-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MuYZq2TDGKmroy8ZWX7fxyMIkfoz+4pbPtZ6QEYTH4UwFbqkinHNoU87rt5o0ZAu O5Dw/G8kI44PYAqVO62dqg== 0001114639-02-000024.txt : 20020829 0001114639-02-000024.hdr.sgml : 20020829 20020829162155 ACCESSION NUMBER: 0001114639-02-000024 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20020531 FILED AS OF DATE: 20020829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDEN ENTERPRISES INC CENTRAL INDEX KEY: 0000042228 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 630250005 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-04339 FILM NUMBER: 02752890 BUSINESS ADDRESS: STREET 1: 2101 MAGNOLIA AVE STE 212 STREET 2: SOUTH CITY: BIRMINGHAM STATE: AL ZIP: 35205 BUSINESS PHONE: 2053266101 MAIL ADDRESS: STREET 1: 2101 MAGNOLIA AVE SOUTH STREET 2: STE 212 CITY: BIRMINGHAM STATE: AL ZIP: 35205 FORMER COMPANY: FORMER CONFORMED NAME: MAGIC CITY FOOD PRODUCTS INC DATE OF NAME CHANGE: 19700805 FORMER COMPANY: FORMER CONFORMED NAME: GOLDEN FLAKE INC DATE OF NAME CHANGE: 19761019 10-K 1 tenkfin.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-4339 GOLDEN ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Delaware 63-0250005 (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) Suite 208, 2140 11th Avenue, South Birmingham, Alabama 35205 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number including area code (205) 933-9300 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Capital Stock, Par Value $0.66-2/3 (Title of Class) Indicate by check mark whether the Registrant (1) has Filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X. No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates of the registrant as of August 12, 2002. Common Stock, Par Value $0.662/3 - $17,904,634 Indicate the number of shares outstanding of each of the Registrant's Classes of Common Stock, as of August 12, 2002. Class Outstanding at August 12, 2002 Common Stock, Par Value $0.662/ 11,883,305 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Proxy Statement for the year ended May 31, 2002 are incorporated by reference into Part III. TABLE OF CONTENTS FORM 10-K ANNUAL REPORT - 2002 GOLDEN ENTERPRISES, INC. Page PART I Item 1. Business 3 Item 2. Properties 5 Item 3. Legal Proceedings 6 Item 4. Submission of Matters to a Vote of Security Holders 6 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 7 Item 6. Selected Financial Data 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 13 Item 8. Financial Statements and Supplementary Data 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 35 PART III Item 10. Directors and Executive Officers of the Registrant 35 Item 11. Executive Compensation 35 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 35 Item 13. Certain Relationships and Related Transactions 35 PART IV Item 14. Exhibits, Financial Statement Schedules,and Reports on Form 8-K 36 PART I ITEM 1. - BUSINESS Golden Enterprises, Inc. (the "Company") is a holding company which owns all of the issued and outstanding capital stock of Golden Flake Snack Foods, Inc., a wholly-owned operating subsidiary company ("Golden Flake"). Golden Enterprises is paid a fee by Golden Flake for providing management services for it. The Company was originally organized under the laws of the State of Alabama as Magic City Food Products, Inc. on June 11, 1946. On March 11, 1958, it adopted the name Golden Flake, Inc. On June 25, 1963, the Company purchased Don's Foods, Inc., a Tennessee corporation which was merged into the Company on December 10, 1966. The Company was reorganized December 31, 1967 as a Delaware corporation without changing any of its assets, liabilities or business. On January 1, 1977, the Company, which had been engaged in the business of manufacturing and distributing potato chips, fried pork skins, cheese curls and other snack foods, spun off its operating division into a separate Delaware corporation known as Golden Flake Snack Foods, Inc. and adopted its present name of Golden Enterprises, Inc. The Company owns all of the issued and outstanding capital stock of Golden Flake Snack Foods, Inc. Golden Flake Snack Foods, Inc. General Golden Flake Snack Foods, Inc. ("Golden Flake") is a Delaware corporation with its principal place of business And home office located at One Golden Flake Drive, Birmingham, Alabama. Golden Flake manufactures and distributes a full line of salted snack items, such as potato chips, tortilla chips, corn chips, fried pork skins, baked and fried cheese curls, onion rings and buttered popcorn. These products are all packaged in flexible bags or other suitable wrapping material. Golden Flake also sells a line of cakes and cookie items, canned dips, pretzels, peanut butter crackers, cheese crackers, dried meat products, and nuts packaged by other manufacturers using the Golden Flake label. No single product or product line accounts for more than 50% f Golden Flake's sales, which affords some protection against loss of volume due to a crop failure of major agricultural raw materials. Raw Materials Golden Flake purchases raw materials used in manufacturing and processing its snack food products on the open market and under contract through brokers and directly from growers. A large part of the raw materials used by Golden Flake consists of farm commodities which are subject to precipitous change in supply and price. Weather varies from season to season and directly affects both the quality and supply available. Golden Flake has no control of the agricultural aspects and its profits are affected accordingly. Distribution Golden Flake sells its products through its own sales organization and independent distributors to commercial establishments which sell food products in Alabama and in parts of Tennessee, Kentucky, Georgia, Florida, Mississippi, Louisiana, North Carolina, South Carolina, Arkansas and Missouri. The products are distributed by approximately 448route salesmen who are supplied with selling inventory by the Company's trucking fleet which operates out of Birmingham, Alabama, Nashville, Tennessee, and Ocala, Florida. All of the route salesmen are employees of Golden Flake and use the direct store door delivery method. Golden Flake is not dependent upon any single customer, or a few customers, the loss of any one or more of which would have a material adverse effect on its business. No single customer accounts for more than 10% of its total sales. Golden Flake has a fleet of 856 company owned vehicles to support the route sales system, including 37 tractors and 96 trailers for long haul delivery to the various company warehouses located throughout its distribution areas, 666 store delivery vehicles and 57 cars and miscellaneous vehicles. Golden Flake also leases 20 store delivery vehicles. Competition The snack foods business is highly competitive. In the area in which Golden Flake operates, many companies engage in the production and distribution of food products similar to those produced and sold by Golden Flake. Most, if not all, of Golden Flake's products are in direct competition with similar products of several local and regional companies and at least one national company, the Frito Lay Division of Pepsi Co., Inc., which is larger in terms of capital and sales volume than is Golden Flake. Golden Flake is unable to state its relative position in the industry. Golden Flake's marketing thrust is aimed at selling the highest quality product possible and giving good service to its customers, while being competitive with its prices. Golden Flake constantly tests the quality of its products for comparison with other similar products of competitors and maintains tight quality controls over its products. Employees Golden Flake employs approximately 1,200 employees. Approximately 700 employees are involved in route sales and sales supervision, approximately 400 are in production and production supervision, and approximately 100 are management and administrative personnel. Golden Flake believes that the performance and loyalty of its employees are the most important factors in the growth and profitability of its business. Since labor costs represent a significant portion of Golden Flake's expenses, employee productivity is important to profitability. Golden Flake considers its relations with its employees to be excellent. Golden Flake has a 401(k) Profit Sharing Plan and an Employee Stock Ownership Plan designed to reward the long term employee for his loyalty. In addition, the employees are provided medical insurance, life insurance, and an accident and sickness salary continuance plan. Golden Flake believes that its employee wage rates are competitive with those of its industry and with prevailing rates in its area of operations. Environmental Matters There have been no material effects of compliance with government provisions regulating discharge of materials into the environment. Recent Developments Since the beginning of its last fiscal year, Golden Flake completed the sale of approximately 27.7 acres of undeveloped surplus land adjacent to its manufacturing plant in Ocala, Florida, on May 31, 2002, for $921,908. Golden Flake continues to own and operate its manufacturing plant in Ocala, Florida as described herein under the heading "Properties". Other than these changes, no significant changes have occurred in the kinds of products manufactured or in the markets or methods of distribution, and no material changes or developments have occurred in the business done and intended to be done by Golden Flake. Executive Officers Of Registrant And Its Subsidiary Name and Age Position and Offices with Management John S. Stein, 65 Mr. Stein is Chairman of the Board. He was elected Chairman on June 1, 1996. He served as Chief Executive Officer from 1991 to April 4, 2001, and as President from 1985 to 1998 and from June 1, 2000 to April 4, 2001. Mr. Stein also served as President of Golden Flake Snack Foods, Inc. from 1976 to 1991. Mr. Stein retired as an employee with the Company on May 31, 2002. Mr. Stein is elected Chairman annually, and his present term will expire on May 31, 2003. Mark W. McCutcheon, 47 Mr. McCutcheon is Chief Executive Officer and President of the Company and President of Golden Flake Snack Foods, Inc., a wholly-owned subsidiary of the Company. He was elected President and Chief Executive Officer of the Company on April 4, 2001 and President of Golden Flake on November 1, 1998. He has been employed by Golden Flake since 1980. During his employment, he has served as Plant Manager of the Ocala, Florida Plant, Plant Manager of the Birmingham, Alabama Plant, Vice President of Manufacturing, Vice President of Operations, and Executive Vice President. Mr. McCutcheon is elected Chief Executive Officer and President of the Company and President of Golden Flake annually, and his present terms will expire on May 31, 2003. John H. Shannon, 65Mr. Shannon has been employed with the Company since 1962. He was elected Controller in 1976, Secretary in 1978 and Vice-President in 1979, and has served in these capacities since then. Mr. Shannon is elected to his positions on an annual basis, and his present term of office will expire on May 31, 2003. ITEM 2. - PROPERTIES The headquarters of the Company are located at Suite 208, 2140 11th Avenue South, Birmingham Alabama 35205. The Company occupies approximately 1500 square feet of office space under lease. The properties of the subsidiary are described below. Golden Flake Manufacturing Plants and Office Headquarters The main plant and office headquarters of Golden Flake are located at One Golden Flake Drive, Birmingham, Alabama, and are situated on approximately 40 acres of land which is serviced by a railroad spur track. This facility consists of 3 buildings which have a total of approximately 300,000 square feet of floor area. The plant manufactures a full line of Golden Flake products. Golden Flake maintains a garage and vehicle maintenance service center from which it services, maintains, repairs and rebuilds its fleet and delivery trucks. Golden Flake has adequate employee and fleet parking. Approximately 17 acres of the Birmingham property is undeveloped. This property is zoned for industrial use and is readily available for future use. Plans for the utilization of this property have not been finalized. Golden Flake also has a manufacturing plant in Ocala, Florida. This plant was placed in service in November 1984. The plant consists of approximately 100,000 square feet, with allowance for future expansion, and is located on a 28-acre site on Silver Springs Boulevard. The Company manufactures corn chips, tortilla chips and potato chips from this facility. The manufacturing plants, office headquarters and additional lands are owned by Golden Flake free and clear of any debts. Distribution Warehouses Golden Flake owns branch warehouses in Birmingham, Montgomery, Pelham, Midfield, Demopolis, Fort Payne, Muscle Shoals, Huntsville, Phenix City, Tuscaloosa, Mobile, Dothan and Oxford, Alabama; Gulfport and Jackson, Mississippi; Chattanooga, Knoxville and Memphis, Tennessee; Decatur, Marietta, and Macon, Georgia; Jacksonville, Panama City, Tallahassee and Pensacola, Florida; Baton Rouge and New Orleans, Louisiana; and Little Rock, Arkansas. The warehouses vary in size from 2,400 to 8,000 square feet. All distribution warehouses are owned free and clear of any debts. Vehicles Golden Flake owns a fleet of 856 vehicles which includes 666 route trucks, 37 tractors, 96 trailers and 57 cars and miscellaneous vehicles. There are no liens or encumbrances on Golden Flake's vehicle fleet. Golden Flake also leases 20 route trucks and owns a 1987 Cessna Citation II aircraft. ITEM 3. - LEGAL PROCEEDINGS There are no material pending legal proceedings against the Company or its subsidiary other than ordinary routine litigation incidental to the business of the Company and its subsidiary. ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. MARKET AND DIVIDEND INFORMATION The Company's common stock is traded in the over-the-counter market under the "NASDAQ" symbol, GLDC, and transactions are reported through the National Association of Securities Dealers Automated Quotation (NASDAQ) National Market System. The following tabulation sets forth the high and low sale prices for the common stock during each quarter of the fiscal years ended May 31, 2002 and 2001 and the amount of dividends paid per share in each quarter. The Company currently expects that comparable regular cash dividends will be paid in the future. Market Price Dividends Paid Quarter High Low Per Share Fiscal 2001 First $ 4.150 $ 2.950 $ .0625 Second 4.020 3.150 .0625 Third 3.950 3.400 .0625 Fourth 4.550 3.450 .0625 Fiscal 2000 First $ 3.563 $ 2.875 $ .0600 Second 4.750 3.063 .0625 Third 4.469 3.063 .0625 Fourth 4.500 3.688 .0625 As of August 12, 2002, there were approximately 1,500 shareholders of record. Securities Authorized For Issuance Under Equity Compensation Plans. The following table provides Equity Compensation Plan information under which equity securities of the Registrant are authorized for issuance: Sale of Unregistered Securities On May 6, 2002, an employee exercised stock options and purchased 1,000 shares of common stock of the Company for the sum of $3,810. The stock options were issued on October 15, 2001 under the Company's 1996 Long Term Incentive Plan. The issuance of the 1,000 shares of common stock were exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) as a private offering. Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Estimates and Policies The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, the preparation of which in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that in certain circumstances affect amounts reported in the consolidated financial statements. In preparing these financial statements, management has made its best estimates and judgements of certain amounts included in the financial statements, giving due considerations to materiality. The Company does not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgement and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Adoption of EITF 01-9 During 2000 and 2001, the Financial Accounting Standards Board's (FASB) Emerging Issues Task Force (EITF) addressed various issues related to income statement classification of certain promotional payments, including consideration from a vendor to a reseller or another party that purchases the vendor's products. EITF 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products), was issued in November, 2001 and codified earlier pronouncements. Adoption of EITF 01-9 is required for financial statements covering annual or interim periods beginning after December 15, 2001. The Task Force encouraged earlier adoption, and the Company has complied by adopting EITF 01-9 for the fiscal year ended May 31, 2002. Financial statements for prior periods presented for comparative purposes have been reclassified to comply with the income statement display requirements under EITF 01-9. Adoption of EITF 01-9 in the fiscal year ended May 31, 2002 had the effect of reducing total revenues by $11.72 million, $l2.93 million, and $l3.46 million for fiscal years 2002, 2001, and 2000, respectively. Selling, general and administrative expenses were reduced by the same amounts. There was no net income impact. Change in Accounting Policy In conjunction with the adoption of EITF 01-9, the Company changed its accounting policy for slotting fees from expensing when incurred to allocating the cost over the life of the agreement, generally one year. The trend of incurred slotting fees has increased during the last half of each fiscal year, and expensing when incurred would disproportionately reduce total revenues, as slotting fee costs reduce revenues under EITF 01-9. The change to allocating the cost over the life of the agreement gives a much better match with the revenues produced by the shelf space obtained with the slotting fees. The cumulative effect of this change on the amount of retained earnings at the beginning of fiscal year 2002, was $0.41 million ($0.03 per share) and is included in net income for fiscal year 2002, the period of the change, as required by APB 20. Impairment of Long -Lived Assets Long-lived assets historically have been reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows estimated to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets. There are no events or changes in circumstances of which management is aware indicating that the carrying value of the Company's long-lived assets may not be recoverable. As described in Note 1 of Notes to Consolidated Financial Statements under "Recent Issued Accounting Standards," the accounting treatment for goodwill and other intangible asset will not have a material impact on the financial statements of the Company. Accrued Expenses Management estimates certain material expenses in an effort to record those expenses in the period incurred. The most material accrued estimates relate to a salary continuation plan for certain key executives of the Company, and to insurance-related expenses, including self-insurance. Workers' compensation and general liability insurance accruals are recorded based on insurance claims processed as well as historical claims experience for claims incurred, but not yet reported. These estimates are based on historical loss development factors. Employee medical insurance accruals are recorded based on medical claims processed as well as historical medical claims experienced for claims incurred but not yet reported. Differences in estimates and assumption could result in an accrual requirement materially different from the calculated accrual. Other Matters The Company does not have off-balance sheet arrangement, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities." Transactions with related parties, reported in Note 15 of Notes to Consolidated Financial Statements, are conducted on an arm's- length basis in the ordinary course of business. Liquidity and Capital Resources Working capital was $13.4 million at May 31, 2002 compared to $12.9 million at May 31, 2001. Net cash provided by operations amounted to $1.9 million in fiscal year 2002, $0.05 million in fiscal year 2001 and $8.4 million in fiscal year 2000. Year-to-year changes in receivables, inventories, prepaid expenses and accounts payable impacted cash flow unfavorably for fiscal years 2002 and 2001. The most material of these changes for fiscal 2002 was an increase in prepaid expenses of $1.8 million, $1.0 million of which was slotting fees that were set up to be allocated over the lives of the slotting fee agreements. Most of the balance of the increase in prepaid expenses was in prepaid taxes and prepaid insurance. There was a net decrease in investment securities providing $2.5 million in cash this year $1.9 million in 2001, and a net cash usage of $4.4 million to increase investment securities in 2000. Additions to property, plant and equipment, net of disposals, were $3.8 million, $1.3 million and $0.1 million in fiscal years 2002, 2001, and 2000, respectively, and are expected to be about $1.8 million in 2003. Included in this year's additions was $4.0 million to upgrade the potato chip packaging department with new conveyors, scales, packaging machines, etc. Expenditures of $0.6 million were also made on a special warehouse renovation project and $0.3 million on the corn products department. These projects were completed in fiscal 2002. In addition to the liquidation of investment securities previously discussed, capital expenditures were financed by increasing bank debt by $3.1 million. Cash dividends of $3.0 million, $3.0 million and $2.9 million were paid during fiscal years 2002, 2001, and 2000, respectively. Cash in the amount of $0.2 million was used to purchase treasury shares in fiscal 2002, $0.5 was used in 2001, and $0.3 million was used for this purpose in 2000. Long-term liabilities as a percentage of total capitalization was 14.4% at May 31, 2002. The Company's current ratio at year end was 3.26 to 1.00. Operating Results Net sales and other operating income increased by 1.8% in fiscal year 2002, and decreased by 8.5% and 2.3 % in fiscal years 2001 and 2000, respectively. The increase in 2002 was primarily due to less promotional payments to vendors that were subtracted from sales as required by EITF 01-9. The sales decreases for fiscal 2001 and 2000 were primarily a result of discontinuing the Company-operated distribution of Golden Flake Branded products in three fringe sales regions in Central Florida as part of the fiscal year 2000 restructuring plan which is explained further in a separate section of this Management's Discussion. The Company's investment income was 4.7% of income before cumulative effect of a change in accounting policy and income taxes in 2002, 7.4% in 2001, and 3.1% in 2000. Investment income for fiscal year 2002 was lower than 2001 because of a lower level of investment securities and generally lower interest rates. Investment income for fiscal year 2001 was higher than the previous year because investment securities were at a higher level for most of the year. The cash and notes received from the sale of the Nashville plant and equipment were major factors contributing to the increase in investments for fiscal 2001. Cost of sales as a percentage of net sales amounted to 51.9% in 2002, 52.2% in 2001, and 50.7% in 2000. The cost decrease in 2002 was due primarily to lower energy costs, while the cost increase in 2001 was because of higher energy prices. Favorable trends in commodity prices and packaging costs were the major factors contributing to the relatively low cost of sales in fiscal 2000. Selling, general and administrative expenses were 45.2% of sales in 2002, 45.1% in 2001, and 45.8% in 2000. The improvement in fiscal 2002 and 2001 was primarily due to lower selling and delivery cost brought about by the exiting of the fringe sales regions in Central Florida as part of the fiscal 2000 restructuring plan. The Company's effective tax rates for 2002, 2001, and 2000 were 38.8%, 34.4% and 42.3%, respectively. Note ten to the consolidated financial statements provides additional information about the provision for income taxes. Market Risk The principal market risks (i.e. the risk of loss arising from adverse changes in market rates and prices) to which the Company is exposed are interest rates on its investment securities and bank loans, and commodity prices affecting the cost of its raw materials. The Company's investment securities consist of short-term marketable securities. Presently these are variable rate money market funds. Its bank loans also carry variable rates. Assuming year end 2002 variable rate investment levels and bank loan balances, a one-point change in interest rates would impact interest income by $160 and interest expense by $40,004. The Company is subject to market risk with respect to commodities because its ability to recover increased costs through higher pricing may be limited by the competitive environment in which it operates. The Company purchases its raw materials on the open market, under contract through brokers and directly from growers. Futures contracts have been used occasionally to hedge immaterial amounts of commodity purchases, but none are presently being used. Inflation Certain costs and expenses of the Company are affected by inflation, and the Company's prices for its products over the past several years have remained relatively flat. The Company will contend with the effect of further inflation through efficient purchasing, improved manufacturing methods, pricing, and by monitoring and controlling expenses. Environmental Matters There have been no material effects of compliance with governmental provisions regulating discharge of materials into the environment. Restructuring Charges The restructuring charge of $2,564,892 recognized in fiscal 2000 relates to a restructuring plan approved by the Board of Directors in January 2000 whereby the Nashville plant which primarily manufactured low fat snacks was closed, a voluntary retirement package was offered to a group of qualified employees, and the company-operated distribution system for Golden Flake Brand products in three fringe sales regions in Central Florida was discontinued. The following is a summary of the one-time restructuring charge to expense for the year ended May 31, 2000. Employee termination benefits $1,335,550 Other Charges 1,229,342 Total restructuring charge $ 2,564,892 Net after tax $ 1,607,892 Per share $ .13 The employee related termination benefits of $1,335,550 primarily includes severance costs for 104 employees, 10 of which accepted the voluntary retirement package, 71 of which were employed in the three fringe sales regions of Central Florida and 23 of which were employed at the Nashville plant. The other charges of $1,229,342 consisted primarily of gains, and losses on disposal of property and equipment and the cost related to the exiting of sales regions in Central Florida. Forward-Looking Statements This discussion contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those forward-looking statements. Factors that may cause actual results to differ materially include price competition, industry consolidation, raw material costs and effectiveness of sales and marketing activities, as described in the Company's filings with Securities and Exchange Commission. ITEM 7A. - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations- Market Risk beginning on page 11. ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the registrant and its subsidiary for the year ended May 31, 2001, consisting of the following, are contained herein: Consolidated Balance Sheets - May 31, 2002 and 2001 Consolidated Statements of Income - Years ended May 31, 2002, 2001 and 2000 Consolidated Statements of - Years ended May 31, 2002, Cash Flows 2001 and 2000 Consolidated Statements of Changes - Years ended May 31, 2002, in Stockholders' Equity 2001 and 2000 Notes to Consolidated Financial Statements - Years ended May 31, 2002, 2001 and 2000 Quarterly Results of Operations - Years ended May 31, 2002 and 2001 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Golden Enterprises, Inc. We have audited the accompanying consolidated balance sheets of Golden Enterprises, Inc. and subsidiary as of May 31, 2002 and 2001, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended May 31, 2002. Our audits also included the financial statement schedule listed at Item 14 (2). These consolidated financia l statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Golden Enterprises, Inc. and subsidiary as of May 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended May 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Note 3 to the financial statements, effective June 1, 2001 the Company changed its accounting policy with respect to slotting fees. Birmingham, Alabama July 18, 2002 DUDLEY, HOPTON-JONES, SIMS & FREEMAN PLLP CONSOLIDATED BALANCE SHEETS May 31, 2002 and 2001 ASSETS 2002 2001 Current Assets: Cash and cash equivalents $286,480 $ 710,278 Investment securities available-for-sale 15,998 2,500,147 Receivables: Trade accounts 9,014,850 9,017,885 Other 931,911 430,197 9,946,761 9,448,082 Less: Allowance for doubtful accounts 196,100 346,100 9,750,661 9,101,982 Notes receivable, current 45,918 42,399 9,796,579 9,144,381 Inventories: Raw materials 1,605,640 1,883,167 Finished goods 3,604,482 2,856,593 5,210,122 4,739,760 Prepaid expenses 4,031,037 2,275,659 Total current assets 19,340,216 19,370,225 Property, Plant and equipment: Land 3,086,571 3,528,054 Buildings 17,040,006 17,151,522 Machinery and equipment 40,819,601 36,023,701 Transportation equipment 15,286,803 15,727,913 76,232,981 72,431,190 Less accumulated depreciation 59,136,721 57,433,048 17,096,260 14,998,142 Other Assets Notes receivable, long-term 1,981,718 2,027,636 Cash surrender value of life insurance 2,785,336 2,835,950 Other 15,337 15,339 Total other assets 4,782,391 4,878,925 Total $41,218,867 $39,247,292 See Accompanying Notes to Consolidated Financial Statements. LIABILITIES AND STOCKHOLDERS' EQUITY 2002 2001 Current Liabilities: Checks outstanding in excess of bank balances $ 621,326 $ 1,552,461 Accounts payable 2,803,182 2,924,428 Current portion of long-term debt 371,516 -___ Note payable - line of credit 478,894 860,100 Other accrued expenses 975,047 941,360 Deferred income taxes 607,489 142,522 Salary continuation plan 81,805 40,773 Total current liabilities 5,939,259 6,461,644 Long-term liabilities: Note payable - bank, non current 3,150,020 -___ Salary continuation plan 1,932,586 1,887,050 Total long-term liabilities 5,082,606 1,887,050 Deferred income taxes 551,742 1,098,672 Commitments and Contingencies - - Stockholders' Equity: Common stock - $.66 2/3 par value, Authorized 35,000,000 shares; issued 13,828,793 shares 9,219,195 9,219,195 Additional paid-in capital 6,497,954 6,499,554 Retained earnings 24,461,288 24,426,345 Treasury shares - at cost (1,945,488 shares in 2002 and 1,896,052 shares in 2001) (10,533,177) (10,345,168) Total stockholders' equity 29,645,260 29,799,926 Total $41,218,867 $39,247,292 CONSOLIDATED STATEMENTS OF INCOME Years ended May 31, 2002, 2001 and 2000 2002 2001 2000 Revenues: Net sales $104,572,608 $102,796,741 $112,723,457 Other income, including gain on sale of property and equipment of $756,259 in 2002, $599,497 in 2001 and $250,180 in 2000 1,121,956 985,741 753,385 Investment income 197,686 304,783 67,454 Total revenues 105,892,250 104,087,265 113,544,296 Cost And Expenses: Cost of sales 54,257,812 53,636,803 57,146,571 Selling, general and administrative expenses 47,107,554 46,153,184 51,168,987 Interest 110,932 3,068 - Contributions to employee 401(k) profit-sharing and employee stock ownership plans 177,405 181,055 510,000 Restructuring charge - - 2,564,892 Total costs a and expenses 101,653,703 99,974,110 111,390,450 Income before cumulative effect of a change in accounting policy and income taxes 4,238,547 4,113,155 2,153,846 Provision for income taxes: Currently payable: Federal 1,762,000 1,678,000 1,242,000 State 225,000 199,000 188,000 Deferred taxes (344,000) (464,000) (519,000) Total provision for income taxes 1,643,000 1,413,000 911,000 Net income before cumulative effect of a change in accounting policy 2,595,547 2,700,155 1,242,846 Cumulative effect of a change in accounting policy net of taxes of $262,037 413,401 - - Net income $3,008,948 $2,700,155 $1,242,846 Per share of common stock: Net income before cumulative effect of a change in accounting policy $0.22 $0.23 $0.10 Cumulative effect of a change in accounting policy net of taxes $0.03 - - Basic earnings $0.25 $0.23 $0.10 Diluted earnings $0.25 $0.23 $0.10 Basic weighted shares outstanding 11,898,097 11,965,671 12,154,057 See Accompanying Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended May 31, 2002, 2001, and 2000 2002 2001 2000 Cash flows from operating activities: Net income $3,008,948 $2,700,155 $1,242,846 Adjustment to reconcile net income to net cash provided by operating activities: Cumulative effect of a change in accounting policy (413,401) - - Depreciation and amortization 2,593,621 2,435,599 3,230,321 Deferred income taxes (344,000) (464,000) (519,000) Gain on sale of property and equipment (756,259) (599,497) (250,180) Change in operating assets and liabilities: (Increase) decrease in receivables - net (648,679) (497,688) 1,631,229 (Increase) decrease in inventories (470,362) (697,415) 586,264 (Increase) decrease in prepaid expenses (1,079,977) (71,729) 145,045 Decrease in cash surrender value of insurance 50,614 30,591 2,618 (Decrease) increase in accounts payable (121,246) (2,073,900) 1,308,713 Increase (decrease) in accrued expenses (33,687) (795,999) 784,993 Increase in salary continuation plan 86,568 83,542 264,828 Net cash provided by operating activities 1,939,514 49,659 8,427,677 Cash flows from investing activities: Purchase of property, plant and equipment (5,236,601) (2,443,988) (1,065,586) Proceeds from sale of property, plant and equipment 1,301,160 253,972 1,166,672 Cash received from disposal of Nashville plant and equipment --_ 1,710,000 - Collection of notes receivable 42,399 19,965_ - Investment securities available-for-sale: Purchases 5,261,176) (10,123,555) (6,909,902) Proceeds from disposals 7,745,325 12,045,251 2,550,000 Net cash (used in) provided by investing activities (1,408,893) 1,461,645 (4,258,816) Cash flows from financing activities: Debt proceeds 7,806,676 860,100 - Debt repayments 4,666,346) -_ Increase (decrease) in checks outstanding in excess of bank balances (931,135) 931,996 (342,009) Purchases of treasury shares (193,419) (467,951) (300,797) Proceeds from exercise of stock option 3,810 --- ----- Cash dividends paid (2,974,005) (2,960,245) (2,918,101) Net cash (used in) financing activities (954,419) (1,636,100) (3,560,907) Net (decrease) cash equivalents (423,798) (124,796) 607,954 Cash and cash equivalents at beginning of year 710,278 835,074 227,120 Cash and cash equivalents at end of year $ 286,480 $ 710,278 $ 835,074 Supplemental information Cash paid durint the year for: Income taxes $ 2,343,597 $ 1,898,808 $ 1,349,392 Interest 110,932 3,068 --_ See Accompanying Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Years ended May 31, 2002, 2001 and 2000 Additional Total Common Paid-in Retained Treasury Stockholders' Stock Capital Earnings Shares Equity Balance - May 31 1999 $ 9,219,195 $ 6,499,554 $ 26,361,690 $ (9,576,420 ) $ 32,504,019 Net income - 2000 -____ -___ 1,242,846 -___ 1,242,846 Cash dividends declared - $.24 per share -____ -___ (2,918,101 ) -___ (2,918,101 ) Treasury shares purchased -____ -___ -___ (300,797 ) (300,797 ) Balance - May 31 2000 9,219,195 6,499,554 24,686,435 (9,877,217 ) 30,527,967 Net income - 2001 -____ -___ 2,700,155 -___ 2,700,155 Cash dividends declared - $.25 per share -____ -___ (2,960,245 ) -___ (2,960,245 ) Treasury shares purchased -____ -___ -___ (467,951 ) (467,951 ) Balance - May 31 2001 9,219,195 6,499,554 24,426,345 (10,345,168 ) 29,799,926 Net income - 2002 -____ -___ 3,008,948 -___ 3,008,948 Cash dividends declared - $.25 per share -____ -___ (2,974,005 ) -___ (2,974,005 ) Treasury shares purchased -____ -___ -___ (193,419 ) (193,419 ) Stock options exercised -____ (1,600 ) -___ 5,410 3,810 Balance - May 31, 2002 $ 9,219,195 $ 6,497,954 $ 24,461,288 $ (10,533,177 ) $ 29,645,260 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of Golden Enterprises, Inc. and subsidiary ("Company") conform to accounting principles generally accepted in the United States of America nd to general principles within the snack foods industry. The following is a description of the more significant accounting policies: Nature of the Business The Company manufactures and distributes a full line of snack items that are sold through its own sales organization and independent distributors to commercial establishments that sell food products primarily in the Southeastern United States. Consolidation The consolidated financial statements include the accounts of Golden Enterprises, Inc. and its wholly-owned subsidiary, Golden Flake Snack Foods, Inc., (the "Company"). All significant intercompany transactions and balances have been eliminated. Revenue Recognition The Company recognizes sales and related costs upon delivery or shipment of products to its customers. Sales are reduced by returns and allowances to customers. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Investment Securities Investment securities at May 31, 2002 are principally instruments of municipalities and of short-term mutual municipal funds. The Company currently classifies all investment securities as available-for-sale. Securities accounted for as available-for-sale include bonds, notes, common stock and non-redeemable preferred stock not classified as either held-to-maturity or trading. Securities classified as available-for-sale are required to be reported at fair value with unrealized gains and losses, net of taxes, excluded from earnings and shown separately as a component of accumulated other comprehensive income within stockholders' equity. Realized gains and losses on the sale of securities available-for-sale are determined using the specific-identification method. Inventories Inventories are stated at the lower of cost or market. Cost is computed on the first-in, first-out method. Property, Plant and Equipment Property, plant and equipment are stated at cost. For financial reporting purposes, depreciation and amortization have been provided principally on the straight-line method over the estimated useful lives of the respective assets. Accelerated methods are used for tax purposes. Expenditures for maintenance and repairs are charged to operations as incurred; expenditures for renewals and betterments are capitalized and written off by depreciation and amortization charges. Property retired or sold is removed from the asset and related accumulated depreciation accounts and any profit or loss resulting therefrom is reflected in the statements of income. Self-Insurance Self-insurance reserves are established for estimated losses for automobile liability, general liability, workers' compensation and property losses based on claims filed and claims incurred but not reported. These reserves are necessarily based on estimates; thus actual results may differ. The Company is insured for losses in excess of $150,000, $150,000, $250,000 and $100,000 per occurrence for automobile liability, generally liability, workers' compensation and property losses, respectively. Advertising The Company expenses advertising costs as incurred. These costs amounted to $5,344,366, $6,043,507 and $5,648,140 for the fiscal years 2002, 2001, and 2000, respectively, and are included in selling, general and administrative expenses in the Consolidated Statement of Income. Income Taxes Deferred income taxes are recorded on the differences between the tax bases of assets and liabilities and the amounts at which they are reported in the consolidated financial statements. Recorded amounts are adjusted to reflect changes in income tax rates and other tax law provisions as they become enacted. Segment Information The Company does not identify separate operating segments for management reporting purposes. The results of operations are the basis on which management evaluates operations and makes business decisions. The Company's sales are generated primarily within the United States of America. Pension and Postretirement Benefits The Company has adopted the revised disclosure requirements of the Statement of Financial Accounting Standards No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits. SFAS 132 standardizes the disclosure requirements for pensions and other postretirement benefits, eliminates certain disclosures and requires additional information on changes in benefit obligations and fair values of plan assets. The adoption of SFAS 132 did not have a material impact on the financial statements of the Company. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Recent Issued Accounting Standards In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations (SFAS 141) and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires that the purchases method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also provides new criteria to determine whether an acquired intangible asset should be recognized separately from goodwill. The adopting of SFAS 141 had no impact on the Company's results of operations or financial condition. SFAS 142 is effective for the Company as of June 1, 2002. In accordance with SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to impairment testing. Intangible assets with finite lives will continue to be amortized over their useful lives. SFAS 142 requires an initial goodwill and indefinite lived intangible asset impairment assessments in the year of adoption, and at a minimum, annual impairment testing thereafter. The adoption of SFAS 142 is not expected to have a material impact on the Company's results of operations or financial conditions. Recent Issued Accounting Standards - Continued In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets to be held and used, to be disposed of other than by sale, and to be disposed of by sale. SFAS 144 is effective for the Company as of June 1, 2002. The adoption of SFAS 144 is not expected to have a material impact on the Company's results of operations or financial condition. In November 2001, the Emerging Issues Task Force reached a consensus on Issue No. 01-09 Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products) effective for annual or interim periods beginning after December 15, 2001. This issue addresses the recognition, measurement and income statement classification for certain sales incentives. The Company implemented this new accounting policy in the fourth quarter of fiscal 2002. The effect of this accounting change is to adopt this policy as of the beginning of fiscal 2002 (June 1, 2001). Certain of these expenses, including slotting fees, previously classified as selling, general and administrative expenses, are now characterized as offsets to net sales. Reclassifications have been made to prior period financial statements to conform to current year presentation. Total vendor sales incentives now characterized as reductions of net sales that previously would have been classified as selling, general and administrative expenses were approximately $11.7 million, $12.9 million and $13.4 million for the years ended 2002, 2001 and 2000, respectively. There was no resulting impact on net income from adopting EITF 01-09. Stock Compensation The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for its employees stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized (see Note 12). Reclassifications Certain prior year amounts have been reclassified to conform to current year classifications. NOTE 2 - INVESTMENT SECURITIES The amortized cost, gross unrealized gains and losses and fair value of the investment securities available-for-sale as of May 31, 2002 and 2001, are as follows: May 31, 2002 Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value Municipal obligations $ -___ $ - $ - $ -___ Mutual funds 15,998 - - 15,998 $15,998 $ - $ - $ 15,998 Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value Municipal obligations $ 625,326 $ - $ - $ 625,326 Mutual funds 1,874,821 - - 1,874,821 $2,500,147 $ - $ - $2,500,147 Maturities of investment securities classified as available- for-sale at May 31, 2002 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to recall or prepay obligations with or without call or prepayment penalties Amortized Cost Fair Value Investment securities available-for-sale: Due within one year $ 15,998 $ 15,998 Due after one year through three years - - Due after three years through five years - - Total $ 15,998 $ 15,998 Proceeds from sales of investment securities available-for- sale during fiscal 2002, 2001 and 2000 were $7,745,325, $12,045,251 and $2,550,000, respectively. No gains or losses were realized on those sales for fiscal 2002, 2001 and 2000. NOTE 3 - CHANGE IN ACCOUNTING POLICY The Company changed its accounting policy in the fourth quarter of fiscal 2002 with regard to slotting fees. The effect of this accounting change was to adopt this policy as of the beginning of fiscal 2002 (June 1, 2001). Previously, slotting fees were expensed as incurred. The Company changed this accounting policy to capitalize and amortize such costs over the expected benefit period, which is generally one year. This change in accounting policy was made to more closely match the cost of the shelf space obtained with the slotting fees with the revenues produced by the shelf space. The cumulative effect of this change in accounting policy resulted in a noncash cumulative adjustment of $413,401 ($0.03 per share), net of taxes. The accounting change also increased net income before the cumulative effect in 2002 by $197,141 ($0.02 per share). The effect on income in 2001 and 2000 has not been determined. Quarterly results for 2002 reflecting this change in accounting are included in Note 17, Quarterly Results of Operations. Pro forma earnings per s hare amounts for previous quarters, assuming the new policy was applied retroactively, are as follows: Basic earnings per share: First Second Third Net income - as reported $ .09 $ .05 $ .09 Net income - pro forma .09 .05 .09 Diluted earnings per share: Net income - as reported $ .09 $ .05 $ .09 Net income - pro forma .09 .05 .09 NOTE 4 - NOTES RECEIVABLE Notes receivable as of May 31, 2002 and 2001 consist of the following: 2002 2001 8% note, due in 120 monthly installments of $1,092 through November 1, 2010, collateralized by equipment and personal guarantee $ 80,625 $ 86,999 8% note, due in 120 monthly installments of $3,640 through November 1, 2010, collateralized by property 268,749 289,995 8% note, due in 360 monthly installments of $12,474 through November 1, 2030, collateriazed by property 1,678,262 1,693,041 2,027,636 2,070,035 Less current portion 45,918 42,399 $ 1,981,718 $2,027,636 Maturities at May 31, 2004 $ 49,729 2005 53,856 2006 58,327 2007 63,168 2008 68,410 Thereafter 1,688,228 NOTE 5 - PREPAID EXPENSES At May 31, prepaid expenses consist of the following: 2002 2001 Prepaid Slotting fees $ 1,001,086 $ -____ Other prepaid expenses 3,029,951 2,275,659 $4,031,037 $2,275,659 NOTE 6 - RESTRUCTURING CHARGES The restructuring charge of $2,564,892 recognized in the fourth quarter of fiscal 2000 relates to a restructuring plan approved by the Board of Directors in January 2000 whereby the Nashville plant which primarily manufactured low fat snacks was closed, a voluntary retirement package was offered to a group of qualified employees, and the Company-operated distribution system for Golden Flake Brand products in three fringe sales regions in Central Florida was discontinued. The following is a summary of the one-time restructuring charge to expense for the year ended May 31, 2000. Employee termination benefits $ 1,335,550 Other charges 1,229,342 Total restructuring charge $ 2,564,892 Net after tax $ 1,607,892 Per share $ .13 The employee related termination benefits of $1,335,550 primarily includes severance costs for 104 employees, 10 of which accepted the voluntary retirement package, 71 of which were employed in the three fringe sales regions of Central Florida and 23 of which were employed at the Nashville plant. The other charges of $1,229,342 consisted primarily of gains and losses on disposal of property and equipment and the cost related to the exiting of sales regions in Central Florida. NOTE 7 - OTHER ACCRUED EXPENSES At May 31, other accrued expenses consist of the following: 2002 2001 Accrued payroll $ 490,000 $ 288,406 Other accrued expenses 485,047 652,954 $ 975,047 $ 941,360 NOTE 8 - NOTES PAYABLE - LINE OF CREDIT Notes payable - line of credit consists of a revolving line of credit with a balance of $478,894 at May 31, 2002. The interest rate varies with the bank's prime 2003. (4.75% at May 31, 2002) with principal and 2004. interest due December 31, 2002. NOTE 9 - LONG-TERM LIABILITIES 2002 Long-term debt consist of the following: Note payable - bank - payable in equal monthly installments of $41,688 including interest at the LIBOR index rate plus 1.75% 3.59% at May 31, 2002) through April 3, 2011, secured by equipment $ 3,521,536 Less: current portion 371,516 $ 3,150,020 Maturities at May 31, 2004 $ 393,916 2005 408,292 2006 423,194 2007 438,639 2008 454,648 Thereafter 1,031,331 Other long-term obligations at May 31,2002 and 2001 consist of the following: 2002 2001 Salary continuation plan $2,014,391 $1,927,823 Less current portion (81,805) (40,773) $1,932,586 $1,887,050 The Company is accruing the present values of the estimated future retirement payments over the period from the date of the agreements to the retirement dates, for certain key executives. The Company recognized compensation expense of approximately $127,000, $121,000 and $265,000 for fiscal 2002, 2001and 2000 respectively. NOTE 10 - INCOME TAXES The effective tax rate for continuing operations differs from the expected tax using statutory rates. A reconciliation between the expected tax and the actual income tax expense follows: 2002 2001 2000 Tax on income at statutory rates $ 1,441,000 $1,398,000 $732,000 Increase (decrease) resulting from: State income taxes, less Federal income tax benefit 149,000 131,000 124,000 Tax exempt interest (9,000) (59,000) (20,000) Other - net 62,000 (57,000) 75,000 Total $ 1,643,000 $ 1,413,000 $ 911,000 The tax effects of temporary differences that result in deferred tax assets and liabilities are as follows: 2002 2001 Deferred tax assets Salary continuation plan $ 723,500 $ 692,500 Allowance for doubtful accounts 66,674 117,674 790,174 810,174 Deferred tax liabilities Property and equipment 1,275,242 1,791,172 Prepaid expenses 674,163 260,196 1,949,405 2,051,368 Total $ (1,159,231) $ (1,241,194) NOTE 11 - EMPLOYEE BENEFIT PLANS The Company has trusteed Qualified Profit-Sharing Plans that were amended and restated effective June 1, 1996 to add a 401(k) salary reduction provision. Under this provision, employees can contribute up to fifteen percent of their compensation to the plan on a pretax basis subject to regulatory limits; and the Company, at its discretion, can match up to 4 percent of the participants' compensation. The annual contributions to the plans are determined by the Board of Directors. Total plan expenses for the years ended May 31, 2002, 2001 and 2000 were $177,405, $181,055, and $255,000, respectively. The Company has an Employee Stock Ownership Plan that covers all full-time employees. The annual contributions to the plan are amounts determined by the Board of Directors of the Company. Annual contributions are made in cash or common stock of the Company. The Employee Stock Ownership Plan expenses for the years ended May 31, 2002, 2001 and 2000 were $-0-, $-0-, and $ 255,000, respectively. Each participant's account is credited with an allocation of shares acquired with the Company's annual contributions, dividends received on ESOP shares and forfeitures of terminated participants' nonvested accounts. The contributions to the 401(k) Profit-Sharing Plans and the Employees Stock Ownership Plan may not exceed fifteen percent of the total compensation of all participating employees. The Company expects to continue these plans indefinitely; however, the rights to modify, amend or terminate the plans have been reserved. The Company has a salary continuation plan with certain of its key officers whereby monthly benefits will be paid for a period of fifteen years following retirement. The Company is accruing the present value of such retirement benefits until the key officers reach normal retirement age at which time the principal portion of the retirement benefits paid are applied to the liability previously accrued. The change in the liability for the Salary Continuation Plan is as follows: May 31, 2002, 2001 and 2000 002 2001 Accrued Salary Continuation Plan - beginning of year $1,927,823 $1,844,281 Benefits Accrued 127,341 121,190 Benefits Paid (40,773) (37,648) Accrued Salary Continuation Plan - end of year $2,014,391 $1,927,823 NOTE 12 - STOCK OPTIONS AND LONG-TERM INCENTIVE PLANS The Company has a stock option plan and a long-term incentive plan currently in effect under which future grants may be issued: the 1988 Stock Option a nd Stock Appreciation Plan (the 1988 Plan) and the 1996 Long-Term Incentive Plan (the 1996 Plan). The Plans are administered by the Stock Option Committee of the Board of Directors, which has sole discretion, subject to the terms of the Plans, to determine those employees including executive officers, eligible to receive awards and the amount and type of such awards. The Stock Option Committee also has the authority to interpret the Plans, formulate the terms and conditions of award agreements, and make all other determinations required in the administration thereof. All options outstanding at the end of 2002, 2001 and 2000 are exercisable. The 1988 Plan provides that non-qualified stock options and stock appreciation rights may be granted to key employees for up to 400,000 shares of the Company's common stock. The options and stock appreciation rights are exercisable three years after date of grant. The option price may be less than, equal to or greater than the fair market value of the stock on the date of grant. Each stock appreciation right entitles the option holder, upon exercise of the related stock option, to receive from the Company the amount of the appreciation in the underlying common stock as determined by the excess of the fair market value of a share of common stock on the exercise date of the related stock option over the option price. The options and stock appreciation rights granted, if not exercised, will expire three months from the date they are exercisable. There were no stock options and stock appreciation rights outstanding under this Plan at May 31, 2002, 2001 and 2000; however, there were 175,500 shares available for granting of additional options. The 1988 Plan expires July 6, 2002 except as to options and stock appreciation rights outstanding on that date; but, the rights to amend, suspend or terminate the Plan have been reserved. The 1996 Plan provides for the granting of Incentive Stock Options as defined under the Internal Revenue Code. Under the Plan, grants may be made to selected officers and employees, of incentive stock options with a term not exceeding ten years from the issue date and at a price not less than the fair market value of the Company's stock at the date of grant. Five hundred thousand shares of the Company's stock have been reserved for issuance under this Plan. The following is a summary of transactions: Shares Under Option 2002 2001 2000 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Outstanding - beginning of year 40,000 3.50 340,000 6.92 340,000 6.92 Granted 330,000 3.81 - - - - Exercised.. ( 1,000) 3.81 - - - - Forfieted - - - - - - Cancelled - - (300,000) 7.38 - - Outstanding - end of year 369,000 3.78 40,000 3.50 340,000 6.92 The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB25) and related Interpretation in accounting for its Employee Stock Options rather than the Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. Under APB25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Proform a information regarding net income and earnings per share is presented as if the Company had accounted for its employee stock options under the fair value method. The per share weighted average fair value of the stock options granted during fiscal 2002 was $.25. The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rate 5.05 percent; dividend yield 6.56 percent; expected option life of 5 years; and expected volatility of 15 percent. No options were granted during 2001 or 2000. The Black-Scholes options pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect an option's fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The Company's actual and proform a information is as follows: 2002 2001 2000 Net income: As reported $3,008,948 $2,700,155 $1,242,846 Pro forma 2,956,659 2,700,155 1,242,846 Basic earnings per share: As reported $ .25 $ .23 $ .10 Pro forma .25 .23 .10 Diluted earnings per share: As reported $ .25 $ .23 $ .10 Pro forma .25 .23 .10 NOTE 13 - NET INCOME PER SHARE During 1996, the FASB issued Statement of Financial Accounting Standards No. 128, Earnings Per Share. SFAS 128 specifies the computation, presentation and disclosure requirements for earnings per share, replacing the presentation of primary earnings per share with the presentation of basic earnings per share. The only difference in the two methods for computing the Company's per share amounts is attributable to outstanding options, under the stock options and long-term incentive plans. The effect of the stock options was determined using the treasury stock method. Consolidated net income as reported was not affected. Shares used to compute diluted earnings per share are as follows: Average Common Stock Shares 2002 2001 2000 Basic weighted shares outstanding 11,898,097 11,965,671 12,154,057 Effects of options 2,796 2,152 - Diluted shares 11,900,893 11,967,823 112,154,057 NOTE 14 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments requires disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value. SFAS 107 defines fair value as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. The fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, such as estimates of timing and amount of expected future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument. The carrying amounts for cash and cash equivalents approximate fair value because of the short maturity, generally less than three months, of these instruments. The fair values of investment securities have been determined using values supplied by independent pricing services and are disclosed together with carrying amounts in Note 2. The fair value of notes receivable is estimated by using a discount rate that approximates the current rate for comparable notes. At May 31, 2002 and 2001 the aggregate fair value was approximately $2,208,839 and $2,160,906 compared to a carrying amount of $2,027,636 and $2,070,035, respectively. The interest rate on the Company's bank debt is reset monthly to reflect the 30 day LIBOR rate. Consequently, the carrying value of the bank debt approximates fair value. The carrying value of the Company's salary continuation plan and accrued liability approximates fair value because present value is used in accruing this liability. The Company does not hold or issue financial instruments for trading purposes and has no involvement with forward currency exchange contracts. NOTE 15 - COMMITMENTS AND CONTINGENCIES Rental expense was $547,742 in 2002, $410,189 in 2001, and $498,307 in 2000. At May 31, 2002, the Company was obligated under certain operating leases for buildings, office space and equipment. The following amounts represent future payment commitments under these leases: May 31, Office Space Equipment Total 2003 $24,000 $187,000 $211,000 2004 -___ 187,000 187,000 2005 -___ -___ -___ The Company leases equipment for approximately $16,000 per month from a company which is principally owned by a major shareholder of Golden Enterprises, Inc. The Company leases its airplane to a major shareholder of the Company for approximately $20,000 per month. The lease provides for his personal use of the airplane for up to 100 flight hours per year and is for a term of one year with automatic renewal at the option of either party. The Company had letters of credit in the amount of $1,500,000 outstanding at May 31, 2002, and $2,000,000 outstanding at May 31, 2001 to support the Company's commercial self-insurance program. The Company pays a commitment fee of 0.375% to maintain the letters of credit. NOTE 16 -CONCENTRATIONS OF CREDIT RISK The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents and trade receivables. The Company maintains its cash accounts primarily with banks located in Alabama. The total cash balances are insured by the F.D.I.C. up to $100,000 per bank. The Company had cash balances on deposit with an Alabama bank at May 31, 2002 that exceeded the balance insured by the F.D.I.C. in the amount of $625,175. The Company's trade receivables result primarily from its snack food operations and reflect a broad customer base, primarily large grocery store chains located in the southeastern United States. The Company routinely assesses the financial strength of its customers. As a consequence, concentrations of credit risk are limited. NOTE 17 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of the unaudited quarterly results of operations of the years ended May 31, 2002 and 2001. Per Share Total Revenues Net Income Net Income Quarter 2002 First $ 26,108,693 $ 1,059,969 $0.09 Second 25,130,769 565,404 0.05 Third 27,137,452 1,122,950 0.09 Fourth 27,515,336 260,925 0.02 For the year $ 105,892,250 $ 3,008,948 $0.25 2001 First $ 26,573,809 $ 1,272,111 $0.11 Second 25,457,003 1,079,301 0.09 Third 25,721,660 389,156 0.03 Fourth 26,334,793 (40,413) 0.00 For the year $104,087,265 $ 2,700,155 $0.23 Revenues for the quarterly information have been adjusted from the amounts previously reported in the Company's 10-Q's. The revised amounts reflect the adoption of EITF 01-9, which requires reclassification of certain expenses. The reclassification involves removing certain expenses from selling, general and administrative expenses and including them as a direct reduction of revenues. The adoption of EITF 01-9 does not affect net income. Quarterly net income amounts for 2002 have been adjusted from amounts reported in the company's 10-Q's to reflect the change in accounting discussed in Note 3. NOTE 18 - SUPPLEMENTARY STATEMENT OF INCOME INFORMATION The following tabulation gives certain supplementary statement of income information for continuing operations for the years ended May 31, 2002, 2001 and 2000: 2002 2001 2000 Maintenance and repairs $ 5,290,498 $5,375,639 $ 5,889,306 Depreciation and amortization 2,593,621 2,435,599 3,230,321 Payroll taxes 2,473,871 2,388,828 2,599,980 Advertising costs 5,344,366 6,043,507 5,648,140 Amounts for depreciation and amortization of intangible assets, royalties, other taxes, rents and research and development costs are not presented because each of such amounts is less than 1% of total revenues. GOLDEN ENTERPRISES, INC. AND SUBSIDIARY SUPPLEMENTAL FINANCIAL INFORMATION Selected quarterly financial data for the fiscal years ended May 31, 2002 and 2001 (unaudited) (Dollar amounts in thousands, except per share data) First Second Third Fourth Quarter Quarter Quarter Quarter 2002 Total revenues $26,109 $25,131 $27,137 $27,515 Income before income taxes $1,675 $920 $1,787 $533 Net income $1,060 $565 $1,123 $261 Net income per share $0.09 $0.05 $0.09 $0.02 Cash dividends per share $0.0625 $0.0625 $0.0625 $0.0625 2001 Total revenues $26,574 $25,457 $25,722 $26,335 Income before income taxes $2,004 $1,689 $598 $(178) Net income $1,272 $1,079 $389 $(40) Net income per share $0.11 $0.09 $0.03 $0.00 Cash dividends per share $0.0600$0.0625 $0.0625 $0.0625 Revenues for the quarterly information have been adjusted from the amounts previously reported in the Company's 10-Q's. The revised amounts reflect the adoption of EITF 01-9, which requires reclassification of certain expenses. The reclassification involves removing certain expenses from selling, general and administrative expenses and including them as a direct reduction of revenues. Quarterly net income amounts for 2002 have been adjusted from amounts reported in the company's 10-Q's to reflect the change in accounting discussed in Note 3 to the Company's consolidated financial statements. ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11. - EXECUTIVE COMPENSATION ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS With the exception of a description of Executive Officers of The Registrant which appears on page 5 herein, Part III is omitted because prior to September 28, 2002, the Company will file a definitive Proxy Statement with the Securities and Exchange Commission pursuant to Regulation 14A which involves the election of directors. PART IV ITEM 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. and 2. LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of Golden Enterprises, Inc. and subsidiary required to be included in Item 8 are listed below: Consolidated Balance Sheets - May 31, 2002 and 2001 Consolidated Statements of Income - Years ended May 31, 2002, 2001 and 2000 Consolidated Statements of Changes in Stockholders' Equity - Years ended May 31, 2002, 2001 and 2000 Consolidated Statements of Cash Flows - Years ended May 31, 2002, 2001 and 2000 Notes to Consolidated Financial Statements The following consolidated financial statements schedule is included in Item 14 (d): Schedule II - Valuation and Qualifying Accounts All other schedules are omitted because the information required therein is not applicable, or the information is given in the financial statements and notes thereto. 3. Exhibits: 10.1 - A copy of Contract for Sale and Purchase of Ocala, Florida surplus property dated January 24, 2002. 10.2 - A copy of Amendment to Salary Continuation Plan, Retirement and Disability for F. Wayne Pate dated April 9, 2002. 10.3 - A copy of Amendment to Salary Continuation Plan, Retirement and Disability for John S. Stein dated April 9, 2002. 10.4 - A copy of Amendment to Salary Continuation Plan, Death Benefits for John S. Stein dated April 9, 2002. 10.5 - A copy of Retirement and Consulting Agreement for John S. Stein dated April 9, 2002. 10.6 - A copy of Salary Continuation Plan for Mark W. McCutcheon dated May 15, 2002. 10.7 - A copy of Trust Under Salary Continuation Plan for Mark W. McCutcheon dated May 15, 2002. 18.1 - A copy of a letter from Dudley, Hopton-Jones, Sims & Freeman PLLP the Company's independent accountant describing a change for the fiscal year ended May 31, 2002 in the method of accounting for slotting fees from expensing the costs as incurred to capitalizing and amortizing such costs over the expected benefit period, which is generally one year. (b) Report on Form 8-K - The Registrant did not file a Form 8-K report during the last quarter of the period covered by this report. (c) Exhibits. See (a) 3. above. (c) Financial Statement Schedules. The response to this portion of Item 14, is submitted under Item 14.(a) 1. and 2. above. 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. Golden Enterprises, Inc. By August 24, 2002 John H. Shannon Date Vice President, Principal Financial Officer and Controller 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: Signature Title Date Chairman of the Board August 24, 2002 Chief Executive August 24, 2002 Officer, President and Director Vice President, Secretary, August 24, 2002 Principal Financial Officer and Controller Director August 24, 2002 Director August 24, 2002 Director August 24, 2002 Director August 24, 2002 Director August 24, 2002 Director August 24, 2002 Director August 24, 2002 Director August 24, 2002 Schedule II GOLDEN ENTERPRISES, INC. AND SUBSIDIARY VALUATION AND QUALIFYING ACCOUNTS Years ended May 31, 2000, 2001, and 2002 Additions Balance at Charged to Balance Allowance for Beginning Costs and at End Doubtful Accounts of Year Expenses Deductions of Year Year ended May 31, 2000 $111,000 $690,983 $201,983 $600,000 Year ended May 31, 2001 $600,000 $(194,938) $58,962 $346,100 Year ended May 31, 2002 $346,100 $(113,175) $36,825 $196,100 INDEX TO EXHIBITS Exhibit Number Page 10.1 A copy of Contract for Sale and Purchase of Ocala, Florida surplus property dated January 24, 2002. 10.2 A copy of Amendment to Salary Continuation Plan, Retirement 10.3 and Disability for F. Wayne Pate dated April 9, 2002. 10.4 A copy of Amendment to Salary Continuation Plan, Retirement 10.5 and Disability for John S. Stein dated April 9, 2002. 10.4 A copy of Amendment to Salary Continuation Plan, Death 10.5 Benefits for John S. Stein dated April 9, 2002. 10.6 A copy of Retirement and Consulting Agreement for 10.7 John S. Stein dated April 9, 2002. 10.6 A copy of Salary Continuation Plan for Mark W. 10.7 McCutcheon dated May 15, 2002. 10.8 A copy of Trust Under Salary Continuation Plan for 10.9 Mark W. McCutcheon dated May 15, 2002. 18.1 A copy of a letter from Dudley, Hopton-Jones, Sims & Freeman PLLP the Company's independent accountant describing a change for the fiscal year ended May 31, 2002 in the method of accounting for slotting fees from expensing the costs as incurred to capitalizing and amortizing such costs over the expected benefit period, which is generally one year. EX-10 3 exhibitb.txt EXHIBIT 10.2 A copy of Amendment to Salary Continuation Plan, Retirement and Disability for F. Wayne Pate dated April 9, 2002. AMENDMENT TO SALARY CONTINUATION PLAN, RETIREMENT AND DISABILITY WHEREAS, Golden Enterprises, Inc. ("Employer") and F. Wayne Pate ("Employee") entered into a Salary Continuation Plan, Retirement and Disability ("Plan") on April 6, 1992; and WHEREAS, such Plan was amended on May 7, 1999; and WHEREAS, pursuant to the terms of the Plan, such agreement could be terminated without further liability of Employer at any time by the Employer's Board of Directors; and WHEREAS, Employer and Employee wish to add additional terms to the Plan and acknowledge certain original terms and intention of the Employer and Employee with regard to the Plan. NOW, THEREFORE, Employer and Employee hereby amend and acknowledge portions of the Plan as follows: 1. Employer and Employee hereby acknowledge and agree that Employer has not created and will not in the future create a separate fund for the payment of deferred compensation amounts due to be paid to Employee pursuant to the terms of the Plan. 2. The Employee acknowledges and agrees that for the purposes of the payment of the deferred compensation payments due Employee pursuant to the terms of the Plan, Employee is to be regarded as a general creditor of the Employer, and that all amounts due Employee are subject to the potential claims of Employer's creditors. 3. Employer and Employee hereby agree that upon Employee's retirement, the deferred compensation payments due Employee can only be terminated by Employer due to Employee's "competing" against Employer. "Competing" against Employer shall be defined as Employee being in the employ of, consulting for or providing any beneficial services (other than investing in the stock or equity of a publically-held corporation or entity, if such investment is less than 1% of the outstanding publically-held stock or equity) for any company or entity that provides goods and/or services similar to Employer. 4. Employer and Employee hereby agree that the Plan may be terminated by the Employer's Board of Directors at any time prior to retirement without further liability to Employer, however, in the event a majority of the Employer's stock is not owned, directly or indirectly, by Sloan Y. Bashinsky, Sr. ("Change of Control"), then upon the date of such Change of Control, the Plan shall not be terminable for any reason (but shall remain subject to potential claims of the Company creditors) and the Board of Directors shall not retain any ability to terminate the Plan. Dated this the 9th day of April, 2002. BY ORDER OF THE BOARD OF DIRECTORS GOLDEN ENTERPRISES, INC. By /S/ MARK W. MCCUTCHEON Mark W. McCutcheon President /S/ F. WAYNE PATE F. Wayne Pate - Employee -2- EX-10 4 exhibitc.txt EXHIBIT 10.3 A copy of Amendment to Salary Continuation Plan, Retirement and Disability for John S. Stein dated April 9, 2002. AMENDMENT TO SALARY CONTINUATION PLAN, RETIREMENT AND DISABILITY WHEREAS, Golden Enterprises, Inc. ("Employer") and John S. Stein ("Employee") entered into a Salary Continuation Plan, Retirement and Disability ("Plan"); and WHEREAS, such Plan is still in force and effect; and WHEREAS, pursuant to the terms of the Plan, such agreement could be terminated without further liability of Employer at any time by the Employer's Board of Directors; and WHEREAS, Employer and Employee wish to add additional terms to the Plan and acknowledge certain original terms and intention of the Employer and Employee with regard to the Plan. NOW, THEREFORE, Employer and Employee hereby amend and acknowledge portions of the Plan as follows: 1. Employer and Employee hereby acknowledge and agree that Employer has not created and will not in the future create a separate fund for the payment of deferred compensation amounts due to be paid to Employee pursuant to the terms of the Plan. 2. The Employee acknowledges and agrees that for the purposes of the payment of the deferred compensation payments due Employee pursuant to the terms of the Plan, Employee is to be regarded as a general creditor of the Employer, and that all amounts due Employee are subject to the potential claims of Employer's creditors. 3. Employer and Employee hereby agree that upon Employee's retirement, the deferred compensation payments due Employee can only be terminated by Employer due to Employee's "competing" against Employer. "Competing" against Employer shall be defined as Employee being in the employ of, consulting for o r providing any beneficial services (other than investing in the stock or equity of a publically-held corporation or entity, if such investment is less than 1% of the outstanding publically-held stock or equity) for any company or entity that provides goods and/or services similar to Employer. 4. Employer and Employee hereby agree that the Plan may be terminated by the Employer's Board of Directors at any time prior to retirement without further liability to Employer, however, in the event a majority of the Employer's stock is not owned, directly or indirectly, by Sloan Y. Bashinsky, Sr. ("Change of Control"), then upon the date of such Change of Control, the Plan shall not be terminable for any reason (but shall remain subject to potential claims of the Company creditors) and the Board of Directors shall not retain any ability to terminate the Plan. Dated this the 9th day of April, 2002. BY ORDER OF THE BOARD OF DIRECTORS GOLDEN ENTERPRISES, INC. By /S/ MARK W. MCCUTCHEON Mark W. McCutcheon President /S/ JOHN S. STEIN John S. Stein - Employee EX-10 5 exhibitd.txt EXHIBIT 10.4 A copy of Amendment to Salary Continuation Plan, Death Benefits for John S. Stein dated April 9, 2002. AMENDMENT TO SALARY CONTINUATION PLAN, DEATH BENEFITS WHEREAS, Golden Enterprises, Inc. ("Employer") and John S. Stein ("Employee") have previously entered into a Salary Continuation Plan, Death Benefits ("Plan"); and WHEREAS, such Plan is still in force and effect; and WHEREAS, pursuant to the terms of the Plan, such agreement could be terminated without further liability of Employer at any time by the Employer's Board of Directors; and WHEREAS, Employer and Employee wish to add additional terms to the Plan and acknowledge certain original terms and intention of the Employer and Employee with regard to the Plan. NOW, THEREFORE, Employer and Employee hereby amend and acknowledge portions of the Plan as follows: 1. Employer and Employee hereby acknowledge and agree that Employer has not created and will not in the future create separate fund for the payment of deferred compensation amounts due to be paid to Employee pursuant to the terms of the Plan. 2. The Employee acknowledges and agrees that for the purposes of the payment of the deferred compensation payments due Employee pursuant to the terms of the Plan, Employee is to be regarded as a general creditor of the Employer, and that all amounts due Employee are subject to the potential claims of Employer's creditors. 3. Employer and Employee hereby agree that upon Employee's retirement, the deferred compensation payments due Employee can only be terminated by Employer due to Employee's "competing" against Employer. "Competing" against Employer shall be defined as Employee being in the employ of, consulting for or providing any beneficial services (other than investing in the stock or equity of a publically-held corporation or entity, if such investment is less than 1% of the outstanding publically-held stock or equity) for any company or entity that provides goods and/or services similar to Employer. 4. Employer and Employee hereby agree that the Plan may be terminated by the Employer's Board of Directors at any time prior to retirement without further liability to Employer, however, in the event a majority of the Employer's stock is not owned, directly or indirectly, by Sloan Y. Bashinsky, Sr. ("Change of Control"), then upon the date of such Change of Control, the Plan shall not be terminable for any reason (but shall remain subject to potential claims of the Company creditors) and the Board of Directors shall not retain any ability to terminate the Plan. Dated this the 9th day of April, 2002. BY ORDER OF THE BOARD OF DIRECTORS GOLDEN ENTERPRISES, INC. By /S/ MARK W. MCCUTCHEON Mark W. McCutcheon President /S/ JOHN S. STEIN John S. Stein - Employee -2- EX-10 6 exhibite.txt EXHIBIT 10.5 A copy of Retirement and Consulting Agreement for John S. Stein dated April 9, 2002. RETIREMENT AND CONSULTING AGREEMENT This Agreement made by and between Golden Enterprises, Inc. ("Company") and John S. Stein ("Stein") on this the 1st day of June, 2002. WHEREAS, Stein has been employed by Company and/or its subsidiaries since 1961, during which time he has served as Chief Executive Officer from 1991 to 2001, as President from 1985 to 1998 and as President of Golden Flake Snack Foods, Inc. from 1976 to 1991; and WHEREAS, Stein is presently serving as Chairman of the Board of Directors of Company, which position he has held since 1996, and has served on the Company's Board of Directors for 32 years; and WHEREAS, Stein desires to retire from his full-time employment on May 31, 2002; and WHEREAS, Company wishes to reward Stein for his years of dedicated and effective service and desires to utilize Stein's expertise and knowledge as an independent consultant for the Company after Stein's retirement date, and Company and Stein desire that Stein shall remain as Chairman of the Board of Directors of Company; NOW, THEREFORE, Company and Stein hereby agree as follows: 1. Stein shall retire from his regular employment with Company on the 31st day of May, 2002. 2. Stein shall continue as the Chairman of the Board of Directors of Company until such time as Stein (i) resigns such position, (ii) is not reelected as Chairman of the Board by the Board of Directors, or (iii) is not reelected to the Board of Directors by the Company stockholders. 3. (a) Stein shall provide consulting services to Company, as an independent contractor, as long as physically and mentally able, on an as-needed basis by Company in Company's sole discretion. Notwithstanding the foregoing, in no event shall Stein be required to provide services to Company of more than 10 hours per month. Company shall provide a suitable place of work for Stein, all of Stein's supplies and support staff needed in providing such work and shall pay any out-of-pocket expenses of Stein. (b) In exchange for providing such consulting services and for his past services to the Company, Company shall pay to Stein, during the period of time that he continues to serve on the Board of Directors of the Company, except as otherwise provided herein, the following compensation: 1. Company shall provide Stein with an automobile pursuant to the executive auto arrangement as currently in effect for Stein. 2. Company shall reimburse Stein for all COBRA payments made by Stein, or Stein's spouse, Jeanne Edgar Stein, for the continued coverage of Stein's spouse from June 1, 2002 until August 31, 2004. 3. Stein and his spouse shall continue to participate in the existing medical reimbursement plan presently in effect for Stein and his spouse, with such payments being made by Company to Stein and/or Stein's spouse. 4. Company shall pay for legal and accounting expenses of Stein up to $2,500 per year, respectively. Such payment may be made by payment to Stein for the reimbursement of expenses previously paid by Stein or by the direct payment of Company, pursuant to Stein's direction, to Stein's accountant and/or attorney. 4. Company and Stein agree that after May 31, 2002, under no circumstances and notwithstanding anything herein to the contrary shall Stein be considered as an employee of Company. Thus, pursuant to Stein's Salary Continuation Plan, dated November 11, 1976, as amended, with Company, Stein shall begin receiving the benefits pursuant to such Plan of $10,000 per month for 15 years beginning on June 1, 2002. 5. Company and Stein agree that no other amounts shall be due and payable from Company to Stein except as set forth herein and except as set forth in any qualified or nonqualified deferred compensation plan of Company. This Agreement approved by the Board of Directors on April 9, 2002 is hereby entered into on this the 9th day April, 2002. GOLDEN ENTERPRISES, INC. By: /S/ MARK W. MCCUTCHEON Mark W. McCutcheon, President /S/ JOHN S. STEIN John S. Stein -3- EX-10 7 exhibitf.txt EXHIBIT 10.6 A copy of Salary Continuation Plan for Mark W. McCutcheon dated May 15, 2002. SALARY CONTINUATION PLAN WHEREAS, the Board of Directors of Golden Enterprises, Inc. (hereinafter referred to as the "CORPORATION") consider it desirable and in the best interests of the CORPORATION that it adopt a Salary Continuation Plan for Mark W. McCutcheon (hereinafter referred to as "MCCUTCHEON"), Chief Executive Officer ("CEO") of the CORPORATION, in order to provide encouragement to MCCUTCHEON to continue his employment, and to further secure his association with the CORPORATION and its subsidiary, as an employee on a long-term basis; and WHEREAS, the said MCCUTCHEON performs significant executive and managerial services as CEO of the CORPORATION, and it is to the best interest of the CORPORATION to adopt a Salary Continuation Plan for MCCUTCHEON in order to secure his continued services to the CORPORATION and its wholly owned subsidiary; and WHEREAS, the Board of Directors of the CORPORATION consider it desirable and in the best interests of the CORPORATION that it adopt a Salary Continuation Plan providing for payments to MCCUTCHEON in the event of his retirement, death or disability; and WHEREAS, the Board of Directors of the CORPORATION consider it desirable and in the best interests of the CORPORATION that it adopt the Mark McCutcheon Salary Continuation Trust (the "Trust"), which will qualify as a "Rabbi" trust pursuant to the Internal Revenue Code, regulations, rulings or pronouncements thereto to fund some or all of the benefits hereunder on a yearly basis. NOW, THEREFORE, the CORPORATION hereby adopts a Salary Continuation Plan as follows: 1. MCCUTCHEON was at the time of the adoption of this plan, 47 years of age, and his "Retirement" as contemplated by this Plan shall occur upon the 31st day of May following his sixty-fifth (65th) birthday. 2. If MCCUTCHEON remains employed until Retirement, then upon Retirement the CORPORATION, or its subsidiary, shall pay to MCCUTCHEON an annual amount equal to One Hundred Twenty Thousand and No/100 Dollars ($120,000.00), adjusted pursuant to Section 5 hereof which shall be paid in equal monthly payments of Ten Thousand and No/100 Dollars ($10,000.00) (or such adjusted monthly amount) for One Hundred Eighty (180) months. In the event MCCUTCHEON should die after Retirement, any unpaid balance of the amount as provided in this Section 2 shall be paid to the designated Beneficiary. 3. In the event MCCUTCHEON should die while employed with the CORPORATION, or a subsidiary thereof, or after becoming totally disabled, as defined herein, but prior to attainment of age sixty-five (65), the CORPORATION shall pay to his designated Beneficiary, an annual amount equal to One Hundred Twenty Thousand and No/100 Dollars ($120,000.00), adjusted pursuant to Section 5 hereof which shall be paid in equal monthly payments of Ten Thousand and No/100 Dollars ($10,000.00) (or such adjusted monthly amount) for One Hundred Eighty (180) months or until the date that MCCUTCHEON would have attained his sixty-fifth (65th) birthday, whichever is the later. 4. In the event MCCUTCHEON should become totally disabled, as defined herein, while employed with the CORPORATION or its subsidiary, the CORPORATION or its subsidiary shall pay to MCCUTCHEON an annual amount equal to: (a) One Hundred Twenty Thousand and No/100 Dollars ($120,000.00), adjusted pursuant to Section 5 hereof which shall be paid in equal monthly payments of Ten Thousand and No/100 Dollars ($10,000.00) (or such adjusted monthly amount) to MCCUTCHEON until he attains age sixty-five (65), provided however, that the monthly payment shall be reduced by the sum of all disability payments received by MCCUTCHEON from all sources, including but not limited to, Social Security Disability Benefits and Long Term Disability Benefits payable by any insurance company, which are funded in whole or in part by premium payments or contributions made by the CORPORATION or its subsidiaries. Notwithstanding the foregoing, any payments received by MCCUTCHEON from the CORPORATION or its subsidiaries' Profit Sharing Plan and Employee Stock Ownership Plan shall not reduce the monthly payment. (b) Upon attainment of age 65, after becoming totally disabled, MCCUTCHEON shall be paid an annual amount equal to One Hundred Twenty Thousand and No/100 Dollars ($120,000.00), adjusted pursuant to Section 5 hereof which shall be paid in equal monthly payments of Ten Thousand and No/100 Dollars ($10,000.00) (or such adjusted monthly amount) for One Hundred Eighty (180) months. In the event MCCUTCHEON should die after attaining age s ixty-five (65), any unpaid balance of the amount as provided in this Section 3(b) shall be paid to the designated Beneficiary. 5. The annual amount to be paid by Corporation to MCCUTCHEON or his beneficiaries pursuant to Sections 2, 3, and/or 4 above, shall be adjusted by Corporation, on a yearly basis. The yearly adjustment to the annual amount (which begins at $120,000) shall be made in April of each year beginning in 2003. Such adjustment shall be the three year average of the yearly percentage change in the Price Index, as issued by the U. S. Department of Labor, Bureau of Labor Statistics. For purposes herein Price Index shall mean the "Consumer Price Index for All Urban Consumers, All Items" issued and published by the United States Department of Labor, Bureau of Labor Statistics or any successor index thereto. Notwithstanding the above, in no event shall the percentage increase in the annual amount for any one year exceed five percent (5%), nor shall there be an decrease in the annual amount. An example of the adjustment set forth in this Section 5 is attached hereto as Exhibit 1. The CORPORATION shall contribute not less than $10,000 per year to the Trust to fund the death, disability and/or retirement benefits of MCCUTCHEON. The CORPORATION shall be designated as the Trustee of the Trust and shall manage the Trust pursuant to the terms and conditions of the Trust Agreement, which is attached hereto. Any amounts remaining in the Trust after the payment of all benefits due MCCUTCHEON, or his beneficiary(ies) hereunder shall, to the extent allowable pursuant to the Trust Agreement, be returned to the CORPORATION. 5. In the event of MCCUTCHEON's death, the payments undertaken by the CORPORATION shall be paid to the Beneficiary of MCCUTCHEON as designated on the attached Beneficiary designation Form. In the event no designated Beneficiary survives MCCUTCHEON, or does not live to receive all payments due hereunder, the remaining payments shall be made to the person or persons entitled to share in MCCUTCHEON's estate under the Laws of Descent and Distribution of the State of Alabama. 6. This Plan shall not be construed or interpreted as an agreement of employment, and nothing contained herein shall be construed to prohibit the CORPORATION or its subsidiary from terminating the employment of MCCUTCHEON for any reason at any time. The benefits to be provided by the Plan shall be deemed as "unfunded" for purposes of the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act. 7. MCCUTCHEON's rights under this Plan are nonassignable and he shall have no interest in any specified fund, contract, investment or other a ssets of the CORPORATION or its subsidiary except as set forth in the Trust Agreement. All rights and obligations of both parties shall terminate upon MCCUTCHEON's termination of employment with the CORPORATION or its subsidiary for reasons other than death, retirement or total disability. MCCUTCHEON acknowledges that for purposes of the payment of the benefits hereunder, MCCUTCHEON is to be regarded as a general creditor of the CORPORATION and all amounts due MCCUTCHEON are subject to the potential claims of CORPORATION's creditors. MCCUTCHEON further acknowledges that all assets held in the Trust are subject to the creditors of the CORPORATION. 8. "Total Disability" means that due to injuries or sickness, MCCUTCHEON is not able to perform the substantial and material duties of his occupation as CEO of CORPORATION and is receiving care by a Physician which is appropriate for the condition causing the disability. 9. This Plan shall be subject to termination at any time prior to death, disability or retirement of MCCUTCHEON by Resolution of the Board of Directors of the CORPORATION in which event MCCUTCHEON shall have no interest in any specific fund, contract, investment or other assets of the CORPORATION or its subsidiary except as may be set forth in the Trust Agreement. Notwithstanding the foregoing, in the event a majority of the Employer's stock is not owned, directly or indirectly, by Sloan Y. Bashinsky, Sr., his estate, any testamentary trust of Sloan Y. Bashinsky, Sr. or SYB, Inc. (a "Change of Control"), then upon the date of such Change of Control, the Plan shall not be terminable for any reason (but shall remain subject to potential claims of the Company creditors) and the Board of Directors shall not retain any ability to terminate the Plan. 10. To the extent the Trust has insufficient assets to pay MCCUTCHEON or his beneficiary(ies) the benefits due hereunder, the CORPORATION shall pay such benefits from its general assets. Dated this the 15 day of May, 2002. BY ORDER OF THE BOARD OF DIRECTORS GOLDEN ENTERPRISES, INC. By /S/ JOHN S. STEIN John S. Stein Chairman BENEFICIARY DESIGNATION SALARY CONTINUATION PLAN RETIREMENT AND DISABILITY Mark W. McCutcheon designates the following as Beneficiary of benefits under the Salary Continuation Plan. All designations may be changed by Mark W. McCutcheon upon his completion of Corporation's then current form which is delivered to the Corporation during Mark W. McCutcheon's lifetime. A. Terri Culver McCutcheon, spouse of Mark W. McCutcheon, if living at the time of death of Mark W. McCutcheon. B. If Terri Culver McCutcheon should die before Mark W. McCutcheon or before all payments are made to her, then to the Trustee of the Family Trust, as designated under the Last Will and Testament of Mark W. McCutcheon. Payments made to the Trustee shall fully discharge Corporation's obligation and Corporation shall not be responsible for the application of the monies so paid. C. If the Family Trust designated under the Last Will and Testament of Mark W. McCutcheon for any reason is not created or the Last Will and Testament of Mark W. McCutcheon creates no Family Trust, then payments shall be made to my daughters, Meagan Carol McCutcheon and Whitney Gail McCutcheon, in equal shares, or to their descendants on a per stirpes basis. May 15, 2002 /S/ MARK W. MCCUTCHEON DATED MARK W. MCCUTCHEON - EMPLOYEE Received by Corporation: By /S/ JOHN S. STEIN John S. Stein Chairman The beneficiary designation is executed in duplicate and Mark W. McCutcheon acknowledges receipt of one copy. /S/ MARK W. MCCUTCHEON MARK W. MCCUTCHEON - EMPLOYEE EXHIBIT 1 EXAMPLE OF YEARLY ADJUSTMENT The Corporation will make the first adjustment in April 2003. The percentage change in the Price Index for the relevant years ended December 31 are as follows: 2002 2.7% (assumed) 2001 1.6%* 2000 3.4%* The average Price Index of the three years is 2.6% ([3.4 + 1.6 + 2.7] - 3). Thus, the percentage adjustment to the annual and monthly amount for April 2003 will be 2.6%. The annual amount pursuant to Sections 2, 3 and 4 will be increased to 123,120 (120,000 x 1.026), paid in equal monthly installments of 10,260. * As published by the United States Department of Labor, Bureau of Labor Statistics. EX-10 8 exhibitg.txt EXHIBIT 10.7 A copy of Trust Under Salary Continuation Plan for Mark W. McCutcheon dated May 15, 2002. TRUST UNDER SALARY CONTINUATION PLAN FOR MARK W. MCCUTCHEON THIS AGREEMENT made this 15th day of May, 2002, by and between Golden Enterprises, Inc., a Delaware corporation ("Company") and Golden Enterprises, Inc. ("Trustee"); WHEREAS, Company has adopted the nonqualified Salary Continuation Plan for Mark W. McCutcheon, a copy of which is attached hereto as Appendix 1 (the "Plan"). WHEREAS, Company has incurred or expects to incur liability under the terms of such Plan to Mark W. McCutcheon (herein referred to as the "Plan Participant"), the individual participating in such Plan; and WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of Company's creditors in the event of Company's Insolvency, as herein defined, until paid to the Plan Participant or his beneficiaries in such manner and at such times as specified in the Plan; and WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded Plan maintained for the purpose of providing deferred compensation for a select member of management or highly compensated employee for purposes of Title I of the Employee Retirement Income Security Act of 1974; and WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan; NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: Section 1. ESTABLISHMENT OF TRUST. (a) Company hereby deposits with Trustee in trust the sum of $100.00, which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. (b) The Trust hereby established is revocable by Company; it shall become irrevocable upon a Change of Control, as defined herein. (c) The Trust is intended to be a grantor Trust, of which Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of the Plan Participant, his beneficiaries and general creditors of the Company as herein set forth. The Plan Participant and his beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of the Plan Participant and his beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. (e) Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither Trustee nor the Plan Participant or any beneficiary shall have any right to compel such additional deposits except as required by the Plan. (f) Upon the date of a Change of Control, as defined herein, Company shall make an irrevocable contribution to the Trust in an amount that is sufficient to pay the Plan Participant or beneficiaries the benefits to which the Plan Participant or his beneficiaries would be entitled pursuant to the terms of the Plan as of the date on which the Change of Control occurred. Section 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES. (a) Company shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable to the Plan Participant (or his beneficiaries), that provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan), and the of commencement for payment of such amounts. Except as otherwise provided herein, Trustee shall make payments to the Plan Participant and his beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Company. (b) The entitlement of the Plan Participant or his beneficiaries to benefits under the Plan shall be determined by Company or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan. (c) Company may make payment of benefits directly to the Plan Participant or his beneficiaries as they become due under the terms of the Plan. Company shall notify Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to the Plan Participant or his beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan, Company shall make the balance of each such payment as it falls due. Trustee shall notify Company where principal and earnings are not sufficient. Section 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT. (a) Trustee shall cease payment of benefits to the Plan Participant or his beneficiaries if the Company is Insolvent. Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as they become due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below. (1) The Chief Executive Officer of Company shall have the duty to inform Trustee in writing of Company's Insolvency. If a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become Insolvent, Trustee shall determine whether Company is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to the Plan Participant or his beneficiaries. (2) Unless Trustee has actual knowledge of Company's Insolvency, or has received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Company is Insolvent. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time Trustee has determined that Company is Insolvent, Trustee shall discontinue payments to the Plan Participant or his beneficiaries and shall hold the assets of the Trust for the benefit of Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of the Plan Participant or his beneficiaries to pursue their rights as general creditors of Company with respect to benefits due under the Plan or otherwise. (4) Trustee shall resume the payment of benefits to the Plan Participant or his beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to the Plan Participant or his beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to the Plan Participant or his beneficiaries by Company in lieu of the payments provided for hereunder during any such period of discontinuance. Section 4. PAYMENTS TO COMPANY. Except as provided in Section 3 hereof, after the Trust has Become irrevocable, Company shall have no right or power to direct Trustee to return to Company or to divert to others any of the Trust assets before all payment of benefits have been made to the Plan Participant and his beneficiaries pursuant to the terms of the Plan. Section 5. INVESTMENT AUTHORITY. In no event may Trustee invest in securities (including stock or rights to acquire stock) or obligations issued by Company, other than a de minimis amount held in common investment vehicles in which Trustee invests. All rights associated with assets of the Trust shall be exercised by Trustee or the person designated by Trustee, and shall in no event be exercisable by or rest with Plan Participant. Section 6. DISPOSITION OF INCOME. During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. Section 7. ACCOUNTING BY TRUSTEE. Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Company and Trustee. Within 90 days following the close of each calendar year and within 60 days after the removal or resignation of Trustee, Trustee shall deliver to Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the trust at the end of such year or as of the date of such removal or resignation, as the case may be. Section 8. RESPONSIBILITY OF TRUSTEE. (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Company which is contemplated by, and in conformity with, the terms of the Plan or this Trust and is given in writing by Company. In the event of a dispute between Company and the Plan Participant or of any beneficiary, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If Trustee undertakes or defends any litigation arising in connection with this Trust, Company agrees to indemnify Trustee against Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If Company does not pay such costs, expenses and liabilities in a reasonably timely manner, Trustee may obtain payment from the Trust. (c) Trustee may consult with legal counsel (who may also be counsel for Company generally) with respect to any of its duties or obligations hereunder. (d) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (e) Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (f) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. Section 9. COMPENSATION AND EXPENSES OF TRUSTEE. Company shall pay all administrative and Trustee's fees and expenses. If not so paid, the fees and expenses shall be paid from the Trust. Section 10. RESIGNATION AND REMOVAL OF TRUSTEE. (a) Trustee may resign at any time by written notice to Company, which shall be effective 30 days after receipt of such notice unless C ompany and Trustee agree otherwise. (b) Trustee may be removed by company on 30 days notice or upon shorter notice accepted by Trustee. (c) Upon a Change of Control, as defined herein, Trustee may not be removed by Company without the written consent and approval of the Plan Participant. (d) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 30 days after receipt of notice of resignation, removal or transfer, unless Company extends the time limit. (e) Trustee may be removed by the Plan Participant within 90 days of a Change of Control, as defined herein. The Plan Participant shall select a successor Trustee in accordance with the provisions of Section 11(c) hereof prior to the effective date of Trustee's removal. (f) If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under paragraphs (a) or (b) of this section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with proceeding shall be allowed as administrative expenses of the Trust. (g) The Successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 7 and 8 hereof. The Successor Trustee shall not be responsible for and Company shall indemnify and defend the Successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes Successor Trustee. Section 11. AMENDMENT OR TERMINATION. (a) This Trust Agreement may be amended by a written instrument executed by Trustee and Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan or shall make the Trust revocable after it has become irrevocable in accordance with Section 1(b) hereof. (b) The Trust shall not terminate until the date on which the Plan Participant and his beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan, unless sooner revoked in accordance with Section 1(b) hereof. Upon termination of the Trust any assets remaining in the Trust shall be returned to Company. (c) If Trustee is removed pursuant to the provisions of Section 10(e) hereof and the Plan Participant selects a successor Trustee, the Plan Participant may appoint any third party which constitutes an unrelated party pursuant to the Internal Revenue Code of 1986, as amended, or any successor thereto. The appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee. The new Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer. Section 13. MISCELLANEOUS. (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to Plan Participant and his beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with the laws of State of Alabama. (d) For purposes of this Trust, Change of Control shall mean any event in which a majority of the Company's stock is not owned, directly or indirectly, by Sloan Y. Bashinsky, Sr., his estate, any testamentary trust of Sloan Y. Bashinsky, Sr. or SYB, Inc. Section 14. EFFECTIVE DATE. The effective date of this Trust Agreement shall be May 15, 2002. GOLDEN ENTERPRISES, INC. By: /S/ JOHN S. STEIN Its: Chairman GOLDEN ENTERPRISES, INC., TRUSTEE By: /S/ JOHN S. STEIN Its: Chairman EX-10 9 exhibita.txt EXHIBIT 10.1 A copy of Contract for Sale and Purchase of Ocala, Florida surplus property dated January 24, 2002. CONTRACT FOR SALE AND PURCHASE PARTIES: GOLDEN FLAKE SNACK FOODS, INC. (Seller), of 3031 West Silver Springs Blvd., Ocala, Florida (Phone) (352) 351-2277 and T. RICHARD BARBER. JR*, AS TRUSTEE OF THE T. RICHARD BARBER, JR. REVOCABLE LIVING, of TRUST U/A/D 7/19/96 (Buyer) of 2940 West Silver Springs Blvd., Ocala, Florida (Phone) (352) 694-2459 , hereby agree that Seller shall sell and Buyer shall buy the following described real property and personal property (collectively Property) pursuant to the terms and conditions of this Contract for Sale and Purchase and any riders and addenda (Contract): I. DESCRIPTION: (a) Legal description of the Real Property located in Marion County, Florida: 6.11 acres described as Parcel No. 22763-000-00 and the Western 21 acres of Parcel # 22768-000-00. See the Attached Exhibit A. (b) Street address, city, zip, of the Property is: SR 40 W/W Silver Springs Blvd. (c) Personal Property: None II. PURCHASE PRICE: See Addendum 27.11 acres at $33,198 per acre. . . . . . . . . $900,000.00 PAYMENT (a) Deposit held in escrow by J. Warren Bullard, P.A. (Escrow Agent) in the amount of . . . . . . ..25,000.00 (b) Additional escrow deposit to be made to Escrow Agent within ___ days after Effective Date see Paragraph III) in the amount of $________ (c) Subject to AND assumption of existing mortgage in good standing in favor of ______________________________________ having an approximate present principal balance of. . . . . . . . . . .. . . $________ (d) New mortgage financing with a Lender (see Paragraph IV) in the amount of $695,000.00 (e) Purchase money mortgage and note to Seller (see rider for terms) in the amount of . . . . . . . . . . . . . . . . .$________ (f) Other: __________________________. . $________ (g) Balance to close by U.S. cash or LOCALLY DRAWN cashiers or official bank check(s) subject to adjustments or prorations. . . . . . . . . . . . . $180,000.00 III. TIME FOR ACCEPTANCE OF OFFER; EFFECTIVE DATE; FACSIMILE: If this offer is not executed and delivered to all parties OR FACT OF EXECUTION communicated in writing between the parties on or before 5 :00 p.m., 2/01/02 the deposit(s) will, at Buyers option, be returned and this offer withdrawn. For purposes of delivery or notice of execution, parties include Buyer and Seller or each of the respective brokers or attorneys The date of Contract (Effective Date) will be the date when the last one of the Buyer and Seller has signed this offer. A facsimile copy of this Contract and any signatures hereon shall be considered for all purposes as an original. IV. FINANCING: (a) This is a cash transaction with no contingencies for financing; (b) This Contract is conditioned on Buyer obtaining a written loan commitment within 60 days after Effective Date for (CHECK ONLY ONE: a fixed; ? an adjustable; or ? a fixed or adjustable rate loan in the principal amount of $695,000.00, at an initial interest rate not to exceed 7-1/2% discount and origination fees not to exceed 1% of principal amount, and for a term of 15 years. Buyer will make application within 15 days (5 days if left blank) after Effective Date and use reasonable diligence to obtain a loan commitment and, thereafter, to satisfy terms and conditions of the commitment and close the loan. Buyer shall pay all loan expenses. If Buyer fails to obtain a commitment or fails to waive Buyers rights under this subparagraph within the time for obtaining a commitment or, after diligent effort, fails to meet the terms and conditions of the commitment by the closing date, then either party thereafter, by written notice to the other, may cancel this Contract and Buyer shall be refunded the deposit(s); or ? (c) The existing mortgage, described in Paragraph II(c) above, has: ? a variable interest rate; or ? a fixed interest rate of _____% per annum. At time of title transfer, some fixed interest rates are subject to increase; if increased, the rate shall not exceed ______ % per annum. Seller shall furnish a statement from each mortgagee stating the principal balance, method of payment, interest rate and status of mortgage or authorize Buyer or Closing Agent to obtain the same. If Buyer has agreed to assume a mortgage which requires approval of Buyer by the mortgagee for assumption, then Buyer shall promptly obtain the necessary application, and diligently complete and return it to the mortgagee. Any mortgagee charge(s), not to exceed $____________ (1% of amount assumed if left blank), shall be paid by Buyer. If Buyer is not accepted by mortgagee or the requirements for assumption are not in accordance with the terms of this Contract or mortgagee makes a charge in excess of the stated amount, Seller or Buyer may rescind this Contract by written notice to the other party unless either elects to pay the increase in interest rate or excess mortgage charges. V. TITLE EVIDENCE: At least 15 days before closing date, (CHECK ONLY ONE): ? Seller shall, at Sellers expense, deliver to Buyer or Buyers attorney; or ? Buyer shall at Buyers expense obtain (CHECK ONLY ONE): ? abstract of title; or ? title insurance commitment (with legible copies of instruments listed as exceptions attached thereto) and, after closing, an owners policy of title insurance. VI. CLOSING DATE: This transaction shall be closed and the closing documents delivered on May 31, 2002, unless modified by other provisions of this Contract. VII. RESTRICTIONS; EASEMENTS; LIMITATIONS: Buyer shall take title subject to: comprehensive land use plans, zoning, restrictions, prohibitions and other requirements imposed by governmental authority; outstanding oil, gas and mineral rights of record without right of entry; public utility easements of record (easements are to be located contiguous to real property lines and not more than 10 feet in width as to the rear or front lines and 7-1/2 feet in width as to the side lines, unless otherwise stated herein); taxes for year of closing and subsequent years; assumed mortgages and purchase money mortgages, if any (if additional items, see addendum); provided, that there exists at closing no violation of the foregoing and none prevent use of the Property for ________________________________ purpose(s). VIII. OCCUPANCY: Seller warrants that there are no parties in occupancy other than Seller; but if Property is intended to be rented or occupied beyond closing, the fact and terms thereof and the tenant(s) or occupants shall be disclosed pursuant to Standard F. Seller shall deliver occupancy of Property to Buyer at time of closing unless otherwise stated herein. If occupancy is to be delivered before closing, Buyer assumes all risks of loss to Property from date of occupancy, shall be responsible and liable for maintenance from that date, and shall be deemed to have accepted Property in its existing condition as of time of taking occupancy unless otherwise stated herein. IX. TYPEWRITTEN OR HANDWRITTEN PROVISIONS: Typewritten or handwritten provisions, riders and addenda shall control all printed provisions of this Contract in conflict with them. X. RIDERS: (CHECK those riders which are applicable AND are attached to this Contract): ? COMPREHENSIVE RIDER ???? HOMEOWNERS ASSN. ? COASTAL CONSTRUCTION CONTROL LINE ???? CONDOMINIUM ? AS IS ???? INSULATION ? VA/FHA ???? LEAD-BASED PAINT ? ____________________ XI. ASSIGNABILITY: (CHECK ONLY ONE): Buyer ? may assign and thereby be released from any further liability under this Contract; ? may assign but not be released from liability under this Contract; or ? may not assign this Contract. XII. DISCLOSURES: (a) Radon is a naturally occurring radioactive gas that when accumulated in a building in sufficient quantities may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding Radon or Radon testing may be obtained from your County Public Health unit. (b) Buyer acknowledges receipt of the Florida Building Energy-Efficiency Rating System Brochure. (c) If the real property includes pre-1978 residential housing then a lead-based paint rider is mandatory. (d) If Seller is a foreign person as defined by the Foreign Investment in Real Property Tax Act, the parties shall comply with that Act. (e) If Buyer will be obligated to be a member of a homeowners association. BUYER SHOULD NOT EXECUTE THIS CONTRACT UNTIL BUYER HAS RECEIVED AND READ THE HOMEOWNERS ASSOCIATION DISCLOSURE. XIII. MAXIMUM REPAIR COSTS: Seller shall not be responsible for payments in excess of: (a) $_________________ for treatment and repair under Standard D (if blank, then 2% of the Purchase Price). (b) $_________________ for repair and replacement under Standard N (if blank, then 3% of the Purchase Price). XIV. SPECIAL CLAUSES; ADDENDA: If additional terms are to be provided, attach addendum and CHECK HERE ?. XV. STANDARDS FOR REAL ESTATE TRANSACTIONS: Standards A through W on the reverse side or attached are incorporated as a part of this Contract. THIS IS INTENDED TO BE A LEGALLY BINDING CONTRACT. IF NOT FULLY UNDERSTOOD, SEEK THE ADVICE OF AN ATTORNEY PRIOR TO SIGNING. THIS FORM HAS SEEN APPROVED BY THE FLORIDA ASSOCIATION OF REALTORS AND THE FLORIDA BAR. Approval does not constitute an opinion that any of the terms and conditions in this Contract should be accepted by the parties in a particular transaction. Terms and conditions should be negotiated based upon the respective interests, objectives and bargaining positions of all interested persons. COPYRIGHT 1998 BY THE FLORIDA BAR AND THE FLORIDA ASSOCIATION OF REALTORS /S/ T. RICHARD BARBER 1/16/02 /S/ LARRY R. WOOD 1/24/02 (Buyer) T. RICHARD BARBER, (Date) Seller) GOLDEN FLAKE (Date) JR., AS TRUSTEE OF THE T. SNACK FOODS, INC. RICHARD BARBER, JR. BY LARRY R. WOOD, REVOCABLE LIVING TRUST PLANT MANAGER U/A/D 7/19/96 STANDARDS FOR REAL ESTATE TRANSACTIONS A. EVIDENCE OF TITLE: (1) An abstract of title prepared or brought current by a reputable and existing abstract firm (if not existing then certified as correct by an existing firm) purporting to be an accurate synopsis of the instruments affecting title to the real properly recorded in the public records of the county wherein the real property is located through Effective Date. It shall commence with the earliest public records, or such later date as may be customary in the county. Upon closing of this Contract, the abstract shall become the property of Buyer, subject to the right of retention thereof by first mortgagee until fully paid. (2) A title insurance commitment issued by a Florida licensed title insurer agreeing to issue Buyer, upon recording of the deed to Buyer, an owners policy of title insurance in the amount of the purchase price, insuring Buyers title to the real property, subject only to liens, encumbrances, exceptions or qualifications provided in this Contract and those to be discharged by Seller at or before closing. Seller shall convey marketable title subject only to liens, encumbrances, exceptions or qualifications provided in this Contract. Marketable title shall be determined according to applicable Title Standards adopted by authority of The Florida Bar and in accordance with law. Buyer shall have 5 days from date of receiving evidence of title to examine it. If title is found defective, Buyer shall within said 5 days notify Seller in writing specifying the defect(s). If defect(s) render title unmarketable, Seller will have 30 days from receipt of notice to remove the defects, failing which Buyer shall, within five (5) days after expiration of the thirty (30) day period, deliver written notice to Seller either: (1) extending the time for a reasonable period not to exceed 120 days within which Seller shall use diligent effort to remove the defects; or (2) requesting a refund of deposit(s) paid which shall be immediately returned to Buyer, If Buyer fails to so notify Seller, Buyer shall be deemed to have accepted the title as it then is. Seller shall, if title is found unmarketable, use diligent effort to correct defect(s) within the time provided therefor. If Seller is unable to timely correct the defects, Buyer shall either waive the defects, or receive a refund of deposit(s), thereby releasing Buyer and Seller from all further obligations under this Contract. If evidence of title is delivered to Buyer less than 5 days prior to closing, Buyer may extend closing date so that Buyer shall have up to 5 days from date of receipt of evidence of title to examine same in accordance with this Standard. B. PURCHASE MONEY MORTGAGE; SECURITY AGREEMENT TO SELLER: A purchase money mortgage and mortgage note to Seller shall provide for a 30 day grace period in the event of default. If a first mortgage and a 15 day grace period if a second or lesser mortgage; shall provide for right of prepayment in whole or in part without penalty; shall permit acceleration in event of transfer of the real property; shall require all prior liens and encumbrances to be kept in good standing and forbid modifications of or future advances under prior mortgage(s); shall require Buyer to maintain policies of insurance containing a standard mortgagee clause covering all improvements located on the real property against fire and all perils included within the term extended coverage endorsements and such other risks and perils as Seller may reasonably require, in an amount equal to their highest insurable value; and the mortgage, note and security agreement shall be otherwise in form and content required by Seller; but Seller may only require clauses and coverage customarily found in mortgages, mortgage notes and security agreements generally utilized by savings and loan institutions or state or national banks located in the county wherein the real property is located. All personal property and leases being conveyed or assigned will, at Sellers option, be subject to the lien of a security agreement evidenced by recorded financing statements. If a balloon mortgage, the final payment will exceed the periodic payments thereon. C. SURVEY: Buyer, at Buyers expense, within time allowed to deliver evidence of title and to examine same, may have the real property surveyed and certified by a registered Florida surveyor. If the survey discloses encroachments on the real property or that improvements located thereon encroach on setback lines, easements, lands of others or violate any restrictions, Contract covenants or applicable governmental regulation, the same shall constitute a tittle defect. D. TERMITES/WOOD DESTROYING ORGANISMS: Buyer, at Buyers expense, within the time allowed to deliver evidence of title, may have the Property inspected by a Florida Certified Pest Control Operator (Operator) to determine if there is any visible active termite infestation or visible damage from termite infestation, excluding fences. If either or both are found, Buyer shall have 4 days from date of written notice thereof within which to have cost of treatment, if required, estimated by the Operator and all damage inspected and estimated by a licensed builder or general contractor. Seller shall pay valid costs of treatment and repair of all damage up to the amount provided in Paragraph XIII(a). If estimated costs exceed that amount, Buyer shall have the option of canceling this Contract within 5 days after receipt of contractors repair estimate by giving written notice to Seller or Buyer may elect to proceed with the transaction and receive a credit at closing on the amount provided in Paragraph XIII(a). Termites shall be deemed to include all wood destroying organisms required to be reported under the Florida Pest Control Act, as amended. E. INGRESS AND EGRESS: Seller warrants and represents that there is ingress and egress to the real property sufficient for its intended use as described in Paragraph VII hereof, title to which is in accordance with Standard A. F. LEASES: Seller shall, not less than 15 days before closing, furnish to Buyer copies of all written leases and estoppel letters from each tenant specifying the nature and duration of the tenants occupancy, rental rates, advanced rent and security deposits paid by tenant. If Seller is unable to obtain such letter from each tenant, the same information shall be furnished by Seller to Buyer within that time period in the form of a Sellers affidavit, and Buyer may thereafter contact tenant to confirm such information. Seller shall, at closing, deliver and assign all original leases to Buyer. G. LIENS: Seller shall furnish to Buyer at time of closing an affidavit attesting to the absence, unless otherwise provided for herein, of any financing statement, claims of lien or potential lienors known to Seller and further attesting that there have been no improvements or repairs to the real property for 90 days immediately preceding date of closing. If the real property has been improved or repaired within that time, Seller shall deliver releases or waivers of construction liens executed by all general contractors, subcontractors, suppliers and materialmen in addition to Sellers lien affidavit setting forth the names of all such general contractors, subcontractors, suppliers and materialmen, further affirming that all charges for improvements or repairs which could serve as a basis for a construction lien or a claim for damages have been paid or will be paid at the closing of this Contract H. PLACE OF CLOSING: Closing shall be held in the county wherein the real property is located at the office of the attorney or other closing agent (Closing Agent) designated by Seller. I. TIME: In computing time periods of less than six (6) days, Saturdays, Sundays and state or national legal holidays shall be excluded. Any time periods provided for herein which shall end on a Saturday, Sunday, or a legal holiday shall extend to 5:00 p.m. of the next business day. Time is of the essence in this Contract. J. CLOSING DOCUMENTS: Seller shall furnish the deed, bill of sale, construction lien affidavit, owners possession affidavit, assignments of leases, tenant and mortgagee estoppel letters and corrective instruments. Buyer shall furnish closing statement, mortgage, mortgage, note, security agreement and financing statements. K. EXPENSES: Documentary stamps on the deed and recording of corrective instruments shall be paid by Seller. Documentary stamps and intangible tax on the purchase money mortgage and any mortgage assumed, mortgagee title insurance commitment with related fees, and recording of purchase money mortgage to Seller, deed and financing statements shall be paid by Buyer. Unless otherwise provided by law or rider to this Contract, charges for the following related title services, namely title or abstract charge, title examination, and settlement and closing fee, shall be paid by the party responsible for furnishing the title evidence in accordance with Paragraph V. L. PRORATIONS; CREDITS: Taxes, assessments, rent, interest, insurance and other expenses of the Property shall be prorated through the day before closing. Buyer shall have the option of taking over existing policies of insurance, if assumable, in which event premiums shall be prorated. Cash at closing shall be increased or decreased as may be required by prorations to be made through day prior to closing, or occupancy, if occupancy occurs before closing. Advance rent and security deposits will be credited to Buyer. Escrow deposits held by mortgagee will be credited to Seller. Taxes shall be prorated based on the current years tax with due allowance made for maximum allowable discount, homestead and other exemptions. If closing occurs at a date when the current years millage is not fixed and current years assessment is available, taxes will be prorated based upon such assessment and prior years millage. If current years assessment is not available, then taxes will be prorated on prior years tax. If there are completed improvements on the real property by January 1st of year of closing, which improvements were not in existence on January 1st of prior year, then taxes shall be prorated based upon prior years millage and at an equitable assessment to be agreed upon between the parties; failing which, request shall be made to the County Property Appraiser for an informal assessment taking into account available exemptions. A tax proration based on an estimate shall, at request of either party, be readjusted upon receipt of tax bill on condition that a statement to that effect is signed at closing. M. SPECIAL ASSESSMENT LIENS: Certified, confirmed and ratified special assessment liens as of date of closing (not as of Effective Date) are to be paid by Seller. Pending liens as of date of closing shall be assumed by Buyer. If the improvement has been substantially completed as of Effective Date, any pending lien shall be considered certified, confirmed or ratified and Seller shall, at closing, be charged an amount equal to the last estimate or assessment for the improvement by the public body. N. INSPECTION, REPAIR AND MAINTENANCE: Seller warrants that the ceiling, roof (including the fascia and soffits) and exterior and interior walls, foundation, seawalls (or equivalent) and dockage do not have any Visible Evidence of leaks, water damage or structural damage and that the septic tank, pool, all appliances, mechanical items, heating, cooling, electrical, plumbing systems and machinery are in Working Condition. The foregoing warranty shall be limited to the items specified unless otherwise provided in an addendum. Buyer may, at Buyers expense, have inspections made of those items within 20 days after the Effective Date, by a firm or individual specializing in home inspections and holding an occupational license for such purpose (if required) or by an appropriately licensed Florida contractor. and Buyer shall. prior to Buyers occupancy but not more than 20 days after Effective Date, report in writing to Seller such items that do not meet the above standards as to defects. Unless Buyer timely reports such detects, Buyer shall be deemed to have waived Sellers warranties as to defects not reported. If repairs or replacements are required to comply with this Standard, Seller shall cause them to be made and shall pay up to the amount provided in Paragraph XIII(b). Seller is not required to make repairs or replacements of a Cosmetic Condition unless caused by a defect Seller is responsible to repair or replace. If the cost for such repair or replacement exceeds the amount provided in Paragraph XIII(b), Buyer or Seller may elect to pay such excess, failing which either party may cancel this Contract. If Seller is unable to correct the defects prior to closing, the cost thereof shall be paid into escrow at closing. Seller shall, upon reasonable notice, provide utilities service and access to the Property for inspections, including a walk-through prior to closing, to confirm that all items of personal property are on the real property and, subject to the foregoing, that all required repairs and replacements have been made and that the Property, including, but not limited to, lawn, shrubbery and pool, if any, has been maintained in the condition existing as of Effective Date, ordinary wear and tear excepted. For purposes of this Contract: (a) Working Condition means operating in the manner in which the item was designed to operate; (b) Cosmetic Condition means aesthetic imperfections that do not affect the working condition of the item, including, but not limited to: pitted marcite; missing or torn screens; fogged windows; tears, worn spots, or discoloration of floor coverings, wallpaper, or window treatments; nail holes, scratches, dents, scrapes, chips or caulking in ceilings, walls, flooring, fixtures, or mirrors; and minor cracks in floors, tiles, windows, driveways, sidewalks, or pool decks; and (c) cracked roof tiles, curling or worn shingles, or limited roof life shall not be considered defects Seller must repair or replace, so long as there is no evidence of actual leaks or leakage or structural damage, but missing tiles will be Sellers responsibility to replace or repair. O. RISK OF LOSS: If the Property is damaged by fire or other casualty before closing and cost of restoration does not exceed 3% of the assessed valuation of the Property so damaged, cost of restoration shall be an obligation of Seller and closing shall proceed pursuant to the terms of this Contract with restoration costs escrowed at closing. If the cost of restoration exceeds 3% of the assessed valuation of the Property so damaged, Buyer shall have the option of either taking the Property as is, together with either the 3% or any insurance proceeds payable by virtue of such loss or damage, or of canceling this Contract and receiving return of the deposit(s). P. PROCEEDS OF SALE; CLOSING PROCEDURE: The deed shall be recorded upon clearance of funds. If an abstract of title has been furnished, evidence of title shall be continued at Buyers expense to show title in Buyer, without any encumbrances or change which would render Sellers title unmarketable from the date of the last evidence. All closing proceeds shall be held in escrow by Sellers attorney or other mutually acceptable escrow agent for a period of not more than 5 days after closing date. If Sellers title is rendered unmarketable, through no fault of Buyer, Buyer shall, within the 5-day period, notify Seller in writing of the defect and Seller shall have 30 days from date of receipt of such notification to cure the defect. If Seller fails to timely cure the defect, all deposit(s) and closing funds shall, upon written demand by Buyer and within 5 days after demand, be returned to Buyer and, simultaneously with such repayment, Buyer shall return the personal property; vacate the real property and reconvey the Property to Seller by special warranty deed and bill of sale. If Buyer fails to make timely demand for refund, Buyer shall take title as is, waiving, all rights against Seller as to any intervening defect except as may be available to Buyer by virtue of warranties contained in the deed or bill of sale. If a portion of the purchase price is to be derived from institutional financing or refinancing, requirements of the lending institution as to place, time of day and procedures for closing, and for disbursement of mortgage proceeds shall control over contrary provision in this Contract. Seller shall have the right to require from the lending institution a written commitment that it will not withhold disbursement of mortgage proceeds as a result of any title defect attributable to Buyer-mortgagor. The escrow and closing procedure required by this Standard shall be waived if the title agent insures adverse matters pursuant to Section 627.7841, F.S., as amended. Q. ESCROW: Any escrow agent (Agent) receiving funds or equivalent is authorized and agrees by acceptance of them to deposit them promptly, hold same in escrow and, subject to clearance, disburse them in accordance with terms and conditions of this Contract. Failure of funds to clear shall not excuse Buyers performance. If in doubt as to Agents duties or liabilities under the provisions of this Contract, Agent may, at Agents option, continue to hold the subject matter of the escrow until the parties hereto agree to its disbursement or until a judgement of a court of competent jurisdiction shall determine the rights of the parties, or Agent may deposit same with the clerk of the circuit court having jurisdiction of the dispute. Upon notifying all parties concerned of such action, all liability on the part of Agent shall fully terminate, except to the extent of accounting for any items previously delivered out of escrow. If a licensed real estate broker, Agent will comply with provisions of Chapter 475, F.S., as amended. Any suit between Buyer and Seller wherein Agent is made a party because of acting as Agent hereunder, or in any suit wherein Agent interpleads the subject matter of the escrow, Agent shall recover reasonable attorneys fees and costs incurred with these amounts to be paid from and out of the escrowed funds or equivalent and charged and awarded as court costs in favor of the prevailing party. The Agent shall not be liable to any party or person for misdelivery to Buyer or Seller of items subject to the escrow, unless such misdelivery is due to willful breach of the provisions of this Contract or gross negligence of Agent. R. ATTORNEYS FEES; COSTS: In any litigation, including breach, enforcement or interpretation, arising out of this Contract, the prevailing party in such litigation, which, for purposes of this Standard, shall include Seller; Buyer and any brokers acting in agency or nonagency relationships authorized by Chapter 475, F.S. as amended, shall be entitled to recover from the non-prevailing party reasonable attorneys fees, costs and expenses. S. FAILURE OF PERFORMANCE: If Buyer fails to perform this Contract within the time specified. Including payment of all deposits, the deposit(s) paid by Buyer and deposit(s) agreed to be paid, may be recovered and retained by and for the account of Seller as agreed upon liquidated damages, consideration for the execution of this Contract and in full settlement of any claims; whereupon. Buyer and Seller shall be relieved of all obligations under this Contract; or Seller, at Sellers option, may proceed in equity to enforce Sellers rights under this Contract. If for any reason other than failure of Seller to make Sellers title marketable after diligent effort, Seller fails, neglects or refuses to perform this Contract, Buyer may seek specific performance or elect to receive the return of Buyers deposit(s) without thereby waiving any action for damages resulting from Sellers breach. T. CONTRACT NOT RECORDABLE; PERSONS BOUND; NOTICE: Neither this Contract nor any notice of it shall be recorded in any public records. This Contract shall bind and inure to the benefit of the parties and their successors in interest. Whenever the context permits, singular shall include plural and one gender shall include all. Notice given by or to the attorney for any party shall be as effective as if given by or to that party. U. CONVEYANCE: Seller shall convey title to the real property by statutory warranty, trustees, personal representatives or guardians deed, as appropriate to the status of Seller, subject only to matters contained in Paragraph VII and those otherwise accepted by Buyer. Personal property shall, at the request of Buyer, be transferred by an absolute bill of sale with warranty of title, subject only to such matters as may be otherwise provided for herein. V. OTHER AGREEMENTS: No prior or present agreements or representations shall be binding upon Buyer or Seller unless included in this Contract. No modification to or change in this Contract shall be valid or binding upon the parties unless in writing and executed by the parry or parties intended to be bound by it. W. WARRANTY: Seller warrants that there are no facts known to Seller materially affecting the value of the Property which are not readily observable by Buyer or which have not been disclosed to Buyer. EXHIBIT B ADDENDUM TO AND PART OF THE CONTRACT FOR SALE AND PURCHASE GOLDEN FLAKE SNACK FOODS, INC. TO T. RICHARD BARBER, JR., AS TRUSTEE OF THE T. RICHARD BARBER, JR. REVOCABLE TRUST U/A/D 7/19/96 SELLER Golden Flake Snack Foods, Inc. ADDRESS 3031 West Silver Springs Blvd., Ocala, Florida BUYER T. Richard Barber, Jr., as Trustee of the T. Richard Barber, Jr. Revocable Trust U/A/D 7/19/96 ADDRESS 2940 West Silver Springs Blvd., Ocala, Florida This Addendum attached to and made a part of a contract for Sale and Purchase between the Seller and Buyer listed below contains provisions which, may change, modify add or delete various written provisions of the Contract for Sale and Purchase, Standards for Real Estate Transactions. This Exhibit B Addendum shall control any previous written provisions of the attached contract for Sale and Purchase and Standards for Real Estate Transactions. A. LEGAL DESCRIPTION OR ADDRESS See attached Exhibit A to Contract for Sale and Purchase B. Additional and/or modified provisions: 1. Purchase Price. It is anticipated that the land subject to this Contract for sale and Purchase will be approximately 27.11 acres as contained in the yellow area of Exhibit A. Seller agrees, upon the signing of this Contract, to obtain, at its expense, a metes and bounds survey of the property which will determine exactly the acreage within the yellow area that the Seller owns and which it is legally able to convey. At the time of the closing, the purchase price will be finally determined based upon a selling price of $33,198 per acre as set forth in the survey. The survey will be completed within ten (10) days of the removal of the last of any contingencies contained in this Contract. Surveyor shall be a registered surveyor in the State of Florida. Survey shall be certified to Buyer, Seller, Title Agency, Title Company and any lender. In the event survey shows any encroachment of property or that improvements intended to be located on property encroach on lands of others or violate any Contract covenants, the same shall be treated as a title defect. Buyer in bargaining for the acreage noted within this Contract. In the event property is found to contain more or less acreage than contracted for, exclusive of road rights of way, easements and/or encroachments the purchase price shall be adjusted based upon the per acre price as set forth above. 2. Tax Deferred Exchange. Seller acknowledges that Buyer may elect to close this transaction as part, of a tax deferred exchange under Section 1031 of the Internal Revenue Code (Code), and that this Agreement may be assigned to a Qualified Intermediary as defined in the Code for that purpose. Seller further agrees to reasonably cooperate in a good faith manner with Buyer in affecting such an exchange, but at no additional cost to seller. Buyer acknowledges that Seller may elect to close this transaction as part of a tax deterred exchange under Section 1031 of the Internal Revenue Code (Code), and that this Agreement may be assigned to a Qualified Intermediary as defined in the Code for that purpose. Buyer agrees to reasonably cooperate in a good faith manner with Seller in effecting such an exchange, but at no additional cost to Buyer. 3. Conditions for Closing. The purchase of property is contingent upon property being physically and financially suitable for Buyers intended use, including land use and zoning, at Buyers sole discretion. Seller agrees to cooperate with Buyer in every way to assure suitability of Property for Buyers intended use. Seller consents to any and all studies or analysis which Buyer may need to conduct prior to closing, all at Buyers expense. Buyer shall exercise Buyers best efforts to satisfy all conditions and close timely. In the event Buyer needs additional time to satisfy conditions or to close this transaction, the closing date may, at Buyers option and with prior notice to Seller, be extended, however, in no event shall closing date be extended for more than ONE HUNDRED AND TWENTY (120) DAYS after closing date noted herein without the prior written consent of Seller. Said consent shall not be unreasonably withheld. All conditions for the benefit of Buyer may be waived in whole or in part by Buyer. Buyer has until actual closing date to satisfy any contingencies or terminate this Contract for any reason. In the event Buyer given written notice to escrow agent that Buyer has determined property is not suitable for Buyers intended use or that one or more conditions to this contract have not been or cannot be satisfied to the satisfaction of Buyer, escrow agent shall return deposit to Buyer, plus any interest earned, and this Contract shall be of no further force and effect. 4. Access Prior To Closing. Buyer and all Buyers agents and contractors shall at all times before closing have the privilege of going upon Property as needed to inspect, examine, conduct environmental studies, take soil tests, borings, percolation tests and tests to obtain any other information necessary to determine environmental, subsurface and topographic conditions, make improvements, and otherwise do what Buyer deems necessary in the examination, engineering and planning for the use of the property. Said privilege shall include the right to have Phase 1 and Phase 2 Environmental Audits performed on the property by a qualified environmental auditor, in accordance with the provisions of the Comprehensive Environmental Response, Compensation Liability Act (42 U.S.C. paragraph 9601, et. seq.). Buyer shall indemnify and hold Seller harmless from any loss or expense incurred by Seller because of Buyers activities on the property prior to closing. The decision to perform any Phase 1, and Phase 2 Environmental Audits shall be made by the Buyer in its absolute and complete discretion and the company and/or companies performing any such audits shell be selected by the Buyer and any and all charges, fees and expenses of said audits shall be paid by Buyer. 5. Buyer as Licensed Florida Real Estate Broker. Buyer and Seller certify that no broker has been contracted regarding this transaction, including listing and cooperating brokers and therefore no brokers compensation will be due in connection with this contract. Seller recognizes that T. Richard Barber is a licensed Florida Real Estate Broker who is not receiving any real estate commission from this transaction. SELLER: GOLDEN FLAKE SNACK FOODS, INC. By: 1/24/02 /S/ RANDY R. WOOD________________ Date BUYER: 1/16/02 /S/ T. RICHARD BARBER, JR.________ Date T. RICHARD BARBER, JR., AS TRUSTEE OF THE T. RICHARD BARBER REVOCABLE LIVING TRUST U/A/D/ 7/19/96 *a Florida Licensed Real Estate Broker -20- STANDARDS (CONT.) -----END PRIVACY-ENHANCED MESSAGE-----