SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 26, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 000-28590
Fine Host Corporation
Delaware 06 - 1156070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Greenwich Office Park
Greenwich, CT 06831
(203) 629 - 4320
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past
90 days. Yes X No
The Registrant had 8,959,266 shares of common stock, $.01 par value, outstanding
as of May 8, 1997.
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information
Page No.
Item 1 - Financial Statements (unaudited)
* Consolidated Balance Sheets - March 26, 1997 and
December 25, 1996 3
* Consolidated Statements of Income- Three Months
Ended March 26, 1997 and March 27, 1996 4
* Consolidated Statement of Stockholders' Equity - Three
Months Ended March 26, 1997 5
* Consolidated Statements of Cash Flows - Three Months
Ended March 26, 1997 and March 27, 1996 6
* Notes to Consolidated Financial Statements 7 - 10
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 13
Item 3 - Quantitative and Qualitative Disclosure About Market
Risk 13
Part II - Other Information
Item 1 - Legal Proceedings 14
Item 6 - Exhibits and Reports on Form 8-K 15
Signature 16
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
FINE HOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 26, 1997 December 25, 1996
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $13,764 $ 4,724
Accounts receivable 19,079 14,580
Inventories 5,014 3,260
Prepaid expenses and other
current assets 4,424 3,749
_______ ______
Total current assets 42,281 26,313
Contract rights, net 28,896 22,869
Fixtures and equipment, net 30,987 24,057
Excess of cost over fair value
of net assets acquired, net 41,873 34,362
Other assets 9,530 9,842
_______ ______
Total assets $153,567 $117,443
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $24,378 $18,690
Current portion of subordinated debt 1,765 3,045
______ _______
Total current liabilities 26,143 21,735
Deferred income taxes 13,000 12,360
Long-term debt 1,461 31,562
Subordinated debt 5,509 5,014
______ ______
Total liabilities 46,113 70,671
Stockholders' equity:
Common Stock, $.01 par value, 25,000,000
shares authorized, 8,955,766 and 6,212,016
issued and outstanding at March 26, 1997
and December 25, 1996, respectively 90 62
Additional paid-in capital 101,551 41,778
Retained earnings 5,969 5,121
Receivables from stockholders for purchase
of Common Stock (156) (189)
________ ______
Total stockholders' equity 107,454 46,772
________ ______
Total liabilities and
stockholders' equity $153,567 $117,443
See accompanying notes to unaudited consolidated
financial statements.
3
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FINE HOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 26, March 27,
1997 1996
Net sales $49,452 $24,160
Cost of sales 44,210 21,630
______ ______
Gross profit 5,242 2,530
General and administrative expenses 3,215 1,336
______ ______
Income from operations 2,027 1,194
Interest expense, net 538 767
______ ______
Income before tax provision 1,489 427
Tax provision 641 168
______ _____
Net income 848 259
Accretion to redemption value of warrants ---- (1,040)
______ _____
Net income (loss) available
to Common Stockholders $ 848 $ (781)
Earnings (loss) per share
of Common Stock $ .11 $ (.23)
Average number of shares
of Common Stock outstanding 7,941 3,408
Earnings (loss) per share of Common
Stock assuming full dilution $ .11 $ (.22)
Average number of shares of Common
Stock outstanding assuming full dilution 7,951 3,510
See accompanying notes to unaudited consolidated
financial statements.
4
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FINE HOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Receivables
from
Stockholders
for
Additional Purchase of
Common Stock Paid-In Retained Common Stockholders'
Shares Amount Capital Earnings Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, December 25, 1996 6,212,016 $62 $41,778 $5,121 $(189) $46,772
Shares issued in connection
with follow-on public offering 2,689,000 27 59,073 59,100
Options exercised 54,750 1 700 701
Stockholder Receivable collected 33 33
Net income 848 848
_________ ___ ________ ______ _____ _________
Balance, March 26, 1997 8,955,766 $90 $101,551 $5,969 $(156) $ 107,454
</TABLE>
See accompanying notes to unaudited consolidated
financial statements.
5
<PAGE>
FINE HOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 26, March 27,
1997 1996
Cash flows from operating activities:
Net income $848 $259
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,874 957
Deferred income tax provision 641 167
Changes in operating assets and liabilities:
Accounts receivable (2,080) 26
Inventories (250) (195)
Prepaid expenses and other current assets (476) 578
Accounts payable and accrued expenses (583) 833
Decrease (Increase) in other assets 350 (995)
_____ _____
Net cash provided by operating activities 324 1,630
Cash flows from investing activities:
Increase in contract rights (1,739) (2,462)
Purchases of fixtures and equipment (2,477) (1,067)
Acquisition of business, net of cash acquired (11,500) (3,215)
Collection of notes receivable - 19
_______ ______
Net cash used in investing activities (15,716) (6,725)
Cash flows from financing activities:
Borrowings under long-term debt agreement - 6,909
Proceeds from issuance of common stock 59,133 --
Payment of long-term debt (35,131) (814)
Payment of subordinated debt (271) (272)
Proceeds from exercise of options 701 -
_______ _____
Net cash provided by financing activities 24,432 5,823
Net increase in cash 9,040 728
Cash, beginning of period 4,724 634
_______ _____
Cash, end of period $13,764 $1,362
See accompanying notes to unaudited consolidated financial
statements.
6
<PAGE>
FINE HOST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation--The unaudited consolidated financial statements
include the accounts of Fine Host (the "Company") and its wholly-owned
subsidiaries. All significant intercompany transactions and accounts have been
eliminated.
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. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The unaudited financial statements include all
adjustments, all of which are of a normal recurring nature, which, in the
opinion of management, are necessary for a fair presentation of the results of
operations for the three months ended March 26, 1997 and March 27, 1996. The
accompanying unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company and notes
thereto for the fiscal year ended December 25, 1996 included in the Company's
Annual Report on Form 10-K.
Earnings (Loss) Per Share--Earnings (loss) per share of Common Stock is
computed based on the weighted average number of common and common equivalent
shares outstanding during each period. Earnings (loss) per share assuming full
dilution gives effect to the assumed exercise of all dilutive stock options and
the assumed conversion of dilutive convertible securities (debt and warrants)
except when their effect is antidilutive. In calculating earnings (loss) per
share, net income has been reduced for the accretion to the redemption value of
warrants by $0 and $1,040 for the three months ended March 26, 1997 and March
27, 1996, respectively.
Accounting Pronouncements -- In February 1997, the FASB issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings per share. SFAS No.
128 specifies the computation, presentation and disclosure requirements for
earnings per share ("EPS"). SFAS No. 128 is effective for financial statements
for interim and annual periods ending after December 15, 1997. Earlier
application is not permitted. On a pro forma basis computed in accordance with
SFAS No. 128 and before warrant accretion, basic EPS would have been $.11 and
$.13 and diluted EPS would have $.11 and $.07 for March 26, 1997 and March 27,
1996, respectively.
2. Acquisitions
On January 23, 1997, the Company acquired 100% of the stock of Versatile
Holding Corporation, which owns 100% of the stock of Serv-Rite Corporation
("Serv-Rite"), a contract food services management company that provides food
services to the education and business dining markets in New York and
Pennsylvania. The purchase price was approximately $7,500, consisting of cash
and assumed debt of Serv-Rite.
On December 30, 1996, the Company acquired 100% of the stock of Service
Dynamics Corp. ("Service Dynamics"). Service Dynamics provides contract food
service to the education and business dining markets primarily in New Jersey.
The purchase price was approximately $3,000, consisting of cash paid to the
seller.
7
<PAGE>
FINE HOST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands, except share and per share data)
(unaudited)
The aforementioned acquisitions have been accounted for under the purchase
method of accounting and, accordingly, the accompanying unaudited consolidated
financial statements reflect the fair values of the assets acquired and
liabilities assumed or incurred as of the effective date of the acquisitions.
The results of operations of the acquired companies are included in the
accompanying unaudited consolidated financial statements since their respective
dates of acquisition.
The following table summarizes pro forma information with respect to the
income statement data for the three months ended March 26, 1997 and March 27,
1996, as if the acquisitions of Serv-Rite and Service Dynamics had been
completed as of the beginning of such period. No adjustment for acquisition
synergies (i.e. overhead reductions) have been reflected:
Three Months Ended
March 26, March 27,
1997 1996
Summary statement of income data:
Net sales $52,198 $34,613
Income from operations 2,045 936
Net income (loss) before warrant accretion 840 (28)
Net income per share before warrant
accretion assuming full dilution $ .11 $ -
This pro forma information is provided for informational purposes only. It
is based on historical information and does not necessarily reflect the actual
results that would have occurred nor is it necessarily indicative of future
results of operations of the combined enterprise.
3. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
March 26, December 25,
1997 1996
Accounts payable $10,064 $ 8,404
Accrued wages and benefits 4,018 2,640
Accrued rent to clients 3,475 3,187
Accrued other 6,821 4,459
Total $24,378 $18,690
8
<PAGE>
FINE HOST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands, except share and per share data)
(unaudited)
4. Long-Term Debt
Long-term debt consists of the following:
March 26, December 25
1997 1996
Working Capital Line $ 1,461 $15,818
Guidance Line ---- 15,744
_______ _______
Total $ 1,461 $31,562
The net proceeds from the follow on public offering on February 12, 1997,
including the exercise of the over allotment option granted to the underwriters
(see Note 5), were used to repay all of the long term debt outstanding at the
close of the transaction.
The Company's bank agreement was amended and restated on June 19, 1996 in
connection with the initial public offering (the "Restated Bank Agreement") and
provides for (i) a working capital revolving credit line (the "Working Capital
Line") for general obligations and letters of credit of the Company, in the
maximum amount of $20,000, and (ii) a line of credit to provide for future
expansion by the Company (the "Guidance Line") in the maximum amount of $55,000.
The maximum borrowing under the Restated Bank Agreement was $75,000 as of March
26, 1997. The Restated Bank Agreement terminates on April 30, 1999.
The Company's obligations under the Restated Bank Agreement are
collateralized by a pledge of shares of the common stock or other equity
interests of the Company's subsidiaries, as well as by certain fixtures and
equipment, notes receivable and other assets, as well as the receipt, if any, of
certain funds paid to the Company with respect to the termination of client
contracts prior to their expiration.
The Restated Bank Agreement contains various financial and other
restrictions, including, but not limited to, restrictions on indebtedness,
capital expenditures and commitments. Additional obligations require maintenance
of certain financial ratios, including the ratio of total debt to operating cash
flow, operating cash flow to cash interest expense, and minimum net worth and
operating cash flow. The Restated Bank Agreement also contains prohibitions on
the payment of dividends.
5. Stockholders' Equity
On February 12, 1997, the Company conducted a follow-on public offering, as
authorized by its Board of Directors, selling 2,689,000 shares of its common
stock at a price of $23.50 per share, generating net proceeds (including the net
proceeds received by the Company upon the exercise of certain options) of
approximately $59.1 million, after deducting the underwriting discount and
offering expenses paid by the Company. The net proceeds were used to repay
obligations under the Company's credit facility in effect prior to the public
offering and the remainder of the net proceeds was invested in short term
investments in accordance with the Company's investment policy.
9
<PAGE>
FINE HOST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in thousands, except share and per share data)
(unaudited)
6. Income Taxes
At March 26, 1997 the Company had a tax provision of $641, which was
entirely deferred. In addition, the Company had, for Federal income tax
reporting, an estimated net operating loss carryforward of approximately $3,000
that will begin to expire in 2008.
7. Major Client
One client represented 8.2% and 15.0% of net sales for the three months
ended March 26, 1997 and March 27, 1996, respectively.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company was formed in 1985 and has grown to become a leading provider of
food and beverage concession and catering services to more than 750 facilities
in 38 states. The Company targets four distinct markets within the contract food
service industry: the recreation and leisure market ("Recreation and Leisure"),
serving arenas, stadiums, amphitheaters, civic centers and other recreational
facilities; the convention center market ("Convention Centers"); the educational
and school nutrition market ("Education"), which the Company entered in 1994,
serving colleges, universities and public and private schools; and the business
dining market ("Business Dining"), which the Company entered in 1994, serving
corporate cafeterias, office complexes and manufacturing plants.
The matters discussed in this Form 10-Q contain forward looking statements
that involve risks and uncertainties including risks associated with the food
service industry and other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission.
Results of Operations
The following table sets forth, for the periods indicated, certain
financial data as a percentage of the Company's net sales:
Three Months Ended
March 26 March 27,
1997 1996
Net sales 100.0% 100.0%
Cost of sales 89.4 89.5
_____ _____
Gross profit 10.6 10.5
General and administrative expenses 6.5 5.5
_____ _____
Income from operations 4.1 5.0
Interest expense, net 1.1 3.2
_____ _____
Income before tax provision 3.0 1.8
Tax provision 1.3 0.7
_____ _____
Net income before warrant accretion 1.7% 1.1%
The following table sets forth net sales attributable to the Company's
principal operating markets, expressed in dollars (in thousands) and as a
percentage of total net sales:
Three Months Ended
March 26, March 27,
1997 1996
Recreation and Leisure $6,505 13.2% $6,898 28.6%
Convention Centers 13,816 27.9 11,835 49.0
Education 14,135 28.6 3,068 12.6
Business Dining 14,996 30.3 2,359 9.8
______ _____ _______ _____
Total $49,452 100.0% $24,160 100.0%
11
<PAGE>
Three Months Ended March 26, 1997 Compared to Three Months Ended March 27, 1996
Net Sales. The Company's net sales increased 105% to $49.5 million for the
three months ended March 26, 1997 from $24.1 million for the three months ended
March 27, 1996. Net sales increased in all market areas except Recreation and
Leisure. However, excluding from the first quarter of 1996 the one time sales
from food service at Super Bowl XXX, net sales from the Recreation and Leisure
market increased from new and existing contracts. Net sales from Convention
Centers increased 17% primarily as a result of increased sales from new and
existing contracts. Net sales in Education and Business Dining more than
doubled, primarily as a result of the impact of acquisitions in 1996 and 1997.
Gross Profit. Gross profit increased to $5.2 million or 10.6% of net sales,
from $2.5 million or 10.5% of net sales for the comparable 1996 period. The
increase in gross profit as a percentage of net sales was attributable to the
contribution from acquisitions, as well as new and existing contracts.
General and Administrative Expenses. General and administrative expenses
increased to $3.2 million (or 6.5% of net sales) for the three months ended
March 26, 1997 from $1.3 million (or 5.5% of net sales) for the three months
ended March 27, 1996. The increase was attributable primarily to the Company's
continued investment in training programs, regional and accounting management
and additional sales personnel to support its current and future growth plans.
Operating Income. Operating income increased 69.8% to $2.0 million for the
three months ended March 26, 1997, from $1.2 million for the three months ended
March 27, 1996, primarily as a result of the factors discussed above.
Interest Expense. Interest expense decreased approximately $229,000 for the
three months ended March 26, 1997, due to decreased debt levels resulting from
the repayment of certain obligations under the Company's credit facility with
the net proceeds from the initial and follow-on public offerings.
Liquidity and Capital Resources
The Company has funded its capital requirements from a combination of
operating cash flow, debt and equity financing. Cash flow from operating
activities was a source of funds of approximately $324,000 and $1.6 million for
the three months ended March 26, 1997 and March 27, 1996. The reduction in the
source of funds from operations quarter over quarter resulted primarily from the
increase in net working capital requirements as a result of the expansion into
the Education market, partially offset by the increase in unit operating cash
flow.
EBITDA was $4.1 million or 8.1% of net sales, compared to $2.2 million or
9.1% of net sales for the three months ended March 26, 1997 and March 27, 1996,
respectively. The decrease in EBITDA as a percentage of net sales was
attributable to an increase in general and administrative expenses. As discussed
above, EBITDA represents earnings before interest expense, income tax expense
and depreciation and amortization. EBITDA is not a measurement in accordance
with GAAP and should not be considered an alternative to, or more meaningful
than, income from operations, net income or cash flows as defined by GAAP as a
measure of the Company's profitability or liquidity.
Cash flows used in investing activities were approximately $15.7 million and
$6.7 million for the three months ended March 26, 1997 and March 27, 1996,
respectively. The increase in use of funds was primarily a result of investments
in acquired companies.
On December 30, 1996, the Company acquired Service Dynamics for a purchase
price of approximately $3.0 million. On January 22, 1997 the Company acquired
Serv-Rite for a purchase price of approximately $7.5 million. The Company is
eliminating certain redundant operations through closings of offices and
termination of excess personnel relating to these acquisitions. The Company's
acquisitions are generally financed through cash from working capital and from
the Company's credit facility.
12
<PAGE>
At March 26, 1997 and December 25, 1996 the Company's current assets
exceeded its current liabilities, resulting in a working capital surplus of
$16.1 million and $4.6 million, respectively. The surplus resulted primarily
from an increase in trade receivables related to the new acquisitions in the
Education and Business Dining markets, which generally invest in shorter term
assets (i.e., accounts receivable), as compared to the Company's Recreation and
Leisure business, which invests in longer term assets (i.e., fixtures and
equipment). The Working Capital Line provides funds for liquidity, seasonal
borrowing needs and other general corporate purposes.
On February 12, 1997, the Company completed the follow-on public offering,
resulting in net proceeds to the Company of approximately $59.1 million after
deducting underwriting discounts and certain expenses. The proceeds of the
follow on offering were used to repay obligations under the Restated Bank
Agreement and for general working capital purposes.
The Company believes that the invested proceeds of its follow-on public
offering, internally generated funds and amounts available under the Restated
Bank Agreement are sufficient to satisfy the Company's presently anticipated
capital requirements for at least the next twelve months.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In April 1997, The Securities and Exchange Commission amended rules and
forms to expand existing disclosure requirements for market risk sensitive
instruments. However, the Company is not obligated to provide such disclosure in
this Form 10-Q.
13
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
Reference is made to the discussion of legal proceedings found in the
Company's Form 10-K for the fiscal year ended December 25, 1996. There have been
no material changes in the status of the proceedings referenced therein.
The Company is involved in certain legal proceedings incidental to the
normal conduct of its business. The Company does not believe that any
liabilities relating to such legal proceedings to which it is a party are likely
to be, individually or in the aggregate, material to its consolidated financial
position or results of operations.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits:
*3.1 Restated Certificate of Incorporation
*3.2 By-Laws
*4 Specimen of Registrant's Common Stock certificate
10.1 Amended and Restated 1996 Non-Employee Director Stock Plan
10.2 Second Amendment to Employment Agreement dated as of March 17, 1997
by and among the Company, Northwest Food Service, Inc. and
Robert F. Barney
10.3 Amendment to Advisory Services Agreement, dated as of April 10,
1997 between the Company and Interlaken Capital, Inc.
11 Computations of Per Share Earnings
27 Financial Data Schedule
* Filed as exhibits to the Company's Registration Statement on Form S-1,
declared effective by the Securities and Exchange Commission on June 19, 1996,
and hereby incorporated by reference.
B) Reports on Form 8-K - None
- -------------------------------------------------------------------------------
Omitted from this Part II are items which are inapplicable or to which the
answer is negative for the period presented.
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Fine Host Corporation
By: /s/ Nelson Barber
Nelson Barber
Senior Vice President and Treasurer
(Duly Authorized Officer and Principal Accounting Officer)
Date: May 8, 1997
16
EXHIBIT INDEX
Exhibit No. Description
*3.1 Restated Certificate of Incorporation
*3.2 By-Laws
*4 Specimen of Registrant's Common Stock certificate
10.1 Amended and Restated 1996 Non-Employee Director Stock Plan
10.2 Second Amendment to Employment Agreement dated as of
March 17, 1997, by and among the Company, Northwest Food
Service, Inc. and Robert F. Barney
10.3 Amendment to Advisory
Services Agreement
dated as of April 10,
1997 between the
Company and
Interlaken Capital,
Inc.
11 Computations of Per Share Earnings
27 Financial Data Schedule
* Filed as exhibits to the Company's Registration Statement on Form S-1,
declared effective by the Securities and Exchange Commission on June 19, 1996,
and hereby incorporated by reference.
<PAGE>
EXHIBIT 10.1
FINE HOST CORPORATION
AMENDED AND RESTATED
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
1. Purpose. The Amended and Restated 1996 Non-Employee Director Stock Plan (the
"Plan") is intended to promote the interests of Fine Host Corporation (the
"Company") by providing an inducement to qualified persons who are neither
employees nor officers of the Company or any affiliate to serve as members of
the Board of Directors of the Company (the "Board") and to provide for a portion
of their annual compensation to be tied directly to shareholder return. This is
accomplished through the automatic annual grant of common stock of the Company,
par value $0.01 per share, (the "Common Stock") with restrictions on the
transferability for a period of time ("Restricted Stock") (each annual grant of
Restricted Stock hereinafter referred to as an "Award").
2. Available Shares. The total number of shares of Common Stock which may be
granted pursuant to the Plan shall not exceed 50,000. Shares subject to the Plan
may be authorized but unissued shares or shares that were previously issued and
subsequently reacquired by the Company. If any shares of Common Stock granted
under the Plan are surrendered before the restrictions thereon lapse, such
shares revert to the Plan and continue to be available for grant under the Plan.
3. Administration. The Plan shall be administered by the Compensation
Committee of the Board (the "Committee"). The Committee shall, subject to the
provisions of the Plan, have the power to construe the Plan, to determine all
questions thereunder, and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable.
4. Agreement. Each Award shall be evidenced by an Agreement, in such form as may
be approved by the Board, which Agreement shall be duly executed and delivered
on behalf of the Company and by the individual to whom such Restricted Stock is
granted. The Agreement shall contain such terms, provisions, restrictions and
conditions not inconsistent with the Plan as may be determined by the Committee.
5. Eligibility. Common Stock may be granted pursuant to the Plan only to
members of the Board who are not employees of the Company or an affiliate at the
time of grant ("Non-Employee Directors").
6. Automatic Grant of Restricted Stock. Upon the consummation of the Company's
initial public offering of stock (the "IPO") each Non-Employee Director at such
time shall be automatically granted without further action by the Board or the
Committee a number of shares of Restricted Stock equal to $15,000 divided by the
price that one share of Common Stock is offered to the public in the IPO.
Thereafter, for the remainder of the term of the Plan and provided he or she
remains a Non-Employee Director, on the date of each of the Company's Annual
Meeting of Stockholders (the "Annual Meeting"), each Non-Employee Director shall
be automatically granted without further action by the Board or the Committee a
number of shares of Restricted Stock equal to $15,000 divided by the "Fair
Market Value" of one share of Common Stock on the date of grant. For purposes of
the Plan, the Fair Market Value of the Common Stock on a given date means (i) if
the Common Stock is listed on a national securities exchange, the closing price
reported as having occurred on the primary exchange with which the Common Stock
is listed and traded on the date prior to such date, or, if there is no such
sale on that date, then on the last preceding date on which such a sale was
reported; (ii) if the Common Stock is not listed on any national securities
exchange but is quoted in the National Market System of the National Association
of Securities Dealers Automated Quotation System on a last sale basis, the
average between the high bid price and low ask price reported on the date prior
to such date, or, if there is no such sale on that date, then on the last
preceding date on which a sale was reported; or (iii) if the Common Stock is not
listed on a national securities exchange nor quoted in the National Market
System of the National Association of Securities Dealers Automated Quotation
System on a last sale basis, the amount determined by the Committee to be the
fair market value based upon a good faith attempt to value the Common Stock
accurately and computed in accordance with applicable regulations of the
Internal Revenue Service. Anything in the Plan to the contrary notwithstanding,
the effectiveness of the Plan and of the grant of all Common Stock hereunder is
in all respects subject to, and the Plan and Common Stock granted under it shall
be of no force and effect unless and until, the approval of the Plan by the
affirmative vote of a majority of the Company's shares present in person or by
proxy and entitled to vote at a meeting of shareholders at which the Plan is
presented for approval, or by written consent of shareholders enforceable under
applicable state law.
7. Restrictions.
(a) Common Stock granted pursuant to the Plan shall be restricted for a period
of time from the date of grant and shall not be assignable or transferable
during such period. Unless otherwise determined by the Board, the restrictions
with respect to each Award shall lapse and the Restricted Stock shall become
freely transferable on the date of the Annual Meeting immediately following the
date of grant of the Award, provided the Non-Employee Director remains as a
member of the Board on the date immediately preceding such Annual Meeting.
(b) The certificates representing the shares of Restricted Stock acquired under
the Plan shall carry such appropriate legend, and such written instructions
shall be given to the Company's transfer agent, as may be deemed necessary or
advisable by counsel to the Company.
(c) In the event a Non-Employee Director ceases to be a member of the Board for
any reason other than death or "Disability," any shares of Restricted Stock
acquired by him or her pursuant to the Plan whose restrictions have not lapsed
shall be forfeited back to the Company. For the purposes of the Plan, Disability
shall mean the permanent and total disability and incapacity of the Non-Employee
Director such that he is unable to perform his duties to the Company, as
certified by the Board.
(d) In the event that a Non-Employee Director ceases to be a member of the Board
by reason of his or her Disability or death, the restrictions with respect to
all shares of Common Stock acquired by him or her pursuant to the Plan shall
immediately lapse and all such shares shall become immediately transferable by
the Non-Employee Director (or his or her personal representative, heir or
legatee, in the event of death).
8. Effect of Change in Control.
(a) In the event of a "Change in Control," the restrictions on all shares of
Common Stock granted pursuant to the Plan shall immediately lapse and all such
shares shall become immediately transferable.
(b) Change in Control shall, unless the Board otherwise directs by resolution
adopted prior thereto or, in the case of a particular Award, the Agreement
states otherwise, be deemed to occur if (i) any "person" (as that term is used
in Sections 13 and 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act")) other than a Permitted Holder (as defined below) is or becomes
the beneficial owner (as that term is used in Section 13(d) of the Exchange
Act), directly or indirectly, of [30%] or more of either the outstanding shares
of Common Stock or the combined voting power of the Company's then outstanding
voting securities entitled to vote generally, (ii) during any period of two
consecutive years beginning on the date of the consummation of the IPO,
individuals who constitute the Board at the beginning of such period cease for
any reason to constitute at least a majority thereof, unless the election or the
nomination for election by the Company's shareholders of each new director was
approved by a vote of at least three-quarters of the directors then still in
office who were directors at the beginning of the period or (iii) the Company
undergoes a liquidation or dissolution or a sale of all or substantially all of
the assets of the Company. Neither the IPO nor any merger, consolidation or
corporate reorganization in which the owners of the combined voting power of the
Company's then outstanding voting securities entitled to vote generally prior to
said combination, own 50% or more of the resulting entity's outstanding voting
securities shall, by itself, be considered a Change in Control. As used herein,
"Permitted Holder" means William R. Berkley or any of his affiliates (as such
term is defined in Rule 1-02 of Regulation S-X under the Securities Act).
(c) The obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from the merger, consolidation
or other reorganization of the Company, or upon any successor corporation or
organization succeeding to substantially all of the assets and business of the
Company. The Company agrees that it will make appropriate provisions for the
preservation of Participant's rights under the Plan in any agreement or plan
which it may enter into or adopt to effect any such merger, consolidation,
reorganization or transfer of assets.
9. Approval of Stockholders. The effectiveness of this Plan and of the
grant of all Common Stock hereunder is in all respects subject to approval by
the Company's shareholders as more fully set forth in Section 6 hereof.
10. Termination and Amendment of Plan. The Board may at any time terminate
the Plan or make such modification or amendment thereof as it deems advisable. *
* *
As adopted by the Board of Directors of Fine Host Corporation as of March 29,
1996 and as amended and restated as of March 17, 1997
EXHIBIT 10.2
SECOND AMENDMENT
TO
EMPLOYMENT AGREEMENT
BETWEEN
FINE HOST CORPORATION
NORTHWEST FOOD SERVICE, INC.
AND
ROBERT F. BARNEY
This Amendment to Employment Agreement is entered into as of this 17th
day of March, 1997, by and among Fine Host Corporation ("Fine Host"), Northwest
Food Service, Inc. (the "Company"), and Robert F. Barney (the "Executive").
WHEREAS, Fine Host, the Company, and the Executive are parties to that
certain Employment Agreement made as of June 30, 1995, as amended on July 1,
1996 (collectively the AEmployment Agreement@); and
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meaning ascribed thereto in the Employment Agreement; and
WHEREAS, the parties wish to modify and amend certain provisions of the
Agreement.
NOW THEREFORE, the parties intending to legally bound thereby, mutually
agree as follows:
1. Title. As of the date hereof, the Executive shall hold the title of
Group President, Education and Business Dining for Fine Host.
2. Confirmation and Integration. Except as expressly amended by this
Amendment, the parties hereby confirm and ratify the Employment Agreement in its
entirety. The Employment Agreement, as amended by this Amendment, constitutes
the entire agreement among Fine Host, the Company, and the Executive pertaining
to the subject matter of the Employment Agreement, as so amended, and supersedes
all prior and contemporaneous agreements and understandings of Fine Host, the
Company, and the Executive in connection therewith.
3. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Idaho without regard to its conflicts
of laws provisions.
4. Counterparts. This Amendment may be executed in any
number of counterparts, each of which shall constitute an original and all of
which together shall constitute but one and the same original document.
5. Headings. The section headings herein are for convenience only and do
not define, limit or construe the contents of such sections.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
NORTHWEST FOOD SERVICE, INC. FINE HOST CORPORATION
By: /s/ Nelson Barber By: /s/ Nelson Barber
Name: Nelson Barber Name: Nelson Barber
Title: Treasurer Title: Senior Vice President
/s/ Robert F. Barney
Robert F. Barney
EXHIBIT 10.3
April 10, 1997
Interlaken Capital, Inc.
165 Mason Street
Greenwich, CT 06830
Attn: Joshua Polan
Re: Advisory Services Agreement
(the "Agreement")
Gentlemen:
When countersigned by you in the space provided below for that purpose,
this letter will serve to formalize the terms pursuant to which Interlaken
Capital, Inc. ("Interlaken") will continue to provide advisory services to Fine
Host Corporation ("Fine Host"). We agree that:
1. Interlaken will continue to provide advisory services to
Fine Host as needed and when requested by Fine Host. Those
services will be as requested by Fine Host but shall not be
greater in scope than those provided to Fine Host for more than
the past three fiscal years of Fine Host pursuant to the previous
arrangements between the parties.
2. As has been the case for more than the past three years,
Fine Host will continue to pay Interlaken the sum of $150,000
annually (payable in equal monthly installments of $12,500) in
consideration of Interlaken's commitment to render the
aforementioned services.
<PAGE>
3. This Agreement shall continue until December 31, 1999.
4. This Agreement constitutes the entire understanding of the
parties hereto and supercedes and replaces all previous
agreements, arrangements or understandings relating to the subject
matter hereof, including the letter, dated March 25, 1996 from
Fine Host to Interlaken.
Very truly yours,
/S/ Randy B. Spector
Randy B. Spector
Executive Vice President
Accepted and Agreed
INTERLAKEN CAPITAL, INC.
EXHIBIT 11
FINE HOST CORPORATION
Computation of Per Share Earnings
Three Months Ended
March 26, March 27,
1997 1996
Income applicable to Common Stock $ 848 259
Stock warrant accretion ---- (1,040)
_________ _________
Net income (loss) available to Common
Stockholders $ 848 $ (781)
Weighted average number of common shares
outstanding 7,630,390 2,048,200
Average convertible Preferred shares
outstanding ----- 939,297
Assumed conversion of:
Warrants ----- 442,870
Options 288,031 80,024
Subordinated Notes 32,618 ----
_________ _________
Average number of shares of Common Stock
outstanding assuming full dilution 7,951,039 3,510,391
Net income (loss) per share assuming
full dilution $ .11 $ (.22)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains Summary Financial Information extracted
from the Balance Sheet and Income Statement for the three
months ended March 26, 1997 for Fine Host Corporation, and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0001011584
<NAME> FINE HOST CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> DEC-26-1996
<PERIOD-END> MAR-26-1997
<EXCHANGE-RATE> 1.00
<CASH> 13,764
<SECURITIES> 0
<RECEIVABLES> 19,079
<ALLOWANCES> 0
<INVENTORY> 5,014
<CURRENT-ASSETS> 42,281
<PP&E> 38,154
<DEPRECIATION> 7,167
<TOTAL-ASSETS> 153,567
<CURRENT-LIABILITIES> 26,143
<BONDS> 0
0
0
<COMMON> 90
<OTHER-SE> 107,364
<TOTAL-LIABILITY-AND-EQUITY> 153,567
<SALES> 49,452
<TOTAL-REVENUES> 49,452
<CGS> 44,210
<TOTAL-COSTS> 44,210
<OTHER-EXPENSES> 3,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 538
<INCOME-PRETAX> 1,489
<INCOME-TAX> 641
<INCOME-CONTINUING> 848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 848
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
