SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC
20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported): September 6,
2007
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Tasty
Baking Company
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(Exact
Name of Registrant as Specified in
Charter)
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Pennsylvania
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1-5084
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23-1145880
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(State
or Other Jurisdiction of Incorporation or Organization)
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(Commission
File
Number)
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(I.R.S.
Employer Identification
No.)
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2801
Hunting Park Avenue, Philadelphia, Pennsylvania
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19129
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (215)
221-8500
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Not
applicable
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(Former
Name or Former Address, if Changed Since Last
Report)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[_] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[_]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[_]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
1.01. Entry Into a Material Definitive
Agreement
On
September 6, 2007 (the “Closing
Date”), Tasty Baking Company (the “Company”) entered into: (1) a Credit
Agreement (the “Bank Agreement”) dated as of the Closing Date among the Company
and its subsidiaries, as Borrowers; Citizens Bank of Pennsylvania (“Citizens”),
as Administrative Agent, Collateral Agent, Swing Line Lender and Letter of
Credit Issuer; and Bank of America, N.A., Sovereign Bank, and Manufacturers
and
Traders Trust Company, each as a Lender; (2) a Credit Agreement (the “PIDC
Agreement”) dated as of the Closing Date among the Company, as Borrower, the
Company’s subsidiaries, as guarantors, and PIDC Local Development Corporation,
as Lender; and (3) a Machinery and Equipment Loan Fund Loan Agreement (the
“MELF
Agreement”) dated as of the Closing Date with The Commonwealth of Pennsylvania
(the “Commonwealth”) acting by and through the Department of Community and
Economic Development. These loans are expected to be used to finance
the Company’s move of its Philadelphia manufacturing facility and corporate
headquarters to new facilities to be constructed at the Philadelphia Navy
Yard, along with refinancing the Company’s existing debt and for working capital
needs.
Bank
Agreement
The
Bank
Agreement established a $100 million credit facility consisting of (i) a
fixed
asset line of credit in an amount up to $55 million (“Fixed Asset Line of
Credit”), (ii) a working capital revolver in an amount up to $35 million
(“Working Capital Revolver”), and (iii) a low-interest job bank loan in an
amount of $10 million from Citizens in partnership with the Commonwealth
(the
“Job Bank Loan”).
The
Fixed
Asset Line of Credit may be disbursed from time to time during the period
commencing upon the Closing Date and ending 3 years thereafter (the “Fixed Asset
Line Draw Period”). The Fixed Asset Line Draw Period may be extended
for 90 days upon the request of the Company. During the Fixed Asset
Line Draw Period, the Company will pay interest only upon all amounts
outstanding or drawn under the Fixed Asset Line of Credit. After the
expiration of the Fixed Asset Line Draw Period, the Fixed Asset Line of Credit
shall convert into three component parts (based upon formulas set forth in
the
Bank Agreement) that will each have a term expiring 2 years after the expiration
of the Fixed Asset Line Draw Period. After this conversion, the
Company will repay the then outstanding principal amount of these components
in
consecutive monthly payments of principal and interest with a final balloon
payment at the end of the term. The three components consist of (i)
an Equipment Component of up to $35 million, (ii) a Mortgage Component of
up to
$20 million (depending on the appraised value of the collateral), and (iii)
an
Intellectual Property Component of up to $20 million less amounts outstanding
under the Mortgage Component. The Mortgage Component and Intellectual
Property Component will be amortized on a 25 year amortization schedule,
and the
Equipment Component will be amortized on a 15 year amortization
schedule. Additionally, the Company will be required to enter into an
interest rate swap on up to 50% of the projected outstanding amount of the
Fixed
Asset Line of Credit on or before December 5, 2007, which shall provide for
interest rate protection through September 6, 2012.
The
Working Capital Revolver has a 5 year term. Amounts borrowed under
the Working Capital Revolver may be borrowed, repaid and reborrowed from
time to
time. All outstanding principal, plus all accrued and unpaid interest
thereon, shall be due and payable on the date that is 5 years after the Closing
Date. Under the Working Capital Revolver, Citizens may issue letters
of credit for up to $20 million in the aggregate for the benefit of third
parties at the request of the Company.
The
Job
Bank Loan will be disbursed in a single advance not later than December
31,
2007, subject to satisfaction of certain conditions set forth in the Bank
Agreement. The Job Bank Loan has a 5 year term, commencing as of the
Closing Date, and will be amortized on a 10 year amortization
schedule. The Company will pay interest on the first day of each
calendar month, commencing on the first day of the first calendar month
following disbursement, and will repay the principal in equal and consecutive
monthly installments with a final balloon payment due and payable approximately
5 years after the Closing Date.
Amounts
borrowed under the Working Capital Revolver and the Fixed Asset Line of Credit
will bear interest, at the Company’s option, at a variable rate equal to (i) the
prime rate (which is defined as the rate of interest announced by Citizens
in
the Commonwealth) in effect from time to time plus an additional margin ranging
from 0-75 basis points depending on the Company’s operating leverage ratio, or
(ii) a rate established for each borrowing for interest periods of one, two,
three or six months, as the Company may select, based on the London interbank
office rate (LIBOR) for U.S. Dollar deposits having comparable maturities
plus
an additional margin ranging from 75-275 basis points depending on the Company’s
operating leverage ratio. The Job Bank Loan has a fixed interest rate
of 5.50% per annum. Pursuant to the Bank Agreement, the Company will
pay certain commitment fees, letter of credit fees and facility
fees.
The
Bank
Agreement contains customary representations and warranties as well as customary
affirmative and negative covenants. Negative covenants include, among
others, limitations on incurrence of liens and secured indebtedness by the
Company and/or its subsidiaries, other than in connection with the PIDC
Agreement and the MELF Agreement. Additionally, the Bank Agreement
requires that periodic financial covenants be satisfied by the
Company. The Bank Agreement also contains customary events of
default. Upon the occurrence and during the continuance of any event
of default, Citizens may declare the outstanding loans and all other obligations
under the Bank Agreement immediately due and payable.
The
loans
under the Bank Agreement are secured by a first priority lien on all of the
assets of the Company and its subsidiaries, including, without limitation,
all
of the Company’s and its subsidiaries’ accounts receivable, inventory,
equipment, general intangibles, instruments and real estate.
The
description of the Bank Agreement contained herein is qualified in its entirety
by reference to the Bank Agreement, a copy of which is filed herewith as
Exhibit
99.1 and is incorporated herein by reference.
PIDC
Agreement
The
PIDC
Agreement established a $12 million line of credit. This credit
facility (i) will be available for borrowing during the period commencing
as of
the Closing Date and ending 3 years thereafter (such period, the “PIDC Borrowing
Period”), (ii) will be amortized over the remaining years of the original 10
year term at below market interest rates, with the amortization period to
begin
at the end of the PIDC Borrowing Period, and (iii) will be secured by (a)
a
second blanket lien on the Company’s assets, subject to the lien in favor of
Citizens, and (b) with respect to certain equipment only, a third lien, subject
to the lien in favor of Citizens and a second lien in favor of the Machinery
and
Equipment Loan Fund (“MELF”). Amounts advanced under the PIDC
Agreement will bear interest until repaid at an effective fixed rate of 4.50%
per annum.
The
PIDC
Agreement contains customary representations and warranties as well as customary
affirmative and negative covenants. Negative covenants include, among
others, limitations on incurrence of liens and secured indebtedness by the
Company and/or its subsidiaries, other than in connection with the Bank
Agreement and the MELF Agreement. Additionally, the PIDC Agreement
requires that the Company and its subsidiaries comply with prevailing wages
and
laws promulgated by PIDC’s funding sources. The PIDC Agreement also
contains customary events of default. Upon the occurrence and during
the continuance of any event of default, PIDC may declare the outstanding
loans
and all other obligations under the PIDC Agreement immediately due and
payable.
The
description of the PIDC Agreement contained herein is qualified in its entirety
by reference to the PIDC Agreement, a copy of which is filed herewith as
Exhibit
99.2 and is incorporated herein by reference.
MELF
Agreement
The
MELF Agreement established a $5
million line of credit. This credit facility (i) will be advanced
periodically during the period commencing as of the Closing Date and ending
2
years thereafter (the “MELF Borrowing Period”), (ii) will be amortized over the
remaining years of the original 10 year term to begin at the end of the MELF
Borrowing Period, and (iii) will be secured by (a) a second lien on certain
equipment acquired with amounts advanced under the MELF Agreement, and (b)
a
third lien on certain other equipment acquired with amounts advanced under
the
MELF Agreement. Amounts advanced under the MELF Agreement will bear
interest until repaid at a fixed rate of 5% per annum.
The
MELF
Agreement contains customary representations and warranties as well as customary
affirmative and negative covenants. Negative covenants include, among
others, limitations on incurrence of liens and secured indebtedness by the
Company, other than in connection with the Bank Agreement and the PIDC
Agreement. The MELF Agreement also contains customary events of
default. Upon the occurrence and during the continuance of any event
of default, MELF may declare the outstanding loans and all other obligations
under the MELF Agreement immediately due and payable.
Contemporaneously
with the closing under the MELF Agreement, MELF delivered to the Company its
commitment to extend a second $5 million line of credit to the Company (the
“Second MELF Credit Facility”). The Second MELF Credit Facility will
close approximately one year from the Closing Date, and will be on the same
terms and conditions as the credit facility under the MELF Agreement as set
forth herein.
The
description of the MELF Agreement contained herein is qualified in its entirety
by reference to the MELF Agreement, a copy of which is filed herewith as
Exhibit
99.3 and is incorporated herein by reference.
Item
1.02. Termination of a Material Definitive
Agreement
On
September 6, 2007, the Company used
a portion of the proceeds received under the Bank Agreement (as
described above in Item 1.01) to terminate and repay all amounts
outstanding under the following loans:
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Amended
and Restated Credit Agreement, dated as of September 13, 2005,
among the
Company and PNC Bank, N.A. and Citizens, as amended ("Amended Credit
Agreement"). The Amended Credit Agreement was a $35 million
unsecured credit facility that had a 5 year term. The interest
rates were indexed to LIBOR based upon the Company’s ratio of debt to
EBITDA and rates could decrease up to 50 basis points based on
that ratio.
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Loan
Agreement, dated as of September 13, 2005, between the Company
and
Citizens, providing for (i) a $5.3 million term loan ("Term
Loan"), (ii) a $2.15 million mortgage loan (“Mortgage
Loan”), and (iii) a $2.55 million secondary term loan
(“Secondary Term Loan”). The Term Loan was entered into on September
13, 2005, while the Mortgage Loan and the Secondary Term Loan were
both entered into on December 20, 2005. The Term Loan was based upon
a 15 year amortization with a scheduled maturity in 5 years due in
September 2010. The Mortgage Loan and the Secondary Term Loan
had terms of 10 years and 5 years, respectively. Interest
rates for these loans were based on LIBOR plus an applicable margin
as determined by the Amended Credit Agreement. Pursuant to the
Mortgage Loan, the Company also executed and delivered
to Citizens a mortgage encumbering the Hunting Park Bakery,
which mortgage has also been
terminated.
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The
Company also terminated (i) a 5 year interest rate swap, dated December 21,
2005, for the Secondary Term Loan, which was for $2.55
million and had a fixed LIBOR rate of 4.99%, and (ii) a 10 year
interest rate swap, dated December 21, 2005, for the Mortgage Loan,
which was for $2.15 million and had a fixed LIBOR rate of 5.08%. These
LIBOR rates were subject to an additional credit spread which could range
from
75 basis points to 140 basis points.
Item
2.03. Results of Operations and Financial
Condition
On
September 6, 2007, the Company
entered into the Bank Agreement, the PIDC Agreement and the MELF Agreement,
each
of which is described in Item 1.01 above, which information is incorporated
by
reference into this Item 2.03.
Item
9.01 Financial Statements and Exhibits.
(d)
The following exhibits are filed herewith:
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99.1
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Credit
Agreement, dated as of September 6, 2007, among Tasty Baking Company
and
its subsidiaries, as Borrowers; Citizens Bank of Pennsylvania,
as
Administrative Agent, Collateral Agent, Swing Line Lender and Letter
of
Credit Issuer; and Bank of America, N.A., Sovereign Bank, and
Manufacturers and Traders Trust Company, each as a
Lender
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99.2
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Credit
Agreement, dated as of September 6, 2007, among Tasty Baking Company,
as
Borrower, the other Loan Parties thereto, and PIDC Local Development
Corporation, as Lender
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99.3
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Machinery
and Equipment Loan Fund Loan Agreement, dated as of September 6,
2007,
between Tasty Baking Company and The Commonwealth of Pennsylvania
acting
by and through the Department of Community and Economic
Development
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“SAFE
HARBOR STATEMENT” UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except
for
historical information contained herein, the matters discussed herein are
forward-looking statements (as such term is defined in the Securities Act
of
1933, as amended) that are subject to risks and uncertainties that could
cause
actual results to differ materially from those stated or implied
herein. There are a number of factors that may cause actual results
to differ from these forward-looking statements, including without limitation,
the costs to lease and fit-out the new facility and relocate thereto, the
risk
of business interruption while transitioning to the new facility, the possible
disruption of production efficiencies arising out of the Company’s announcement
of a reduction in workforce, the success of marketing and sales strategies
and
new product development, the ability to successfully enter new markets, the
price of raw materials, and general economic and business
conditions. Other risks and uncertainties that may materially affect
the company are provided in the Company’s annual reports to shareholders and the
company’s periodic reports filed with the Securities and Exchange Commission
from time to time, including, without limitation, reports on Forms 10-K and
10-Q. Please refer to these documents for a more thorough description
of these and other risk factors. There can be no assurance that the
Company will successfully meet all conditions of the lease or the financing
described herein, or that the change to the new manufacturing facility will
be
successful. The Company assumes no obligation to publicly update or
revise any forward-looking statements.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this Report to be signed on its behalf by the undersigned hereunto
duly authorized.
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TASTY
BAKING COMPANY |
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(Registrant) |
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By:
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/s/
David S. Marberger
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David
S. Marberger
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Executive
Vice President and
Chief
Financial Officer
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EXHIBIT
INDEX
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99.1
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Credit
Agreement, dated as of September 6, 2007, among Tasty Baking Company
and
its subsidiaries, as Borrowers; Citizens Bank of Pennsylvania,
as
Administrative Agent, Collateral Agent, Swing Line Lender and Letter
of
Credit Issuer; and Bank of America, N.A., Sovereign Bank, and
Manufacturers and Traders Trust Company, each as a
Lender
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99.2
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Credit
Agreement, dated as of September 6, 2007, among Tasty Baking Company,
as
Borrower, the other Loan Parties thereto, and PIDC Local Development
Corporation, as Lender
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99.3
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Machinery
and Equipment Loan Fund Loan Agreement, dated as of September 6,
2007,
between Tasty Baking Company and The Commonwealth of Pennsylvania
acting
by and through the Department of Community and Economic
Development
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8