwise dispose of
accounts receivable.
Section 7.8 Prepayments.
Make any voluntary or optional prepayment of any
Indebtedness for borrowed money incurred or permitted to exist
under the terms of this Agreement, other than Indebtedness
evidenced by the Notes, unless and to the extent refinanced with
new long term Indebtedness on terms (including amortization and
maturity) at least as favorable to the Borrowers as the
Indebtedness being prepaid; provided, however, that no Default
or Event of Default has occurred and is then continuing or would
result from any such payment.
Section 7.9 Investments .
Make, or suffer to exist, any Investment in any Person,
including, without limitation, any shareholder, director,
officer or employee of any Borrower or any of the Subsidiaries,
except (and so long as at the time such Investment is made no
Default or Event of Default then exists or would result from the
making of such Investment):
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(a) Investments in:
(i) obligations issued or guaranteed by the
United States of America;
(ii) certificates of deposit, bankers acceptances
and other "money market instruments" issued by any bank or
trust company organized under the laws of the United States of
America or any State thereof and having capital and surplus in
an aggregate amount of not less than $100,000,000;
(iii) open market commercial paper bearing
the highest credit rating issued by Standard & Poor's
Corporation or by another nationally recognized credit rating
agency maturing or being due or payable in full not more than180
days after the date of the Borrower's or the Subsidiary's, as
applicable, acquisition thereof;
(iv) repurchase agreements entered into with any
bank or trust company organized under the laws of the United
States of America or any State thereof and having capital and
surplus in an aggregate amount of not less than $100,000,000
relating to United States of America government obligations
maturing or being due or payable in full not more than180 days
after the date of the Borrower's or the Subsidiary's, as
applicable, acquisition thereof;
(v) shares of "money market funds", each having
net assets of not less than $100,000,000; in each case maturing
or being due or payable in full not more than180 days after the
date of the Borrower's or the Subsidiary's, as applicable,
acquisition thereof; and
(vi) accounts receivable arising out of sales of
inventory in the ordinary course of business;
(b) Investments in Subsidiaries that are acquired
pursuant to a Permitted Acquisition; provided such Subsidiary
becomes a Borrower pursuant to Section 7.13 of this Agreement;
(c) Other Investments; provided, that, the amount of
all such other Investments at any one time outstanding shall not
exceed $500,000 in the aggregate with respect to all such other
Investments;
(d) Investments by any Borrower in any other
Borrower;
(e) Arm's-length transactions among Affiliates; and
(f) Dispositions of obsolete equipment and other
dispositions of assets in the ordinary course of business.
65
Section 7.10 Fiscal Year .
Change its fiscal year.
Section 7.11 ERISA Obligations .
(a) Permit the occurrence of any Termination Event,
or the occurrence of a termination or partial termination of a
Defined Contribution Plan which would result in a liability to
any Loan Party or ERISA Affiliate; or
(b) Permit the present value of all benefit
liabilities under all Pension Plans to exceed the current value
of the assets of such Pension Plans allocable to such benefit
liabilities; or
(c) Permit any accumulated deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code) with respect
to any Pension Plan, whether or not waived; or
(d) Fail to make any contribution or payment to any
Multiemployer Plan which any Loan Party or ERISA Affiliate may
be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto which results
in or is likely to result in any liability; or
(e) Engage, or permit any Loan Party or ERISA
Affiliate to engage, in any prohibited transaction under Section
406 of ERISA or Section 4975 of the Code, for which a civil
penalty pursuant to Section 502(i) of ERISA or a tax pursuant to
Section 4975 of the Code is imposed; or
(f) Engage or permit any Loan Party or ERISA
Affiliate to engage, in any breach of fiduciary duty under Part
4 of Title I of ERISA; or
(g) Permit the establishment of any Employee Benefit
Plan providing postretirement welfare benefits or establish or
amend any Employee Benefit Plan which establishment or amendment
could result in liability to any Loan Party or ERISA Affiliate
or increase the obligation of any Loan Party or ERISA Affiliate
to a Multiemployer Plan which liability or increase,
individually or together with all similar liabilities and
increases, is material to any Loan Party or ERISA Affiliate; or
(h) Permit any Loan Party or ERISA Affiliate to be or
become obligated to the
PBGC other than in respect of annual premium payments; or
(i) Fail, or permit any Loan Party or ERISA Affiliate
to fail, to establish, maintain and operate each Employee
Benefit Plan in compliance in all material respects with the
66
provisions of ERISA, the Code and all other applicable laws and
the regulations and interpretations thereof.
Section 7.12 Amendments of Documents .
Modify, amend, supplement or terminate, or agree to modify,
amend, supplement or terminate, its certificate of incorporation
or by-laws.
Section 7.13 Additional Subsidiaries .
Not allow any Domestic Subsidiary to be acquired or
established by any Borrower after the date of this Agreement
unless and until the Borrowers shall have caused such new
Domestic Subsidiary to become a Borrower hereunder and in
connection therewith shall execute, and shall have caused such
new Domestic Subsidiary to execute, a Joinder and any other
documentation reasonably requested by the Agent, which may
include amendments to this Agreement.
Section 7.14 Double Negative Pledge .
No Borrower shall enter into any agreement which
prohibits or limits the ability of any Borrower to create,
incur, assume or suffer to exist any Lien upon any of its
property or revenues, whether now owned or hereafter acquired.
Section 7.15 Intentionally Omitted .
Section 7.16 Intentionally Omitted .
Section 7.17 Transactions with Affiliates .
Except as expressly permitted by this Agreement, directly
or indirectly: (a) make any Investment in any of its Affiliates
that is not a Borrower; (b) transfer, sell, lease, assign or
otherwise dispose of any assets to any of its Affiliates that is
not a Borrower; (c) merge into or consolidate with or purchase
or acquire assets from any of its Affiliates that is not a
Borrower; or (d) enter into any other transaction directly or
indirectly with or for the benefit of any of its Affiliates that
is not a Borrower (including, without limitation, guarantees and
assumptions of obligations of such an Affiliate); provided,
however, that: (i) payments on Investments expressly permitted
by Section 7.9 hereof may be made, (ii) any Affiliate of a
Borrower who is a natural person may serve as an employee or
director of any Borrower and receive reasonable compensation for
his services in such capacity, and (iii) any Borrower may enter
into any transaction with any of its Affiliates that is not a
Borrower providing for the leasing of property, the rendering or
receipt of services or the purchase or sale of product,
inventory and other assets in the ordinary course of business if
the monetary or business consideration arising therefrom would
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be substantially as advantageous to such Borrower as the
monetary or business consideration that would obtain in a
comparable arm's length transaction with a Person not an
Affiliate of a Borrower.
Section 7.18 Hazardous Material .
(a) Cause or permit:
(i) any Hazardous Material to be placed, held,
located or disposed of, on, under or at any real property owned
by a Borrower or any part thereof, except for such Hazardous
Materials that are necessary for any Borrower's or any
Subsidiary's or any tenant's operation of its business thereon
and which shall be used, stored, treated and disposed of in
compliance with all applicable Environmental Laws and
Regulations; or
(ii) such real property or any part thereof to be
used as a collection, storage, treatment or disposal site for
any Hazardous Material.
(b) Each Borrower and each Subsidiary acknowledges
and agrees that the Agent and the Banks shall have no liability
or responsibility for either:
(i) damage, loss or injury to human health, the
environment or natural resources caused by the presence,
disposal, release or threatened release of Hazardous Materials
on any part of such real property; or
(ii) abatement and/or clean-up required under any
applicable Environmental Laws and Regulations for a release,
threatened release or disposal of any Hazardous Materials
located at such real property or used by or in connection with
any Borrower's or any Subsidiary's or any such tenant's
business.
ARTICLE 8
Events of Default
If any one or more of the following events ("Events of
Default") shall occur and be continuing, the Commitments shall
terminate and the entire unpaid balance of the principal of and
interest on the Notes outstanding and all other obligations and
Indebtedness of any and/or all of the Borrowers to the Banks and
the Agent arising hereunder and under the other Loan Documents
shall immediately become due and payable upon written notice to
that effect given to a Borrower by the Agent (except that in the
case of the occurrence of any Event of Default described in
Section 8.6 no such notice shall be required), without
presentment or demand for payment, notice of non-payment,
protest or further notice or demand of any kind, all of which
are expressly waived by each Borrower:
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Section 8.1 Payments .
(a) Failure to make any payment of interest upon any
Note or to make any payment of any Fee within five days of when
due; or
(b) Failure to make any payment or mandatory
prepayment of principal upon any
Note when due; or
Section 8.2 Certain Covenants .
(a) Failure to perform or observe any of the
agreements of any Borrower or any
Subsidiary contained in Section 6.9 hereof; or
(b) Failure to perform or observe any of the
agreements of any Borrower or any
Subsidiary contained in Article 7 hereof; provided, that, the
failure to perform or observe any of such agreements of any
Borrower or any Subsidiary has or may result in a Material
Adverse Effect; or
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Section 8.3 Other Covenants .
(a) Failure by any Borrower to (i) perform or observe
any of the agreements of
any Borrower or any Subsidiary contained in Article 7 hereof
that has not or may not result in a
Material Adverse Effect and (ii) perform or observe any other
term, condition or covenant of this Agreement not covered by any
of the other Events of Default set forth in this Article 8 or of
any of the other Loan Documents to which it is a party, in each
case which shall remain unremedied for a period of 30 days after
notice thereof shall have been given to a Borrower by the Agent;
or
(b) Failure by any Loan Party other than a Borrower
to perform or observe any term, condition or covenant of any of
the Loan Documents to which it or he is a party, which shall
remain unremedied for a period of 30 days after notice thereof
shall have been given to a Borrower by the Agent; or
Section 8.4 Other Defaults .
(a) Failure to perform or observe any term, condition
or covenant of any bond, note, debenture, loan agreement,
indenture, guaranty, trust agreement, mortgage or similar
instrument to which any Borrower or any Subsidiary is a party or
by which it is bound, or by which any of its properties or
assets may be affected (a "Debt Instrument"), so that, as a
result of any such failure to perform, the Indebtedness included
therein or secured or covered thereby may be declared due and
payable prior to the date on which such Indebtedness would
otherwise become due and payable; or
(b) Any event or condition referred to in any Debt
Instrument shall occur or fail to occur, so that, as a result
thereof, the Indebtedness included therein or secured or covered
thereby may be declared due and payable prior to the date on
which such Indebtedness would otherwise become due and payable;
or
(c) Failure to pay any Indebtedness for borrowed
money due at final maturity or
pursuant to demand under any Debt Instrument;
provided, however that the provisions of this Section 8.4 shall
not be applicable to any Debt Instrument that on the date this
Section 8.4 would otherwise be applicable thereto, relates to or
evidences Indebtedness in a principal amount of less than Five
Hundred Thousand ($500,000) Dollars; or
Section 8.5 Representations and Warranties .
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Any representation or warranty made in writing to the Banks
or the Agent in any of the Loan Documents or in connection with
the making of the Loans, or any certificate, statement or report
made or delivered in compliance with this Agreement, shall have
been false or misleading in any material respect when made or
delivered; or
Section 8.6 Bankruptcy .
(a) Any Borrower or any Subsidiary shall make an
assignment for the benefit of creditors, file a petition in
bankruptcy, be adjudicated insolvent, petition or apply to any
tribunal for the appointment of a receiver, custodian, or any
trustee for it or him or a substantial part of its or his
assets, or shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect, or any Borrower or any Subsidiary shall
take any corporate action to authorize any of the foregoing
actions; or there shall have been filed any such petition or
application, or any such proceeding shall have been commenced
against it or him, that remains undismissed for a period of
sixty (60) days or more; or any order for relief shall be
entered in any such proceeding; or any Borrower or any
Subsidiary by any act or omission shall indicate its or his
consent to, approval of or acquiescence in any such petition,
application or proceeding or the appointment of a custodian,
receiver or any trustee for it or him or any substantial part of
any of its or his properties, or shall suffer any custodianship,
receivership or trusteeship to continue undischarged for a
period of sixty (60) days or more; or
(b) Any Borrower or any Subsidiary shall generally
not pay its or his debts as such debts become due; or
(c) Any Borrower or any Subsidiary shall have
concealed, removed, or permitted to be concealed or removed, any
part of its or his property, with intent to hinder, delay or
defraud its or his creditors or any of them or made or suffered
a transfer of any of its or his property that may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or
shall have made any transfer of its or his property to or for
the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or shall have suffered or
permitted, while insolvent, any creditor to obtain a Lien upon
any of its or his property through legal proceedings or
distraint that is not vacated within sixty (60) days from the
date thereof; or
Section 8.7 Judgements .
Any judgment against any Borrower or any Subsidiary or any
attachment, levy or
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execution against any of its properties for any amount in excess
of Two Hundred Fifty Thousand
($250,000) Dollars shall remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of sixty (60)
days or more; or
Section 8.8 ERISA .
(a) The termination of any Plan or the institution by
the PBGC of proceedings for the involuntary termination of any
Plan, in either case, by reason of, or that results or could
result in, a "material accumulated funding deficiency" under
Section 412 of the Code ; or
(b) Failure by any Borrower to make required
contributions, in accordance with the applicable provisions of
ERISA, to each of the Plans hereafter established or assumed by
it; or
Section 8.9 Ownership of Stock .
Gerald Shreiber (or, in the event of his death, his estate,
legal representative or heirs) shall at any time own,
beneficially and of record, less than 10% in the aggregate of
all of the issued and outstanding shares of Capital Stock of
Parent having ordinary voting rights for the election of
directors; or
Section 8.10 Management .
Gerald Shreiber shall cease for any reason whatsoever,
including, without limitation, death or disability (as such
disability shall be determined in the sole and absolute judgment
of the Agent) to be and continuously perform the duties of chief
executive officer of Parent or, if such cessation shall occur as
a result of the death or such disability, no successor
satisfactory to the Agent, in its sole discretion, shall have
become and shall have commenced to perform the duties of chief
executive officer of Parent within one hundred twenty (120) days
after such cessation; provided, however, that if any
satisfactory successor shall have been so elected and shall have
commenced performance of such duties within such period, the
name of such successor or successors shall be deemed to have
been inserted in place of Gerald Shreiber in this Section 8.10.
ARTICLE 9The Agent
Section 9.1 Appointment, Powers and Immunities .
Each Bank hereby irrevocably appoints and authorizes the
Agent to act as its agent hereunder and under the other Loan
Documents with such powers as are specifically delegated to the
Agent by the terms of this Agreement and the other Loan
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Documents together with such other powers as are reasonably
incidental thereto. The Agent shall have no duties or
responsibilities except those expressly set forth in this
Agreement and the other Loan Documents and shall not be a
trustee for any Bank. The Agent shall not be responsible to the
Banks for any recitals, statements, representations or
warranties contained in this Agreement, or the other Loan
Documents in any certificate or other document referred to or
provided for in, or received by any of them under, this
Agreement or the other Loan Documents, or for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the other Loan Documents or any
other document referred to or provided for herein or therein or
for the collectibility of the Loans or for any failure by any
Borrower or any of the other Loan Parties to perform any of its
obligations hereunder or under the other Loan Documents. The
Agent may employ agents and attorneys-in-fact and shall not be
answerable, except as to money or securities received by it or
its authorized agents, for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable
care. Neither the Agent nor any of its directors, officers,
employees or agents shall be liable or responsible for any
action taken or omitted to be taken by it or them hereunder or
the other Loan Documents or in connection herewith or therewith,
except for its or their own gross negligence or willful
misconduct.
Section 9.2 Reliance by Agent .
The Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on
behalf of the proper person or persons, and upon advice and
statements of legal counsel, independent accountants and other
experts selected by the Agent. As to any matters not expressly
provided for by this Agreement or the other Loan Documents, the
Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or the other Loan Documents in
accordance with instructions signed by the Required Banks, and
such instructions of the Required Banks and any action taken or
failure to act pursuant thereto shall be binding on all of the
Banks.
Section 9.3 Events of Default .
The Agent shall not be deemed to have knowledge of the
occurrence of a Default (other
than the non-payment of principal of or interest on Loans)
unless the Agent has received notice
from a Bank or a Borrower specifying such Default and stating
that such notice is a "Notice of Default". In the event that
the Agent receives such a notice of the occurrence of a Default,
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the Agent shall give notice thereof to the Banks (and shall give
each Bank notice of each such nonpayment). The Agent shall
(subject to Section 9.7 hereof) take such action with respect to
such Default as shall be directed by the Required Banks.
Section 9.4 Rights as a Bank .
With respect to its Commitment and the Loans made by it,
the Agent in its capacity as a Bank hereunder shall have the
same rights and powers hereunder as any other Bank and may
exercise the same as though it were not acting as the Agent, and
the term "Bank" or "Banks" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. The
Agent and its Affiliates may (without having to account therefor
to any Bank) accept deposits from, lend money to and generally
engage in any kind of banking, trust or other business with the
Borrowers or their Affiliates, as if it were not acting as the
Agent, and the Agent may accept fees and other consideration
from the Borrowers or their Affiliates, for services in
connection with this Agreement or any of the other Loan
Documents or otherwise without having to account for the same to
the Banks.
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Section 9.5 Indemnification .
The Banks shall indemnify the Agent (to the extent not
reimbursed by the Borrowers under Sections 10.1 and 10.2
hereof), ratably in accordance with the aggregate principal
amount of the Loans made by the Banks (or, if no Loans are at
the time outstanding, ratably in accordance with their
respective Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of this
Agreement or any of the other Loan Documents or any other
documents contemplated by or referred to herein or therein or
the transactions contemplated by or referred to herein or
therein or the transactions contemplated hereby and thereby
(including, without limitation, the costs and expenses that the
Borrowers are obligated to pay under Sections 10.1 and 10.2
hereof, but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to
the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof, or of any such other
documents, provided that no Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
Section 9.6 Non-Reliance on Agent and other Banks .
Each Bank agrees that it has, independently and without
reliance on the Agent or any
other Bank, and based on such documents and information as it
has deemed appropriate, made its
own credit analysis of each Borrower and decision to enter into
this Agreement and that it will, independently and without
reliance upon the Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking
or not taking action under this Agreement or the other Loan
Documents. The Agent shall not be required to keep itself
informed as to the performance or observance by any Borrower of
this Agreement or the other Loan Documents or any other document
referred to or provided for herein or therein or to inspect the
properties or books of any Borrower. Except for notices,
reports and other documents and information expressly required
to be furnished to the Banks by the Agent hereunder or under the
other Loan Documents, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or
business of any Borrower, that may come into the possession of
the Agent or any of its Affiliates.
Section 9.7 Failure to Act .
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Except for action expressly required of the Agent
hereunder, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder or
thereunder unless it shall be indemnified to its satisfaction by
the Banks against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any
such action.
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Section 9.8 Resignation or Removal of Agent .
Subject to the appointment and acceptance of a successor
Agent as provided below, the
Agent may resign at anytime by giving not less than 30 days'
prior written notice thereof to the Banks and a Borrower and the
Agent may be removed at any time with or without cause by the
Required Banks. Upon any such resignation or removal, the
Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by
the Required Banks and shall have accepted such appointment
within 30 days after the retiring Agent's giving of notice of
resignation or the Required Banks' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Banks,
after consultation with Parent, appoint a successor Agent which
shall be a bank that has an office in New Jersey with a combined
capital and surplus of at least $100,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Article 9 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken
by it while it was acting as the Agent.
Section 9.9 Sharing of Payments.
(a) Prior to any acceleration by the Agent and the
Banks of the Obligations:
(i) in the event that any Bank shall obtain
payment in respect of a Note, or interest thereon, whether
voluntarily or involuntarily, and whether through the exercise
of a right of banker's lien, set-off or counterclaim against any
Borrower or any other Loan Party or otherwise, in a greater
proportion than any such payment obtained by any other Bank in
respect of the corresponding Note held by it, then the Bank so
receiving such greater proportionate payment shall purchase for
cash from the other Bank or Banks such portion of each such
other Bank's or Banks' Loan as shall be necessary to cause such
Bank receiving the proportionate overpayment to share the excess
payment with each Bank; and
(ii) in the event that any Bank shall obtain
payment in respect of any Interest Rate Contract to which such
Bank is a party, whether voluntarily or involuntarily, and
whether through the exercise of a right of banker's lien, set-
off or counterclaim against any Borrower or any other Loan Party
or otherwise, such Bank shall be permitted to retain the full
amount of such payment and shall not be required to share such
payment with any other Bank.
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(b) Upon or following any acceleration by the Agent
and the Banks of the Obligations, in the event that any Bank
shall obtain payment in respect of a Note, or interest thereon,
whether voluntarily or involuntarily, and whether through the
exercise of a right of banker's lien, set-off or counterclaim
against any Borrower or any other Loan Party or otherwise, in a
greater proportion than any such payment obtained by any other
Bank in respect of the aggregate amount of the corresponding
Note held by such Bank and any Interest Rate Contract to which
such Bank is a party, then the Bank so receiving such greater
proportionate payment, shall purchase for cash from the other
Bank or Banks such portion of each such other Bank's or Banks'
Loan, as shall be necessary to cause such Bank receiving the
proportionate overpayment to share the excess payment ratably
with each Bank. For the purposes of this subsection 9.9(b),
payments on Notes received by each Bank shall be in the same
proportion as the proportion of (A) the sum of: (x) the
Obligations owing to such Bank in respect of the Note held by
such Bank, plus (y) the Obligations owing to such Bank in
respect of Interest Rate Contracts to which such Bank is party,
if any, to (B) the sum of: (x) the Obligations owing to all of
the Banks in respect of all of the Notes, plus (y) the
Obligations owing to all of the Banks in respect of all Interest
Rate Contracts to which any Bank is a party;
provided, however, that, with respect to subsections 9.9(a)(i)
and (b) above, if all or any portion of such excess payment or
benefits is thereafter recovered from the Bank that received the
proportionate overpayment, such purchase of Loans or payment of
benefits, as the case may be, shall be rescinded, and the
purchase price and benefits returned, to the extent of such
recovery, but without interest.
ARTICLE 10Miscellaneous Provisions
Section 10.1 Fees and Expenses; Indemnity .
The Borrowers will promptly pay all costs of the Agent in
preparing the Loan Documents and all costs and expenses of the
issue of the Notes and of the Borrowers' and the other Loan
Parties' performance of and compliance with all agreements and
conditions contained herein on its part to be performed or
complied with (including, without limitation, all costs of
filing or recording any assignments, mortgages, financing
statements and other documents and all appraisal and
environmental review fees and expenses), and the reasonable fees
and expenses and disbursements of counsel to the Agent in
connection with the preparation, execution and delivery,
administration, interpretation and enforcement of this
Agreement, the other Loan Documents and all other agreements,
instruments and documents relating to this transaction, the
consummation of the transactions contemplated by all such
78
documents, the preservation of all rights of the Banks and the
Agent, the negotiation, preparation, execution and delivery of
any amendment, modification or supplement of or to, or any
consent or waiver under, any such document (or any such
instrument that is proposed but not executed and delivered) and
with any claim or action threatened, made or brought against any
of the Banks or the Agent arising out of or relating to any
extent to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby (other than a claim
or action resulting from the gross negligence, willful
misconduct, or intentional violation of law by the Agent and or
the Banks). In addition, the Borrowers will promptly pay all
costs and expenses (including, without limitation, reasonable
fees and disbursements of counsel) suffered or incurred by each
Bank in connection with its enforcement of the payment of the
Notes held by it or any other sum due to it under this Agreement
or any of the other Loan Documents or any of its other rights
hereunder or thereunder. In addition to the foregoing, each
Borrower shall indemnify each Bank and the Agent and each of
their respective directors, officers, employees, attorneys,
agents and Affiliates against, and hold each of them harmless
from, any loss, liabilities, damages, claims, costs and expenses
(including reasonable attorneys' fees and disbursements)
suffered or incurred by any of them arising out of, resulting
from or in any manner connected with, the execution, delivery
and performance of each of the Loan Documents, the Loans and any
and all transactions related to or consummated in connection
with the Loans (other than as a result of the gross negligence,
willful misconduct or intentional violation of law by the Agent
and/or the Banks), including, without limitation, losses,
liabilities, damages, claims, costs and expenses suffered or
incurred by any Bank or the Agent or any of their respective
directors, officers, employees, attorneys, agents or Affiliates
arising out of or related to any Environmental Liability or
Environmental Proceeding, or in investigating, preparing for,
defending against, or providing evidence, producing documents or
taking any other action in respect of any commenced or
threatened litigation, administrative proceeding or
investigation under any federal securities law or any other
statute of any jurisdiction, or any regulation, or at common law
or otherwise against the Agent, the Banks or any of their
officers, directors, affiliates, agents or Affiliates, that is
alleged to arise out of or is based upon: (i) any untrue
statement or alleged untrue statement of any material fact of
any Borrower and its affiliates in any document or schedule
filed with the Securities and Exchange Commission or any other
governmental body; (ii) any omission or alleged omission to
state any material fact required to be stated in such document
or schedule, or necessary to make the statements made therein,
in light of the circumstances under which made, not misleading;
(iii) any acts, practices or omission or alleged acts, practices
or omissions of any Borrower or its agents related to the making
of any acquisition, purchase of shares or assets pursuant
79
thereto, financing of such purchases or the consummation of any
other transactions contemplated by any such acquisitions that
are alleged to be in violation of any federal securities law or
of any other statute, regulation or other law of any
jurisdiction applicable to the making of any such acquisition,
the purchase of shares or assets pursuant thereto, the financing
of such purchases or the consummation of the other transactions
contemplated by any such acquisition; or (iv) any withdrawals,
termination or cancellation of any such proposed acquisition for
any reason whatsoever. The indemnity set forth herein shall be
in addition to any other obligations or liabilities of the
Borrowers to the Agent and the Banks hereunder or at common law
or otherwise. The provisions of this Section 10.1 shall survive
the payment of the Notes and the termination of this Agreement.
Section 10.2 Taxes .
If, under any law in effect on the date of the closing of
any Loan hereunder, or under any retroactive provision of any
law subsequently enacted, it shall be determined that any
Federal, state or local tax is payable in respect of the
issuance of any Note, then the Borrowers will pay any such tax
and all interest and penalties, if any, and will indemnify the
Banks and the Agent against and save each of them harmless from
any loss or damage resulting from or arising out of the
nonpayment or delay in payment of any such tax. If any such tax
or taxes shall be assessed or levied against any Bank or any
other holder of a Note, such Bank, or such other holder, as the
case may be, may notify a Borrower and make immediate payment
thereof, together with interest or penalties in connection
therewith, and shall thereupon be entitled to and shall receive
immediate reimbursement therefor from the Borrower.
Notwithstanding any other provision contained in this Agreement,
the covenants and agreements of the Borrowers in this Section
10.2 shall survive payment of the Notes and the termination of
this Agreement.
Section 10.3 Payments .
(a) As set forth in Article 2 hereof, all payments by
the Borrowers on account of principal, interest, fees and other
charges (including any indemnities) shall be made to the Agent
at the Principal Office of the Agent, in lawful money of the
United States of America in immediately available funds, by wire
transfer or otherwise, not later than 11:00 A.M. New Jersey time
on the date such payment is due. Any such payment made on such
date but after such time shall, if the amount paid bears
interest, be deemed to have been made on, and interest shall
continue to accrue and be payable thereon until, the next
succeeding Business Day. If any payment of principal or
interest becomes due on a day other than a Business Day, such
payment may be made on the next succeeding Business Day and such
extension shall be included in computing interest in connection
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with such payment. Upon payment in full of any Note, the Bank
holding such Note shall mark the Note "Paid" and return it to a
Borrower.
(b) All payments hereunder and under the Notes shall
be made without set-off or counterclaim.
Section 10.4 Survival of Agreements and Representations;
Construction .
All agreements, representations and warranties made herein
shall survive the delivery of this Agreement and the Notes. The
headings used in this Agreement and the table of contents are
for convenience only and shall not be deemed to constitute a
part hereof All uses herein of the masculine gender or of
singular or plural terms shall be deemed to include uses of the
feminine or neuter gender, or plural or singular terms, as the
context may require.
Section 10.5 Set-off of Deposits .
Each Borrower hereby agrees that, in addition to (and
without limitation of) any right of set-off, banker's lien or
counterclaim a Bank may otherwise have, each Bank shall be
entitled, at its option, to offset balances held by it at any of
its offices against any principal of or interest on any of its
Loans hereunder, or any Fee payable to it, that is not paid when
due (regardless of whether such balances are then due to a
Borrower), in which case it shall promptly notify a Borrower and
the Agent thereof, provided that its failure to give such notice
shall not affect the validity thereof. Furthermore, at any
time, after the occurrence and during the continuance of any
Event of Default, without demand or notice, the Agent or any
Bank may set off any and all deposits or other sums at any time
credited by or due from the Agent or any Bank or any Affiliate
of the Agent or any Bank to the Borrower and/or any other Loan
Party, whether now existing or hereafter arising, whether in
regular or special depository accounts or otherwise or any part
thereof and apply the same to any of the Obligations of the
Borrowers and/or any other Loan Party even though unmatured and
regardless of the adequacy of any other collateral securing the
Obligations.
Section 10.6 Modifications, Consents and Waivers .
(a) Notwithstanding anything to the contrary
contained in any Loan Document, with the written consent of the
Required Banks, the Agent and the Borrowers may, from time to
time, enter into written amendments, supplements or
modifications thereof and, with the consent of the Required
Banks, the Agent on behalf of the Banks, may execute and deliver
to any such parties a written instrument waiving or consenting
to the departure from, on such terms and conditions as the Agent
may specify in such instrument, any of the requirements of the
81
Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such amendment,
supplement, modification, waiver or consent shall:
(i) without the written consent of all of the
Banks (A) increase the Commitment of any Bank, (B) extend the
Credit Period, (C) reduce the rate or amount, or extend the time
of payment, of any Fee , (D) reduce the rate or amount of, or
extend the time of payment of, interest on any Loan or any Note,
(E) reduce the amount, or extend the time of payment of any
installment or other payment of principal on any Loan or any
Note, (F) decrease or forgive the principal amount of any Loan
or any Note, (G) consent to any assignment or delegation by any
Borrower of any of its rights or obligations under any Loan
Document; (H) change the provisions of Section 2.22, 2.24, 2.26
or this Section 10.6, (I) change the definition of "Required
Banks", or any provision of this Agreement requiring the consent
or approval of all the Banks, (J) change the several nature of
the Banks' obligations, (K) change any provision governing the
sharing of payments and liabilities among the Banks, or (L)
release all or substantially all of the obligations of any
Borrower under any Loan Document; and
(ii) without the written consent of the Agent,
amend, modify or waive any provision of Article 9 or otherwise
change any of the rights or obligations of the Agent under any
Loan Document.
(b) No modification, amendment or waiver of or with
respect to any provision of this Agreement, any Notes, or any of
the other Loan Documents and all other agreements, instruments
and documents delivered pursuant hereto or thereto, nor consent
to any departure of any Borrower from any of the terms or
conditions thereof, shall in any event be effective unless it
shall be in writing and signed by the Agent and the Banks whose
consent is required as provided above. Upon full execution, any
such amendment, supplement, modification, waiver or consent
shall apply equally to the Agent, each Bank and each Borrower
and shall be binding upon Borrower, the Banks, the Agent and all
future holders of the Notes. In the case of any waiver, each
Borrower, the Banks and the Agent shall be restored to their
former position and rights hereunder and under the outstanding
Notes and other Loan Documents to the extent provided for in
such waiver, any such waiver or consent shall be effective only
in the specific instance and for the purpose for which given and
any Default or Event of Default waived shall not extend to any
subsequent or other Default or Event of Default, or impair any
right consequent thereon. No consent to or demand on any
Borrower in any case shall, of itself, entitle it to any other
or further notice or demand in similar or other circumstances.
Section 10.7 Remedies Cumulative, Counterclaims .
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Each and every right granted to the Agent and the Banks
hereunder or under any other document delivered hereunder or in
connection herewith, or allowed it by law or equity, shall be
cumulative and may be exercised from time to time. No failure
on the part of the Agent or any Bank or the holder of any Note
to exercise, and no delay in exercising, any right shall operate
as a waiver thereof, nor shall any single or partial exercise of
any right preclude any other or future exercise thereof or the
exercise of any other right. The due payment and performance of
the Obligations shall be without regard to any counterclaim,
right of offset or any other claim whatsoever that any Borrower
may have against any Bank or the Agent and without regard to any
other obligation of any nature whatsoever that any Bank or the
Agent may have to any Borrower, and no such counterclaim or
offset shall be asserted by any Borrower (unless such
counterclaim or offset would, under applicable law, be
permanently and irrevocably lost if not brought in such action)
in any action, suit or proceeding instituted by any Bank or the
Agent for payment or performance of the Obligations.
Section 10.8 Further Assurances .
At any time and from time to time, upon the request of the
Agent, each Borrower shall execute, deliver and acknowledge or
cause to be executed, delivered and acknowledged, such further
documents and instruments and do such other acts and things as
the Agent may reasonably request in order to fully effect the
purposes of this Agreement, the other Loan Documents and any
other agreements, instruments and documents delivered pursuant
hereto or in connection with the Loans.
Section 10.9 Notices .
All notices, requests, reports and other communications
pursuant to this Agreement shall be in writing, either by letter
(delivered by hand or commercial messenger service or sent by
certified mail, return receipt requested, except for routine
reports delivered in compliance with Article 5 hereof which may
be sent by ordinary first-class mail) or telegram or telecopy,
addressed as follows:
(a) If to any Borrower:
c/o J & J Snack Foods Corp.
6000 Central Highway
Pennsauken, NJ 08109
Attention: Mr. Dennis Moore, Chief Financial
Officer
Telecopier No.: (856) 488-7587
with a copy to:
83
Blank Rome Comisky & McCauley
Woodland Falls Corporate Park
210 Lake Drive East
Cherry Hill, NJ 08002
Attention: A. Fred Ruttenberg, Esq.
Telecopier No.: (856) 779-7647
(b) If to any Bank:
To its address set forth below its
name on the signature pages hereof,
with a copy to the Agent; and
(c) If to the Agent:
Citizens Bank of Pennsylvania, as Agent
Citizens Corporate Financing
Citizens Gateway Center
3025 Chemical Road, Suite 300
Plymouth Meeting, PA 19462-1739
Attention: Devon L. Starks
Telecopier No.: (610) 941-4136
with a copy (other than in the case
of Borrowing Notices and reports
and other documents delivered in
compliance with Article 5 hereof) to:
Archer & Greiner, P.C.
One Centennial Square
Haddonfield, New Jersey 08033
Attention: Terence J. Fox, Esq.
Telecopier No.: (856) 354-3030
Any notice, request, demand or other communication hereunder
shall be deemed to have been given on: (x) the day on which it
is telecopied to such party at its telecopier number specified
above (provided such notice shall be effective only if followed
by one of the other methods of delivery set forth herein) or
delivered by receipted hand or such commercial messenger service
to such party at its address specified above, or (y) on the
third Business Day after the day deposited in the mail, postage
prepaid, if sent by mail, or (z) on the day it is delivered to
the telegraph company, addressed as aforesaid, if sent by
telegraph. Any party hereto may change the person, address or
telecopier number to whom or which notices are to be given
hereunder, by notice duty given hereunder; provided, however
that any such notice shall be deemed to have been given
hereunder only when actually received by the party to which it
is addressed.
Section 10.10 Counterparts .
84
This Agreement may be signed in any number of counterparts
with the same effect as if the signatures thereto and hereto
were upon the same instrument.
Section 10.11 Severability .
The provisions of this Agreement are severable, and if any
clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or
provision, or part thereof, in such jurisdiction and shall not
in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision in this Agreement
in any jurisdiction. Each of the covenants, agreements and
conditions contained in this Agreement is independent and
compliance by the Borrowers with any of them shall not excuse
non-compliance by the Borrowers with any other. All covenants
hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or condition exists.
Section 10.12 Binding Effect; No Assignment or Delegation
by Borrowers .
This Agreement shall be binding upon and inure to the
benefit of each Borrower and its successors and to the benefit
of the Banks and the Agent and their respective successors and
assigns. The rights and obligations of the Borrowers under this
Agreement shall not be assigned or delegated without the prior
written consent of the Agent, and any purported assignment or
delegation without such consent shall be void.
Section 10.13 Assignments and Participations by Banks .
(a) Each Bank may, with the prior written consent of
the Agent, the Borrowers and any Bank whose then outstanding
Commitment is equal to or greater than fifty (50%) of more of
the aggregate then outstanding Commitments (which such consents
shall not be unreasonably withheld; provided that, at any time a
Default or Event of Default has occurred and is continuing, the
prior consent of any Borrower shall not be required), assign to
one or more banks or other entities (other than a Bank or a
Federal Reserve Bank) all or a portion of its rights and
obligations under this Agreement (including, without limitation,
all or a portion of its Commitment, the Loans owing to it, and
the Note or Notes held by it); provided however, that: (i) each
such assignment shall be of a constant, and not a varying,
percentage of all of the assigning Bank's rights and obligations
under this Agreement, (ii) the amount of the Commitment of the
assigning Bank being assigned pursuant to each such assignment
85
(determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than
$5,000,000 and shall be an integral multiple of $1,000,000 for
amounts in excess thereof, and (iii) each such assignment shall
be to an Eligible Assignee. Upon such execution, delivery,
acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective
date shall be at least two Business Days after the execution
thereof. (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance,
have the rights and obligations of a Bank hereunder, and (y) the
Bank assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining
portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto).
(b) Each Bank may, with the prior written consent of
the Agent (which consent shall not be unreasonably withheld),
assign to one or more Affiliates of such Bank all or a portion
of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the
Loans owing to it, and the Note or Notes held by it); provided
however, that: (i) each such assignment shall be of a constant,
and not a varying, percentage of all of the assigning Bank's
rights and obligations under this Agreement, (ii) the amount of
the Commitment of the assigning Bank being assigned pursuant to
each such assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall
in no event be less than $5,000,000 and shall be an integral
multiple of $1,000,000 for amounts in excess thereof, and (iii)
each such assignment shall be to an Eligible Assignee. Upon
such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least two Business
Days after the execution thereof. (x) the assignee thereunder
shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a
Bank hereunder, and (y) the Bank assignor thereunder shall, to
the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning Bank's
rights and obligations under this Agreement, such Bank shall
cease to be a party hereto).
(c) Each Bank may assign to one or more Banks all or
a portion of its rights and obligations under this Agreement
86
(including, without limitation, all or a portion of its
Commitment, the Loans owing to it, and the Note or Notes held by
it); provided however, that: (i) each such assignment shall be
of a constant, and not a varying, percentage of all of the
assigning Bank's rights and obligations under this Agreement,
and (ii) the amount of the Commitment of the assigning Bank
being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to
such assignment) shall in no event be less than $5,000,000 and
shall be an integral multiple of $1,000,000 for amounts in
excess thereof. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at
least two Business Days after the execution thereof. (x) the
assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder, and (y) the Bank assignor
thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion
of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto).
(d) By executing and delivering an Assignment and
Acceptance, the Bank assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Bank makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in
or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement or any other instrument or document furnished
pursuant hereto; (ii) such assigning Bank makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower or the
performance or observance by any Borrower of any of its
obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with
copies of such financial statements and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Bank or any other Bank
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement;
(v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such
87
action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a
Bank.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Bank and an assignee representing that
it is an Eligible Assignee, together with any Note subject to
such assignment, the Agent shall: (i) accept such Assignment and
Acceptance, and (ii) give prompt notice thereof to a Borrower.
Within five Business Days after its receipt of such notice, the
Borrowers, at their own expense, shall execute and deliver to
the Agent in exchange for the surrendered Note a new Note to the
order of such Eligible Assignee in an amount equal to the
Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Bank has retained a Commitment
hereunder, a new Note to the order of the assigning Bank in an
amount equal to the Commitment retained by it hereunder. Such
new Note shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note, shall be
dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibit A
hereto.
(f) Each Bank may, without the prior consent of the
other Banks or any Borrower, sell participations to one or more
banks or other entities in all or a portion of its rights and
obligations under this Agreement (including, without limitation,
all or a portion of its Commitment), the Loans owing to it, and
the Note held by it; provided, however, that: (i) such Bank's
obligations under this Agreement (including, without limitation,
its Commitment hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Bank shall
remain the holder of any such Note for all purposes of this
Agreement, and (iv) the Borrowers, the Agent and the other Banks
shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this
Agreement.
(g) Any Bank may, in connection with any assignment
or participation or proposed assignment or participation
pursuant to this Section 10.13, disclose to the assignee or
participant or proposed assignee or participant, any information
relating to the Borrowers furnished to such Bank by or on behalf
of the Borrowers; provided that prior to any such disclosure,
the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any confidential
information relating to the Borrowers received by it from such
Bank.
88
(h) Anything in this Section 10.13 to the contrary
notwithstanding, any Bank may assign and pledge all or any
portion of its Loans and its Notes to any Federal Reserve Bank
(and its transferees) as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve
System and any Operating Circular issued by such Federal Reserve
Bank. No such assignment shall release the assigning Bank from
its obligations hereunder.
Section 10.14 Delivery of Tax Forms .
Each Bank that is not organized under the laws of the
United States or a state thereof shall:
(a) deliver to a Borrower and the Agent, on or prior
to the date of the execution and delivery of this Agreement: (i)
two accurate and duly completed executed copies of United States
IRS Form 1001 or 4224, or successor applicable form, as the case
may be, and (ii) an accurate and complete IRS Form W-8 or W-9,
or successor applicable form, as the case may be;
(b) deliver to a Borrower and the Agent two further
accurate and complete executed copies of any such form or
certification on or before the date that any such form or
certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent
form previously delivered by it to a Borrower; and
(c) obtain such extensions of time for filing and
completing such forms or certifications as may reasonably be
requested by a Borrower or the Agent; unless in any such case an
event (including, without limitation, any change in treaty, law
or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Bank from duly
completing and delivering any such form with respect to it and
such Bank so advises a Borrower and the Agent. Such Bank shall
certify: (i) in the case of a Form 1001 or 4224 that is required
pursuant to subsection 10.14(a), that it is entitled to receive
payments under this Agreement without deduction or withholding
of any United States Federal income taxes; (ii) in the case of
an IRS Form 1001 or 4224, that is provided pursuant to
subsection 10.14(b), to the extent legally entitled to do so,
that it is entitled to receive payments under this Agreement
without, or at a reduced rate of, deduction or withholding of
any United States Federal income taxes; and (iii) in the case of
a Form W-8 or W-9, that it is entitled to an exemption from
United States backup withholding tax. Each Person not organized
under the laws of the United States or a state thereof that is
an assignee hereunder shall, prior to the effectiveness of the
related transfer, be required to provide all of the forms and
statements required pursuant to this subsection 10. 14.
89
Section 10.15 GOVERNING LAW; CONSENT TO JURISDICTION,
WAIVER OF TRIAL BY JURY .
(a) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL
OTHER DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED IN
CONNECTION HEREWITH AND THEREWITH, SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO ITS RULES
PERTAINING TO CONFLICTS OF LAWS.
(b) EACH BORROWER IRREVOCABLY CONSENTS THAT ANY LEGAL
ACTION OR PROCEEDING AGAINST IT UNDER, ARISING OUT OF OR IN ANY
MANNER RELATING TO THIS AGREEMENT, AND EACH OTHER LOAN DOCUMENT
MAY BE BROUGHT IN ANY COURT OF THE COMMONWEALTH OF PENNSYLVANIA,
OR IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT
OF PENNSYLVANIA. EACH BORROWER, BY THE EXECUTION AND DELIVERY
OF THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY ASSENTS AND SUBMITS
TO THE PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH
ACTION OR PROCEEDING. EACH BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY COMPLAINT, SUMMONS, NOTICE OR
OTHER PROCESS RELATING TO ANY SUCH ACTION OR PROCEEDING BY
DELIVERY THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER PROVIDED
FOR IN SECTION 10.9 HEREOF. EACH BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION OR
PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS. NO
BORROWER SHALL BE ENTITLED IN ANY SUCH ACTION OR PROCEEDING TO
ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER THE LAWS OF ANY STATE
OTHER THAN THE COMMONWEALTH OF PENNSYLVANIA UNLESS SUCH DEFENSE
IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA. NOTHING IN THIS SECTION 10.15 SHALL AFFECT OR
IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF ANY BANK TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY
BORROWER IN ANY JURISDICTION OR TO SERVE PROCESS IN ANY
PERMITTED BY LAW.
(c) EACH BORROWER, THE AGENT AND THE BANKS (BY
ACCEPTANCE OF THE NOTES) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY, AND EACH
BORROWER WAIVES THE RIGHT TO INTERPOSE ANY SETOFF OR
COUNTERCLAIM, IN EACH CASE IN RESPECT OF ANY CLAIM BASED HEREON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN
CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OR
DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE AGENT OR ANY
BANK RELATING TO THE ADMINISTRATION OF THE LOANS AND/OR ANY
OTHER CREDIT FACILITIES HEREUNDER OR THE ENFORCEMENT OF THE LOAN
DOCUMENTS AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE
ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED.
90
Section 10.16 Entire Agreement .
This Agreement and the other Loan Documents are intended by
the parties as the final, complete and exclusive statement of
the transactions evidenced thereby. All prior or
contemporaneous promises, agreements and understandings, whether
oral or written, are deemed to be superceded by this Agreement
and such other Loan Documents, and no party is relying on any
promise, agreement or understanding not set forth in this
Agreement or such other Loan Documents.
Section 10.17 Interest Adjustment .
All Loan Documents are hereby expressly limited so that in
no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to a Bank
for the use or the forbearance of the indebtedness evidenced
hereby exceed the maximum permissible under applicable law. As
used herein, the term "applicable law" shall mean the law in
effect as of the date hereof; provided, however, that in the
event there is a, change in the law which results in a higher
permissible rate of interest, then the Loan Documents shall be
governed by such new law as of its effective date. In this
regard, it is expressly agreed that it is the intent of each
Borrower, the Agent and the Banks in the execution, delivery and
acceptance of this Agreement to contract in strict compliance
with the laws of the State of New Jersey from time to time in
effect. If, under or from any circumstances whatsoever,
fulfillment of any provision hereof or of any of the Loan
Documents at the time of performance of such provision shall be
due, shall involve transcending the limit of such validity
prescribed by applicable law, then the obligation to be
fulfilled shall automatically be reduced to the limits of such
validity, and if under or from circumstances whatsoever a Bank
should ever receive as interest an amount which would exceed the
highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal
balance evidenced by a Note (in such manner as such Bank may
determine in its sole discretion) and not to the payment of
interest. This provision shall control every other provision of
each of the Loan Documents.
Section 10.18 Lost Notes .
Upon receipt of an affidavit of an officer of any Bank as
to the loss, theft, destruction or mutilation of any Note
payable to such Bank or any other Loan Document which is not of
public record, and, in the case of any such loss, theft,
destruction or mutilation, upon surrender and cancellation of
such Note or other Loan Document, each Borrower will issue, in
lieu thereof, a replacement Note or other Loan Document in the
same principal amount thereof and otherwise of like tenor.
91
Section 10.19 Joint and Several Basis; Notices Binding .
All Obligations of the Borrowers to the Agent and/or Bank
under or in any way connected with the Loan Documents shall be
on a joint and several basis and each Borrower shall be jointly
and severally liable for all such Obligations. It is expressly
agreed that any notice sent by one or more Borrowers to the
Agent and/or any Bank shall be binding on all the Borrowers and
any notice sent by the Agent and/or any Bank to one or more
Borrowers shall be binding upon each Borrower.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES AND EXHIBITS FOLLOW]
92
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date first above written.
PARENT:
J & J SNACK FOODS CORP.
By:___________________________________
Name: Dennis G. Moore
Title: Senior Vice President
SUBSIDIARY BORROWERS:
BAKERS BEST SNACK FOODS CORP.
FEDERAL PBC COMPANY
THE ICEE COMPANY
J&J RESTAURANT GROUP, INC.
J&J SNACK FOODS SALES CORP. OF
TEXAS
J&J SNACK FOODS CORP. OF NEW
JERSEY
J&J SNACK FOODS SALES CORP.
J&J SNACK FOODS CORP. OF
PENNSYLVANIA
J&J SNACK FOODS TRANSPORT CORP.
J&J SNACK FOODS CORP. OF
CALIFORNIA
J&J SNACK FOODS INVESTMENT CORP.
J&J SNACK FOODS CORP./MIDWEST
J&J SNACK FOODS CORP./MIA
PRETZELS, INC.
By:___________________________________
Name: Dennis G. Moore
Title: Vice President of each
of the above Subsidiary Borrowers
93
Commitment:
$25,000,000.00 Citizens Bank of Pennsylvania,
as Agent and as a Bank
By:_____________________________
Name:
Title:
Lending Office for ABR
Loans and LIBOR Loans:
Citizens Bank of Pennsylvania
Citizens Corporate Financing
Citizens Gateway Center
3025 Chemical Road, Suite 300
Plymouth Meeting, PA 19462-1739
Attention: Devon L. Starks
Telecopier No.: (610) 941-4136
Address for Notices:
Citizens Bank of Pennsylvania
Citizens Corporate Financing
Citizens Gateway Center
3025 Chemical Road, Suite 300
Plymouth Meeting, PA 19462-1739
Attention: Devon L. Starks
Telecopier No.: (610) 941-4136
94
Commitment:
$25,000,000.00 FIRST UNION NATIONAL BANK, as a
Bank
By:_________________________________
Name:
Title:
Lending Office for ABR
Loans and LIBOR Loans:
First Union National Bank
Commercial Banking
FC-7-415-3-12
600 Cuthbert Boulevard
Haddon Township, New Jersey 08108
Attention: Ellen Gibbin Dodell
Address for Notices:
First Union National Bank
Commercial Banking
FC-7-415-3-12
600 Cuthbert Boulevard
Haddon Township, New Jersey 08108
Attention: Ellen Gibbin Dodell
Telecopier: (856) 771-5860
993186-5
95
TABLE OF CONTENTS
Page
LOAN AGREEMENT 1
ARTICLE 1 - Definitions 1
ARTICLE 2 - Commitments; Loans -18-
Section 2.1 Loans -18-
Section 2.2 Notices Relating to Loans -19-
Section 2.3 Disbursement of Loan Proceeds -19-
Section 2.4 Notes -19-
Section 2.5 Payment Applications -20-
Section 2.6 Interest -20-
Section 2.7 Fees -21-
Section 2.8 Changes in Commitment -22-
Section 2.9 Use of Proceeds of Loans -22-
Section 2.10 Computations -23-
Section 2.11 Minimum Amounts of Borrowings, Conversions,
Prepayments and
Interest Periods -23-
Section 2.12 Time and Method of Payments -23-
Section 2.13 Lending Offices -23-
Section 2.14 Several Obligations -24-
Section 2.15 Letter of Credit Subfacility -24-
Section 2.16 Intentionally Omitted -28-
Section 2.17 Intentionally Omitted -28-
Section 2.18 Pro Rata Treatment Among Banks -28-
Section 2.19 Non-Receipt of Funds by the Agent -29-
Section 2.20 Sharing of Payments and Set-Off Among Banks -29-
Section 2.21 Conversions of Loans -30-
Section 2.22 Additional Costs; Capital Requirements -
30-
Section 2.23 Limitation on Types of Loans -32-
Section 2.24 Illegality -32-
Section 2.25 Certain Conversions pursuant to Sections
2.22 and 2.24. -32-
Section 2.26 Yield Maintenance -33-
ARTICLE 3 - Representations and Warranties -34-
Section 3.1 Organization -34-
Section 3.2 Power, Authority, Consents -35-
Section 3.3 No Violation of Law or Agreements -35-
Section 3.4 Due Execution, Validity, Enforceability -
36-
Section 3.5 Properties -36-
Section 3.6 Judgements, Actions, Proceedings -36-
Section 3.7 No Defaults, Compliance With Laws -36-
i
Section 3.8 Burdensome Documents -37-
Section 3.9 Financial Statements; Projections -37-
Section 3.10 Tax Returns -37-
Section 3.11 Intangible Assets -38-
Section 3.12 Regulation U -38-
Section 3.13 Intentionally Omitted -38-
Section 3.14 Full Disclosure -38-
Section 3.15 Licenses and Approvals -38-
Section 3.16 Labor Disputes; Collective Bargaining
Agreements; Employee
Grievances -39-
Section 3.17 Intentionally Omitted -39-
Section 3.18 ERISA -39-
ARTICLE 4 -Conditions to the Loans -41-
Section 4.1 Conditions to Initial Loans -41-
Section 4.2 Conditions to Subsequent Loans -42-
ARTICLE 5 - Delivery of Financial Reports, Documents and Other
Information -43-
Section 5.1 Annual Financial Statements and -43-
Section 5.2 Quarterly Financial Statements -43-
Section 5.3 Compliance Information -44-
Section 5.4 No Default Certificate -44-
Section 5.5 Certificate of Accountants -44-
Section 5.6 Accountants' Reports -44-
Section 5.7 Copies of Documents -44-
Section 5.8 Notices of Defaults -45-
Section 5.9 ERISA Notices and Requests -45-
Section 5.10 Intentionally Omitted -46-
Section 5.11 Additional Information -46-
ARTICLE 6 - Affirmative Covenants -46-
Section 6.1 Books and Records -46-
Section 6.2 Inspections and Audits -47-
Section 6.3 Maintenance and Repairs -47-
Section 6.4 Continuance of Business -47-
Section 6.5 Copies of Corporate Documents -47-
Section 6.6 Perform Obligations -47-
Section 6.7 Notice of Litigation -48-
Section 6.8 Insurance -48-
Section 6.9 Financial Covenants -48-
Section 6.10 Notice of Certain Events -49-
Section 6.11 Comply with ERISA -49-
Section 6.12 Environmental Compliance -49-
Section 6.13 Certain Subsidiary Matters -50-
ARTICLE 7 - Negative Covenants -50-
Section 7.1 Indebtedness -50-
Section 7.2 Liens -51-
Section 7.3 Guaranties -52-
Section 7.4 Mergers, Acquisitions -52-
Section 7.5 Redemptions; Distributions -52-
ii
Section 7.6 Stock Issuance -53-
Section 7.7 Changes in Business -53-
Section 7.9 Investments -53-
Section 7.10 Fiscal Year -54-
Section 7.11 ERISA Obligations -54-
Section 7.12 Amendments of Documents -55-
Section 7.13 Additional Subsidiaries -55-
Section 7.14 Double Negative Pledge -56-
Section 7.15 Intentionally Omitted -56-
Section 7.16 Intentionally Omitted -56-
Section 7.17 Transactions with Affiliates -56-
Section 7.18 Hazardous Material -56-
ARTICLE 8 - Events of Default -57-
Section 8.1 Payments -57-
Section 8.2 Certain Covenants -57-
Section 8.3 Other Covenants -58-
Section 8.4 Other Defaults -58-
Section 8.5 Representations and Warranties -58-
Section 8.6 Bankruptcy -59-
Section 8.7 Judgements -59-
Section 8.8 ERISA -59-
Section 8.9 Ownership of Stock -60-
Section 8.10 Management -60-
ARTICLE 9 - The Agent -60-
Section 9.1 Appointment, Powers and Immunities -60-
Section 9.2 Reliance by Agent -61-
Section 9.3 Events of Default -61-
Section 9.4 Rights as a Bank -61-
Section 9.5 Indemnification -62-
Section 9.6 Non-Reliance on Agent and other Banks -
62-
Section 9.7 Failure to Act -62-
Section 9.8 Resignation or Removal of Agent -63-
ARTICLE 10 - Miscellaneous Provisions -64-
Section 10.1 Fees and Expenses; Indemnity -64-
Section 10.2 Taxes -65-
Section 10.3 Payments -66-
Section 10.4 Survival of Agreements and Representations;
Construction -66-
Section 10.5 Set-off of Deposits -66-
Section 10.6 Modifications, Consents and Waivers -
64-
Section 10.7 Remedies Cumulative-, Counterclaims -
68-
Section 10.8 Further Assurances -68-
Section 10.9 Notices -68-
Section 10.10 Counterparts -70-
Section 10.11 Severability -70-
Section 10.12 Binding Effect; No Assignment or Delegation
by Borrowers -70-
iii
Section 10.13 Assignments and Participations by Banks -
70-
Section 10.14 Delivery of Tax Forms -73-
Section 10.15 GOVERNING LAW; CONSENT TO JURISDICTION,
WAIVER
OF TRIAL BY JURY -74-
Section 10.16 Entire Agreement -75-
Section 10.17 Interest Adjustment -75-
Section 10.18 Lost Notes -76-
Section 10.19 Joint and Several Basis; Notices Binding -
76-
iv
EXHIBIT 13.1
J&J Snack Foods
6000 Central Highway
Pennsauken, NJ 08109
(856) 665-9533
www.jjsnack.com
2001 ANNUAL REPORT
30 Years of Perfecting the Art of Snack Foods
Caption for cover:
Cover illustration derived from Creation of Adam by
Michelangelo, Sistine Chapel, Vatican/Canali
Photobank Milan/SuperStock.
FINANCIAL HIGHLIGHTS
Fiscal year ended in September
2001 2000 1999 1998 1997
(In thousands except per share data)
Net Sales $351,696 $318,490 $286,493 $261,456 $219,275
Net Earnings $11,876 $9,968 $14,264 $11,850 $8,159
Total Assets $224,481 $220,039 $213,680 $213,261 $136,827
Long-Term Debt $28,368 $42,481 $34,660 $48,199 $5,028
Stockholders'
Equity $146,143 $133,274 $131,169 $119,681 $105,904
Common Share Data
Earnings Per
Diluted Share $1.36 $1.10 $1.50 $1.26 $.91
Earnings Per Basic
Share $1.40 $1.13 $1.58 $1.32 $.93
Book Value Per
Share $16.92 $15.64 $14.57 $13.25 $11.97
Common Shares
Outstanding
At Year End 8,636 8,522 9,000 9,036 8,850
Contents
2001 in Review 1
President's Letter 2
Soft Pretzels 4
Frozen Beverages 6
Frozen Desserts 8
More Snacks 10
Family of Brands 12
Financial Information 13
Corporate Information 29
President's Letter
As I reflect proudly on our 30-year anniversary and
the pride I share with our employees, friends and
shareholders, I am overwhelmed with the assignment
that I have as Founder, CEO and Chairman of J&J Snack
Foods Corp. And, after 30 years, or 360 months, or
nearly 11,000 days of developing our classics, I find
that both the company and I are just hitting our
stride. I'm not a painter and I'm certainly not an
artist by any stretch of the imagination, but I have
been using whatever creative talent and minimum
artistic ability I possess to help create our own
classics. Our masterpieces.
30th Anniversary -
record sales and increased earnings
Our fiscal year 2001 began with a weak start, but
ended with a strong close. Our summary sketch of the
year's highlights include:
* Net sales grew by 10% to $352 million - the 30th
consecutive year of increased sales
* Net income grew 19% to $11.9 million
* Earnings per share increased 24% to $1.36
* Book value climbed to $16.92 per share
Maintaining the artistic criteria
Many years ago, we established criteria for creating
our own classics or masterpieces. And, we still hold
true to these criteria today. The principles include
selling quality niche products, being a low cost
producer and establishing strong marketing and
distribution channels in carrying these products to
the marketplace.
Perfecting the art of snack foods
In addition to our financial results, our 30th
anniversary year also included important achievements
in further developing our niches as well as expanding
our product lines and distribution channels. In
fiscal year 2001, we introduced our new "first-of-its-
kind" PRETZEL FILLERS, a variety of specialty filled
and topped soft pretzels. Four flavors (Twisted
Pizza, Hollerin' Jalape-o, Cinnamon Apple Harvest and
Sweet Dream Cream Cheese) were successfully introduced
in the second half of our fiscal year. Sales of these
national award-winning "Best In Show" soft pretzels
have been good as the products are being well
received. We expect to build on this momentum in our
new fiscal year.
With the completion of our first full year of selling
MINUTE MAID* licensed products, we began to deliver on
the potential opportunities we envisioned for our
long-term partnership with The Minute Maid Company.
Together with new creations such as our LUIGI'S SWIRL,
an improved softer texture for LUIGI'S Real Italian
Ice, and favorable weather in our important summer
selling months, we had a record year with our frozen
desserts and juice bars.
Overall, our Snack Food segment, including sharp
increases from cookie sales, the Uptown Bakery group
and retail supermarkets, helped to make this year's
record sales volume.
ICEE Frozen Beverages - a blend of colors
The ICEE Company had another record year in sales and
further enhanced its position as a mechanical service
provider and supporting infrastructure partner in the
growing critical equipment service area. Aided by
expanding new products such as SMOOTHEE by ICEE, JAVA
FREEZE and FROZEN COCKTAILS, The ICEE Company now has
product entries in multiple channels of our growing
food service segment. ICEE has been developing as a
classic for even longer than our snack food products.
And now, with an artist's touch, we are blending
colors and light to increase and enhance its market
presence.
Our strengths - past, present and future
It seems I have stated this before. Simple but
effective. Niche products, low cost producer, strong
sales and marketing. Complemented by strategic
alliances and partnerships with world-class companies.
These are the criteria that have served us well in the
past and present. And more importantly, will continue
to serve us for the future.
Gallery of market leaders
We are not yet The Louvre, but we do take pride in our
own gallery of market leaders including SUPERPRETZEL;
ICEE and frozen beverages; churros; funnel cakes; as
well as frozen juice bars and our fast growing cookie
segment. At J&J Snack Foods, we have spent the past
30 years perfecting the art of snack foods and
beverages. We will continue the process and momentum
with the tremendous talent and experience our team has
brought together. I'm confident the succeeding years
will be equally artistic. Pass the paintbrush please.
Sincerely,
Gerald B. Shreiber
President and Chairman
December 1, 2001
*MINUTE MAID is a registered trademark of The
Coca-Cola Company.
Caption:
J&J Snack Foods Corp. joins with millions of Americans
in extending our deepest sympathy for the victims and
all those affected by the September 11th attacks on
our country.
God Bless America.
Portrait of Gerald B. Shreiber derived from Self
Portrait by Vincent van Gogh, SuperStock.
Soft Pretzels
J&J Snack Foods is proud to be the world's largest
manufacturer of soft pretzels - with over a billion
produced each year! Our flagship brand, SUPERPRETZEL,
America's Favorite Soft Pretzel, remains the clear
category leader.
SUPERPRETZEL - A one-of-a-kind original
Thirty years ago, history was in the making as
SUPERPRETZEL was born. It has since grown to become a
full palette of creative soft pretzel products that
continues to evolve to satisfy changing consumer
tastes.
For three decades, J&J has been masterful in leading
snack food trends. And because today's lifestyles
demand convenience, our innovative soft pretzel
products have become the ideal snack for today's
consumers, who are constantly on the move and looking
for a grab-and-go snack. They enjoy our SUPERPRETZEL
soft pretzels at tens-of-thousands of high-traffic
locations across the country: malls and shopping
centers; stadiums and sports arenas; amusement,
leisure and theme parks; schools and colleges; movie
theaters; business and industry cafeterias; fast food
outlets; and supermarkets, chain, convenience and
warehouse club stores.
Food Service... a valuable market
Food Service soft pretzel sales grew this year with an
important contribution from the November 2000
acquisition of Uptown Bakeries, which manufactures an
impressive collection of fresh bakery products
including soft pretzels, bagels, donuts, muffins and
cookies.
The unveiling of PRETZEL FILLERS in May 2001 also
contributed to the sales increase. These award-winning
soft pretzels are the first of their kind. This new
generation of filled soft pretzel is available in four
delicious varieties: Twisted Pizza, Hollerin' Jalape-
o, Cinnamon Apple Harvest and Sweet Dream Cream
Cheese. Introductory sales of PRETZEL FILLERS to
sports arenas, theaters, schools and colleges,
convenience stores, and business and industry channels
are very encouraging. Like fine art, we expect their
value to appreciate over time.
A creative lesson for America's children
Across the country, SUPERPRETZEL products continue to
delight schoolchildren. Our shaped soft pretzels -
including shamrocks, hearts, stars, and more - help
create seasonal promotions in an artistic way. They're
fun and delicious, and they satisfy bread requirements
for the U.S.D.A. National School Lunch/Breakfast
Program. And now, kids can enjoy a lunchtime classic:
PBJ CRUISERS, peanut butter and jelly-filled soft
pretzels - introduced during the fourth quarter of
fiscal 2001. They meet both bread and protein
requirements!
SUPERPRETZEL Smiles at the supermarket
The SUPERPRETZEL brand, the market leader in the soft
pretzel category, is the clear consumer choice. In
fiscal 2001, soft pretzel sales grew, driven by a 10%
sales spike for SUPERPRETZEL SOFTSTIX, our cheese-
filled soft pretzel sticks co-branded with KRAFT*.
Our Restaurant Group - which operates BAVARIAN PRETZEL
BAKERY and PRETZEL GOURMET retail stores in the Mid-
Atlantic region - played an increasing role in the
development and marketing of some of our new products,
including PRETZEL.FILLERS. Although sales declined by
6%, primarily due to reduced mall traffic and store
closings, the strategic use of this group provides
quick access to new product analysis.
*KRAFT and the KRAFT logo are registered trademarks
owned and licensed by Kraft Foods, Inc.
Caption:
Derived from American Gothic by Grant Wood, Friends of
the American Art Collection. All rights reserved by
the Art Institute of Chicago and VAGA, New York, NY.
Frozen Beverages
The ICEE Company, our frozen beverage division and the
world's largest distributor of frozen beverages, had
another strong showing. Sales continued to grow in
fiscal 2001. While maintaining
its loyal customer base, ICEE continues to broaden its
appeal with popular flavor additions such as sour
green apple.
The tools of the trade
Served from our proprietary dispensing equipment, the
ICEE brand is sold throughout the United States, and
across the borders in Canada and Mexico, while other
brands such as ARCTIC BLAST are also available. As a
part of the ICEE experience, consumers can use either
straws or spoons to savor these delicious carbonated
and uncarbonated treats.
So that consumers can enjoy one of our delicious
frozen drinks wherever they choose, an additional
1,500 new dispensing machines were installed
nationwide this past fiscal year. Now 21,500 food
service outlets make our refreshing ICEE frozen
beverages available to the public... and more
locations are being added every day. Many of the same
outlets also offer our delicious SUPERPRETZEL soft
pretzels and other J&J snack food products, making for
a classic combo purchase!
Mastering the art of service
When your product depends on equipment and its
performance for sales, service is critically
important, and no one does it better than The ICEE
Company. Our centralized Customer Service Center
supports a nationwide network of branches and service
technicians exhibiting state-of-the-art "Service
Excellence". In fiscal 2001 we also expanded our
network and infrastructure in order to perform service
for other beverage and related food equipment
providers and users as well.
Frozen drinks and friends
Our long-term marketing agreement with The Coca-Cola
Company exemplifies the power of partners. The ICEE
Company provides service for all frozen carbonated
beverage dispensing machines in Burger King* locations
across the country, while The Coca-Cola Company
provides the syrup. We continue to partner with The
Coca-Cola Company and look forward to creating
exciting new beverage programs together.
Capitalizing on promotional opportunities and
successful merchandising are other time-tested
components of ICEE's consumer appeal. Throughout the
year we initiate account-specific themed promotions -
made available nationally - including sweepstakes,
major movie release tie-ins, and NFL** and
NASCAR(r)*** cup promotions. Clearly, consumers can't
resist the awe-inspiring graphics that stimulate
impulse purchases in high-traffic locations every
time.
Uncarbonated and unbelievably good
Sales of our frozen uncarbonated beverages - including
SMOOTHEE by ICEE, JAVA FREEZE and FROZEN COCKTAILS -
painted a pretty picture in fiscal 2001. SMOOTHEE by
ICEE, made with real fruit juice and offered in a
variety of flavors, is now a schooltime favorite...
and gourmet coffee-flavored JAVA FREEZE exhibited
popularity at snack bars. FROZEN COCKTAILS, created
expressly for adults,
can be enjoyed with or without alcohol at sports and
entertainment venues everywhere. Try one for a taste
sensation!
*Burger King is a registered trademark of Burger
King Corporation.
**NFL is a registered trademark of The National
Football League.
***NASCAR is a registered trademark of The National
Association for Stock Car Auto Racing, Inc.
Caption:
Derived from Members of the Draper's Club by Rembrandt
van Rijn, Rijksmuseum, Amsterdam/SuperStock.
Frozen Desserts
There is no mistaking the smiles when it comes to
J&J's recognizable and impressive brands of frozen
desserts, which include LUIGI'S, ICEE, MINUTE MAID*,
SHAPE UPS, CHILL and MAMA TISH'S. Sales were up
significantly in fiscal 2001.
Made for each other
Our long-term partnership with The Minute Maid Company
- which was forged in 1999 - provides J&J exclusive
rights to manufacture, sell and distribute licensed
frozen juice products under the MINUTE MAID brand
name. Our frozen dessert business has enjoyed
significant growth as a result.
As part of this marketing agreement, we unveiled a
brand-new, state-of-the-art water purification system
in our Scranton, Pennsylvania facility. This 99.7%
pure water ultrafiltration system ensures that the
water that goes into our frozen desserts is as safe
and pure as can be.
Masterful results for food service
New distribution, new product introductions and the
February 2001 acquisition of CHILL brand fruit ice
food service products produced a strong 16% increase
in sales for the Food Service division. The CHILL
brand reinforces the already strong J&J line-up,
especially in leisure and theme accounts and at sports
venues.
More smiles at the store
Fiscal 2001 was picture-perfect for retail supermarket
sales, which increased 28%! LUIGI'S - the nation's
top-selling brand of Italian ice - posted strong
gains, helped by an improved, softer texture
formulation and the successful test-market
introduction of LUIGI'S SWIRL, two flavors swirled
together into one delicious frozen treat. Look forward
to more flavors and a national rollout in fiscal 2002.
MINUTE MAID Juice Bars, MINUTE MAID Soft Frozen
Lemonade and ICEE Squeeze Tubes all capitalized on
their strong brand awareness with increased sales and
distribution. Like fine art, their value to consumers
will continue to appreciate.
2001 was also a portrait of success for warehouse club
store sales, due to a marked increase in sales of
MINUTE MAID Soft Frozen Lemonade in particular, as
well as ICEE, LUIGI'S and MAMA TISH'S brands.
Style and substance at school
With more than 80 million servings every year, SHAPE
UPS frozen juice bars are far and away the #1 juice
bar with America's schoolchildren. They proudly carry
the Child Nutrition (CN) Label and fulfill juice
requirements for the U.S.D.A. National School
Lunch/Breakfast Program, making them the obvious
choice for school food service directors nationwide.
In the fourth quarter, we received extra credits for
our fresh, new look and the addition of the MINUTE
MAID brand name, so expect our grades to improve even
more in 2002.
*MINUTE MAID is a registered trademark of The Coca-
Cola Company.
Caption:
Derived from Mona Lisa by Leonardo da Vinci, Musee du
Louvre, Paris/SuperStock.
More Snacks
J&J continues to receive positive reviews for our
gallery of other sweet and dreamy niche snack foods
and bakery goods, including cookies, churros and
funnel cakes. Our Los Angeles-based West Coast Bakery,
which produces frozen cookie dough, commercial
specialty baking products, contract private label
products, and organically certified baked goods,
turned in another solid performance in fiscal 2001,
with a 4% sales increase.
More hands in our cookie jar
On the wings of a 20% sales increase in fiscal 2001,
J&J continues to demonstrate skill and savvy in the
expanding food service cookie market.
Our wholesome MRS. GOODCOOKIE brand ascended to new
heights this past year with increased sales and the
introduction of individually wrapped cookies in an
assortment of sizes and flavors. The cookie business
also got a boost from our CAMDEN CREEK brand, our
private label fundraising cookies and the distribution
of cookies through Uptown Bakeries. Uptown has allowed
J&J to enter the fresh bakery arena with lots of
goodies - bagels, donuts, muffins and more. Thanks to
our newly expanded food service sales and distribution
base, the sky's the limit for potential future growth.
Churros are churning ahead
Capturing the essence of the Southwest, TIO PEPE'S
churros - crispy, cinnamon, doughnut-like snacks -
continue to broaden their appeal from their Hispanic
roots into mainstream American culture. Fiscal 2001
was encouraging, due to a 3% sales increase in our
food service business led by widening acceptance of
our fruit-filled churros.
Our tasty fruit-filled churros are also helping us get
a foothold in the promising school food service
channel, as they satisfy both bread and fruit
requirements for the U.S.D.A. National School
Lunch/Breakfast Program. Children and food service
directors alike are delighted they're on the menu.
Sales in the retail supermarket provided the finishing
touch for churros with an 11% sales increase in fiscal
2001 due to increased consumption.
Funnel cakes in fine form
Our heavenly funnel cakes, available as frozen pre-
cooked and pre-shaped or as make-your-own dry mix,
continue their sweet success in food service. In fact,
THE FUNNEL CAKE FACTORY brand funnel cakes crafted a
12% sales gain this past year. They continue to make
an impression in all the channels where they are sold,
including theme and amusement parks, stadiums and
arenas, fundraising and at special events. They also
earn high grades with America's schoolchildren - as
they meet bread requirements for the U.S.D.A. National
School Lunch/Breakfast Program.
J&J looks forward to refining the art of snack foods
and beverages for decades to come - by viewing each of
our products as a masterpiece. We thank everyone who
has contributed to our first 30 years and look forward
to creating new and exciting snack innovations in the
years ahead.
Caption:
Derived from Sistine Madonna by Raphael, SuperStock.
J&J Snack Foods Corp.
FAMILY OF BRANDS
Timeline:
J&J Snack Foods Corp. is a classic portrait of "The
American Dream". Follow our 30-year history of growth.
1971
* September 27 - Gerald B. Shreiber purchases J&J Soft
Pretzel Co. at bankruptcy auction. J&J Snack Foods
Corp. established in Pennsauken, NJ.
1972
* Los Angeles Branch opens. Business activity is
initiated in Western U.S.
1973
* SUPERPRETZEL Soft Pretzel trademark registered.
1974
* J&J introduces animated carousel display cases.
* Sales break $1 million mark.
1975
* Plant expanded, production capacity doubled.
1976 - 77
* National network of distributors developed. Soft
pretzel markets expanded.
1978
* Acquisitions of two soft pretzel manufacturers give
J&J a national presence:
- Frampton Corp. - St. Louis, MO
- Pretzel Man Corp. - Los Angeles, CA
* "King Size" soft pretzels introduced.
1980-81
* Churro product acquired from subsidiary of Rapid
American Corp. TIO PEPE'S Churros created.
1982
* Exclusive license rights for the manufacture and
sale of AMF pretzel twisters acquired.
1983-84
* New building acquired and major expansion completed.
Capacity increases fourfold.
* Acquisition of BSP Soft Pretzel Co. (formerly
Bachman Soft Pretzel Co.)
* SUPER JUICE Juice Bar product line introduced.
1985-86
* J&J expands into retail supermarket business.
* Company completes successful initial public offering
of 600,000 shares. Stock is traded on NASDAQ.
* DUTCHIE soft pretzel business acquired.
* Southern Food Products acquired and western soft
pretzel operations relocated to its facility in
Vernon, CA.
* Sales go over $25 million.
1987
* At first Annual Shareholders' Meeting, Gerald B.
Shreiber, Chairman, announces $100 million sales goal
by 1992.
* Company completes successful $20 million Convertible
Debenture offering.
* Controlling interest in ICEE-USA is acquired, adding
Frozen Carbonated Beverages to our niche products.
* J&J acquires FROSTAR frozen novelties from Schwan's.
* Sales climb to over $47 million.
1988
* J&J is recognized by Forbes magazine as one of the
200 Best Small Companies in America.
* Acquisitions of:
- Trotter Soft Pretzel Co.
- Western Syrup
- American Snack Foods
- MIA Products Co.
1989
* New generation of soft pretzel twisters developed.
King size soft pretzel production automated.
* $20 million Convertible Debentures converted to
common stock 2 years after issuance.
* LUIGI'S Real Italian Ice introduced to supermarkets.
1990
* Frozen Carbonated Beverage business expanded through
the acquisition of Michigan Carbonic Company.
1991
* Company logo updated; retail SUPERPRETZEL package redesigned.
* Additional common stock offering raises $29 million.
* Company breaks $100 million sales mark.
* J&J is again recognized by Forbes magazine.
1992
* SOFTSTIX Cheese Filled Soft Pretzel Sticks added to
SUPERPRETZEL line.
* ARCTIC BLAST frozen carbonated beverage introduced.
1993
* New 104,000 square foot state-of-the-art
distribution center opened at Pennsauken facility.
1994
* Acquisitions of:
- The Funnel Cake Factory, Inc.
- Bavarian Soft Pretzels, Inc.
1995
* ICEE international rights acquired.
1996
* Acquisitions of:
- Pretzel Gourmet Corp.
- Mazzone Enterprises, Inc.
- Bakers Best Snack Food Corp.
* New frozen warehouse and distribution center opened
in Vernon, CA.
1997
* Acquisitions of:
- Pretzels, Inc.
- Mama Tish's International Foods
* Sales exceed $220 million.
1998
* J&J makes its biggest acquisition to date with
National ICEE Corp.
* Mrs. GoodCookie, a line of ready-to-bake cookies is
introduced.
1999
* J&J acquires CAMDEN CREEK BAKERY.
* Frozen novelties are introduced under the ICEE
brand.
2000
* J&J launches a line of frozen desserts under the
Minute Maid brand.
* SUPERPRETZEL merchandiser/display is updated with a
new look for the millennium.
2001
* J&J acquires Uptown Bakeries.
* Pretzel Fillers, a new and unique line of
filled and topped soft pretzels, are
introduced.
* Sales reach $352 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In addition to historical information, this
discussion and analysis contains forward-looking
statements. The forward-looking statements
contained herein are subject to certain risks and
uncertainties that could cause actual results to
differ materially from those projected in the
forward-looking statements. Important factors
that might cause such a difference include, but
are not limited to, those discussed in the
"Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Readers are cautioned not to place undue reliance
on these forward-looking statements, which
reflect management's analysis only as of the date
hereof. The Company undertakes no obligation to
publicly revise or update these forward-looking
statements to reflect events or circumstances
that arise after the date hereof.
RESULTS OF OPERATIONS
Fiscal 2001 (52 weeks) Compared to Fiscal 2000
(53 weeks)
Net sales increased $33,206,000 or 10% to
$351,696,000 in fiscal 2001 from $318,490,000 in
fiscal 2000.
Excluding sales resulting from acquisitions,
sales increased 5% for the 52 weeks compared to
the 53 weeks in fiscal 2000.
The Company has two reportable segments, as
disclosed in the notes to the consolidated
financial statements: Snack Foods and Frozen
Beverages. The Snack Foods segment manufactures
and distributes snack foods and bakery items,
which includes sales to food service customers,
retail supermarkets and our restaurant group. The
Frozen Beverages segment markets and distributes
frozen beverage products. These segments are
managed as strategic business units due to their
distinct production processes and capital
requirements.
Snack Foods
Sales to food service customers increased
$22,726,000 or 19% to $140,911,000 in fiscal
2001. Excluding sales resulting from
acquisitions, sales would have increased
approximately 4% for the year. Soft pretzel sales
to the food service market increased 2% to
$61,520,000 for the 2001 year. Excluding sales
resulting from acquisitions, food service soft
pretzel sales would have decreased approximately
3%. Churro sales increased 3% to $11,478,000.
Frozen juice bar and ices sales increased 16% to
$33,558,000. Approximately 40% of the frozen
juice bars and ices sales increase resulted from
acquisitions. Sales of cookies to food service
customers increased $2,346,000, or 20%, to
$13,943,000 for the year.
*Minute Maid is a registered trademark of The
Coca-Cola Company.
Sales of products to retail supermarkets
increased $8,533,000 or 16% to $62,437,000 in
fiscal 2001. Total soft pretzel sales to retail
supermarkets were $26,336,000, an increase of 2%
from fiscal 2000. Sales of our flagship
SUPERPRETZEL brand soft pretzels increased 2% to
$24,093,000. Sales of frozen juice bars and ices
increased $8,113,000 or 28% to $36,935,000 in
2001 from $28,822,000 in 2000 due to increased
volume of LUIGI'S Real Italian Ice and the
Company's MINUTE MAID* brand licensed products.
Bakery sales increased $1,054,000 or 4% to
$30,462,000 in fiscal 2001 due to increased unit
sales across our customer base. Our Bavarian
Pretzel Bakery restaurant group sales decreased
6% to $12,043,000 for the year due to decreased
mall traffic and the closing of unprofitable
stores. All of the increases and decreases in
sales throughout the Snack Foods segment were
primarily the result of changes in unit volume.
Frozen Beverages
Frozen beverage and related product sales
increased $1,672,000 or 2% to $105,843,000 in
fiscal 2001. Beverage sales alone increased 2% to
$89,930,000 for the year although gross profit on
beverage sales was essentially unchanged for the
year. Service and lease revenue increased
$1,433,000, or 13% to $12,396,000 for the year.
Consolidated
Gross profit decreased to 49% of sales in 2001
from 52% of sales in 2000. Approximately 85% of
the decrease is due to the inclusion of Uptown
Bakeries which has a low gross profit percentage
relative to the balance of the Company's
business.
Total operating expenses increased $7,360,000 to
$152,761,000 in fiscal 2001 and as a percentage
of sales decreased to 43% in 2001 from 46% in
2000. Marketing expenses decreased to 31% of
sales in fiscal 2001 from 33% in 2000 because of
the inclusion of Uptown Bakeries which had no
significant marketing expenses. Distribution and
administrative expenses were 8% and 4%,
respectively, in both years.
Operating income increased $1,737,000 or 9% to
$20,549,000 in fiscal 2001.
Operating income was impacted by higher property
and casualty insurance costs of approximately
$1,500,000 for the year. The higher costs were
due to market conditions and the Company's claims
experience.
Interest expense increased $428,000 to $3,183,000
in fiscal 2001 due to debt incurred to fund
acquisitions and a $213,000 charge to writedown a
swap agreement to fair value.
Sundry income increased $1,476,000 to $833,000 in
2001 compared to sundry expense of $643,000 in
2000, primarily due to insurance gains and the
settlement of certain litigation in 2001 compared
to the writedown to its net realizable value of
property held for sale in 2000.
The effective income tax rate was 36% in fiscal
2001 and 37% in fiscal 2000.Net earnings
increased $1,908,000 or 19% in fiscal 2001 to
$11,876,000 or $1.36 per fully diluted share.
Fiscal 2000 (53 weeks) Compared to Fiscal 1999
(52 weeks)
Net sales increased $32,673,000 or 11% to
$318,490,000 in fiscal 2000 from $286,493,000 in
fiscal 1999.
The Company has two reportable segments, as
disclosed in the notes to the consolidated
financial statements: Snack Foods and Frozen
Beverages. The Snack Foods segment manufactures
and distributes snack foods and bakery items,
which includes sales to food service customers
and retail supermarkets. The Frozen Beverages
segment markets and distributes frozen beverage
products. These segments are managed as strategic
business units due to their distinct production
processes and capital requirements.
Snack Foods
Sales to food service customers increased
$4,978,000 or 4% to $118,185,000 in fiscal 2000.
Soft pretzel sales to the food service market
decreased 2% to $60,309,000 due primarily to
lower unit sales to two customers. Churro sales
decreased 8% to $11,162,000 due primarily to
decreased unit sales to two customers. Frozen
juice bar and ices sales increased 7% to
$29,014,000. Sales of the Company's MINUTE MAID
brand licensed products accounted for the frozen
juice bars and ices sales increase. Sales of
cookies to food service customers increased
$4,471,000, or 63%, to $11,597,000 for the year
due to the acquisition of the Camden Creek Bakery
cookie business and increased unit sales.
Sales of products to retail supermarkets
increased $11,921,000 or 28% to $53,904,000 in
fiscal 2000. Total soft pretzel sales to retail
supermarkets were $25,721,000, an increase of 7%
from fiscal 1999. Sales of our flagship
SUPERPRETZEL brand soft pretzels, excluding
SOFTSTIX, increased 3% to $19,340,000. An
advertising program which began in last year's
first quarter helped boost year ago pretzel
sales. SOFTSTIX sales increased $1,203,000 or 40%
to $4,234,000 from the previous year. Sales of
frozen juice bars and ices increased $10,949,000
or 61% to $28,822,000 in 2000 from $17,873,000 in
1999 due primarily to the introduction of the
Company's MINUTE MAID brand licensed products.
Bakery sales increased $2,503,000 or 9% to
$29,408,000 in fiscal 2000 due to increased unit
sales across our customer base. Our Bavarian
Pretzel Bakery restaurant group sales increased
1% to $12,822,000 for the year.
Frozen Beverages
Frozen beverage and related product sales
increased $12,422,000 or 14% to $104,171,000 in
fiscal 2000. Beverage sales alone increased 12%
to $88,421,000 for the year and gross profit on
beverage sales increased 8%, or $4,694,000 for
the year. Service and lease revenue increased
$4,378,000 for the year.
Consolidated
Gross profit decreased to 52% of sales in 2000
from 53% of sales in 1999. The gross profit
percentage decrease is primarily attributable to
cost overruns during start up manufacturing of
our MINUTE MAID brand licensed products which was
begun during the Company's second quarter, lower
food service pretzel and churro sales, and lower
gross profit percentages of the increased service
and lease revenue of our frozen beverage
business.
Total operating expenses increased $18,834,000 to
$145,401,000 in fiscal 2000 and as a percentage
of sales increased to 46% in 2000 from 44% in
1999. Marketing expenses increased to 33% of
sales in fiscal 2000 from 32% in 1999 due to
increased depreciation expense of frozen beverage
dispensers, increased payroll and vehicle costs
for the servicing of frozen beverage dispensers
and establishing of reserves for trade
receivables from movie theatre chains.
Distribution expenses were 8% of sales in fiscal
2000 and 1999. Administrative expenses were 4% of
sales in both fiscal 2000 and 1999.
Operating income decreased $6,151,000 or 25% to
$18,812,000 in fiscal 2000.
Without the impact of reserving for accounts
receivable from movie theatre chains, operating
income would have decreased $5,098,000 or 20% to
$19,865,000 in fiscal 2000.
Interest expense decreased $469,000 to $2,755,000
in fiscal 2000 due to lower debt levels.
Sundry expense increased $1,058,000 to $643,000
in 2000 compared to sundry income of $415,000 in
1999 primarily because of the writedown to its
net realizable value of property held for sale in
2000.
The effective income tax rate was 37% in both
fiscal 2000 and fiscal 1999.
Net earnings decreased $4,296,000 or 30% in
fiscal 2000 to $9,968,000 or $1.10 per fully
diluted share.
Without the impact of reserving for the trade
receivables from movie theatre chains and the
writedown of the property held for sale, net
earnings in 2000 would have been $11,158,000 or
$1.23 per diluted share.
ACQUISITIONS, LIQUIDITY AND CAPITAL RESOURCES
In November 2000, the Company acquired the assets
of Uptown Bakeries for cash. Uptown Bakeries,
located in Bridgeport, NJ, sells bakery items to
the food service industry with approximate annual
sales of $17,000,000.
In February 1999, the Company acquired the Camden
Creek Bakery cookie business from Schwan's Sales
Enterprises, Inc., Marshall, MN for cash. Camden
Creek sells frozen ready-to-bake cookies to the
food service industry with approximate annual
sales of $5,000,000.
All of the Company's acquisitions were accounted
for under the purchase method of accounting, and
the operations are included in the consolidated
financial statements from the respective
acquisition date.
The Company's future expected operating cash flow
along with its borrowing capacity are its primary
sources of liquidity. The Company believes that
these sources are sufficient to fund future
growth and expansion.
Fluctuations in the value of the Mexican peso and
the resulting revaluation of the net assets of
the Company's Mexican frozen beverage subsidiary
caused decreases of $25,000 and $15,000 in
accumulated comprehensive income in the 2001 and
2000 fiscal years, respectively, and an increase
of $93,000 in fiscal year 1999. In 2001, sales of
the Mexican subsidiary were $3,248,000 as
compared to $2,967,000 in 2000.
In fiscal year 2001, the Company purchased and
retired 111,000 shares of its common stock at a
cost of $1,431,000. In fiscal year 2000, the
Company purchased and retired 614,000 shares of
its common stock at a cost of $9,834,000. In
fiscal year 1999, the Company purchased and
retired 250,000 shares of its common stock at a
cost of $5,625,000. The Company purchased the
stock in 1999 from its President and Chief
Executive Officer. Under a buyback authorization
approved by the Board of Directors in December
1999, 275,000 shares remain to be purchased at
September 29, 2001.
Subsequent to September 29, 2001 and prior to the
issuance of these financial statements, the
Company refinanced its general-purpose bank
credit line. The outstanding balance under this
facility was $23,000,000 at September 29, 2001.
The new agreement provides for up to a
$50,000,000 revolving credit facility repayable
in three years, with the availability of
repayments without penalty. The new agreement
contains restrictive covenants and requires
commitment fees in accordance with standard
banking practice.
In December 2001, the Company borrowed $5,000,000
on its general-purpose bank credit line to pay
off early its $5,000,000 7.25% redeemable
economic development revenue bond payable
December 2005.
In June 1998, Statement of Financial Accounting
Standards (SFAS) No. 133 "Accounting for
Derivative Instruments and Hedging Activities"
was issued. Subsequent to this statement, SFAS
No. 137 was issued, which amended the effective
date of SFAS No. 133 to be all fiscal quarters of
all fiscal years beginning after June 15, 2000.
In June 2000, SFAS 138 was issued, "Accounting
for Certain Derivative Instruments and Certain
Hedging Activities, an amendment of SFAS 133."
SFAS 133, as amended by SFAS 138, requires that
all derivative instruments be recorded on the
balance sheet at their respective fair values.
Changes in the fair value of derivatives are
recorded each period in current earnings or other
comprehensive income, depending on the
designation of the hedge transaction. The Company
adopted SFAS 133, as amended by SFAS 138, on
October 1, 2000. Based on the Company's minimal
use of derivatives, the adoption of this standard
did not have a significant impact on earnings or
financial position of the Company.
In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements
(SAB 101) which addresses certain criteria for
revenue recognition. SAB 101, as amended by SAB
101A and SAB 101B, outlines the criteria that
must be met to recognize revenue and provides
guidance for disclosures related to revenue
recognition policies. The Company implemented the
provisions of SAB 101 on October 1, 2000. The
Company's revenue recognition policies complied
with the guidance contained in SAB 101 and,
therefore, the Company's results of operations
were not materially affected.
On June 29, 2001, SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and
Intangible Assets, were issued. These statements
are expected to result in significant
modifications relative to the Company's
accounting for goodwill and other intangible
assets. SFAS No. 141 requires that all business
combinations initiated after June 30, 2001 must
be accounted for under the purchase method of
accounting. SFAS No. 141 was effective upon
issuance. SFAS No. 142 includes requirements to
test goodwill and indefinite lived intangible
assets for impairment rather than amortize them.
SFAS No. 142 is effective for fiscal years
beginning after December 31, 2001 and early
adoption is permitted for companies with fiscal
years beginning after March 15, 2001 provided
they have not issued their first quarter
financial statements. The Company anticipates
early adopting SFAS 142 on September 30, 2001 and
expects to complete the measurement of any
potential transitional impairment loss by the due
date of its first quarter financial statements.
If adopted, the Company will no longer amortize
goodwill, thereby eliminating an annual
amortization expense of approximately $2,700,000.
Fiscal 2001 Compared to Fiscal 2000
Trade receivables increased $2,533,000 or 7% to
$35,501,000 in 2001 due primarily to the
receivables of Uptown Bakeries, which was
acquired in November 2000. Inventories increased
$276,000 or 1% to $21,749,000 in 2001.
Property, plant and equipment decreased
$4,413,000 to $104,756,000 because expenditures
for dispensers required for the expansion of the
frozen beverage business, for ovens and portable
merchandisers required for the expansion of the
food service business and for the expansion and
upgrading of production capability at the
Company's manufacturing facilities was
approximately $13,000,000 less than depreciation
of existing assets which was partially offset by
the property, plant and equipment acquired in the
Uptown Bakeries acquisition.
Goodwill, trademarks and rights, net of
accumulated amortization decreased $1,070,000 to
$47,698,000 due to amortization net of the
acquisition of the Chill brand fruit ice license
agreement.
Accounts payable and accrued liabilities
increased $5,039,000 in 2001 from $33,641,000 in
2000 due primarily to an increase in income taxes
payable resulting from a change in the due date
of the September 15 federal estimated tax payment
to October 1.
Current maturities of long-term debt decreased by
$2,071,000 to $115,000 and long-term debt, less
current maturities decreased by $14,113,000 to
$28,368,000 primarily due to the paydown of debt.
Deferred income taxes increased by $888,000 to
$9,228,000 which related primarily to disposals
and depreciation of property, plant and
equipment.
Common stock increased $1,018,000 to $29,421,000
in 2001 because of the exercise of incentive
stock options and stock issued under the
Company's stock purchase plan for employees, net
of share repurchases.
Net cash provided by operating activities
increased $12,248,000 to $49,454,000 in 2001
primarily due to increased net earnings,
depreciation and amortization of fixed assets,
deferred income taxes and accounts payable and
accrued liabilities.
Net cash used in investing activities decreased
$6,995,000 to $28,088,000 in 2001 primarily due
to decreased purchases of property, plant and
equipment.
Net cash used in financing activities increased
$8,619,000 in 2001 to $15,308,000 from $6,689,000
in 2000. The increase of $8,619,000 was the
result of net paydown in borrowings in 2001 of
$16,184,000 compared to an increase in borrowings
of $1,793,000 in 2000 offset by a decrease of
$8,403,000 in payments to repurchase common
stock.
Fiscal 2000 Compared to Fiscal 1999
There were no short-term investments held to
maturity at September 30, 2000 as compared to
$924,000 at September 25, 1999 because the
investment matured during fiscal year 2000.
Trade receivables increased $1,564,000 or 5% to
$32,968,000 in 2000 primarily due to receivables
generated from sales of the Company's MINUTE MAID
brand licensed products, introduced in fiscal
year 2000. Inventories increased $5,286,000 or
33% to $21,473,000 in 2000 primarily because of
the introduction of the MINUTE MAID brand
licensed products, parts required to service
frozen beverage dispensers in over 7,000 Burger
King* restaurants, and the start-up of cookie
manufacturing on the East Coast.
*Burger King is a registered trademark of Burger
King Corporation.
Property, plant and equipment increased
$29,071,000 to $261,324,000 primarily because of
expenditures for dispensers required for the
expansion of the frozen beverage business, for
ovens and portable merchandisers required for the
expansion of the food service business and for
the expansion and upgrading of production
capability at the Company's manufacturing
facilities.
Goodwill, trademarks and rights, net of
accumulated amortization decreased $2,053,000 to
$48,768,000 due to amortization.
Accounts payable and accrued liabilities
increased $1,951,000 in 2000 from $31,690,000 in
1999 due primarily to increased levels of
business.
Current maturities of long-term debt decreased by
$6,028,000 to $2,186,000 and long-term debt, less
current maturities increased by $7,821,000 to
$42,481,000 because of the reclassification of
debt due under an unsecured term loan and a
general-purpose bank credit line which was
refinanced subsequent to September 30, 2000 and
prior to the issuance of these financial
statements.
Deferred income taxes increased by $638,000 to
$8,340,000 which related primarily to disposals
and depreciation of property, plant and
equipment.
Common stock decreased $7,848,000 in 2000 to
$28,403,000 because of the repurchase and
retirement of 614,000 shares of common stock, net
of the exercise of incentive stock options and
stock issued under the Company's stock purchase
plan for employees.
Net cash provided by operating activities
decreased $11,162,000 to $37,206,000 in 2000
primarily due to decreased net earnings, and
increases in trade receivables and inventories.
Net cash used in investing activities increased
$6,464,000 to $35,083,000 in 2000 primarily due
to increased purchases of property, plant and
equipment.
Net cash used in financing activities decreased
$10,319,000 in 2000 to $6,689,000 from
$17,008,000 in 1999. The decrease of $10,319,000
was the result of an increase in borrowings in
2000 of $1,793,000 compared to a net paydown of
$13,748,000 in 1999 caused by an increase of
$4,209,000 in payments to repurchase common stock
in addition to the aforementioned reduction in
net cash provided by operating activities and the
increase in net cash used in investing
activities.
CONSOLIDATED STATEMENTS OF EARNINGS
Fiscal year ended
September 29, September 30, September 26,
2001 2000 1999
(52 weeks) (53 weeks) (52 weeks)
(in thousands, except per share information)
Net Sales $351,696 $318,490 $286,493
Cost of goods sold 178,386 154,277 134,963
Gross profit 173,310 164,213 151,530
Operating expenses
Marketing 110,323 104,784 90,563
Distribution 26,985 26,296 22,366
Administrative 12,747 11,470 10,668
Amortization of intangibles
and deferred costs 2,706 2,851 2,970
152,761 145,401 126,567
Operating income 20,549 18,812 24,963
Other income (expenses)
Investment income 356 409 487
Interest expense (3,183) (2,755) (3,224)
Sundry 833 (643) 415
(1,994) (2,989) (2,322)
Earnings before
income taxes 18,555 15,823 22,641
Income taxes 6,679 5,855 8,377
NET EARNINGS $11,876 $9,968 $14,264
Earnings per diluted share $1.36 $1.10 $1.50
Weighted average number of
diluted shares 8,754 9,063 9,530
Earnings per basic share $1.40 $1.13 $1.58
Weighted average number
of basic shares 8,502 8,819 9,025
The accompanying notes are an integral part of these statements.
CONSOLIDATED BALANCE SHEETS
September 29, September 30,
2001 2000
(in thousands, except share amounts)
Assets
Current Assets
Cash and cash equivalents $7,437 $1,379
Receivables
Trade, less allowances of
$1,672 and $1,573,
respectively 35,501 32,968
Other 1,517 658
Inventories 21,749 21,473
Prepaid expenses and other 1,197 1,418
Total current assets 67,401 57,896
Property, Plant and Equipment,
at cost 279,423 261,324
Less accumulated depreciation
and amortization 174,667 152,155
Other Assets 104,756 109,169
Goodwill, trademarks and rights,
less accumulated amortization
of $14,108 and $11,423,
respectively 47,698 48,768
Long-term investment securities
held to maturity 1,515 1,620
Sundry 3,111 2,586
52,324 52,974
$224,481 $220,039
Liabilities and Stockholders' Equity
Current Liabilities
Current maturities of
long-term debt $115 $2,186
Accounts payable 24,515 24,913
Accrued liabilities 16,047 8,728
Total current liabilities 40,677 35,827
Long-Term Debt, less current
maturities 28,368 42,481
Deferred Income Taxes 9,228 8,340
Other Long-Term Liabilities 65 117
Stockholders' Equity
Preferred stock, $1 par value; authorized,
5,000,000 shares; none issued - -
Common stock, no par value;
authorized, 25,000,000 shares;
issued and outstanding, 8,636,000
and 8,522,000 respectively 29,421 28,403
Accumulated other comprehensive loss (1,641) (1,616)
Retained earnings 118,363 106,487
146,143 133,274
$224,481 $220,039
The accompanying notes are an integral part of these
statements.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated
Other
Common Stock Comprehensive Retained
Comprehensive
Shares Amount Loss Earnings Total Income
(in thousands)
Balance at September 27,
1998 9,036 $39,120 $(1,694) $82,255 $119,681
Issuance of common
stock upon exercise
of stock options 200 2,487 - - 2,487
Issuance of common
stock for employee
stock purchase plan 14 269 - - 269
Foreign currency
translation
adjustment - - 93 - 93 $93
Repurchase of common
stock (250) (5,625) - - (5,625)
Net earnings for
the fiscal year
ended September 25,
1999 - - - 14,264 14,264 14,264
Comprehensive Income - - - - -$14,357
Balance at September 25,
1999 9,000 $36,251 $(1,601) $96,519 $131,169
Issuance of common
stock upon exercise
of stock options 118 1,688 - - 1,688
Issuance of common
stock for employee
stock purchase plan 18 298 - - 298
Foreign currency
Translation
adjustment - - (15) - (15) $(15)
Repurchase of common
stock (614) (9,834) - - (9,834)
Net earnings for
the fiscal year
ended September 30,
2000 - - - 9,968 9,968 9,968
Comprehensive Income - - - - - $9,953
Balance at September 30,
2000 8,522 $28,403 $(1,616)$106,487 $133,274
Issuance of common
stock upon exercise
of stock options 207 2,194 - - 2,194
Issuance of common
stock for employee
stock purchase plan 18 255 - - 255
Foreign currency
Translation
adjustment - - (25) - (25) $(25)
Repurchase of common
stock (111) (1,431) - - (1,431)
Net earnings for
the fiscal year
ended September 29,
2001 - - - 11,876 11,876 11,876
Comprehensive Income - - - - - $11,851
Balance at September 29,
2001 8,636 $29,421 $(1,641)$118,363 $146,143
The accompanying notes are an integral part of this
statement.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal year ended
September 29, September 30, September 25,
2001 2000 1999
(52 weeks)(53 weeks)(52 weeks)
(in thousands)
Operating activities:
Net earnings $11,876 $9,968 $14,264
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Depreciation and
amortization of
fixed assets 30,170 26,947 24,179
Amortization of
intangibles and
deferred costs 3,346 3,435 3,459
(Gains) losses from
disposals and write-
downs of property
and equipment (330) 830 168
Increase in deferred
income taxes 888 638 3,315
Changes in assets
and liabilities,
net of effects from
purchase of companies:
(Increase) decrease
in accounts
receivable (3,411) (1,783) 2,609
(Increase) decrease
in inventories (361) (4,997) 700
Decrease (increase)
in prepaid expenses
and other 221 (288) 52
Increase (decrease)
in accounts payable
and accrued
liabilities 7,055 2,456 (378)
Net cash provided by
operating activities 49,454 37,206 48,368
Investing activities:
Purchases of property,
plant and equipment (17,127) (34,928) (26,606)
Payments for purchase
of companies, net of
cash acquired and debt
assumed (11,330) (1,280) (2,336)
Proceeds from investment
securities held to
maturity 105 1,229 255
Proceeds from disposal
of property and
equipment 824 428 518
Other (560) (532) (450)
Net cash used in investing
activities (28,088) (35,083) (28,619)
Financing activities:
Proceeds from borrowings 13,000 11,000 4,000
Proceeds from issuance
of common stock 2,307 1,352 2,365
Payments to repurchase
common stock (1,431) (9,834) (5,625)
Payments of long-term
debt (29,184) (9,207) (17,748)
Net cash used in financing
activities (15,308) (6,689) (17,008)
Net increase (decrease)
in cash and cash
equivalents 6,058 (4,566) 2,741
Cash and cash equivalents at
beginning of year 1,379 5,945 3,204
Cash and cash equivalents at
end of year $ 7,437 $ 1,379 $ 5,945
The accompanying notes are an integral part of these
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
J & J Snack Foods Corp. and Subsidiaries (the Company)
manufactures, markets and distributes a variety of
nutritional snack foods and beverages to the food
service and retail supermarket industries. A summary
of the significant accounting policies consistently
applied in the preparation of the accompanying
consolidated financial statements follows.
1. Principles of Consolidation
The consolidated financial statements include the
accounts of J & J Snack Foods Corp. and its wholly-
owned subsidiaries. Intercompany balances and
transactions have been eliminated in the
consolidated financial statements.
2. Revenue Recognition
The Company recognizes sales and the related cost of
sales at the time the products are shipped to
customers or when its services are performed. The
Company provides an allowance for doubtful
receivables after taking into consideration
historical experience and other factors.
In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements (SAB
101) which addresses certain criteria for revenue
recognition. SAB 101, as amended by SAB 101A and SAB
101B, outlines the criteria that must be met to
recognize revenue and provides guidance for
disclosures related to revenue recognition policies.
The Company implemented the provisions of SAB 101 on
October 1, 2000. The Company's revenue recognition
policies complied with the guidance contained in SAB
101 and, therefore, the Company's results of
operations were not materially affected.
In September 2000, the Emerging Issues Task Force
reached a consensus on Issue 00-10, "Accounting for
Shipping and Handling Fees and Costs" (Issue 00-10).
Issue 00-10 requires that all amounts billed to
customers related to shipping and handling should be
classified as revenues. In addition, Issue 00-10
specifies that the classification of shipping and
handling cost is an accounting policy decision that
should be disclosed pursuant to APB 22, "Disclosure
of Accounting Policies". The Company's product costs
include amounts for shipping and handling;
therefore, it charges its customers shipping and
handling fees at the time the products are shipped
or when its services are performed. The cost of
shipping products to the customer is recognized at
the time the products are shipped to the customer
and is included in Distribution expenses.
Accordingly, this consensus opinion had no effect on
the Company's current and previous classifications.
The Company also sells service contracts covering
frozen beverage machines sold. The terms of coverage
range between 12 and 60 months. The Company records
deferred income on service contracts which is
amortized by the straight-line method over the term
of the contracts.
During the years ended September 29, 2001 and
September 30, 2000, the Company sold $1,329,000 and
$1,090,000, respectively, of service contracts
related to its frozen beverage machines. At
September 29, 2001 and September 30, 2000, deferred
income on service contracts was $466,000 and
$85,000, respectively, of which $65,000 is included
in other long-term liabilities as of September 29,
2001 and the balance is reflected as short-term and
included in accrued liabilities on the consolidated
balance sheet. Service contract income of $948,000,
$1,143,000 and $897,000 was recognized for the
fiscal years ended 2001, 2000 and 1999,
respectively.
3. Foreign Currency
Assets and liabilities in foreign currencies are
translated into U.S. dollars at the rate of exchange
prevailing at the balance sheet date. Revenues and
expenses are translated at the average rate of
exchange for the period. The cumulative translation
adjustment is recorded as a separate component of
stockholders' equity.
4. Use of Estimates
In preparing financial statements in conformity with
accounting principles generally accepted in the
United States of America, management is required to
make estimates and assumptions that affect the
reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at
the date of the financial statements, and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from
those estimates.
5. Cash Equivalents
Cash equivalents are short-term, highly liquid
investments with original maturities of three months
or less.
6. Concentrations of Credit Risk
Concentrations of credit risk with respect to trade
receivables are limited due to the dispersion of the
Company's customers over different industries and
geographies.
7. Inventories
Inventories are valued at the lower of cost
(determined by the first-in, first-out method) or
market.
8. Investment Securities
The Company classifies its investments in securities
in one of two categories: held to maturity and
available for sale. Debt securities that the Company
has the positive intent and ability to hold to
maturity are classified as held to maturity and are
reported at amortized cost. The balance of its debt
securities and any equity securities are classified
as available for sale.
Net unrealized gains and losses, if significant, on
such securities, net of income tax, are reported as
a separate component of stockholders' equity and
excluded from the determination of net income.
9. Depreciation and Amortization
Depreciation of equipment and buildings is provided
for by the straight-line and accelerated methods
over the assets' estimated useful lives.
Amortization of improvements is provided for by the
straight-line method over the term of the lease or
the assets' estimated useful life, whichever is
shorter. Goodwill, trademarks and rights arising
from acquisitions are amortized by the straight-line
method over periods ranging from 5 to 40 years.
Management reviews the realization of goodwill based
upon past and expected performance of individual
acquired businesses.
The Company follows SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of", which provides
guidance on when to recognize and how to measure
impairment losses of long-lived assets and certain
identifiable intangibles and how to value long-lived
assets to be disposed of.
10. Fair Value of Financial Instruments
The carrying values of the Company's short-term
financial instruments, such as receivables and
accounts payable, approximate their fair values,
based on the short-term maturities of these
instruments. The carrying values of long-term debt
obligations, consisting primarily of unsecured term
note and an unsecured general purpose credit line
with interest rates based on current short-term
market rates, approximate the fair value at
September 29, 2001 and September 30, 2000.
11. Income Taxes
The Company accounts for its income taxes under the
liability method. Under the liability method,
deferred tax assets and liabilities are determined
based on the difference between the financial
statement and tax bases of assets and liabilities as
measured by the enacted tax rates which will be in
effect when these differences reverse. Deferred tax
expense is the result of changes in deferred tax
assets and liabilities.
12. Earnings Per Common Share
The Company follows SFAS No. 128, "Earnings Per
Share" (EPS). This standard eliminated primary and
fully diluted EPS and instead requires presentation
of basic and diluted EPS in conjunction with the
disclosure of the methodology used in computing such
EPS. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by
the weighted average common shares outstanding
during the period. Diluted EPS takes into
consideration the potential dilution that could
occur if securities (stock options) or other
contracts to issue common stock were exercised and
converted into common stock.
13. Accounting for Stock-Based Compensation
The Company follows SFAS No. 123, "Accounting for
Stock-Based Compensation", which contains a fair
value-based method for valuing stock-based
compensation that entities may use, which measures
compensation cost at the grant date based on the
fair value of the award. Compensation is then
recognized over the service period, which is usually
the vesting period. The Company has chosen an
alternative, permitted by the standard, to continue
accounting for employee stock options and similar
equity instruments under APB Opinion No. 25,
"Accounting for Stock Issued to Employees."
14. Advertising Costs
Advertising costs are expensed as incurred. Total
advertising expense was $5,451,000, $4,878,000, and
$5,537,000 for the fiscal years 2001, 2000 and 1999,
respectively.
15. Interest Rate Risk Management
As part of its risk management activities, the
Company uses interest rate swaps to modify the
interest rate characteristics of certain long-term
obligations. The Company holds no other derivatives
or similar instruments. The derivatives contracts
are designated as hedges when acquired.
They are expected to be effective economic hedges
and have high correlation with the items being
hedged at inception and throughout the hedge period.
The variable interest rate of a swap contract is
referenced to the same index as the variable
interest rate of the debt being hedged.
Interest rate swaps are accounted for using the
accrual method, with an adjustment to interest
expense in the income statement. The effects of swap
positions are included in financing activities in
the Statement of Cash Flows. Interest receivable or
payable under the swap contracts is included in
Receivables or Accounts Payable. Unrealized gains
and losses on the swaps are not recognized in the
balance sheet. Realized gains and losses from
disposition or settlement of swap contracts are
deferred on the balance sheet and amortized to
interest expense over the appropriate period.
If the hedged item is settled or terminated,
deferred and/or unrecognized gains or losses on the
hedging instrument on that date are recognized as an
adjustment to the gain or loss on disposition or
termination of the related hedged item. Future
accruals on the swap and subsequent gains and losses
on the swap or forward contract are included in
income in the period they occur.
16. Commodity Price Risk Management
The Corporation's most significant raw material
requirements include flour, shortening, corn syrup,
chocolate and macadamia nuts. The Corporation
attempts to minimize the effect of future price
fluctuations related to the purchase of raw
materials primarily through forward purchasing to
cover future manufacturing requirements, generally
for periods from 1 to 24 months. Futures contracts
are not used in combination with forward purchasing
of these raw materials. The Corporation's
procurement practices are intended to reduce the
risk of future price increases, but also may
potentially limit the ability to benefit from
possible price decreases.
17. Comprehensive Income
In fiscal year 1999, the Company adopted SFAS No.
130, "Reporting Comprehensive Income". SFAS No. 130
established standards for reporting and display of
comprehensive income and its components in the
financial statements. These financial statements
were reclassified in fiscal year 1999 to reflect the
provisions of SFAS No. 130.
18. Segment Reporting
In fiscal year 1999, the Company adopted SFAS No.
131, "Disclosures about Segments of an Enterprise
and Related Information". SFAS No. 131 superceded
SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the "industry
segment" approach with the "management approach".
The management approach designates the internal
organization that is used by management for making
operating decisions and assessing performance as the
source of the Company's reportable segments, as well
as disclosures about products and services and major
customers. The adoption of SFAS No. 131 did not
affect the results of operations or the financial
position of the Company.
19. Recent Accounting Pronouncements
In June 1998, Statement of Financial Accounting
Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities" was issued.
Subsequent to this statement, SFAS No. 137 was
issued, which amended the effective date of SFAS No.
133 to be all fiscal quarters of all fiscal years
beginning after June 15, 2000. In June 2000, SFAS
138 was issued, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an
amendment of SFAS 133". SFAS 133, as amended by SFAS
138, requires that all derivative instruments be
recorded on the balance sheet at their respective
fair values. Changes in the fair value of
derivatives are recorded each period in current
earnings or other comprehensive income, depending on
the designation of the hedge transaction. The
Company adopted SFAS 133, as amended by SFAS 138, on
October 1, 2000. Based on the Company's minimal use
of derivatives, the adoption of this standard did
not have a significant impact on earnings or
financial position of the Company.
On June 29, 2001, SFAS No. 141 "Business
Combinations" and SFAS No. 142 "Goodwill and
Intangible Assets" were issued. These statements are
expected to result in significant modifications
relative to the Company's accounting for goodwill
and other intangible assets. SFAS No. 141 requires
that all business combinations initiated after June
30, 2001 must be accounted for under the purchase
method of accounting. SFAS No. 141 was effective
upon issuance. SFAS No. 142 includes requirements to
test goodwill and indefinite lived intangible assets
for impairment rather than amortize them. SFAS No.
142 is effective for fiscal years beginning after
December 31, 2001 and early adoption is permitted
for companies with fiscal years beginning after
March 15, 2001 provided they have not issued their
first quarter financial statements. The Company
anticipates early adopting SFAS 142 on September 30,
2001 and expects to complete the measurement of any
potential transitional impairment loss by the due
date of its first quarter financial statements. If
adopted, the Company will no longer amortize
goodwill, thereby eliminating an annual amortization
expense of approximately $2,700,000.
20. Reclassifications
Certain prior year financial statement amounts have
been reclassified to be consistent with the
presentation for the current year.
NOTE B - ACQUISITIONS
On November 20, 2000, the Company acquired the
assets of Uptown Bakeries for cash. Uptown Bakeries,
located in Bridgeport, NJ, sells fresh bakery
products to the food service industry with
approximate annual sales of $17 million.
In February 1999, the Company acquired the Camden
Creek Bakery cookie business from Schwan's Sales
Enterprises, Inc., Marshall, MN. Camden Creek sells
frozen ready-to-bake cookies to the food service
industry with approximately $4.6 million of sales in
1998.
These acquisitions were accounted for under the
purchase method of accounting, and the operations
are included in the consolidated financial
statements from the respective acquisition dates.
NOTE C - INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and
losses, and fair values of the Company's long-term
investment securities held to maturity at September
29, 2001 are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
(in thousands)
Municipal government
securities $1,015 $ 30 $ - $1,045
Other debt securities 500 - - 500
$1,515 $30 $ - $1,545
The amortized cost, gross unrealized gains and losses,
and fair values of the Company's long-term investment
securities available for sale and held to maturity at
September 30, 2000 are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
(in thousands)
Municipal government
securities $1,120 $ - $ 64 $1,056
Other debt securities 500 - - 500
$1,620 $ - $64 $1,556
The following table lists the maturities of long-
term investment securities classified as held to
maturity at September 29, 2001:
Amortized
Cost Fair Value
(in thousands)
Due after one year through five years $1,515 $1,545
There were no proceeds from sales of securities in the
past three years. The Company uses the specific
identification method to determine the cost of
securities sold.
NOTE D - INVENTORIES
Inventories consist of the following:
September 29, September 30,
2001 2000
(in thousands)
Finished goods $9,965 $10,714
Raw materials 2,509 2,136
Packaging materials 3,146 2,532
Equipment parts and other 6,129 6,091
$21,749 $21,473
NOTE E - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
September 29, September 30, Estimated
2001 2000 Useful Lives
(in thousands)
Land $756 $795 -
Buildings 5,456 5,586 15-39.5 years
Plant machinery
and equipment 85,312 75,817 5-10 years
Marketing equipment 164,381 156,093 5 years
Transportation equipment 796 2,043 5 years
Office equipment 7,420 6,981 3-5 years
Improvements 15,182 12,705 5-20 years
Construction in progress 120 1,304 -
$279,423 $261,324
NOTE F - ACCRUED LIABILITIES
Included in accrued liabilities is accrued
compensation of $4,922,000 and $4,134,000 as of
September 29, 2001 and September 30, 2000,
respectively.
NOTE G - LONG-TERM DEBT
Subsequent to September 29, 2001 and prior to the
issuance of these financial statements, the Company
refinanced its general-purpose bank credit line. The
outstanding balance under this facility was
$23,000,000 at September 29, 2001. The new agreement
provides for up to a $50,000,000 revolving credit
facility repayable in three years, with the
availability of repayments without penalty. The new
agreement contains restrictive covenants and requires
commitment fees in accordance with standard banking
practice.
Long-term debt consists of the following:
September 29, September 30,
2001 2000
(in thousands)
Bank debt refinanced in 2001 $ - $39,000
$60,000,000 unsecured general-purpose
bank credit line, with interest
rate tied to LIBOR with interest
payments due monthly (subject to
financial covenants), subsequently
refinanced as long-term, discussed
above 23,000 -
7.25% redeemable economic development
revenue bonds payable December 2005;
interest payable semiannually
(subject to financial covenants);
paid off December 2001 5,000 5,000
Other 483 667
28,483 44,667
Less current maturities 115 2,186
$28,368 $42,481
Annual principal payments of long-term debt as of
September 29, 2001 are as follows (in thousands):
2002 $115
2003 368
2004 -
2005 28,000
$28,483
NOTE H - INCOME TAXES
Income tax expense is as follows:
Fiscal year ended
September 29, September 30, September 25,
2001 2000 1999
(in thousands)
Current
U.S. Federal $5,042 $4,697 $4,516
Foreign 96 41 55
State 653 479 491
$5,791 $5,217 $5,062
Deferred
U.S. Federal 816 606 3,046
State 72 32 269
888 638 3,315
$6,679 $5,855 $8,377
The provisions for income taxes differ from the
amounts computed by applying the federal income tax
rate of approximately 34% to earnings before income
taxes for the following reasons:
Fiscal year ended
September 29, September 30, September 25,
2001 2000 1999
(in thousands)
Income taxes at statutory rates $6,309 $5,341 $7,698
Increase (decrease) in taxes
resulting from:
State income taxes,
net of federal
income tax benefit 360 337 324
Nontaxable income (11) (28) (38)
Other, net 21 205 393
$6,679 $5,855 $8,377
Deferred tax assets and liabilities consist of the following:
September 29, September 30,
2001 2000
(in thousands)
Deferred tax assets
Vacation accrual $483 $427
Insurance accrual 899 1,162
Allowances 1,201 1,187
Other, net 407 1,062
2,990 3,838
Deferred tax liabilities
Depreciation of property
and equipment 12,087 12,046
Other, net 131 132
12,218 12,178
$9,228 $8,340
NOTE I - EARNINGS PER SHARE
The Company's calculation of EPS is as follows:
Fiscal year ended September 29, 2001
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Earnings Per Basic Share
Net Income available to common
stockholders $11,876 8,502 $1.40
Effect of Dilutive Securities
Options - 252 (.04)
Earnings Per Diluted Shares
Net Income available to common
stockholders plus assumed
conversions $11,876 8,754 $1.36
294,167 anti-dilutive weighted shares have been
excluded in the computation of 2001 diluted EPS
because the options' exercise price is greater than
the average market price of the common stock.
Fiscal year ended September 30, 2000
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Earnings Per Basic Share
Net Income available to common
stockholders $9,968 8,819 $1.13
Effect of Dilutive Securities
Options - 244 (.03)
Earnings Per Diluted Share
Net Income available to common
stockholders plus assumed
conversions $9,968 9,063 $1.10
241,363 anti-dilutive weighted shares have been
excluded in the computation of 2000 diluted EPS
because the options' exercise price is greater than
the average market price of the common stock.
Fiscal year ended September 25, 1999
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Earnings Per Basic Share
Net Income available to common
stockholders $14,264 9,025 $1.58
Effect of Dilutive Securities
Options - 505 (.08)
Earnings Per Diluted Shares
Net Income available to common
stockholders plus assumed
conversions $14,264 9,530 $1.50
29,484 anti-dilutive weighted shares have been
excluded in the computation of 1999 diluted EPS
because the options' exercise price is greater than
the average market price of the common stock.
NOTE J - COMMITMENTS
1. Lease Commitments
The following is a summary of approximate future
minimum rental commitments for noncancelable operating
leases with terms of more than one year as of
September 29, 2001:
Plants and
Offices Equipment Total
(in thousands)
2002 $4,966 $4,288 $9,254
2003 4,422 3,695 8,117
2004 3,861 2,588 6,449
2005 3,253 786 4,039
2006 and thereafter 14,914 103 15,017
$31,416 $11,460 $42,876
Total rent expense was $8,800,000, $9,330,000 and
$8,547,000 for fiscal years 2001, 2000 and 1999,
respectively.
2. Other Commitments
The Company is a party to litigation which management
currently believes will not have a material adverse
effect on the Company's financial condition or results
of operations.
NOTE K - CAPITAL STOCK
Under share repurchase programs authorized by the
Board of Directors, 275,000 shares remain to be
repurchased. In fiscal year 2001, the Company
purchased and retired 111,000 shares of its common
stock at a cost of $1,431,000. In fiscal year 2000,
the Company purchased and retired 614,000 shares of
its common stock at a cost of $9,834,000. In fiscal
year 1999, the Company purchased and retired 250,000
shares of its common stock at a cost of $5,625,000.
The Company purchased the stock in 1999 from its
President and Chief Executive Officer.
NOTE L - STOCK OPTIONS
The Company has a Stock Option Plan (the "Plan").
Pursuant to the Plan, stock options may be granted to
officers and key employees of the Company which
qualify as incentive stock options as well as stock
options which are nonqualified. The exercise price of
incentive stock options is at least the fair market
value of the common stock on the date of grant. The
exercise price for nonqualified options is determined
by a committee of the Board of Directors. The options
are generally exercisable after three years and expire
no later than ten years from date of grant. There were
2,000,000 shares reserved under the Plan; options for
529,000 shares remain unissued as of September 29,
2001.
The Company has a nonqualified stock option plan for
nonemployee directors and the Chief Executive Officer
of the Company whereby a total of 440,000 shares of
common stock may be issued. Under this plan, each
nonemployee director is granted options to purchase
3,000 shares of common stock, and the Chief Executive
Officer is granted options to purchase 25,000 shares
annually. The option price is equal to the fair market
value of the common stock at the date of grant, and
the options expire ten years after date of grant.
Other nonqualified options have been issued to the
Chief Executive Officer, directors and certain
employees.
The Company has adopted only the disclosure provisions
of SFAS No. 123, "Accounting for Stock-Based
Compensation". It applies APB No. 25 and related
interpretations in accounting for its plans and does
not recognize compensation expense for its stock-based
compensation plans. Had compensation cost for the
plans been determined based on the fair value of the
options at the grant date consistent with SFAS No.
123, the Company's net earnings and earnings per
common share would have been reduced to the pro forma
amounts indicated below:
Fiscal year ended
September 29, September 30, September 25,
2001 2000 1999
(in thousands, except per share amounts)
Net Earnings:
As reported $11,876 $9,968 $14,264
Pro forma $10,225 $8,609 $13,054
Earnings Per Diluted Share:
As reported $1.36 $1.10 $1.50
Pro forma $1.17 $.95 $1.37
These pro forma amounts may not be representative of
future disclosures because they do not take into
effect pro forma compensation expense related to
grants before October 1, 1995. The fair value of these
options is estimated on the date of grant using the
Black-Scholes option pricing model with the following
weighted-average assumptions for grants in fiscal
2001, 2000 and 1999, respectively; expected volatility
of 38% for fiscal year 2001 and 30% for years 2000 and
1999; risk-free interest rates of 4.69%, 6.35% and
6.21%; and expected lives ranging between 4.5 and 10
years for all years.
A summary of the status of the Company's option plans
as of fiscal years 2001, 2000 and 1999 and the changes
during the years ended on those dates is represented
below:
Nonqualified
Incentive Stock Options Stock Options
Weighted- Weighted-
Stock Average Stock Average
Options Exercise Options Exercise
Outstanding Price Outstanding Price
Balance,
September 27, 1998 896,333 $12.18 360,500 $12.41
Granted 241,860 21.87 34,000 21.75
Exercised (149,960) 11.62 (62,000) 11.39
Cancelled (37,574) 12.22 - -
Balance,
September 25, 1999 950,659 14.67 332,500 13.56
Granted 186,334 13.68 34,000 15.94
Exercised (113,253) 10.43 (10,500) 7.00
Cancelled (108,446) 15.55 - -
Balance,
September 30, 2000 915,294 14.92 356,000 13.99
Granted 182,333 21.24 34,000 20.60
Exercised (195,800) 10.80 (34,000) 12.00
Cancelled (21,000) 15.10 - -
Balance,
September 29, 2001 880,827 $17.08 356,000 $14.75
Exercisable Options,
September 29, 2001 319,547 322,000
The weighted-average fair value of incentive options
granted during fiscal years ended September 29, 2001,
September 30, 2000 and September 25, 1999 was $8.19,
$4.93 and $9.22, respectively. The weighted-average
fair value of nonqualified stock options granted
during fiscal years ended September 29, 2001,
September 30, 2000 and September 25, 1999 was $12.22,
$8.95 and $13.75, respectively.
The following table summarizes information about
incentive stock options outstanding at September 29,
2001:
Options Outstanding Options Exercisable
Number Weighted- Number
Outstanding at Average Weighted- Exercisable Weighted-
Range of September Remaining Average September Average
Exercise Prices 29, 2001 Contractual Exercise 29, 2001 Exercise
Life Price Price
$ 9.38-$14.00 291,250 4.72 years $12.10 128,500 $11.24
$15.38-$22.88 579,577 4.76 years $19.40 191,047 $15.81
$24.50 10,000 2.36 years $24.50 - -
880,827 319,547
The following table summarizes information about
nonqualified stock options outstanding at September
29, 2001:
Options Outstanding Options Exercisable
Number Weighted- Number
Outstanding at Average Weighted- Exercisable Weighted
Range of September Remaining Average September Average
Exercise Prices 29, 2001 Contractual Exercise 29,2001 Exercise
Life Price Price
$10.75-$15.94 254,000 3.81 years $10.75 254,000 $10.75
$19.25-$21.75 102,000 8.61 years $20.53 68,000 $20.50
356,000 322,000
NOTE M - 401(K) PROFIT-SHARING PLAN
The Company maintains a 401(k) profit-sharing plan for
its employees. Under this plan, the Company may make
discretionary profit-sharing and matching 401(k)
contributions. Contributions of $866,000, $819,000 and
$684,000 were made in fiscal years 2001, 2000 and
1999, respectively.
NOTE N - CASH FLOW INFORMATION
The following is supplemental cash flow information:
Fiscal year ended
September 29, September 30, September 25,
2001 2000 1999
(in thousands)
Cash paid for:
Interest $2,966 $2,649 $3,231
Income taxes 344 3,474 5,617
NOTE O - SEGMENT REPORTING
Using the guidelines set forth in SFAS No. 131, the
Company has two reportable segments: Snack Foods and
Frozen Beverages. Snack Foods manufactures and
distributes snack foods and bakery items. Frozen
Beverages markets and distributes frozen beverage
products. The segments are managed as strategic
business units due to their distinct production
processes and capital requirements.
The Company evaluates each segment's performance
based on income or loss before taxes, excluding
corporate and other unallocated expenses and non-
recurring charges. Information regarding the
operations in these reportable segments is as
follows:
Fiscal year ended
September 29, September 30, September 25,
2001 2000 1999
(in thousands)
Sales:
Snack Foods $245,853 $214,319 $194,744
Frozen Beverages 105,843 104,171 91,749
$351,696 $318,490 $286,493
Depreciation and Amortization:
Snack Foods $16,195 $14,273 $13,039
Frozen Beverages 17,321 16,109 14,599
$33,516 $30,382 $27,638
Income Before Taxes:
Snack Foods $14,833 $13,071 $17,227
Frozen Beverages 3,722 2,752 5,414
$18,555 $15,823 $22,641
Capital Expenditures:
Snack Foods $6,941 $17,706 $12,332
Frozen Beverages 10,186 17,222 14,274
$17,127 $34,928 $26,606
Assets:
Snack Foods $128,983 $117,244 $112,271
Frozen Beverages 95,498 102,795 101,409
$224,481 $220,039 $213,680
NOTE P - QUARTERLY FINANCIAL DATA (UNAUDITED)
Fiscal year ended September 29, 2001
Net Earnings
Net (Loss) Per
Gross Earnings Diluted
Net Sales Profit (Loss) Share(1)
(in thousands, except per share information)
1st Quarter $70,070 $34,018 $(693) $(0.08)
2nd Quarter 76,807 37,109 367 0.04
3rd Quarter 100,970 50,562 5,778 0.65
4th Quarter 103,849 51,621 6,424 0.72
Total $351,696 $173,310 $11,876 $1.33
Fiscal year ended September 30, 2000
Net Earnings
Per
Gross Net Diluted
Net Sales Profit Earnings Share(1)
(in thousands, except per share information)
1st Quarter $65,506 $32,125 $666 $0.07
2nd Quarter 67,813 35,221 740 0.08
3rd Quarter 88,888 46,364 5,010 0.56
4th Quarter 96,283 50,503 3,552 0.41
Total $318,490 $164,213 $9,968 $1.12
(1) Total of quarterly amounts do not necessarily
agree to the annual report amounts due to separate
quarterly calculations of weighted average shares
outstanding.
Report of Independent Certified Public Accountants
Shareholders and Board of Directors
J & J Snack Foods Corp.
We have audited the accompanying consolidated balance
sheets of J & J Snack Foods Corp. and Subsidiaries as
of September 29, 2001 and September 30, 2000, and the
related consolidated statements of earnings, changes
in stockholders' equity and cash flows for each of
the fiscal years in the three-year period ended
September 29, 2001 (52 weeks, 53 weeks and 52 weeks,
respectively). These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. Those standards require that we plan and
perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit
also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall financial statement
presentation.
We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of J & J Snack Foods
Corp. and Subsidiaries as of September 29, 2001 and
September 30, 2000, and the consolidated results of
their operations and their consolidated cash flows
for each of the fiscal years in the three-year period
ended September 29, 2001 in conformity with
accounting principles generally accepted in the
United States of America.
Grant Thornton LLP
Philadelphia, Pennsylvania
November 6, 2001
Corporate Information
Directors
Gerald B. Shreiber
Chairman of the Board, President and Chief Executive Officer
Dennis G. Moore
Senior Vice President,
Chief Financial Officer,Secretary and Treasurer
Robert M. Radano
Senior Vice President and Chief Operating Officer
Stephen N. Frankel
President,
Stephen N. Frankel Realtor, Inc.
Peter G. Stanley
Vice President,
Emerging Growth Equities, Ltd.
Leonard M. Lodish, Ph.D.
Samuel R. Harrell Professor,
Marketing Department of the Wharton School,
University of Pennsylvania
Officers
Gerald B. Shreiber
Chairman of the Board,
President and Chief Executive Officer
Dennis G. Moore
Senior Vice President,
Chief Financial Officer, Secretary and Treasurer
Robert M. Radano
Senior Vice President and Chief Operating Officer
Paul L. Hirschman
Vice President, Information Systems
Officers of Subsidiary Companies
J&J SNACK FOODS CORP. OF NEW JERSEY
John Duckett
Vice President, Service & Assembly
Anthony P. Harrison II
Vice President, Quality Control and Research & Development
Michael Karaban
Vice President, Marketing
H. Robert Long
Vice President, Distribution
Milton L. Segal
Vice President, Purchasing
Don Smith
Vice President,
Research & Development, West
Steven J. Taylor
Vice President, Sales
Thomas Weber
Vice President, Operations
MIA PRODUCTS
T.J. Couzens
Vice President/General Manager
THE ICEE COMPANY
Dan Fachner
President
Kent Galloway
Vice President and Chief Financial Officer
Joe Boulanger
Vice President/General Manager
Western Zone
Lou Fiorentino
Vice President/General Manager
Eastern Zone
Rick Naylor
Vice President/General Manager
Central Zone
Rod Sexton
Vice President of Service Operations
ICEE DE MEXICO, S.A. DE C.V.
Andres Gonzalez
Vice President
PRETZELS, INC.
Gary Powell
President
Quarterly Common Stock Data
Market Price
Fiscal 2001 High Low
1st Quarter 18.50 12.50
2nd Quarter 17.88 15.00
3rd Quarter 23.79 16.50
4th Quarter 24.10 14.82
Fiscal 2000 High Low
1st Quarter 22.75 15.50
2nd Quarter 21.88 16.81
3rd Quarter 20.50 14.00
4th Quarter 19.00 12.50
Stock Listing
The common stock of J&J Snack Foods Corp. is traded on
the over-the-counter market on the NASDAQ National
Market System with the symbol JJSF.
Transfer Agent and Registrar
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Independent Accountants
Grant Thornton LLP
Philadelphia, PA
Counsel
Blank, Rome, Comisky & McCauley LLP
Annual Meeting
The Annual Meeting of Shareholders is scheduled for
Tuesday, February 5, 2002 at 10:00 a.m. at the Hilton
at Cherry Hill, 2349 W. Marlton Pike, Cherry Hill,
New Jersey.
Form 10-K
Copies of the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K may be
obtained without charge by writing to:
J&J Snack Foods Corp.
6000 Central Highway
Pennsauken, NJ 08109
Attention: Dennis G. Moore
Web Site
www.jjsnack.com
EXHIBIT 22.1 - SUBSIDIARIES OF J & J SNACK FOODS CORP.
Place of
Incorporation
J & J Snack Foods Investment Corp. Delaware
The ICEE Company Delaware
J & J Snack Foods Corp. of New Jersey New Jersey
J & J Snack Foods Corp. of California California
J & J Snack Foods Corp./Midwest Illinois
J & J Snack Foods Corp./Mia Pennsylvania
J & J Snack Foods Corp. of Pennsylvania Pennsylvania
J & J Snack Foods Sales Corp. New Jersey
J & J Snack Foods Sales Corp. of Texas Texas
J & J Snack Foods Transport Corp. New Jersey
ICEE-Canada, Inc. Canada
ICEE de Mexico, S.A. De C.V. Mexico
J & J Restaurant Group, Inc. Pennsylvania
Bakers Best Snack Food Corp. Pennsylvania
Pretzels, Inc. Texas
Federal PBC Company Pennsylvania
138
EXHIBIT 24.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated November 6, 2001
accompanying the consolidated financial statements and
schedules incorporated by reference or included in the
Annual Report of J & J Snack Foods Corp. and Subsidiaries
on Form 10-K for the year ended September 29, 2001. We
hereby consent to the incorporation by reference of said
reports in the Registration Statement of J & J Snack Foods
Corp. and Subsidiaries on Forms S-8 (File No. 333-94795
,
effective January 18, 2000, File No. 333-03833, effective
May 16, 1996, File No. 33-87532, effective December 16,
1994 and File No. 33-50036, effective July 24, 1992).
GRANT THORNTON LLP
Philadelphia, Pennsylvania
December 13, 2001
139