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 April 1, 1998
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ________
Commission file number: 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 9,047,970 shares of common stock, $.01 par value, outstanding
as of May 22, 1998.
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information
Page No.
Item 1 - Financial Statements (unaudited)
- ------
* Consolidated Balance Sheets - April 1, 1998 and
December 31, 1997 1
* Consolidated Statements of Operations - Three Months
Ended April 1, 1998 and March 26, 1997 2
* Consolidated Statement of Stockholders' Equity - Three Months
Ended April 1, 1998 3
* Consolidated Statements of Cash Flows - Three Months Ended
April 1, 1998 and March 26, 1997 4
* Notes to Consolidated Financial Statements 5 - 7
Item 2 - Management's Discussion and Analysis of Financial Condition and
- ------
Results of Operations 8 - 11
Item 3 - Qualitative and Quantitative Disclosures about Market Risk 12
- ------
Part II - Other Information
Item 1 - Legal Proceedings 13 - 14
- ------
Item 6 - Exhibits and Reports on Form 8-K 15
- ------
Signature 16
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
FINE HOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
April 1, 1998 December 31, 1997
------------ -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $103,335 $109,722
Accounts receivable, net of allowance for bad debts 33,516 29,712
Inventories 6,234 6,241
Prepaid expenses and other current assets 2,072 1,940
---------- -----------
Total current assets 145,157 147,615
Contract rights, net 34,828 36,152
Fixtures and equipment, net 24,648 24,269
Excess of cost over net assets acquired, net 55,517 55,551
Contract loans and notes receivable 16,383 15,481
Other assets 10,351 11,110
---------- ----------
Total assets $286,884 $290,178
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 46,104 $ 41,270
Current portion of long-term obligations 464 464
Current portion of subordinated debt 2,447 2,219
----------- -----------
Total current liabilities 49,015 43,953
Convertible subordinated notes 175,000 175,000
Long-term obligations 454 574
Subordinated debt 4,681 5,187
----------- ----------
Total liabilities $229,150 $224,714
-------- --------
Stockholders' equity:
Common Stock, $.01 par value, 25,000 shares authorized
9,060 issued and outstanding at
April 1, 1998 and December 31, 1997 91 91
Additional paid-in capital 102,949 102,949
Accumulated deficit (45,150) (37,420)
Receivables from stockholders for purchase of Common Stock (156) (156)
---------- -----------
Total stockholders' equity 57,734 65,464
--------- ----------
Total liabilities and stockholders' equity $286,884 $290,178
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
1
<PAGE>
FINE HOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 1, 1998 March 26, 1997
<S> <C> <C>
Net sales $84,996 $54,333
Cost of sales 77,979 49,484
-------- --------
Gross profit 7,017 4,849
General and administrative expenses 8,560 7,645
Special charge 4,932 -
Provision for asset impairment and disposal 174 -
---------- ------------
Loss from operations (6,649) (2,796)
Interest expense, net of interest income of $1,982 and $159 1,041 532
--------- ---------
Loss before income tax expense (benefit) (7,690) (3,328)
Income tax expense (benefit) 40 (850)
----------- ---------
Net loss $ (7,730) $ (2,478)
======== ========
Basic and diluted loss per share of Common Stock $ (.85) $ (.32)
========== ==========
Average number of shares of Common Stock outstanding 9,060 7,669
========== =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
FINE HOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Receivables
from
Stockholders
for
Additional Purchase of
Common Stock Paid-In Accumulated Common Stockholders'
Shares Amount Capital Deficit Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 9,060 $91 $102,949 $(37,420) $(156) $65,464
Net loss - - - (7,730) - (7,730)
----- ------ -------- ---------- --------- --------
Balance, April 1, 1998 9,060 $91 $102,949 (45,150) $(156) $57,734
===== === ======== ========= ===== =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
FINE HOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 1, March 26,
1998 1997
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,730) $ (2,478)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 3,042 1,643
Deferred income tax benefit - (900)
Special charge 4,932 -
Provision for asset impairment and disposal 174 -
Provision for bad debts 158 -
Changes in operating assets and liabilities, net of effects from acquisition
of businesses:
Accounts receivable (3,267) (1,621)
Inventories (83) (369)
Prepaid expenses and other current assets (141) 312
Accounts payable and accrued expenses (1,345) 1,900
Decrease in other assets 292 913
-------- ---------
Net cash used in operating activities (3,968) (600)
-------- ---------
Cash flows from investing activities:
Direct payments to acquire contracts (166) (67)
Purchases of fixtures and equipment (1,534) (3,047)
Disposal of fixtures and equipment 59 -
Acquisition of businesses, net of cash acquired 591 (11,500)
Collection of notes receivable 121 -
Issuance of contract notes receivable (1,092) -
-------- ----------
Net cash used in investing activities (2,021) (14,614)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock - 59,133
Payment of long-term obligations (120) (35,185)
Payment of subordinated debt (278) (271)
Proceeds from exercise of options - 701
-------- ----------
Net cash (used in) provided by financing activities (398) 24,378
-------- --------
Net (decrease) increase in cash (6,387) 9,164
Cash, beginning of period 109,722 4,747
--------- ---------
Cash, end of period $103,335 $13,911
======== =======
</TABLE>
Supplemental disclosure of non-cash financing activities:
- Subordinated notes issued in conjunction with acquisitions, net of
discount, totaled $1,472 in 1997.
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
FINE HOST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
(unaudited)
1. Description of Business
Fine Host Corporation and its subsidiaries (the "Company") provide contract
food service management to six distinct markets within the contract food service
industry: the recreation and leisure market (arenas, stadiums, amphitheaters,
civic centers and other recreational facilities); the convention center market;
the education market (colleges, universities and elementary and secondary
schools); the business dining market (corporate cafeterias, office complexes and
manufacturing plants); the healthcare market (long term care facilities and
hospitals) and the corrections market (prisons and jails).
2. Summary of Significant Accounting Policies
Basis of Presentation - The unaudited consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany transactions and accounts have been eliminated.
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 April 1, 1998 and March 26, 1997. 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 31, 1997 included in the Company's
Annual Report on Form 10-K.
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.
Revenue Recognition and Cost of Sales - Sales from all food and beverage
concession and catering contract food services are recognized as net sales as
the services are provided. Net sales include reimbursements for food and payroll
costs incurred on behalf of customers under contracts in which the Company
manages food service programs for a fee.
The Company enters into one of the following types of contracts for its
food services: profit and loss contracts ("P&Ls"), profit sharing contracts and
a limited number of management fee contracts with a fixed base fee, some of
which provide for an additional incentive fee based upon certain performance
criteria. In certain P&Ls the Company is required to bear all the expenses of
the operation, including rent paid to the client usually calculated as a fixed
percentage of various categories of sales. In other P&Ls, net sales include
reimbursements for operating expenses incurred on behalf of customers, as well
as revenues generated at the facility under contracts in which the Company
manages the food service contract for a management fee. Under the profit sharing
contracts, the Company receives a percentage of profits earned at the facility
after the payment for all expenses of the operation plus a fixed fee or
percentage of sales as an administrative fee. For the limited number of the
company's management fee contracts that have a fixed base fee, the revenues
generated at the location are used to pay for all expenses incurred in providing
food and beverage services, and the excess of revenues over management fees and
operating expenses is distributed to the client.
Basic and Diluted Loss Per Share - In December 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share". Under SFAS No. 128, basic earnings per share is based on the weighted
average number of common shares outstanding during the year, whereas diluted
earnings per share also gives effect to all dilutive potential common shares
that were outstanding during the period. Dilutive potential common shares
include preferred stock, stock options, warrants and convertible notes.
5
<PAGE>
Accounting Pronouncements - In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income". SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. The adoption of SFAS No. 130 does not have an impact on the Company.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual and interim financial statements and related disclosures
about products and services, geographic areas, and major customers. SFAS No. 131
is effective for fiscal years beginning after December 15, 1997. The Company
will adopt SFAS No. 131 for the fiscal year ending December 30, 1998.
Reclassifications - Certain prior year amounts and balances have been
reclassified to conform to the current presentation.
3. Special Charge
On February 6, 1998, the Company filed a Current Report on Form 8-K in
which the Company's financial statements for the years ended December 25, 1996,
December 27, 1995 and December 28, 1994 were restated from the amounts
previously reported to (i) reflect certain items previously improperly
capitalized as period costs; (ii) adjust previously recorded reserves and
accruals for certain items; (iii) expense items that had previously been charged
to inappropriately established acquisition liabilities; (iv) write-off certain
non-performing assets; (v) properly recognize revenue related to certain
contracts and agreements; and (vi) record adjustments for the settlement of
certain terminated contracts. All previously filed Form 10-Qs and the 1996 10-K
have been amended and filed with the Securities and Exchange Commission to
reflect the restatement.
In connection with the restatement, the Company incurred costs in the first
quarter of 1998 of approximately $4.9 million to cover the costs of legal,
accounting and management consulting fees, severance and the cost of rescinding,
in January 1998, the 10 year lease that was signed in October 1997 for the
relocation of its corporate headquarters. The Company expects to incur
additional costs during 1998 to cover the costs of legal, accounting and
management consulting fees.
In addition, in connection with management's turnaround and business plan,
the Company anticipates that it will incur restructuring charges throughout the
remainder of 1998. These charges are expected to include severance and other
incremental costs associated with the business plan.
4.Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
April 1, December 31,
1998 1997
------- ------------
Accounts payable $11,783 $11,794
Accrued wages and benefits 9,744 8,275
Accrued rent to clients 5,096 4,070
Severance, fees and other liabilities relating to
acquisition of businesses 4,623 4,755
Deferred income 3,417 3,138
Professional fees 911 1,075
Accrued interest 4,240 1,836
Accrued other 6,290 6,327
------- ---------
Total $46,104 $41,270
======= =======
6
<PAGE>
5. Convertible Subordinated Notes
On October 27, 1997, the Company issued $175.0 million of 5% Convertible
Subordinated Notes due 2004 (the "Convertible Notes") in a private placement
under Rule 144A of the Securities Act of 1933. The Convertible Notes are
unsecured obligations of the Company and are convertible into common stock at a
conversion price of $44.50 per share. The net proceeds of $169.1 million, after
deducting discounts and certain expenses, were used to repay approximately $50.0
million in outstanding obligations under the Company's then existing $200
million credit facility. The remaining proceeds were invested in short-term
investments in accordance with the Company's investment policy. In connection
with the Company's private offering of the Convertible Notes, the Company had
agreed to file a shelf Registration Statement, which would cause the Convertible
Notes to be freely tradable. The Company has been unable to file the shelf
Registration Statement and, therefore, is obligated to pay liquidated damages on
the Convertible Notes, from January 25, 1998, in the amount of $.05 per week per
thousand dollar principal amount, subject to increase every quarter up to a
maximum of approximately 1.3% per annum.
6. Income Taxes
For the three months ended April 1, 1998, the Company recorded a state tax
provision of $40. In addition, the Company had, for Federal income tax
reporting, an estimated net operating loss carry forward of approximately $38.1
million that expires at various dates through 2012.
7. Loss Per Share
SFAS 128 requires the disclosure of a reconciliation of the numerators and
denominators of the basic and diluted per share computations for income/loss.
Since the inclusion of dilutive potential common shares (stock options and
convertible notes) would be antidilutive, meaning inclusion of these potential
common shares would decrease loss per share amounts, the Company's calculation
of basic and diluted earnings per share are the same.
Three Months Ended
April 1, March 26,
1998 1997
--------- ---------
Net loss $(7,730) $(2,478)
Basic and diluted shares 9,060 7,669
Basic and diluted loss per share $ (.85) $ (.32)
======== ==========
8. Subsequent Events
Cynthia J. Robbins resigned as Vice President and Controller of the
Company, effective May 12, 1998.
7
<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, catering and ancillary services to more than
900 facilities in 41 states. The Company targets six 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 markets ("Education"), which the Company
entered in 1994, serving colleges, universities and since 1996, elementary and
secondary schools; the business dining market ("Business Dining"), which the
Company entered in 1994, serving corporate cafeterias, office complexes and
manufacturing plants; the healthcare market ("Healthcare"), serving long term
care facilities and hospitals, which the Company substantially entered in 1997;
and the corrections market ("Corrections"), serving prisons and jails, which the
Company entered in 1996.
The matters discussed herein contain forward-looking statements which
involve risks relating to future events and uncertainties associated with the
food service industry. The Company's actual events or results may differ
materially from the results discussed in the forward looking statements. These
risks are 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
April 1, March 26,
1998 1997
---------- ---------
Net sales 100.0% 100.0%
Cost of sales before depreciation and amortization 88.4 88.5
Depreciation and amortization 3.3 2.6
------- -------
Gross profit 8.3 8.9
General and administrative expenses 10.1 14.1
Special charge 5.8 -
Provision for asset impairment and disposal 0.2 -
------- ------
Loss from operations (7.8) (5.2)
Interest expense, net 1.3 1.0
------- ------
Loss before tax benefit (9.1) (6.2)
Tax provision (benefit) - (1.6)
--------- ------
Net loss (9.1)% (4.6)%
======= ======
8
<PAGE>
The following table sets forth net sales attributable to the Company's
principal operating markets, expressed in dollars and as a percentage of total
net sales:
Three Months Ended
($ in thousands)
April 1, March 26,
1998 1997
------------------ ----------------
Recreation and Leisure $ 8,083 9.5% $ 8,175 15.0%
Convention Centers 20,332 23.9 17,239 31.7
Education 25,300 29.8 13,922 25.6
Business Dining 16,279 19.2 12,262 22.6
Healthcare 8,414 9.9 835 1.5
Corrections 5,349 6.3 834 1.5
Other 1,239 1.4 1,066 2.1
--------- ------ ------- ------
Total $84,996 100.0% $54,333 100.0%
======= ===== ======= =====
A significant portion of the Company's growth to date has been derived from
acquisitions. In the 1997 fiscal year, the Company acquired five companies.
Commencing in December 1996, the Company acquired Service Dynamics Corp.
("Service Dynamics"), serving the Business Dining and Education markets, for a
purchase price of approximately $3.0 million. In January 1997, the Company
acquired Serv-Rite Corporation ("Serv-Rite"), serving the Business Dining and
Education markets, for a purchase price of approximately $8.0 million. In August
1997, the Company acquired Statewide Industrial Catering, Inc. ("Statewide"),
serving the Education market, for approximately $3.2 million and Best, Inc.
("Best"), serving the Healthcare, Corrections, Education and Business Dining
markets, for approximately $26.0 million. In October 1997, the Company acquired
Total Food Service Direction, Inc. ("Total"), serving the Business Dining
market, for approximately $4.9 million. The purchase price for each of the
foregoing acquisitions includes debt assumed by the company as part of the
acquisition. The Company is in the process of eliminating certain redundant
operations through closings of offices and termination of excess personnel from
certain of the acquired companies.
Three Months Ended April 1, 1998 Compared to Three Months Ended March 26, 1997
Net Sales. The Company's net sales increased 56% to $85.0 million for the
three months ended April 1, 1998 from $54.3 million for the three months ended
March 26, 1997. Net sales increased in all market areas except Recreation and
Leisure.
Recreation and Leisure decreased 1.1% from $8.2 million to $8.1 million.
Same unit performance increased 3.5% over the comparable prior year period.
Increases in new business were primarily related to the Arizona Veterans
Memorial Coliseum, Oregon Museum of Science and Industry and The Theatre at
Bayou Place. These increases were more than offset by the Onondaga County
Convention Center/War Memorial Complex (OnCenter), which decided to provide its
food service operations internally and Montage Mountain, Lackawanna County
Stadium and Fort Myers Stadium, clients whose contracts expired.
Convention centers increased 17.9% to $20.3 million from $17.2 million.
This increase was primarily attributable to the performance at Orange County
Convention Center ("OCCC"), which accounted for $2.4 million or 77% of the total
increase. The increase was driven by additional capacity and two new shows that
took place in 1998. As of January 1998, OCCC has added over 150,000 square feet
including additional meeting rooms and concession stands to its operations.
Education increased 81.7% to $25.3 million from $13.9 million. Same unit
performance increased 11.7% over the comparable prior year period. New and
acquired business accounted for approximately $11.0 million or 44% of total
revenue. School district business was up $7.6 million primarily due to the
acquisition of Statewide and Best. Higher Education was up $4.4 million due to
the acquisitions of Total and Best and to a lesser extent from new business at
Alfred University and Oregon Health Sciences University. These increases were
partially offset by the expiration of certain contracts.
9
<PAGE>
Business dining increased 32.8% to $16.3 million from $12.3 million. New
and acquired business accounted for approximately 37% of total revenue or $6.1
million primarily from the acquisition of Total and one additional month of
operations from the Serv-Rite businesses. These increases were partially offset
by the disposition of the Republic vending business in December 1997.
Healthcare increased from $0.8 million to $8.4 million. The acquisition of
Best accounted for approximately $7.6 million or 91% of the total revenue.
Corrections increased from $0.8 million to $5.3 million. New and acquired
business accounted for approximately $4.7 million or 87% of total revenue. This
increase is attributable to the acquisition of Best. In addition, same unit
performance increased 3.9% over the comparable prior year period.
Gross Profit. Gross profit increased to $7.0 million or 8.3% of net sales,
from $4.8 million or 8.9% of net sales for the comparable 1997 period. The
slight decrease in gross profit as a percentage of net sales was attributable to
the increased activity in the lower margin business dining and education
markets, as well as increased amortization of contract rights and goodwill
originating from acquisitions.
General and Administrative Expenses. General and administrative expenses
increased to $8.6 million for the three months ended April 1, 1998 from $7.6
million for the three months ended March 26, 1997. The increase was primarily
attributable to overhead of acquired companies, particularly Best, Total and
Statewide. However, as a percentage of sales, general and administrative
expenses declined from 14.1% to 10.1%. The Company continues to focus on the
elimination of duplicative regional operations and accounting overhead.
Special Charge. In connection with the Restatement, the Company incurred
costs of $4.9 million (or 5.8% of net sales) in the first quarter of 1998 to
cover $4.4 million for the costs of legal, accounting and management consulting
fees and severance and $.5 million for the cost of rescinding, in January 1998,
the 10 year lease that was signed in October 1997 for the relocation of its
corporate headquarters.
Operating Loss. Operating loss increased to $6.6 million for the three
months ended April 1, 1998, from $2.8 million for the three months ended March
26, 1997, primarily as a result of the factors discussed above.
Interest Expense, Net. Interest expense, net of interest income of $2.0
million, increased approximately $0.5 million for the three months ended April
1, 1998, due to increased debt levels resulting from the Convertible Notes.
Liquidity and Capital Resources
At April 1, 1998, the Company had cash and cash equivalent balances of
$103.3 million and the Company's current assets of $145.2 million exceeded its
current liabilities of $49.0 million, resulting in a working capital surplus of
$96.2 million. The cash balances are primarily attributable to the proceeds from
the issuance of the Convertible Notes. There was a working capital surplus of
$103.7 million at December 31, 1997. The decline in the surplus resulted from
negative EBITDA of $3.7 million offset by seasonal increases in accounts
receivable. Excluding the special charge, there was a positive EBITDA of $1.2
million.
Cash flows used in investing activities were approximately $2.0 million and
$14.6 million for the three months ended April 1, 1998 and March 26, 1997,
respectively, the principal components of which are purchases of fixtures and
equipment and contract loans as well as the acquisition of Service Dynamics and
Serv-Rite in 1997.
In October 1997, the Company issued, through a private placement pursuant
to Rule 144A under the Securities Act of 1933, the Convertible Notes. The
Convertible Notes are unsecured obligations of the Company and are convertible
into common stock at a conversion price of $44.50 per share. The net proceeds of
$169.1 million, after deducting underwriting discounts and certain expenses,
were used to repay approximately $50.0 million in outstanding debt under a then
existing credit facility. The remaining net proceeds were invested in short term
investments. In connection with the offering of the Convertible Notes, the
Company had agreed to file a shelf registration statement, which would cause the
Convertible Notes to be freely tradeable. The Company has been unable to file
the shelf Registration Statement and, therefore, is obligated to pay liquidated
damages on the Convertible Notes, from January 25, 1998, in the amount of $.05
per week per thousand dollar principal amount, subject to increase every quarter
up to a maximum of approximately 1.3% per annum.
10
<PAGE>
On May 18, 1998, the Company's outstanding obligation in respect of a
Standby Letter of Credit issued by BankBoston, N.A. for the benefit of the
Maryland Stadium Authority ("MSA") in the amount of $10 million, which Letter of
Credit was issued to secure the Company's obligation to pay MSA in connection
with the Company's Concessions Management Agreement with the Baltimore Ravens
Limited Partnership dated August 14, 1997, was paid in full.
Management has developed a comprehensive turnaround and business plan (the
"Plan"), and has extensively reviewed the business base underlying the contracts
for its more than 900 operating locations. This process was undertaken with the
assistance of its outside management consultants and approximately 30 members of
the Company's management team. Among other things, the Plan contemplates a
reduction in overhead through the consolidation of duplicative accounting sites
acquired as part of the 1996 and 1997 acquisitions, a consolidation of the
Company's Education and Business Dining and School Nutrition Services divisions
under one leadership, together with a reduction in duplicative field overhead,
and a reduction of both food and labor costs through continuing efforts in
procurement and labor scheduling. There can be no assurance, however, that such
cost savings can be achieved. In connection with the Plan, the Company
anticipates that it will incur severance and other incremental costs in 1998.
Management has met with certain holders (the "Note Holders"), of the
Company's Convertible Notes, who have formed a committee comprised of the three
largest present Note Holders, holding in excess of $100 million of the aggregate
$175 million of Convertible Notes issued in October 1997. The Company's cash
position at April 1, 1998 was $103.3 million, which management believes will be
sufficient to satisfy the Company's cash requirements for at least the next
twelve months. Accordingly, management believes it is unlikely in 1998, that
cash flow demands will be made upon the Company which it will be unable to
satisfy from its present cash position and operations. However, if the
plaintiffs prevail in the Note Holders and stockholders suits described in Part
II Item 1 - Legal Proceedings, the outcome could have a material adverse effect
on the Company's financial position, results of operations and cash flows.
Capital to meet these potential cash flow demands may not be available to the
Company when required.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
12
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
In January 1996, the Company was served with a complaint naming it as
one of five defendants in a lawsuit brought by multiple plaintiffs in the New
York State Supreme Court alleging damages arising out of the Woodstock II
Festival held in August 1994 in Saugerties, New York. The promoter of the
festival is also a defendant. According to the complaint, the plaintiffs were
hired by the Company (which had a concession agreement with the promoter of the
festival) as subcontractors of food, beverage and/or merchandise. In their
complaint, which seeks approximately $5.9 million, the plaintiffs allege damages
arising primarily from the failure to provide adequate security and prevent
festival attendees from bringing food and beverages in to the festival. The
Company and the promoter have made cross-demands for indemnification against
each other under applicable provisions of their concession agreement. On April
4, 1996, the other defendants named in the suit answered the complaint and
asserted cross-claims for contribution and indemnification against the Company.
Thereafter, the Company answered the complaint and asserted a cross-claim for
indemnification against the promoter and a cross-claim for contribution against
all of its co-defendants.
The Company has also sued a former client in the Jefferson Circuit
Court of the Commonwealth of Kentucky for certain amounts owed by the former
client under the food service contract between the parties, and the former
client has filed a counterclaim against the Company seeking unspecified damages
for the Company's alleged tortious interference with a prospective contractual
relationship with another food service provider.
The Company does not believe that any liabilities relating to the
foregoing legal proceedings are likely to be, individually or in the aggregate,
material to its consolidated financial position, results of operations or cash
flows.
Between December 15, 1997 and March 25, 1998, 13 purported class action
lawsuits were filed in the United States District Court for the District of
Connecticut against the Company and certain of its officers and/or directors.
The complaints assert various claims against the Company, including claims
alleging violations of Sections 10(b), and 20(a) of the Securities Exchange Act
of 1934 and/or violations of Sections 11, 12(2), and 15 of the Securities Act of
1933 and various rules promulgated thereunder, as well as fraud and negligent
misrepresentation. On February 13, 1998, the plaintiffs in the actions filed a
Motion for Consolidation and for Appointment as Lead Plaintiffs and for Approval
of A Selection of Lead Counsel (the "Motion"). On March 25, 1998, the Motion was
granted. On or about January 30, 1998, the Company was named as a defendant in
an action arising out of the issuance and sale in October 1997 of $175 million
in the aggregate principal amount of the Company's Convertible Notes. The
plaintiffs allegedly purchased the Convertible Notes in the aggregate principal
amount of $7.5 million. The Amended Complaint filed on or about April 22, 1998,
alleges, among other things, that the Offering Memorandum prepared by the
Company in connection with the offering contained materially false information.
The complaint asserts various claims against the Company, including claims
alleging violations of Sections 10(b), 18(a) and 20(a) of the Securities
Exchange Act of 1934 and various rules promulgated thereunder, as well as fraud
and negligent misrepresentation. The relief sought by plaintiffs includes
compensatory damages of $1.5 million plus interest, punitive damages of $0.5
million, costs and disbursements, and attorneys' fees. If the plaintiffs prevail
in such suits, the results of such an outcome could have a material adverse
effect on the Company's financial condition, results of operations and cash
flows. Capital to meet these potential obligations from sources such as selling
assets, curtailing expansion or proceeds from debt or equity sources, may not be
available to the Company when required. (See Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources)
On February 19, 1998, the Securities and Exchange Commission issued a
formal order of investigation into the events relating to the December 12 and
15, 1997 announcements as described in the Company's Form 10-K for the fiscal
year ended December 31, 1997.
13
<PAGE>
The Company is involved in certain other legal proceedings incidental
to the normal conduct of its business. The Company does not believe that any
liabilities relating to such other legal proceedings to which it is a party are
likely to be, individually or in the aggregate, material to its consolidated
financial position, results of operations or cash flows.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits
*3.1 Restated Certificate of Incorporation
*3.2 By-Laws
*4.1 Specimen of Registrant's Common Stock Certificate
4.4 Change in Indenture Trustee dated as of January 1, 1998 by and among the
Company and The Bank of New York and Marine Midland Bank
10.12(d)Third Amendment to the Fourth Amended and Restated Loan Agreement, dated
March 12, 1998.
10.14 Management Consulting Agreement dated as of December 16, 1997 between
the Company and Buccino & Associates, Inc.
10.15 Employment Agreement dated as of March 1, 1998 between the Company and
Gerald P. Buccino.
10.16 Separation and Consulting Agreement dated as of March 18, 1998 between
the Company and Randy B. Spector.
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
1. A Current Report on Form 8-K was filed on February 6, 1998 restating
the Company's financial statements for fiscal years 1994 through 1996.
2. A Current Report on Form 8-K was filed on February 12, 1998 to
report that the Company had dismissed Deloitte & Touche LLP as the
Company's independent auditors and that the Company had engaged
Price Waterhouse LLP as its independent auditors for the fiscal
year ended December 31, 1997.
3. A Current Report on Form 8-K/A was filed on February 17, 1998
amending the Company's Form 8-K originally filed on February 6,
1998, to include restated financial statements for the nine months
ended September 24, 1997.
- --------------------------------------------------------------------------------
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/ Catherine B. James
Catherine B. James
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
Date: May 22, 1998
16
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
4.4 Change in Indenture Trustee dated as of January 1,
1998 by and among the Company and The Bank of New
York and Marine Midland Bank
10.12(d) Third Amendment to the Fourth Amended and Restated
Loan Agreement, dated March 12, 1998.
10.14 Management Consulting Agreement dated as of
December 16, 1997 between the Company and Buccino
& Associates, Inc.
10.15 Employment Agreement dated as of March 1, 1998
between the Company and Gerald P. Buccino
10.16 Separation and Consulting Agreement dated as of
March 18, 1998 between the Company and Randy B.
Spector.
27 Financial Data Schedule
17
<PAGE>
Exhibit 4.4
AGREEMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE, dated as of
January 1, 1998 by and among Fine Host Corporation, a corporation duly organized
and existing under the laws of the State of Delaware and having its principal
office at 3 Greenwich Office Park, Greenwich, CT 06831 (the "Company"), The Bank
of New York, a banking corporation duly organized and existing under the laws of
the State of New York and having its principal corporate trust office at 101
Barclay Street, New York, NY 10286 (the "Resigning Trustee") and Marine Midland
Bank, a banking corporation duly organized and existing under the laws of the
State of New York and having its principal corporate trust office at 140
Broadway, New York, NY 10005-1180 (the "Successor Trustee").
RECITALS:
WHEREAS, there was originally authorized and issued $175,000,000
aggregate principal amount of the Company's 5% Convertible Subordinated Notes
due 2004 under an Indenture dated as of October 27, 1997 by and between the
Company and the Resigning Trustee (said Notes are hereinafter referred to as
"Securities" and said Indenture is hereinafter referred to as the "Indenture");
WHEREAS, Section 7.8 of the Indenture provides that the Trustee may at
any time resign by giving written notice of such resignation to the Company,
effective upon the acceptance by a successor Trustee of its appointment as a
successor Trustee;
WHEREAS, Section 7.8 of the Indenture provides that, if the Trustee
shall resign, the Company shall promptly appoint a successor Trustee;
WHEREAS, Section 7.8 of the Indenture provides that any successor
Trustee appointed in accord ance with the Indenture shall execute, acknowledge
and deliver to the Company and to its predecessor Trustee an instrument
accepting such appointment under the Indenture, and thereupon the resignation of
the predecessor Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all
rights, powers, duties and obligations of the predecessor Trustee;
WHEREAS, the Resigning Trustee was appointed Registrar and Paying Agent
by the Company;
WHEREAS, the Company desires to appoint Successor Trustee as Trustee,
Registrar and Paying Agent to succeed Resigning Trustee under the Indenture; and
WHEREAS, Successor Trustee is willing to accept such appointment as
successor Trustee, Registrar and Paying Agent under the Indenture;
NOW, THEREFORE, the Company, Resigning Trustee and Successor Trustee,
for and in consideration of the premises and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby consent and agree as follows:
ARTICLE ONE
THE RESIGNING TRUSTEE
SECTION I. Pursuant to Section 7.8 of the Indenture, Resigning Trustee
hereby notifies the Company that Resigning Trustee is hereby resigning as
Trustee, Registrar and Paying Agent under the Indenture.
SECTION II. Resigning Trustee hereby represents and warrants to
Successor Trustee that:
(a) No covenant or condition contained in the Indenture has been
waived by Resigning Trustee or, to
the best of the knowledge of the Responsible Officers of
Resigning Trustee's Corporate Trust Group, by the Holders of
the percentage in aggregate principal amount of the Securities
required by the Indenture to effect any such waiver.
(b) There is no action, suit or proceeding pending or, to the best
of the knowledge of the Responsible Officers assigned to
Resigning Trustee's Corporate Trust Group, threatened against
Resigning Trustee before any court or any governmental
authority arising out of any action or omission by Resigning
Trustee as Trustee under the Indenture.
(c) As of the effective date of this Agreement, Resigning Trustee
will hold no property under the Indenture.
(d) Pursuant to Section 2.2 of the Indenture, Resigning Trustee
duly authenticated and delivered, on October 27, 1997,
$175,000,000 aggregate principal amount of Securities, all of
which are outstanding as of the effective date hereof.
(e) Each person who so authenticated the Securities was duly
elected, qualified and acting as an officer of Resigning
Trustee and empowered to authenticate the Securities at the
respective times of such authentication and the signature of
such person or persons appearing on such Securities is each
such person's genuine signature.
(f) This Agreement has been duly authorized, executed and
delivered on behalf of Resigning Trustee and constitutes its
legal, valid and binding obligation.
(g) To the best of the knowledge of the responsible Officers of
the Resigning Trustee's Corporate Trust Group, no event has
occurred and is continuing which is, or after notice or lapse
of time would become, an Event of Default under Section 6.1 of
the Indenture.
SECTION III. Resigning Trustee hereby assigns, transfers, delivers and
confirms to Successor Trustee all right, title and interest of Resigning Trustee
in and to the trust under the Indenture and all the rights, powers and trusts of
the Trustee under the Indenture. Resigning Trustee shall execute and deliver
such further instruments and shall do such other things as Successor Trustee may
reasonably require so as to more fully and certainly vest and confirm in
Successor Trustee all the rights, trusts and powers hereby assigned,
transferred, delivered and confirmed to Successor Trustee as Trustee, Paying
Agent and Registrar.
SECTION IV. Resigning Trustee shall deliver to Successor Trustee, as of
or immediately after the effective date hereof, all of the documents listed on
Exhibit A hereto.
ARTICLE TWO
THE COMPANY
SECTION V. The Company hereby accepts the resignation of Resigning
Trustee as Trustee, Registrar and Paying Agent under the Indenture.
SECTION VI. [Reserved]
SECTION VII. The Company hereby appoints Successor Trustee as Trustee,
Registrar and Paying Agent under the Indenture to succeed to, and hereby vests
Successor Trustee with, all the rights, powers, duties and obligations of
Resigning Trustee under the Indenture with like effect as if originally named as
Trustee in the Indenture.
SECTION VIII. Promptly after the effective date of this Agreement, the
Successor Trustee shall cause a notice, substantially in the form of Exhibit B
annexed hereto, to be sent to each Holder of the Securities in accordance with
the provisions of Section 7.8 of the Indenture.
SECTION IX. The Company hereby represents and warrants to Resigning
Trustee and Successor Trustee that:
(a) The Company is a corporation duly and validly organized and
existing pursuant to the laws of the State of Delaware.
(b) This Agreement has been duly authorized, executed and
delivered on behalf of Company and constitutes its legal,
valid and binding obligation.
(c) All conditions precedent relating to the appointment of Marine
Midland Bank as successor Trustee under the Indenture have
been complied with by the Company.
<PAGE>
ARTICLE THREE
THE SUCCESSOR TRUSTEE
SECTION X. Successor Trustee hereby represents and warrants to
Resigning Trustee and to the Company that:
(a) Successor Trustee is not disqualified under the provisions of
Section 7.10 and is eligible under the provisions of Section
7.10 of the Indenture to act as Trustee under the Indenture.
(b) This Agreement has been duly authorized,executed and delivered
on behalf of Successor Trustee and constitutes its legal,valid
and binding obligation.
SECTION XI. Successor Trustee hereby accepts its appointment as
successor Trustee, Registrar and Paying Agent under the Indenture and accepts
the rights, powers, duties and obligations of Resigning Trustee as Trustee under
the Indenture, upon the terms and conditions set forth therein, with like effect
as if originally named as Trustee under the Indenture.
SECTION XII. References in the Indenture to "Corporate Trust Office" or
other similar terms shall be deemed to refer to the Corporate Trust Office of
Successor Trustee at 140 Broadway, New York, NY 10005-1180 or any other office
of Successor Trustee at which, at any particular time, its corporate trust
business shall be administered.
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
SECTION XIII. Except as otherwise expressly provided herein or unless
the context otherwise requires, all terms used herein which are defined in the
Indenture shall have the meaning assigned to them in the Indenture.
SECTION XIV. This Agreement and the resignation, appointment and
acceptance effected hereby shall be effective as of the opening of business on
January , 1998.
SECTION XV. Resigning Trustee hereby acknowledges payment or provision
for payment in full by the Company of compensation for all services rendered by
Resigning Trustee under Section 7.7 of the Indenture and reimbursement in full
by the Company of the expenses, disbursements and advances incurred or made by
Resigning Trustee in accordance with the provisions of the Indenture. Resigning
Trustee acknowledges that it relinquishes any lien it may have upon all property
or funds held or collected by it to secure any amounts due it pursuant to the
provisions of Section 7.7 of the Indenture. The Company acknowledges its
obligation set forth in Section 7.7 of the Indenture to indemnify Resigning
Trustee for, and to hold Resigning Trustee harmless against, any loss, liability
and expense incurred without negligence or bad faith on the part of the
Resigning Trustee and arising out of or in connection with the acceptance or
administration of the trust evidenced by the Indenture (which obligation shall
survive the execution hereof).
SECTION XVI. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION XVII. This Agreement may be executed in any number of
counterparts each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
SECTION XVIII. The Company, Resigning Trustee and Successor Trustee
hereby acknowledge receipt of an executed counterpart of this Agreement and the
effectiveness thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Agreement of
Resignation, Appointment and Acceptance to be duly executed and as of the date
first written above.
Fine Host Corporation
By:________________________
Name:
Title:
The Bank of New York
Resigning Trustee
By:___________________________
Name:
Title:
Marine Midland Bank
Successor Trustee
By:________________________
Name:
Title:
<PAGE>
EXHIBIT A
Documents to be delivered to Successor Trustee
1. Executed copy of Indenture dated as of October 27, 1997
2. File of Closing Documents
3. Copies of the most recent of each of the SEC reports delivered by the
Company pursuant to Section 4.7 of the Indenture, if any.
4. A copy of the most recent Compliance Certificate delivered pursuant to
Section 4.6 of the Indenture, if any.
5. Copies of any official notices sent by the Trustee to all the Holders
of the Notes pursuant to the terms of the Indenture during the past twelve
months and a copy of the most recent Trustee's Annual Report to Holders, if any.
<PAGE>
EXHIBIT B
[MMB LETTERHEAD]
NOTICE
To the Holders of
Fine Host Corporation
5% Convertible Subordinated Notes due 2004
NOTICE IS HEREBY GIVEN, pursuant to Section 7.8 of the Indenture dated as of
October 27, 1997 by and between Fine Host Corporation (the "Company") and The
Bank of New York, as Trustee, that The Bank of New York has resigned as Trustee
under the Indenture.
Pursuant to Section 7.8 of the Indenture, Marine Midland Bank, a corporation
duly organized and existing under the laws of the State of New York, has
accepted appointment as Trustee under the Indenture. The address of the
Corporate Trust Office of Marine Midland Bank is 140 Broadway, New York, NY
10005-1180.
The Bank of New York resignation as Trustee and Marine Midland Bank appointment
as successor Trustee were effective as of the opening of business on January ,
1998.
Dated: New York, New York
January ___, 1998
Very truly yours,
Marine Midland Bank
By:______________________
Name:
Title:
Exhibit 10.12(d)
EXECUTION COPY
THIRD AMENDMENT TO
FOURTH AMENDED AND RESTATED LOAN AGREEMENT
This THIRD AMENDMENT TO FOURTH AMENDED AND RESTATED LOAN AGREEMENT
(this "Third Amendment") is executed and effective as of March 12, 1998, by and
among (a) FINE HOST CORPORATION, a Delaware corporation, for itself and as agent
for all of the Borrowers (as defined below) (hereinafter referred to as "Fine
Host" when acting for itself and as the "Borrower Agent" when acting as agent
for all of the Borrowers (including Fine Host)), (b) all of the Subsidiaries of
Fine Host (said Subsidiaries, together with Fine Host and any and all other
Subsidiaries which may hereafter become parties to the Loan Agreement (as
defined below) are hereinafter sometimes referred to collectively as the
"Borrowers" and each singly as a "Borrower"), (c) VARIOUS BANKS AND OTHER
FINANCIAL INSTITUTIONS which are parties to the Loan Agreement (hereinafter
referred to collectively as the "Banks" and each singly as a "Bank"), (d)
BANKBOSTON, N.A., a national banking association ("BankBoston"), as
administrative agent for the Banks (in such capacity, the "Administrative
Agent"), and (e) USTRUST, a Massachusetts trust company ("USTrust"), as
documentation agent for the Banks (in such capacity, the "Documentation Agent")
(the Administrative Agent and the Documentation Agent are hereinafter sometimes
referred to collectively as the "Agents").
All capitalized terms not defined herein but defined in that certain
Fourth Amended and Restated Loan Agreement, dated as of July 30, 1997, by and
among Fine Host, all of the Subsidiaries, the Banks, and the Agents, as amended
or otherwise affected by (a) a certain First Amendment to Loan Agreement, dated
as of August 14, 1997, by and among Fine Host, certain of the Subsidiaries, the
Banks and the Agents, (b) a certain Second Amendment to Loan Agreement, executed
and effective on October 21, 1997, by and among Fine Host, certain of the
Subsidiaries, the Banks and the Agents and (c) a certain Joinder and Assumption
Agreement, dated as of November 11, 1997, by and among Fine Host, all of the
Subsidiaries and the Administrative Agent (said Fourth Amended and Restated Loan
Agreement, as so amended and/or affected, is hereinafter referred to as the
"Loan Agreement") shall have the meanings given to such terms in the Loan
Agreement.
PRELIMINARY STATEMENTS
WHEREAS, on December 12, 1997, Fine Host issued a press release
announcing, inter alia, that (i) the Audit Committee of its Board of Directors
had instructed Fine Host's auditors to conduct an inquiry into certain
accounting practices, including the capitalization of certain expenses, (ii) the
auditors had advised the Audit Committee on December 12, 1997, based upon their
preliminary inquiry, that certain expenses incurred during 1997 had been
incorrectly capitalized rather than expensed in the period in which they were
incurred and (iii) Fine Host believed the amounts would be material and that
earnings for each of the first three quarters of 1997 would need to be restated;
and
WHEREAS, on December 15, 1997, Fine Host issued a press release
announcing, inter alia, that (i) preliminary indications were that the
accounting problems were not limited to the incorrect capitalization of expenses
and that periods prior to 1997 would also need to be restated and (ii) the
outside directors of Fine Host's Board of Directors had terminated the
employment of Richard E. Kerley, Chairman of the Board of Directors and Chief
Executive Officer, and Nelson A. Barber, Senior Vice President and Treasurer;
and
WHEREAS, on December 15, 1997, counsel to the Administrative Agent
notified Fine Host, that, inter alia, pursuant to Section 8.2 of the Loan
Agreement the Banks were no longer obligated to make, and would no longer make
Loans under the Loan Agreement; and
WHEREAS, on February 6, 1998, Fine Host issued a press release
announcing, inter alia, that (i) it will restate its financial statements for
fiscal years 1994 through 1996, and for the nine months ended September 24,
1997, (ii) as a result of the restatement, Fine Host will report pre-tax losses
of approximately $1,600,000 for 1994; $4,300,000 for 1995; $6,300,000 for 1996;
and $11,400,000 for the nine months ended September 24, 1997 and (iii) the
restatement will include a cumulative negative adjustment of $2,800,000 for
years prior to 1994; and
WHEREAS, in light of the foregoing, the parties have agreed, subject
only to subsection 1.2 of this Third Amendment to terminate the Banks'
obligations to make Loans and/or provide Extensions of Credit under the Loan
Documents, including the Loan Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Termination of Commitments.
1.1 Subject only to subsection 1.2 of this Third Amendment,
effective as of the date hereof: --------------
(a) All Commitments, including the Swing Line Commitment,
are hereby irrevocably and unconditionally terminated, canceled
and eliminated in all respects; and
(b) The Banks, including the Swing Line Bank and the Issuing
Bank, shall no longer have any obligation to make, and the
Borrowers, including the Borrower Agent, shall no longer have any
right to request, any Loan or Extension of Credit of any kind or
nature whatsoever under the Loan Documents, including, the Loan
Agreement.
1.2 Notwithstanding subsection 1.1 of this Third Amendment to the
contrary, nothing in this Third Amendment or otherwise, shall be
deemed or construed, directly or indirectly, by implication or
otherwise to terminate, cancel, eliminate, limit or otherwise affect
in any way (i) the Issuing Bank's payment obligations under the Letter
of Credit described on Schedule 1 hereto (such Letter of Credit being
referred to herein as the "Outstanding L/C"), (ii) the Issuing Bank's
and the Banks' respective obligations, if any, under the Loan
Agreement with respect to (but only with respect to) the Outstanding
L/C; (iii) the Borrowers' Reimbursement Obligations, together with
interest thereon to the extent provided for in the Loan Agreement,
with respect to the Outstanding L/C, (iv) the Borrowers' obligations
to pay or reimburse any fees, commissions, expenses or other charges
provided for in the Loan Documents (after giving effect to the
termination of the Commitments pursuant to subsection 1.1 hereof),
including, without limitation, the fees, commissions, expenses or
other charges provided for in subsection 2.1.13 of the Loan Agreement
(but not including the fees provided for in subsections 2.1.4 and
2.2.4 of the Loan Agreement, which fees shall not be payable from and
after December 15, 1997), (v) the Banks' obligations under subsection
2.1.15A(a) of the Loan Agreement to make their respective Guidance
Loan Percentages available to the Administrative Agent to the extent
provided for in such subsections with respect to (but only with
respect to) the Outstanding L/C; provided, however, notwithstanding
anything in the Loan Agreement to the contrary, any Guidance Loan made
or otherwise constituted pursuant to subsection 2.1.15A(a) of the Loan
Agreement with respect to the Outstanding L/C shall be immediately due
and payable on the Borrowing Date applicable to any such Loan, without
presentment, demand, protest, or notice of any kind, all of which are
hereby waived by the Borrowers and the Borrower Agent and (vi) the
validity, perfection or priority of any Lien in favor of the Agents
and/or the Banks with respect to the Collateral.
2. Amendments To Loan Agreement.
2.1 Amendments to Subsection 1.1.
(a) The definition of "Guidance Loan Maturity Date" in
subsection 1.1 of the Loan Agreement is hereby amended and
restated in its entirety as follows:
"Guidance Loan Maturity Date" means August 1, 1999.
(b) The definition of "Reimbursement Obligation" in
subsection 1.1 of the Loan Agreement is hereby amended and
restated in its entirety as follows:
"Reimbursement Obligation" means the obligation of the
Borrowers to reimburse the Issuing Bank pursuant to subsections
2.1.15 and/or 2.1.15A for amounts drawn under Letters of Credit.
2.2 Amendments to Section 10.12. The addresses for notices set
forth in Section 10.12 of the Loan Agreement are hereby amended and
restated in their entirety as follows:
(i) If to the Administrative Agent, at:
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
Attention: David F. Eusden, Director
Mail Code: 01-06-01
Telephone No.: 617-434-5176
Telecopier No. 617-434-4775
with copies to:
Peabody & Arnold
50 Rowes Wharf
Boston, MA 02110
Attention: Anil Khosla, Esq.
Telecopier No. 617-951-2125
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Chaim J. Fortgang, Esq.
(ii) If to the Documentation Agent, at:
USTrust
40 Court Street
Boston, MA 02108
Attention: Michael O'Neill
Telephone No.: 617-726-7198
Telecopier No. 617-695-5250
with copies to:
Peabody & Arnold
50 Rowes Wharf
Boston, MA 02110
Attention: Anil Khosla, Esq.
Telecopier No. 617-951-2125
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Chaim J. Fortgang, Esq.
(iii) If to any Borrower, at:
Fine Host Corporation
3 Greenwich Office Park
Greenwich, CT 06831
Attention: Catherine B. James
Telecopier No. 203-629-5089
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Cornelius T. Finnegan, III, Esq.
Telecopier No.: 212-821-8111
2.3 Amendments to Annex B. The addresses for notices set forth on
Annex B of the Loan Agreement are amended as follows:
For BANKBOSTON, N.A.:
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
Attn: David F. Eusden, Director
Mail Code: 01-06-01
Telephone: 617-434-5176
Telecopier: 617-434-4775
For USTRUST:
USTrust
40 Court Street
Boston, MA 02108
Attention: Michael O'Neill
Telephone No.: 617-726-7198
Telecopier No. 617-695-5250
<PAGE>
For THE SUMITOMO BANK, LIMITED:
The Sumitomo Bank, Limited
450 Lexington Avenue, Suite 1700
New York, NY 10017
Attn: Ronald W. Gale, Vice President
Telephone: 212-808-2337
Telecopier: 212-818-8065
For STATE STREET BANK AND TRUST COMPANY:
State Street Bank and Trust Company
191 Post Road West
Westport, CT 06880
Attn: Arlene M. Doherty, Vice President
Telephone: 203- 221-2778
Telecopier: 203-222-0527
For MELLON BANK, N.A.:
Mellon Bank, N.A.
1735 Market Street
AIM# 1930705
Philadelphia, PA 19103
Attn: Susan Saxer, SVP
Telephone: 215-553-4364
Telecopier: 215-553-4560
For THE BANK OF NEW YORK:
The Bank of New York
One Wall Street, 16th Floor
New York, NY 10286
Attn: Richard P. Hebner, VP
Telephone: 212-635-7214
Telecopier: 212-635-7290
with a copy to:
The Bank of New York
One Wall Street, 16th Floor
New York, NY 10286
Attn: Albert R. Taylor
Telephone: 212-635-7284
Telecopier: 212-635-7290
For KEYBANK, N.A.:
KeyBank, N.A.
One Canal Plaza
ME-01-CP-06-05
Portland, ME 04101
Attn: Alex Strazzela
Telephone: 207-874-7266
Telecopier: 207-874-7002
For FIRST UNION NATIONAL BANK:
First Union National Bank
Special Assets Division
5 Research Drive
Shelton, CT 06484
Attn: Thomas J. Donnelly, SVP
Telephone: 203-944-4132
Telecopier: 203-944-4678
For BANK OF SCOTLAND:
Bank of Scotland
One Post Office Square, Suite 3750
Boston, MA 02109
Attn: William Boland, Director
Telephone: 617-426-1059
Telecopier: 617-426-1353
with a copy to:
Bank of Scotland
565 Fifth Avenue
New York, New York 10017
Attn: Annie Chin Tat, Vice President
Telephone: 212-450-0871
Telecopier: 212-557-9460
For THE BANK OF NOVA SCOTIA:
The Bank of Nova Scotia
One Liberty Plaza, 26th Floor
New York, New York 10006
Attn: Kevin McCarthy
Telephone: 212-225-5074
Telecopier: 212-225-5090
For NATIONAL WESTMINSTER BANK plc:
National Westminster Bank plc
175 Water Street, 26th Floor
New York, New York 10028
Attn: Andrew S. Weinberg
Telephone: 212-602-4438
Telecopier: 212-602-4506
with a copy to:
Gleacher NatWest
660 Madison Avenue, 17th Floor
New York, New York 10012
Attn: Field Smith, VP
Telephone: 212-418-4525
Telecopier: 212-418-4598
For BANK LEUMI USA:
Bank Leumi USA
562 Fifth Avenue
New York, New York 10036
Attn: Paul Tine
Telephone: 212-626-1386
Telecopier: 212-626-1311
3. Ratification of Loan Documents. Subject to the amendments expressly
set forth in this Third Amendment, each of the Borrowers hereby ratifies
and reaffirms all of the terms and provisions of the Loan Documents to
which it is a party or by which it or its property is bound, and hereby
expressly acknowledges and confirms that the terms and provisions of each
thereof, as amended hereby, shall and do remain in full force and effect.
4. Miscellaneous.
4.1 No Other Amendments; No Waiver. Except for the amendments
expressly set forth in this Third Amendment, nothing contained herein
shall be construed to modify, amend or otherwise alter any of the
terms or provisions of any of the Loan Documents; nothing contained
herein shall constitute a waiver of or bar to any rights or remedies
available to any of the Agents or the Banks, or a waiver of any Event
of Default on any occasion, other than as expressly set forth herein;
and nothing contained herein shall constitute an agreement by any of
the Agents or the Banks or obligate any of the Agents or the Banks to
take or refrain from taking any action.
4.2 Execution; Counterparts. This Third Amendment may be executed
in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears hereon, and all
of which shall together constitute one and the same instrument. This
Third Amendment shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures of
the Borrowers and the Required Banks.
4.3 Successors and Assigns. This Third Amendment shall be binding
upon and inure to the benefit of the parties hereto, and their
respective representatives, successors and assigns.
4.4 Joint and Several Liability. All of the obligations and
liabilities of the Borrowers under this Third Amendment and under all
of the other Loan Documents are joint and several.
4.5 Governing Law. This Third Amendment and all questions
relating to its validity, interpretation, performance and enforcement
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, notwithstanding any conflict-of-law
provisions to the contrary.
<PAGE>
IN WITNESS WHEREOF, this Third Amendment has been duly executed as an
instrument under seal by the duly authorized representative of each party
hereto, as of the day and year first above written.
BANKBOSTON, N.A., USTRUST, AS
AS ADMINISTRATIVE AGENT DOCUMENTATION AGENT
By:_______________________ By:_______________________
Title:____________________ Title:____________________
BANKBOSTON, N.A. AS LENDER USTRUST, AS LENDER
By:_______________________ By:_______________________
Title:____________________ Title:____________________
STATE STREET BANK AND THE SUMITOMO BANK, LIMITED
TRUST COMPANY
By:_______________________
Title:____________________
By:_______________________ By:_______________________
Title:____________________ Title:____________________
MELLON BANK, N.A. THE BANK OF NEW YORK
By:_______________________ By:_______________________
Title:____________________ Title:____________________
KEYBANK, N.A. FRIST UNION BANK OF CONNECTICUT
By:_______________________ By:_______________________
Title:____________________ Title:____________________
<PAGE>
THE BANK OF SCOTLAND THE BANK OF NOVA SCOTIA
By:_______________________ By:_______________________
Title:____________________ Title:____________________
NATIONAL WESTMINSTER BANK plc BANK LEUMI USA
By:_______________________ By:_______________________
Title:____________________ Title:____________________
FINE HOST CORPORATION FINE HOST SERVICES CORPORATION
By:_______________________ By:_______________________
Title:____________________ Title:____________________
FINE HOST OF VERMONT, INC. FANFARE, INC.
By:_______________________ By:_______________________
Title:____________________ Title:____________________
GLOBAL FANFARE, INC. CORPORATION FINE HOST INTERNATIONAL
By:_______________________ By:_______________________
Title:____________________ Title:____________________
CREATIVE FOOD MANAGEMENT INC. NORTHWEST FOOD SERVICE, INC.
By:_______________________ By:_______________________
Title:____________________ Title:____________________
<PAGE>
TARRANT COUNTY SUN WEST SERVICES, INC.
CONCESSIONS, L.L.C.
By:_______________________ By:_______________________
Title:____________________ Title:____________________
REPUBLIC MANAGEMENT CORP.OF VERSATILE HOLDINGS CORPORATION
MASSACHUSETTS
By:_______________________ By:_______________________
Title:____________________ Title:____________________
SERV-RITE CORPORATION IDEAL MANAGEMENT SERVICES, INC.
By:_______________________ By:_______________________
Title:____________________ Title:____________________
SERVICE DYNAMICS CORP. PCS HOLDING CORP. (f/k/a HCS
Management Corp.)
By:_______________________ By:_______________________
Title:____________________ Title:____________________
PCS MANAGEMENT CORP. HEARTSTRINGS GIFT SHOPS, INC.
(f/k/a N.C. PCSM, Inc.) (f/k/a Hospital Coffee Shoppes, Inc.)
By:_______________________ By:_______________________
Title:____________________ Title:____________________
THE ENVIRONMENTAL GROUP, INC. CREATIVE DATA SYSTEMS, INC.
By:_______________________ By:_______________________
Title:____________________ Title:____________________
STATEWIDE CATERING, INC. BEST, INC.
By:_______________________ By:_______________________
Title:____________________ Title:____________________
TOTAL FOOD SERVICE DIRECTION, INC. GLOBAL FOOD SERVICE, INC.
By:_______________________ By:_______________________
Title:____________________ Title:____________________
<PAGE>
FINE HOST/R&N/A CUP ABOVE JOINT VENTURE, a joint venture
By: Fine Host Corporation, in its capacity as a
joint venturer of aforesaid joint venture
By:_______________________
Title:____________________
By: R&N Management Services, Inc., in its
capacity as a joint venturer of aforesaid
joint venture
By:_______________________
By: Minority Empowerment Opportunity Co.,
Inc. (doing business as A Cup Above),
in its capacity as a joint venturer
of aforesaid joint venture
By:_______________________
FINE HOST/S. BROOKS & ASSOCIATES
JOINT VENTURE, a joint venture
By: Fine Host Corporation, in its capacity as a
joint venturer of aforesaid joint venture
By:_______________________
Title:____________________
By: S. Brooks & Associates, Inc., in its capacity
as a joint venturer of aforesaid joint venture
By:_______________________
Title:____________________
<PAGE>
WISCONSIN CENTER JOINT VENTURE, a joint venture
By: Fine Host Corporation, in its capacity as a
joint venturer of aforesaid joint venture
By:_______________________
Title:____________________
By: Five-Star Marketing, Inc., in its capacity as
a joint venturer of aforesaid joint venture
By:_______________________
Title:____________________
<PAGE>
SCHEDULE 1
LETTER OF CREDIT
Account Party Beneficiary Issuer Number
Fine Host Corporation Maryland Stadium BankBoston, N.A. I-053-NEMM-50081746
Authority
Exhibit 10.14
A G R E E M E N T
1. Parties: Fine Host Corporation ("Fine Host")
Buccino & Associates, Inc. ("Buccino")
2. Effective Date: December 16, 1997
3. Buccino to act as crisis manager and, as such, assess all critical
business issues, including: review of profit/loss by business unit or
major service area, financial contracts and obligations, review major
bids pending, work with existing operations and financial management in
an attempt to stabilize Fine Host's environment and review contractual
agreements with key accounts. Further, scope to include a review of all
cash flow, cost containment and cash enhancement opportunities couple
with a critical management assessment. Scope also to include all
necessary implementation of Buccino's findings, as approved by the
Board of Directors. At further direction of the Board of Directors,
Buccino shall interface with financial constituents as required,
including lenders, bondholders, shareholders, and vendors, etc.
Furthermore, Buccino to interface with forensic accountants to avoid
duplication of effort and to expedite the accountants report to the
Board of Directors.
4. Buccino shall receive a retainer of $75,000 upon execution of this
agreement. Such retainer shall remain on deposit with Buccino during
the course of the engagement. Upon completion of the engagement and/or
cancellation of this Agreement by either party, the retainer shall be
returned to Fine Host after applying such retainer against any final
outstanding amounts due Buccino. Fine Host shall retain Buccino at the
following hourly rates: Chairman $425 per hour; Engagement Managers,
$300 per hour; Senior Consultants, $200 to $250 per hour; and
Consultants, $150 per hour. In addition, Fine Host is to reimburse
Buccino for all out-of-pocket expenses. Additionally, in the event that
Buccino is named Chief Executive Officer of Fine Host, a mutually
acceptable incentive will be negotiated within ninety (90) days of said
event.
5. Neither Buccino nor Fine Host shall employ personnel of the other party
during the period of this Agreement and for a period of one year (1)
year after termination of this Agreement without the written agreement
of the other party.
6. Fine Host shall indemnify Buccino, its shareholders, directors,
officers, employees and agents from and against any and all claims,
liability, loss, cost, damage or expense (including reasonable
attorneys' fees) asserted against, or incurred by Buccino or any such
shareholder, director, officer, employee or agent by reason of, or
arising out of this Agreement or performance under this Agreement,
except to the extent such claims, liability, loss, cost, damage or
expense results from the willful misconduct, dishonesty, fraudulent act
or omission, or gross negligence of Buccino or any such shareholder,
director, officer, employee or agent.
Fine Host Corporation Buccino & Associates, Inc.
By: /s/ Randy B. Spector By: /s/ Gerald P. Buccino
Gerald P. Buccino
Chairman and CEO
Exhibit 10.15
Mr. Gerald P. Buccino
March 1, 1998
Page 1
March 1, 1998
Mr. Gerald P. Buccino
Buccino & Associates, Inc.
c/o Sonnenschein Nath & Rosenthal
1221 Avenue of the Americas
New York, New York 10020-1089
Dear Mr. Buccino:
This letter (the "Agreement") constitutes our agreement on the terms of
employment of Gerald P. Buccino ("Executive") by Fine Host Corporation
("Company").
1. Employment
Company agrees to employ Executive during the term of this
Agreement as President and Chief Executive Officer of Company,
reporting to the Board of Directors or the Special Committee
thereof. In that capacity, Executive shall have the rights,
powers and duties prescribed by present Article V, Section 9,
of the Company's Bylaws (a copy of which is attached as
Exhibit A).
Executive accepts employment as President and Chief Executive
Officer of Company and agrees to devote substantially all of
his working time and effort to his exercise of the powers, and
his performance of the duties, of that office; provided,
however, that Company acknowledges that Executive is also
Chairman of the Board and President of Buccino & Associates,
Inc. and, as such, has continuing duties and obligations to,
and must continue to devote a limited amount of time and
attention to the business of, that corporation, and Company
agrees that nothing in this Agreement shall preclude him from
continuing to doing so, or from engaging in charitable
activities and community affairs, or from managing his
personal investments and affairs, provided that such
activities, in the aggregate, do not interfere in any material
respect with his duties hereunder.
2. Term of Employment
Executive's employment under this Agreement shall be for a
term (the "Term") commencing on the date hereof and, subject
to the terms of this Agreement, terminating on December 31,
1998, unless sooner terminated as provided in Paragraph 8 or
9.
3. Salary and Additional Payment
Company shall pay Executive a salary of $100,000 per month.
The initial monthly $100,000 payment for the month of March
shall be paid simultaneously with the execution of this
Agreement and the monthly payments for the following months
shall be paid on the first day of each month thereafter.
Company shall pay an additional $100,000 to Executive on the
second day of January, 1999. All payments shall be made
subject to any withholding or similar tax required under
applicable law.
4. Expenses
Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this
Agreement and Company shall pay directly, or reimburse
Executive for, all business expenses reasonably incurred by
him in carrying out his duties and responsibilities under this
Agreement, subject to documentation in accordance with Company
policy.
5. Vacation
During the Term Executive shall be entitled to three weeks of
paid vacation.
6. Success Payment
Commencing not later than 45 days after the date of this
Agreement, Company and Executive agree to negotiate in good
faith to establish mutually agreeable arrangements for payment
to Executive (whether in cash, stock of the Company, stock
options, phantom stock, or some other form) of incentive
compensation based upon mutually agreed performance criteria
and goals, and to agree upon that arrangement within 90 days
of the date of this Agreement or such additional time as may
be mutually agreed upon.
7. Director and Officer Liability Insurance
During the Term and continuing for a period of three (3) years
thereafter, Company shall maintain in force Director and
Officer Liability Insurance in the aggregate amount of not
less than $20 million including Executive as an officer
covered under that policy; provided, however, that if the
aggregate annual premiums for such insurance at any time
during such period shall exceed 125% of the per annum rate of
premium currently paid by the Company for such insurance on
the date of this Agreement (which amount is represented by the
Company to be $600,000), then Company shall provide the
maximum coverage then available to the Company at an annual
premium equal to 125% of such rate.
8. Termination For Cause
The Company may terminate Executive's employment without Cause
(as hereinafter defined) and may terminate for Cause only
after written notice to Executive specifying, in reasonable
detail, the reasons for that termination for Cause. If Company
terminates Executive's employment for Cause, it shall be
obligated to pay all amounts due to Executive to and including
the date of termination, and, except with respect to any
matter involved in the termination for Cause, shall remain
obligated to provide the Director and Officer Liability
Insurance provided by Paragraph 7 and the Indemnity provided
by Paragraph 10 and the Bylaws, but shall not be obligated for
any other payments after the date of that termination.
"Cause" shall mean:
(i) Executive's conviction of, or plea to, a felony,
under federal or state law;
(ii) Executive's theft, larceny or embezzlement from
or fraud upon, the Company;
(iii) Executive's wilful misconduct in the performance
of his duties under this Agreement.
Other than for Cause; Termination for Good Reason
If Company terminates Executives's employment other than for
Cause, or if Executive terminates in a Termination for Good
Reason, Company shall pay Executive all amounts due to
Executive to and including the date of that termination, shall
remain obligated to provide the Director and Officer Liability
Insurance provided by Paragraph 7 and the Indemnity provided
by Paragraph 10 and by the Bylaws, and, in addition, shall pay
Executive the greater of: (x) the aggregate of all amounts
which would be due Executive from the date of that termination
through and including January 2, 1999, or (y) $350,000.
"Termination for Good Reason" shall mean termination by
Executive by reason of any of the following:
(i) a reduction in Executive's compensation;
(ii) a material diminution of Executive's rights,
powers, and duties, or a change in his title or
office;
(iii) any change in the Executor's reporting
responsibility being solely to the Board of
Directors or the Special Committee thereof;
(iv) material failure of the Company to perform its
obligations under this Agreement;
(v) failure by the Company to maintain Director and
Officer Liability Insurance as required by
Paragraph 7.
9. Death, Disability, Change of Control
Death
In the event Executive's employment is terminated by reason of
Executive's death, the Company shall pay to Executive's estate
or beneficiaries, as the case may be, all amounts due to
Executive to and including the date of termination, shall
remain obligated to provide the Director and Officer Liability
Insurance provided by Paragraph 7 and the Indemnity provided
by Paragraph 10 and the Bylaws, and, in addition, 50% of the
greater of: (x) the aggregate of all amounts which would be
due Executive from the date of that termination through and
including January 2, 1999, or (y) $350,000.
Disability
In the event Executive's employment is terminated due to his
Disability (as hereinafter defined), Company shall pay to
Executive all amounts due Executive to and including the date
of termination for Disability, shall remain obligated to
provide the Director and Officer Liability Insurance provided
by Paragraph 7 and the Indemnity provided by Paragraph 10 and
by the Bylaws, and, in addition, shall pay Executive 50% of
the greater of: (x) the aggregate of all amounts which would
be due Executive from the date of that termination through and
including January 2, 1999, or (y) $350,000.
Disability shall have the meaning given to such term under the
terms of the Company's disability program. Absent such a
program, it shall mean a physical or mental condition which,
in the reasonable judgment of Company, renders Executive
unable or incompetent to carry out his duties and obligations
under this Agreement.
Change of Control
In the event of a Change of Control (as hereinafter defined),
the Company shall, simultaneously with the Change of Control,
pay to Executive all amounts due Executive to and including
the date of that Change of Control, shall remain obligated to
provide the Director and Officer Liability Insurance provided
by Paragraph 7 and the Indemnity provided by Paragraph 10 and
by the Bylaws, and, in addition, shall pay Executive the
greater of: (x) the aggregate of all amounts which would be
due Executive from the date of that Change of Control through
and including January 2, 1999, or (y) $350,000.
"Change of Control" shall mean the occurrence of any one or
more of the following events:
(a) the acquisition by any person or group of
beneficial ownership of more than 50% of
either the then outstanding Stock or the
combined voting power of the then
outstanding voting securities of the
Company entitled to vote generally on the
election of directors;
(b) individuals who, as of the date hereof,
constitute the Board (the "Incumbent
Directors") cease for any reason to
constitute at least a majority of the
Board; provided that any individual who
becomes a director after the date hereof
whose election, or nomination for
election by the Company's stockholders
was approved by a vote or written consent
of more than 50% of the directors then
comprising the Incumbent Directors shall
be considered as though such individual
were an Incumbent Director, but
excluding, for this purpose, any such
individual whose initial assumption of
office is in connection with an actual or
threatened election contest relating to
the election of the directors of the
Company (as such terms are used in Rule
14a-11 under the Securities Exchange Act
of 1934, as amended ("1934 Act")); or
(c) aproval by the stockholders of the
Company of (i) a merger, reorganization
or consolidation, (ii) a liquidation or
dissolution of the Company, or (iii) the
sale or other disposition of all or
substantially all of the assets of the
Company to an unaffiliated third party.
For purposes of this definition, "person" means such term as
used in Securities Exchange Commission ("SEC") Rule 13d-5(b)
under the Securities Exchange Act of 1934 (the "1934 Act");
"beneficial owner" means such term as defined in SEC Rule
13d-3 under the 1934 Act; "group" means such term as defined
in Section 13(d) of the 1934 Act; and "Stock" means the common
stock of the Company, par value $.01 per share, or any other
common stock that the Company may issue from time to time.
10. Indemnification
In addition to, and without limitation of, the indemnification
provided Executive by the provision of Article VIII of the
Restated Certificate of Incorporation of the Company and by
the provisions of Article VIII Section 8 of the current
Bylaws, a copy of which Certificate of Incorporation and Bylaw
sections are attached as Group Exhibit B (or any amendment
thereof permitting broader indemnification than that provided
prior to such amendment), all Expenses (as hereinafter
defined) incurred by or on behalf of Executive in any
Proceeding (as hereinafter defined) shall be paid by Company
within thirty (30) days after receipt by Company from
Executive of a statement or statements requesting such advance
or advances, from time to time, whether before, or after, the
final disposition of the Proceeding. Such statement or
statements shall reasonably evidence the Expenses incurred in
connection therewith and shall contain an undertaking
("Undertaking") by the Executive to repay such amounts if it
shall ultimately be determined that the Executive is not
entitled to be indemnified under the provisions of Article
VIII Section 8 of the current Bylaws (or the Bylaws as amended
to provide broader indemnification). The Undertaking shall
provide that if Executive has commenced proceedings in a court
of competent jurisdiction to secure a determination that such
Executive should be indemnified by the Company, there shall be
no obligation to repay the Company during the pendency of such
proceeding.
The termination of any Proceeding by settlement or upon a plea
of nolo contendere or its equivalent, shall not, of itself (i)
adversely affect the rights of Executive to indemnification,
or (ii) create a presumption that Executive did not meet any
particular standard of conduct or have any particular belief
or that a court has determined that indemnification or
contribution is not permitted by applicable law.
Executive's rights of indemnification and advancement of
expenses provided by this Agreement shall not be deemed
exclusive of any other rights to which such Executive may now
or in the future be entitled under applicable law, the
certificate of incorporation, Bylaws, agreement, vote of
stockholders or resolution of the Board of the Company.
Subject to the Undertaking, Expenses incurred by Executive in
connection with Executive's request for indemnification or
advances hereunder shall be borne by the Company. In the event
that Executive is a party to or intervenes in any proceeding
in which the validity or enforceability of the Agreement is at
issue or seeks an adjudication or award in arbitration to
enforce Executive's rights under, or to recover damages for
breach of, the Agreement, Executive, upon prevailing in whole
or in part in such action, shall be entitled to recover from
the Company and shall be indemnified by the Company against
any Expenses actually and reasonably incurred by Executive in
that proceeding.
When Executive makes a claim seeking to avoid repayment to the
Company pursuant to an Undertaking, either Executive or the
Company shall have the right, but not the obligation, to have
a determination made by Independent Counsel, at the expense of
the Company, as to whether indemnification of the Executive is
proper under applicable Delaware law. If selected by the
Executive, such Independent Counsel shall be reasonably
satisfactory to the Company; if selected by the Company, such
Independent Counsel shall be reasonably satisfactory to the
Executive. (If both Executive and Company are unable to agree
on such Independent Counsel, then each shall designate an
Independent Counsel, who, together, shall select the
Independent Counsel who will make the determination.) If a
determination has been made by Independent Counsel in writing
in accordance with the preceding sentence, no determination
inconsistent therewith by other legal counsel, by the Board or
by stockholders of Company shall be of any force or effect,
provided, however, that Executive shall maintain all rights
specified in the preceding paragraph of this Section 10.
"Independent Counsel" shall mean a law firm or a member of a
law firm that neither is presently, nor in the past five (5)
years has been, retained to represent: (1) the Executive
seeking indemnification with respect to which such Independent
Counsel is to be retained, or by the Company, in any matter
material to the Executive or the Company, as the case may be,
or (ii) any other party to the action, suit, investigation or
Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under
the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing
either the Company or the Executive seeking indemnification
hereunder in an action to determine the Executive's right to
indemnification under this Agreement.
"Proceeding" shall mean an action, suit or proceeding, whether
civil, criminal, administrative or investigative, and any
appeal therefrom.
11. Expenses of Agreement
Promptly after Executive's submission to the Company of
invoices therefor, Company shall pay or reimburse Executive
for the reasonable attorneys fees and expenses incurred by
Executive in connection with the drafting and negotiation of
this Agreement and of the success payment to be negotiated
pursuant to Paragraph 6, up to a limit of $7,500.
12. Headings.
The headings of the paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute
part of this Agreement or to affect the construction thereof.
13. Entire Agreement; Modification and Waiver.
This Agreement contains the entire understanding of the
parties with respect to the terms and conditions of
Executive's employment by Company. No waiver, supplement,
modification or amendment of this Agreement shall be binding
unless executed in writing by each of the parties hereto,
provided that no supplement, modification, or amendment shall
be executed by Executive on behalf of the Company. No waiver
of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof
(whether or not similar).
14. Notices.
All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the
party to whom said notice or other communication shall have
been directed, or (ii) mailed by certified or registered mail
with postage prepaid, on the third business day after the date
on which it is so mailed:
If to Executive:
c/o Buccino & Associates, Inc.
1221 Avenue of the Americas
24th Floor
New York, New York 10020
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Mr. Paul J. Miller
If to Company:
3 Greenwich Office Park
Greenwich, CT 06831
Attention: Ellen Keats, Esq.
with a copy to:
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
Attention: Steven J. Gartner
or to such other address as may be furnished by the party to
receive notice to the other.
15. Governing Law
This Agreement is governed by, and construed in accordance
with, the laws of the State of New York with respect to
contracts made and to be performed entirely therein, and
without regard to choice of law or principles thereof.
16. Survival.
The provision of Paragraphs 7 and 10 of this Agreement shall
survive any termination of the Executives Employment with the
Company and shall be binding upon the successors and assigns
of the Company and shall issue to the benefit of the
successors, assigns, heirs and personal representatives of the
Executive.
17. Identical Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and
the same Agreement. Only one such counterpart signed by the
party against whom enforceability is sought needs to be
produced to evidence the existence of this Agreement.
Please indicate your agreement by signing and returning a copy of this letter.
FINE HOST CORPORATION
By:________________________
AGREED:
- -----------------------------
Gerald P. Buccino
1328679.04
<PAGE>
EXHIBIT A
ARTICLE V
Section 9. President: The President shall, when present, preside at all
meetings of the stockholders, and, in the absence of the Chairman of the Board
of Directors, at meetings of the Board of Directors. He shall have power to call
special meetings of the stockholders or of the Board of Directors or of the
Executive Committee at any time. He shall be the chief executive officer of the
Corporation, and shall have the general direction of the business, affairs and
property of the Corporation, and of its several officers, and shall have and
exercise all such powers and discharge such duties as usually pertain to the
office of President.
<PAGE>
GROUP EXHIBIT B
CERTIFICATE OF INCORPORATION, ARTICLE VIII
The Corporation shall indemnify each person who is or was a director, officer or
employee of the Corporation (including the heirs, executors, administrators or
estate of such person) or is or was serving at the request of the Corporation as
a director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise, to the fullest extent permitted under
subsections 145(a), (b) and (c) of the Delaware General Corporation Law or any
successor statute.
The indemnification provided by this Article VIII shall not be deemed exclusive
of any other rights to which any of those seeking indemnification or advancement
of expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
BYLAWS, ARTICLE VIII
Section 8. Indemnification of Officers and Directors: The Corporation
shall indemnify any and all of its directors or officers, including former
directors or officers, and any employee, who shall serve as an officer or
director of any corporation at the request of this Corporation, to the fullest
extent permitted under and in accordance with the laws of the State of Delaware;
provided, however, that the Corporation shall not be permitted to indemnify any
person in connection with any proceeding initiated by such person, unless such
proceeding is authorized by a majority of the directors of the Corporation.
Exhibit 10.16
EXECUTION COPY
FINE HOST CORPORATION
3 Greenwich Office Park
Greenwich, Connecticut 06831
as of March 18, 1998
Mr. Randy B. Spector
6 Barn Swallow Drive
Westport, Connecticut 06880
Re: Separation and Consulting Agreement
Dear Randy:
This letter shall constitute the Separation and Consulting
Agreement (the "Agreement") between you and Fine Host Corporation (the
"Company"). Upon your execution of this Agreement and failure to revoke within
the seven-day period described in Section B.10 hereof, this Agreement shall
replace any and all prior employment arrangements you may have had with the
Company. The effective date of this Agreement shall be the eighth day following
your execution of this Agreement (the "Effective Date"), provided you have not
revoked this Agreement prior to such date.
A. In consideration of your execution of this Agreement, on
and as of the Effective Date:
1. (a) The Company agrees to retain you as a consultant to the
Company for a term commencing on April 1, 1998 and terminating on October 1,
1998 (the "Consulting Term"). During the Consulting Term, you shall, as and when
reasonably requested by the Chief Executive Officer of the Company from time to
time, act as a consultant and render assistance and participation, giving at all
times the full benefit of your knowledge, expertise and background, in all
matters involved in or relating to the business of the Company and its
subsidiaries. You shall report directly to the Chief Executive Officer of the
Company. In no event shall you be deemed, or be obligated to perform duties as,
a manager or executive of the Company or any of its subsidiaries. You shall
devote up to a monthly average of thirty (30) hours per week to the Company,
such days and times as shall be determined by you and the Company; provided,
however, that (i) you shall be entitled to take two weeks of vacation during the
Consulting Term, (ii) you shall not be required to work on weekends and (iii)
you shall not be required to travel during more than 25% of the time you devote
to the Company. In consideration for your consulting services hereunder, you
shall receive a fee of $17,916.67 per month for each month during the Consulting
Term, payable on the first day of each month beginning April 1, 1998 and ending
on September 1, 1998. You shall be reimbursed for reasonable out-of-pocket
expenses incurred by you in connection with consulting services; provided that
such expenses shall not exceed $250 without the prior written approval of the
Company. Such expenses shall be reimbursed promptly following receipt by the
Company of expense reports with accompanying supporting documentation in detail
reasonably acceptable to the Company.
(b) You shall be entitled to terminate the Consulting Term at
any time upon 14 days' written notice to the Company. Effective as of the date
of such termination, the Severance Period (defined below) shall immediately
commence, and you shall no longer be obligated under Section B.1 or B.2 hereof.
2. The Company agrees to pay you severance for the
twelve-month period immediately following the Consulting Term (the "Severance
Period") in the amount of $17,916.67 per month for each month during the
Severance Period, payable on the first day of each month; provided, however,
that in the event you are employed on a full-time basis at any time after the
Consulting Term (including as a sole proprietor), the Company's obligation shall
hereunder shall be reduced on a dollar for dollar basis by the amount of any
salary or bonus paid to you or earned by you during the Severance Period.
3. The Company shall pay at your request up to $20,000 for
outplacement services, upon presentation of appropriate documentation therefor.
4. Upon your request, the Company will withhold from your last
paycheck as an employee of the Company (which will be delivered on March 30,
1998) such amount as you may request, which amount shall be contributed on your
behalf to the Company's 401(k) plan (the "Plan"); provided, however, that such
amount shall not exceed the amount of such paycheck after appropriate
withholding for taxes or the maximum amount permitted to be contributed by you
to the Plan under applicable law. During the Consulting Term and the Severance
Period, the Company shall pay all premiums that would otherwise be required of
you to obtain the same medical coverage as in effect for you and your dependents
immediately prior to the Effective Date in accordance with the federal
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
subject only to your timely election to continue medical coverage through COBRA;
provided, that the Company shall have no obligation to pay such premiums beyond
the expiration of the Consulting Term and the Severance Period; and provided
further, that the Company shall not be required to pay such premiums in the
event you accept employment with any corporation or other entity and such
corporation or other entity provides you with medical coverage on terms
substantially similar to the benefits provided to you by the Company. You may
continue to use the Company car currently provided to you only during the
Consulting Term and shall promptly deliver the Company car as instructed by the
Company following the end of the Consulting Term, it being understood that in
the event you terminate the Consulting Term pursuant to Section A.1(b), the car
shall be returned as of the date of such termination. You shall be responsible
for all costs associated with the Company car other than the lease payment and
insurance costs, including without limitation gas (except to the extent
reimbursable by the Company in connection with mileage you incur on Company
business) and maintenance costs.
5. All of your options to purchase common stock of the Company
under the Company's Amended and Restated 1994 Stock Option Plan (as amended, the
"Plan") will fully vest as of the Effective Date and, pursuant to the terms of
the Plan, you shall be entitled to exercise such options for a period of ten
years following the date of grant. Schedule A hereto sets forth the number of
options held by you, the grant and expiration dates for such options and the
exercise price therefor.
6. The Company shall indemnify you to the fullest extent
permitted under Section 145 of the Delaware General Corporation Law (the "DGCL")
and shall advance expenses to you in accordance with subsection (e) thereof
subject to Section B.7 hereof.
7. With a view to making available the benefits of certain
rules and regulations of the Securities and Exchange Commission (the
"Commission") which may permit the sale of restricted securities to the public
without registration, the Company agrees to:
(a) make and keep public information available as those terms
are understood and defined in Rule 144 ("Rule 144") under the
Securities Act of 1933, as amended (the "Securities Act");
(b) use its reasonable best efforts to file with the
Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the Securities Exchange Act
of 1934; and
(c) furnish to you upon request, a written statement by the
Company as to its compliance with the reporting requirements of Rule
144, and such other reports and documents so filed as you may
reasonably request in availing yourself of any rule or regulation of
the Commission allowing you to sell any such securities without
registration. The provisions of this Section A.7 shall terminate at
such time as you are eligible to sell the shares of Common Stock of the
Company owned by you pursuant to Rule 144(k) under the Securities Act.
8. To the extent permitted by applicable law, the Company will
withhold state and federal taxes from the amounts to be paid to you pursuant to
Sections A.1 and A.2 hereof.
B. In consideration of the above-referenced payments and
benefits, you agree as follows:
1. During the Consulting Term, except with the prior written
consent of the Company, you shall not (whether as an officer, director, owner,
employee, consultant, partner or other direct or indirect participant) engage in
any Competitive Business. "Competitive Business" shall mean the provision of
contract food services. For such period, you shall also not interfere with,
disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Company and any of its subsidiaries and any account, customer,
supplier or employee of the Company or any of its subsidiaries.
2. During the Consulting Term, except with the prior written
consent of the Company, you will not, directly or indirectly, employ, solicit
for employment, or advise or recommend to any other person that they employ or
solicit for employment, any person employed at the time by the Company or any of
its subsidiaries.
3. Not later than the Effective Date, you shall execute and
deliver to the Company a letter of resignation pursuant to which you shall
resign as President and Chief Operating Officer and a director of the Company
and as an officer and/or director of any subsidiaries of the Company,
substantially in the form of Exhibit A hereto.
4. Promptly (and in any event within 28 days of the Effective
Date) after the Effective Date, you agree to transfer to the Company 11,873
shares of common stock of the Company owned by you in full satisfaction of that
certain Amended and Restated Promissory Note, dated June 25, 1996 from you to
the Company (the "Note"), in the principal amount of $74,208. To effect such
transfer, you shall deliver certificates for such shares, together with
appropriate instruments of transfer duly executed by you. Upon such transfer,
the Company shall return to you the Note, marked "Cancelled."
5. It is understood that during the course of your consulting
you may be exposed to material and information which is confidential to the
Company. All such material and information, whether tangible or intangible, made
available, disclosed or otherwise known to you as a result of your services
under this Agreement or by reason of your prior employment with the Company,
shall be considered the sole property of the Company, shall be used by you only
for the benefit of the Company during the Consulting Term and shall not be
disclosed to others except with the Company's prior approval. This obligation of
confidentiality shall survive the termination of this Agreement. Upon
termination of the Consulting Term, you shall promptly return all material data
and documents which you may then have in your possession as a result of your
services under this Agreement.
6. It is understood that your status during the Consulting
Term shall be that of independent contractor and not of agent or employee of the
Company. In this connection, you will not, except as otherwise expressly set
forth in this Agreement, be entitled to any employee benefits from the Company
as a result of this Agreement or the services rendered under it. Without
limiting the generality of the foregoing, you shall not be entitled to receive
any benefit pursuant to the Company's 1997 Long-Term Incentive Plan, any bonus
plan or arrangement or, except as expressly set forth in Sections A.5 hereof,
any stock-based compensation program.
7. You agree to repay all fees and severance payments made to
you under this Agreement and that the Company's obligations under this
Agreement, including without limitation the payment of fees and severance and
the provision of benefits, shall immediately cease if it shall ultimately be
determined that you are not entitled to be indemnified by the Company as
authorized in Section 145 of the DGCL. In addition, you agree to repay any
amounts advanced to you or on your behalf pursuant to Section A.6 or pursuant to
the Company's Restated Certificate Incorporation or Bylaws if it shall
ultimately be determined that you are not entitled to be indemnified by the
Company in accordance with Section 145 of the DGCL.
8. You hereby waive any and all rights to sue the Company, and
any subsidiaries and affiliates, and their past, present and future officers,
directors, employees and agents based upon any act or event occurring prior to
the Effective Date. Without limitation, you specifically release the Company
from any and all claims based on discrimination under federal
anti-discrimination laws such as Title VII of the Civil Rights Act, the Age
Discrimination in Employment Act and any and all federal, state and local laws.
However, you are not giving up your right to appeal a denial of a claim for
benefits submitted under the medical, dental, life insurance or disability
income programs maintained by the Company. Further, you are not giving up your
right to file for unemployment insurance benefits at the appropriate time if you
so choose, and your signing of this release will not affect your rights, if any,
to coverage by Worker's Compensation insurance.
9. You hereby waive any and all rights you have pursuant to
the Registration Rights Agreement, dated as of June 25, 1996, between the
Company and you and certain other stockholders. You acknowledge that the Company
has no obligation to keep any registration statement in effect on your behalf
and that any sales of common stock of the Company by you must be made pursuant
to Rule 144 under the Securities Act, or a valid exemption from the registration
requirements of the Securities Act.
10. You will have twenty-one (21) days from the date you
receive this Agreement (including the release contained herein) to consider and
sign. If you do not sign and return this Agreement within such 21 day period,
the Company will consider your action a refusal to sign, and you will not be
entitled to the consideration described above. If you do sign this document, it
will not be effective for a period of seven days thereafter, during which time
you can change your mind and revoke your signature. To revoke your signature,
you must notify the Company in writing within seven days of the date you signed
it. In the event you revoke your signature you will not be entitled to the
consideration described above.
11. This Agreement shall be binding on the successors and
assigns of the parties hereto.
Finally, you are reminded of the continuing nature of your
obligation to maintain in confidence and not to make use of information
concerning the Company's business or affairs of any nature that is not otherwise
a matter of public record, including without limitation the terms of this
Agreement. This obligation continues after the termination of your employment
and after termination of the Consulting Term. Unless disclosure is required by
applicable law or regulation (including regulations of the Commission), the
Company will keep the terms of this Agreement confidential.
<PAGE>
Please acknowledge your understanding of and agreement to the
provisions of this Agreement by signing and dating the statement below.
Very truly yours,
/s/ Gerald P. Buccino
Gerald P. Buccino
President and Chief Executive Officer
Fine Host Corporation
MY SIGNATURE BELOW ACKNOWLEDGES THAT I HAVE READ THE ABOVE, UNDERSTAND WHAT I AM
SIGNING AND AM ACTING OF MY OWN FREE WILL. I UNDERSTAND THAT IF ANY PROVISION OF
THIS AGREEMENT IS FOUND TO BE INVALID OR UNENFORCEABLE, IT WILL NOT AFFECT THE
VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION. I UNDERSTAND THAT THIS
AGREEMENT AND ITS TERMS REPLACE IN ALL RESPECTS ANY PRIOR EMPLOYMENT
ARRANGEMENTS I MAY HAVE HAD WITH THE COMPANY. I FURTHER AGREE THAT THIS
AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE COMPANY HAS
ADVISED ME TO CONSULT WITH AN ATTORNEY, AND I HAVE DONE SO, PRIOR TO SIGNING
THIS AGREEMENT.
SIGNATURE: /s/ Randy B. Spector DATE 3/18/98
RANDY B. SPECTOR
<PAGE>
EXHIBIT A
Resignation
I hereby resign as (i) a director of Fine Host Corporation (the
"Company"), (ii) a member of any committee of the Board of Directors of the
Company and (iii) an officer or director of the Company and any subsidiary of
the Company, in each case effective March 10, 1998.
_______________
Randy B. Spector
<PAGE>
0410198.07
Schedule A
Number of Options Grant Date Expiration Date Exercise Price
5,750 11/1/94 11/1/2004 $6.43
22,000 6/19/96 6/19/2006 $12.00
7,500 1/7/97 1/7/2007 $20.75
75,000 5/23/97 5/23/2007 $27.31
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from the Consolidated Balance Sheet and Consolidated Statement
of Operations of the Company as of and for the three months ended
April 1, 1998 and is qualified in its entirety by reference to
such statements.
</LEGEND>
<CIK> 0001011584
<NAME> FINE HOST CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> APR-01-1998
<EXCHANGE-RATE> 1.00
<CASH> 103,335
<SECURITIES> 0
<RECEIVABLES> 34,746
<ALLOWANCES> 1,230
<INVENTORY> 6,234
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<PP&E> 37,702
<DEPRECIATION> 13,054
<TOTAL-ASSETS> 286,884
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<BONDS> 0
0
0
<COMMON> 91
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<TOTAL-LIABILITY-AND-EQUITY> 286,884
<SALES> 84,996
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<CGS> 77,979
<TOTAL-COSTS> 86,539
<OTHER-EXPENSES> 4,932
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<INCOME-PRETAX> (7,690)
<INCOME-TAX> 40
<INCOME-CONTINUING> (7,730)
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<NET-INCOME> (7,730)
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</TABLE>
