<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1997
REGISTRATION NO. 333-23893
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CFP HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 2013 95-4413619
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
CFP GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 2013 95-4616486
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
CUSTOM FOOD PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 2013 95-3760291
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
QF ACQUISITION CORP.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 2013 22-3174301
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
CFP HOLDINGS, INC.
1117 WEST OLYMPIC BLVD.
MONTEBELLO, CA 90640
213-727-0900
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------
ERIC W. EK
VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
CFP HOLDINGS, INC.
1117 WEST OLYMPIC BLVD.
MONTEBELLO, CA 90640
213-727-0900
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------
COPY TO:
LAWRENCE G. GRAEV, ESQ.
O'SULLIVAN GRAEV & KARABELL, LLP
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(212) 408-2400
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CFP HOLDINGS, INC.
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B),
SHOWING LOCATION OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
(1) Forepart of Registration Statement and Outside Front
Cover Page of Prospectus........................... Outside Front Cover Page of Prospectus
(2) Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages of
Prospectus; Available Information
(3) Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................. Prospectus Summary; Risk Factors; Selected Historical
Financial Data
(4) Terms of the Transaction............................. Prospectus Summary; The Exchange Offer; Description
of Notes; Certain Federal Income Tax Considerations
(5) Pro Forma Financial Information...................... Prospectus Summary; Unaudited Pro Forma Condensed
Combined Financial Information; Unaudited Pro Forma
Condensed Combined Balance Sheet; Unaudited Pro
Forma Condensed Statement of Operations
(6) Material Contacts with the Company Being Acquired.... *
(7) Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters...... Plan of Distribution
(8) Interests of Named Experts and Counsel............... *
(9) Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................................ *
(10) Information With Respect to S-3 Registrants.......... *
(11) Incorporation of Certain Information by Reference.... *
(12) Information With Respect to S-2 or S-3 Registrants... *
(13) Incorporation of Certain Information by Reference.... *
(14) Information With Respect to Registrants Other Than
S-2 or S-3 Registrants............................. Prospectus Summary; Risk Factors; Unaudited Pro Forma
Condensed Combined Financial Information; Unaudited
Pro Forma Condensed Combined Balance Sheet;
Unaudited Pro Forma Condensed Statement of
Operations; Selected Historical Financial Data of
Quality Foods; Selected Historical Financial Data
of Custom Foods; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Description of the Bank
Credit Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
(15) Information With Respect to S-3 Companies............ *
<C> <S> <C>
(16) Information With Respect to S-2 or S-3 Companies..... *
(17) Information With Respect to Companies Other Than S-2
or S-3 Companies................................... *
(18) Information if Proxies, Consents or Authorization Are
to be Solicited.................................... *
(19) Information if Proxies, Consents or Authorizations
Are Not to be Solicited, or in an Exchange Offer... Management; Principal Stockholders;
</TABLE>
- ------------------------
* Not applicable or answer is in the negative.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 16, 1997
PROSPECTUS
CFP HOLDINGS, INC.
OFFER TO EXCHANGE UP TO $115,000,000 OF ITS
11 5/8% SERIES B SENIOR GUARANTEED NOTES DUE 2004
FOR ANY AND ALL OF ITS OUTSTANDING
11 5/8% SENIOR GUARANTEED NOTES DUE 2004
------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
------------------------
CFP Holdings, Inc. (the "Company") hereby offers, upon the terms and subject
to the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange $1,000
principal amount of 11 5/8% Series B Senior Guaranteed Notes due 2004 (the "New
Notes") of the Company for each $1,000 principal amount of the issued and
outstanding 11 5/8% Senior Guaranteed Notes due 2004 (the "Old Notes" and the
Old Notes and the New Notes, collectively, the "Notes") of the Company from the
Holders (as defined herein) thereof. As of the date of this Prospectus, there is
$115,000,000 aggregate principal amount of the Old Notes outstanding. The terms
of the New Notes are identical in all material respects to the Old Notes, except
that the New Notes have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and therefore will not bear legends restricting
their transfer and will not contain certain provisions providing for an increase
in the interest rate on the Old Notes under certain circumstances relating to
the Registration Rights Agreement (as defined herein), which provisions will
terminate as to all of the Notes upon the consummation of the Exchange Offer.
Interest on the New Notes will accrue from January 28, 1997 and will be
payable semi-annually on January 15 and July 15 of each year, commencing July
15, 1997. No interest will be payable on the Old Notes accepted for exchange.
Upon a Change of Control (as defined herein), each Holder will have the right to
require the Company to purchase all or any part of such Holder's Notes at a
purchase price equal to 101% of the principal amount of such Notes, plus accrued
and unpaid interest, if any, to the date of purchase. There can be no assurance
that the Company will be able to raise sufficient funds to meet this obligation
should it arise. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered.
The New Notes will be unconditionally guaranteed on a senior basis by the
Company's existing subsidiaries and each future subsidiary of the Company and
will be similarly guaranteed by the Company's parent. The New Notes, the
subsidiary guarantees and the parent guarantee will be senior unsecured
obligations and will rank PARI PASSU in right of payment with all other existing
and future senior obligations of the Company, the subsidiary guarantors and the
parent, respectively. Loans under the Company's Bank Credit Agreement (as
defined herein) will be secured by substantially all of the Company's assets,
will be guaranteed by the Company's subsidiaries, which guarantees will be
secured by substantially all of the assets of the Company's subsidiaries, and
will be guaranteed by the Company's parent, which guarantee is secured by a
pledge of all of the stock of the Company. Accordingly, the Old Notes are, and
the New Notes and the guarantees will be, effectively subordinated to the loans
outstanding under the Bank Credit Agreement and the guarantees of such loans to
the extent of the value of the assets securing such loans and guarantees. As of
March 31, 1997 after giving effect to the acquisition of the business of Quality
Foods, L.P., the Offering (as defined herein) and the application of the net
proceeds therefrom and the other transactions referred to herein, the Company
had $24.9 million of indebtedness outstanding other than the Notes, all of which
was secured debt. The terms of the Indenture (as defined herein) will permit the
Company and its subsidiaries to incur additional indebtedness, subject to
certain limitations. See "Description of Notes."
The Old Notes were not registered under the Securities Act in reliance upon
an exemption from the registration requirements thereof. In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The New Notes are being offered hereby in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement. The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any Holder without
compliance with the registration and prospectus delivery requirements of the
Securities Act. Based on interpretations by the staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters issued to
third parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by any holder thereof (other than any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 promulgated under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business, such holder has no
arrangement with any person to participate in the distribution of such New Notes
and neither such holder nor any such other person is engaging in or intends to
engage in a distribution of such New Notes. Since the Commission has not
considered the Exchange Offer in the context of a no-action letter, there can be
no assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer. Any Holder who is an affiliate of the
Company or who tenders in the Exchange Offer for the purpose of participating in
a distribution of the New Notes cannot rely on such interpretations by the staff
of the Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a resale transaction.
Notwithstanding the foregoing, each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by such broker-dealer in connection
with any resale of New Notes received in exchange for such Old Notes where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 120 days after
the date of this Prospectus, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale.
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the New Notes. The Company does not currently
intend to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn as provided herein at
any time prior to the Expiration Date (as defined herein). The Exchange Offer is
subject to certain customary conditions.
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
---------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
The date of this Prospectus is June , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the New
Notes being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations promulgated by the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed or incorporated by
reference as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference.
The Registration Statement may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may also be obtained at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. Such
materials can also be inspected on the Internet at http://www.sec.gov.
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports and other information with the Commission.
Such material filed by the Company with the Commission may be inspected, and
copies thereof obtained, at the places, and in the manner, set forth above.
In the event that the Company ceases to be subject to the informational
reporting requirements of the Exchange Act, the Company has agreed that, so long
as the Old Notes or the New Notes remain outstanding, it will file with the
Commission and distribute to holders of the Old Notes or the New Notes, as
applicable, copies of (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to annual information only, a report thereon by
the Company's independent public accountants and (ii) all reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. The Company will also make such reports available
to prospective purchasers of the Old Notes or the New Notes, as applicable,
securities analysts and broker-dealers upon their request. In addition, the
Company has agreed that for so long as any of the Old Notes remain outstanding
it will make available to any prospective purchaser of the Old Notes or
beneficial owner of the Old Notes in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act, until such
time as the Issuer has either exchanged the Old Notes for securities identical
in all material respects which have been registered under the Securities Act or
until such time as the holders thereof have disposed of such Old Notes pursuant
to an effective registration statement filed by the Company.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES HEREIN TO (I) "CFP
GROUP" ARE TO CFP GROUP, INC., A DELAWARE CORPORATION, (II) "CFP HOLDINGS" ARE
TO CFP HOLDINGS, INC., A DELAWARE CORPORATION AND A WHOLLY-OWNED SUBSIDIARY OF
CFP GROUP, (III) "CUSTOM FOODS" ARE TO CUSTOM FOOD PRODUCTS, INC., A CALIFORNIA
CORPORATION AND A WHOLLY-OWNED SUBSIDIARY OF CFP HOLDINGS, (IV) "QUALITY FOODS,"
PRIOR TO THE ACQUISITION (AS DEFINED), INCLUDES BOTH QUALITY FOODS, L.P., A
DELAWARE LIMITED PARTNERSHIP, THE BUSINESS OF WHICH WAS ACQUIRED BY CFP
HOLDINGS, AND QF ACQUISITION CORP., WHICH WAS ONE OF THE GENERAL PARTNERS OF
QUALITY FOODS, L.P. AND, FOLLOWING THE ACQUISITION, MEANS ONLY QF ACQUISITION
CORP. WHICH SUCCEEDED TO THE BUSINESS OF QUALITY FOODS, L.P. AND BECAME A
WHOLLY-OWNED SUBSIDIARY OF CFP HOLDINGS, (V) THE "COMPANY" ARE, PRIOR TO THE
ACQUISITION, TO CFP HOLDINGS AND ITS SUBSIDIARY CUSTOM FOODS, AND FOLLOWING THE
ACQUISITION AND THE RECAPITALIZATION (AS DEFINED) ARE TO CFP GROUP AND ITS
SUBSIDIARY, CFP HOLDINGS AND ITS SUBSIDIARIES, QUALITY FOODS AND CUSTOM FOODS
AND (VI) THE "ACQUISITION" ARE TO THE ACQUISITION BY CFP HOLDINGS OF THE
BUSINESS OF QUALITY FOODS, L.P. COMPLETED ON DECEMBER 31, 1996. PRO FORMA
INFORMATION GIVES EFFECT TO THE ACQUISITION, THE OFFERING AND THE APPLICATION OF
THE ESTIMATED NET PROCEEDS THEREFROM, AND THE OTHER TRANSACTIONS REFERRED TO
HEREIN, AS IF EACH OF THE FOREGOING TRANSACTIONS HAD OCCURRED ON OCTOBER 1,
1995. ALL REFERENCES TO PRO FORMA INFORMATION REFER TO THE FISCAL YEAR ENDING
SEPTEMBER 30 OR THE FISCAL YEAR ENDED MARCH 31 OF EACH YEAR, AS APPLICABLE. ALL
REFERENCES TO THE COMPANY'S AND CUSTOM FOODS' FISCAL YEAR REFER (I) FOR ALL
PERIODS ENDING ON OR PRIOR TO SEPTEMBER 30, 1996, TO THE FISCAL YEAR ENDING ON
SEPTEMBER 30 OF EACH YEAR AND (II) FOR ALL PERIODS ENDING ON OR AFTER OCTOBER 1,
1996, TO THE FISCAL YEAR ENDED MARCH 31, 1997, AND ALL REFERENCES TO QUALITY
FOODS' FISCAL YEAR REFER TO THE FISCAL YEAR ENDING ON DECEMBER 31 OF EACH YEAR.
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS
PROSPECTUS, INCLUDING, WITHOUT LIMITATION, THE STATEMENTS UNDER "PROSPECTUS
SUMMARY," "RISK FACTORS," "SUMMARY UNAUDITED PRO FORMA CONDENSED FINANCIAL
DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" AND "BUSINESS" AND LOCATED ELSEWHERE HEREIN CONTAIN CERTAIN
FORWARD-LOOKING STATEMENTS CONCERNING THE COMPANY'S OPERATIONS, ECONOMIC
PERFORMANCE AND FINANCIAL CONDITION, INCLUDING, AMONG OTHER THINGS, THE
COMPANY'S BUSINESS STRATEGY. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO
ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S
EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS
INCLUDING, WITHOUT LIMITATION, IN CONJUNCTION WITH THE FORWARD-LOOKING
STATEMENTS INCLUDED IN THIS PROSPECTUS, AND UNDER "RISK FACTORS." ALL SUBSEQUENT
WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR
PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE
CAUTIONARY STATEMENTS.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SPECIFIC FACTORS SET
FORTH UNDER "RISK FACTORS" PRIOR TO MAKING A DECISION TO TENDER THEIR OLD NOTES
IN THE EXCHANGE OFFER.
1
<PAGE>
THE COMPANY
The Company is a leading developer, manufacturer and marketer of value-added
meat and poultry products sold to the foodservice industry and manufacturers of
packaged foods. The Company provides a wide range of pre-cooked and uncooked
products, including beef and chicken sandwich steaks; beef, pork and poultry
meat rolls used in further processing; charbroiled products and crumble
toppings; barbecue-flavored meats; and meatballs. The Company principally
manufactures higher margin specialty products that provide superior quality and
performance for the end-user and that are typically custom-formulated to meet
specific customer requirements. In the foodservice industry, the Company
supplies some of the country's leading restaurant chains and outlets, including
Subway ("Subway"), Great Steak & Potato Co., International House of Pancakes,
Inc., Domino's Pizza, Inc., Wal-Mart Stores, Inc., Nathan's Famous Inc., Blimpie
International, Inc. and Arby's ("Arby's"). The Company also serves many of the
country's leading packaged foods manufacturers, including Chef America, Inc.
("Chef America"), H. J. Heinz Co., Inc., Foodbrands America, Inc., Schwan's
Sales Enterprises Inc., Kraft Foods Inc. and McLane Company, Inc. The Company
believes that its proprietary recipes and manufacturing processes, national
presence and long-standing customer relationships pose barriers to entry for
other manufacturers seeking to provide competitive products. The Company is
comprised of two operating subsidiaries, Quality Foods, which was acquired on
December 31, 1996, and Custom Foods. For the 12-month period ended September 30,
1996, after giving effect to the Acquisition, the Offering and the application
of the net proceeds therefrom and the other transactions referred to herein, the
Company would have had pro forma net sales of $156.6 million, and for the six
month fiscal year ended March 31, 1997, after giving effect to the Acquisition,
the Offering and the application of the net proceeds therefrom and the other
transactions referred to herein, the Company would have had pro forma net sales
of $81.6 million.
Quality Foods is one of the country's leading manufacturers of pre-cooked
and uncooked, thinly-sliced beef used primarily in "Philadelphia-style" steak
sandwiches. It also supplies sliced chicken products and pre-cooked and uncooked
meatballs and hamburger patties. Quality Foods serves the foodservice industry,
with particular emphasis on quick service restaurants ("QSRs"), sandwich chains
and family dining establishments. For over ten years, Quality Foods has been the
primary supplier of pre-cooked beef to the Subway restaurant chain for its
popular steak and cheese sandwich. Quality Foods employs a proprietary forming
and freezing process that, the Company believes, produces a product with
excellent flavor and visual appearance, as well as superior yield when cooked.
Because of its product quality and performance, Quality Foods has historically
been able to charge a premium price for its uncooked sandwich steak products.
From fiscal 1991 to fiscal 1995, Quality Foods experienced compound annual
growth in net sales and operating profit of 14.5% and 26.1%, respectively, and
for the nine months ended September 30, 1996 net sales and operating profit
increased 9.4% and 39.2%, respectively, compared to the same period in 1995. The
Company believes this growth has been due to Quality Foods' superior product
quality, the expanding national presence of the Philadelphia-style steak
sandwich on restaurant menus, increased demand by its customers for high
value-added products and a continued focus on improving its proprietary low-cost
manufacturing processes. Quality Foods sells its products through an established
network of independent foodservice brokers and its direct sales force to over
400 foodservice distributors located in 42 states and six Canadian provinces.
Quality Foods has recently developed and introduced several complementary beef
and chicken products which, the Company believes, can be successfully marketed
through these established distribution channels.
2
<PAGE>
In November 1996, Quality Foods completed an $11.0 million purchase,
renovation and retrofit of a 150,000 square foot production facility in
Philadelphia, and the substantial consolidation of three manufacturing and
administrative facilities into this location (collectively, the "Philadelphia
Consolidation"). The Philadelphia Consolidation has more than doubled Quality
Foods' production capacity and will enable it to meet its anticipated
manufacturing needs for at least the next five years. The Company believes that
the Philadelphia Consolidation will result in annual cost savings of
approximately $4.5 million as a result of the improvements in Quality Foods'
production processes through the use of new cooking equipment, the elimination
of its historic dependence on outside co-packing arrangements, the reduction in
overtime through productivity improvements and the elimination of redundant
facility costs.
Custom Foods develops, manufactures and markets pre-cooked meat and poultry
products sold primarily to manufacturers of branded and private label packaged
foods, also referred to as "industrial" users. Custom Foods' pre-cooked products
include a variety of pork, beef, chicken and turkey items, such as meat rolls
used in further processing; barbecue products; Mexican specialties; charbroiled
patties and crumble toppings. Custom Foods focuses on sales to manufacturers of
frozen and refrigerated convenience foods, including items in the fast-growing
hand-held foods segment. In its pre-cooked operations, Custom Foods is the
largest supplier of custom-formulated meat and poultry fillings to Chef America
for use in substantially all of its microwaveable sandwich product lines. Chef
America has accounted for a majority of Custom Foods' sales of pre-cooked
products for each of the past three years and, according to Packaged Facts, a
consumer products research publication, Chef America is the country's leading
manufacturer of frozen hand-held entrees. From fiscal 1992 to fiscal 1996,
Custom Foods experienced compound annual growth in net sales and gross profit of
29.7% and 40.2%, respectively, in its pre-cooked operations, due to strong
growth in Chef America's business and growth in demand from other industrial
users for pre-cooked, cost-effective meat and poultry products. Due to capacity
constraints and the growing needs of its customers, Custom Foods has, over the
past two years, significantly broadened its operations with the opening and
subsequent expansion of a new facility in Kentucky. With capacity expansions
completed, Custom Foods recently created a direct sales and marketing
department. Custom Foods has developed over 400 proprietary product
formulations, many of which, the Company believes, can now be successfully
marketed through this sales group.
Custom Foods, through its Best Western division, supplies uncooked beef
products to Arby's. Prior to fiscal 1995, Custom Foods supplied Arby's on a
national basis. However, in the first quarter of fiscal 1995, Custom Foods
entered into an 18-month contract to supply Arby's on a regional basis only.
Under this contract, sales to Arby's declined from $61.0 million in fiscal 1994
to $26.2 million in fiscal 1995, resulting in an overall 28.9% decrease in
Custom Foods' net sales. Nevertheless, Custom Foods' income from operations
during this period increased 19.7%, reflecting significant growth in its more
profitable pre-cooked operations. In June 1996, following completion of the
expansion of its Kentucky facility, Custom Foods entered into a new three-year
contract to once again supply Arby's on a national basis. Despite the increased
sales and profitability associated with the new Arby's contract, Custom Foods
plans to continue to focus on its faster growing, higher margin pre-cooked
product operations.
INDUSTRY
The Company is considered a value-added processor within the meat and
poultry industry and is focused on serving the foodservice and industrial
markets. The foodservice industry is composed of establishments that serve food
away from the home and includes restaurants; the food operations of
3
<PAGE>
healthcare providers, schools and other institutions, hotels, resorts and
corporations; and other non-traditional foodservice outlets. The foodservice
industry generated $300 billion in revenues in 1995 and experienced compound
annual growth of 4.7% from 1990 to 1995, according to Restaurants and
Institutions, an industry publication. This growth has been driven by the
increase in away-from-home meal preparation, which has accompanied the expanding
number of both dual income and single-parent households. According to Technomic,
Inc., the foodservice industry in the United States captured 51% of all consumer
food expenditures in 1995, surpassing traditional retail supermarkets and
outlets. Another trend within the foodservice industry is the growth in the
number of non-traditional foodservice outlets such as, convenience stores,
retail stores, supermarkets and food kiosks. These non-traditional locations
often lack extensive cooking, storage or preparation facilities, resulting in a
need for pre-cooked and prepared foods similar to those provided by the Company.
The expansion in the foodservice industry has also been accompanied by the
continued consolidation and growth of broadline and specialty foodservice
distributors, many of which are long-standing customers of the Company.
The same demographic and lifestyle trends which contributed to the growth in
the foodservice industry have led to a growing demand for branded and private
label packaged foods, particularly for easy-to-prepare, microwaveable
convenience foods. Among the fastest growing segments is the approximately $1.2
billion refrigerated and frozen hand-held foods segment, which includes burritos
and other wrap sandwiches, pocket-style sandwiches, hand-held appetizers and
other similar products. This segment grew at a compound annual rate of 9.1% from
1993 to 1995, and is expected to grow at a compound annual rate of 8.0% from
1995 to 2000, according to Packaged Facts. As these markets have expanded,
manufacturers have sought to reduce their all-in costs while improving product
variety, safety and consistency. The Company believes that its value-added
products, which are typically manufactured to the specific requirements of its
customers, position it well to take advantage of these trends.
4
<PAGE>
THE QUALITY FOODS ACQUISITION
On December 31, 1996, pursuant to a securities purchase agreement (the
"Acquisition Agreement"), CFP Holdings, a company controlled by an affiliate of
First Atlantic Capital, Ltd. ("First Atlantic"), acquired all of the capital
stock of the general partners of, and substantially all of the partnership
interests in, Quality Foods (the "Acquisition") for a cash purchase price of
$63.7 million and refinanced and assumed $23.2 million of Quality Foods'
indebtedness. In addition, the remaining partnership interests in Quality Foods
(the "Rollover Interests"), with a value of $1.5 million, were exchanged for
approximately 7.4% of the fully-diluted common stock of CFP Group. Funds used
for the Acquisition and for working capital were provided by: (i) a new bank
credit agreement (the "Bank Credit Agreement") providing for $76.0 million of
7-year secured term loans (the "Term Loans") and a $20.0 million 5 1/2-year
revolving credit facility (the "Revolving Credit Facility"), under which $3.7
million was borrowed at the time of the closing, (ii) $25.0 million of
subordinated bridge notes (the "Bridge Notes") and (iii) a $2.0 million equity
investment (including the Rollover Interests) from certain members of Quality
Foods' management. See "The Quality Foods Acquisition -- Financing of the
Acquisition."
The Company expects the Acquisition to enhance its overall growth prospects
and strengthen its position in its target markets. The Company believes that the
Acquisition will: (i) create cross-marketing opportunities, (ii) expand
manufacturing, distribution and product development capabilities, (iii)
establish critical scale with vendors and major customers and (iv) broaden
management resources. The Company also believes that the Acquisition will allow
it to better serve the growing needs of its customer base and take advantage of
the growth trends in the foodservice and industrial markets. Specifically, the
Company believes the Acquisition will result in the following:
- EXPANDED SALES GROWTH OPPORTUNITIES. The Company intends to pursue new
sales opportunities created by the combination of Custom Foods' broad
product line and Quality Foods' established foodservice presence. Quality
Foods has a strong national foodservice broker network and extensive
distribution relationships. Custom Foods manufactures a broad line of
pre-cooked meat and poultry products that to date have been marketed
principally to packaged foods manufacturers but which, the Company
believes, can be marketed effectively to foodservice customers. The
Company believes that opportunities exist to cross-market its now
broadened product lines, as well as continue to increase sales in the
foodservice industry and to industrial accounts.
- EXPANDED MANUFACTURING AND PRODUCT DEVELOPMENT CAPABILITIES. The
Acquisition combines complementary manufacturing and distribution
capabilities, affording the Company the opportunity to further reduce
operating costs and provide greater economies of scale through improved
facility utilization and logistics. Specifically, Custom Foods operates
two plants in California with capacity sufficient to manufacture and
warehouse certain of Quality Foods' products for West Coast distribution.
This capability could potentially reduce cross-country freight costs and
enhance Quality Foods' national customer service capabilities. In
addition, the Company believes that Quality Foods' and Custom Foods'
combined manufacturing expertise in pre-cooked and uncooked products will
strengthen its overall product development efforts.
- DIVERSIFIED OPERATIONS. The Acquisition positions the Company as a
sizeable and diversified competitor in the value-added meat and poultry
industry, with national distribution and multiple manufacturing locations.
The Company believes that the combination of Custom Foods' broad product
line and Quality Foods' distribution capabilities provides an enhanced
ability to efficiently service a
5
<PAGE>
geographically diverse customer base. The Company believes that this
increased scale provides it with a competitive advantage over many
regional and local manufacturers with which it competes. Furthermore, the
Company believes the Acquisition positions it to continue to grow its
business through internal expansion and selected strategic acquisitions.
- BROADENED MANAGEMENT CAPABILITIES. The Acquisition combines two strong
management teams with diverse experience in the meat processing industry.
The Company's management team has complementary skills in manufacturing,
product development, marketing and sales. In particular, Custom Foods'
manufacturing experience, when combined with Quality Foods' marketing and
distribution expertise, should benefit the Company as it pursues its
growth strategy.
BUSINESS STRATEGY
The Company's objective is to be one of the premier multi-niche suppliers of
value-added meat and poultry products for the foodservice and industrial
markets. The Company intends to achieve this objective by continuing to
introduce new value-added products, further expanding its sales and marketing
capabilities and maintaining excellent customer service. The key components of
the Company's business strategy are to (i) maximize the benefits of the
Acquisition, (ii) expand product lines and sales in the foodservice industry,
(iii) increase sales penetration of pre-cooked products among packaged foods
manufacturers, (iv) increase productivity by maximizing the utilization of
existing facilities and (v) pursue strategic acquisitions that complement its
existing product offerings.
The Company is located at 1117 West Olympic Boulevard, P.O. Box 1027,
Montebello, California 90640. The Company's telephone number is (213) 727-0900.
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Registration Rights Agreement.......... The Old Notes were sold by the Company on January
28, 1997 (the "Offering") to NationsBanc Capital
Markets, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchasers"),
who placed the Old Notes with institutional
investors. In connection therewith, the Company and
the Initial Purchasers executed and delivered for
the benefit of the holders of the Old Notes a
registration rights agreement (the "Registration
Rights Agreement") providing, among other things,
for the Exchange Offer.
The Exchange Offer..................... New Notes are being offered in exchange for a like
principal amount of Old Notes. As of the date
hereof, $115,000,000 aggregate principal amount of
Old Notes are outstanding. The Exchange Offer is
not conditioned upon any minimum principal amount
of Old Notes being tendered. The Company will issue
the New Notes to Holders promptly following the
Expiration Date. See "Risk Factors--Consequences of
Failure to Exchange."
The Company has not requested, and does not intend
to request, an interpretation by the staff of the
Commission with respect to whether the New Notes
issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for sale, resold
or otherwise transferred by any Holder without
compliance with the registration and prospectus
delivery requirements of the Securities Act.
Based on interpretations by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold or otherwise transferred by any holder
thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of
Rule 405 promulgated under the Securities Act)
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that such New Notes are acquired in
the ordinary course of such Holder's business, such
holder has no arrangement with any person to
participate in the distribution of such New Notes
and neither such Holder nor any such other person
is engaging in or intends to engage in a
distribution of such New Notes. Since the
Commission has not considered the Exchange Offer in
the context of a no-action letter, there can be no
assurance that the staff of the Commission would
make a similar determination with respect to the
Exchange Offer. Any Holder who is an affiliate of
the Company or who tenders in the Exchange Offer
for the
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
purpose of participating in a distribution of the
New Notes cannot rely on such interpretations by
the staff of the Commission and must comply with
the registration and prospectus delivery
requirements of the Securities Act in connection
with a resale transaction. Notwithstanding the
foregoing, each broker-dealer that receives New
Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such
New Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with any
resale of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities (other than
Old Notes acquired directly from the Company). The
Company has agreed that, for a period of 120 days
from the date of this Prospectus, it will make this
Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of
Distribution."
Expiration Date........................ 5:00 p.m., New York City time, on ,
1997, unless the Exchange Offer is extended as
provided herein, in which case the term "Expiration
Date" means the latest date and time to which the
Exchange Offer is extended.
Interest............................... Each New Note will bear interest from January 28,
1997, the date of the Offering of the Old Notes. No
interest will be paid on the Old Notes accepted for
exchange.
Conditions to the Exchange Offer....... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company reserves the right to amend, terminate or
extend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition. See "The Exchange Offer--Conditions."
Procedures for Tendering Old Notes..... Each Holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, or an
Agent's Message (as defined herein) together with
the Old Notes and any other required documentation
to the exchange agent (the "Exchange Agent") at the
address set forth herein. By executing the Letter
of Transmittal or delivering an Agent's Message,
each Holder will represent to the Company, among
other things, that (i) the New Notes acquired
pursuant to the
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Exchange Offer by the Holder and any beneficial
owners of Old Notes are being obtained in the
ordinary course of business of the person receiving
such New Notes, (ii) neither the Holder nor such
beneficial owner has an arrangement with any person
to participate in the distribution of such New
Notes, (iii) neither the Holder nor such beneficial
owner nor any such other person is engaging in or
intends to engage in a distribution of such New
Notes and (iv) neither the Holder nor such
beneficial owner is an "affiliate," as defined
under Rule 405 promulgated under the Securities
Act, of the Company. Each broker-dealer that
receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired
by such broker-dealer as a result of market-making
activities or other trading activities (other than
Old Notes acquired directly from the Company), may
participate in the Exchange Offer but may be deemed
an "underwriter" under the Securities Act and,
therefore, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in
connection with any resale of such New Notes. The
Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. See "The Exchange Offer--Procedures
for Tendering" and "Plan of Distribution."
Special Procedures for Beneficial
Owners............................... Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered Holder
promptly and instruct such registered Holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal or delivering an Agent's
Message and delivering his Old Notes, either make
appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or
obtain a properly completed bond power from the
registered Holder. The transfer of registered
ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Procedures......... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or an Agent's Message or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures set
forth
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
in "The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights...................... Tenders may be withdrawn as provided herein at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
Acceptance of Old Notes and Delivery of
New Notes............................ The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Exchange Agent......................... United States Trust Company of New York is serving
as Exchange Agent in connection with the Exchange
Offer. See "The Exchange Offer --Exchange Agent."
Use of Proceeds........................ There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Federal Income Tax Consequences........ The exchange of Old Notes for New Notes will not be
a taxable exchange for Federal income tax purposes.
See "Certain Federal Income Tax Considerations."
Consequences of Failure to Exchange.... Holders of Old Notes who do not exchange their Old
Notes for New Notes pursuant to the Exchange Offer
will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the
legend thereon as a consequence of the issuance of
the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration
requirements of the Securities Act and applicable
state securities laws. In general, Old Notes may
not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws.
</TABLE>
10
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The Exchange Offer applies to $115,000,000 aggregate principal amount of Old
Notes. The terms of the New Notes are identical in all material respects to the
Old Notes, except that the New Notes have been registered under the Securities
Act and, therefore, will not bear legends restricting their transfer and will
not contain certain provisions providing for an increase in the interest rate on
the Old Notes under certain circumstances relating to the Registration Rights
Agreement, which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer. The New Notes will evidence the same debt as
the Old Notes and, except as set forth in the immediately preceding sentence,
will be entitled to the benefits of the Indenture, under which both the Old
Notes were, and the New Notes will be, issued. See "Description of Notes."
<TABLE>
<S> <C>
The New Notes................ $115.0 million aggregate principal amount of 11 5/8% Series
B Senior Guaranteed Notes Due 2004.
Maturity Date................ January 15, 2004.
Interest Rate and Payment
Dates...................... The New Notes will bear interest at a rate of 11 5/8% per
annum. Interest will be payable semi-annually on January 15
and July 15, commencing July 15, 1997.
Guarantees................... The New Notes will be unconditionally guaranteed (the
"Subsidiary Guarantees") on a senior basis by Quality Foods
and Custom Foods and each of the future subsidiaries of the
Company (the "Subsidiary Guarantors") and will be similarly
guaranteed by CFP Group (the "Parent Guarantee" and,
together with the Subsidiary Guarantees, the "Guarantees").
Each of the Guarantees will be a guarantee of payment and
not of collection. See "Description of Notes."
Ranking...................... The New Notes, the Subsidiary Guarantees and the Parent
Guarantee will be senior unsecured obligations and will rank
PARI PASSU in right of payment with all other existing and
future senior obligations of the Company, the Subsidiary
Guarantors and CFP Group, respectively. Loans under the Bank
Credit Agreement will be secured by substantially all of the
Company's assets, including a pledge of all the stock of
Quality Foods and Custom Foods, will be guaranteed by the
Company's subsidiaries, which guarantees will be secured by
substantially all of the assets of the Company's
subsidiaries, and will be guaranteed by CFP Group, which
guarantee will be secured by a pledge of all of the stock of
the Company. Accordingly, the New Notes and the Guarantees
will be effectively subordinated to the loans outstanding
under the Bank Credit Agreement and the guarantees by the
subsidiaries and CFP Group of such loans, to the extent of
the value of the assets securing such loans and guarantees.
As of March 31, 1997, after giving effect to the
Acquisition, the Offering and the application of the net
proceeds therefrom and the other transactions referred to
herein, the Company had $24.9 million of
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
indebtedness outstanding other than the Notes, all of which
was secured debt. Subject to certain limitations, the
Company and its subsidiaries may incur additional
indebtedness in the future.
Optional Redemption.......... The New Notes will be redeemable at the Company's option, in
whole or in part, at any time on or after January 15, 2001
at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. See
"Description of Notes -- Redemption -- Optional Redemption."
In addition, at any time prior to January 15, 2000, the
Company may redeem up to $40.0 million aggregate principal
amount of the Notes with the net proceeds of one or more
equity offerings of CFP Group's common stock, at a
redemption price equal to 110% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the
date of redemption; provided that at least $75.0 million
aggregate principal amount of the Notes remains outstanding
after each such redemption.
Mandatory Redemption......... None, except at maturity on January 15, 2004.
Change of Control............ Upon a Change of Control (as defined), the Company will be
required to make an offer to repurchase all outstanding
Notes at 101% of the principal amount thereof plus accrued
and unpaid interest thereon to the date of repurchase. See
"Description of Notes -- Purchase of Notes upon a Change of
Control."
Covenants.................... The Indenture will restrict, among other things, the
Company's ability to incur additional indebtedness, pay
dividends or make certain other restricted payments, apply
net proceeds from certain asset sales, enter into certain
transactions with affiliates, agree to certain payment
restrictions applicable to Restricted Subsidiaries, sell
stock of Restricted Subsidiaries, designate subsidiaries as
Restricted or Unrestricted Subsidiaries, incur liens or
enter into consolidations or mergers. See "Description of
Notes -- Certain Covenants."
</TABLE>
RISK FACTORS
For a discussion of certain matters that should be considered by Holders
prior to tendering Old Notes in the Exchange Offer, see "Risk Factors."
12
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following table sets forth the Summary Unaudited Pro Forma Condensed
Combined Financial Data for the fiscal year ended September 30, 1996 and the six
months ended March 31, 1997, after giving effect to the Acquisition, the
Offering and the application of the net proceeds therefrom and the other
transactions referred to herein, as if each of the foregoing transactions had
occurred on October 1, 1995 with respect to the statement of operations data.
The pro forma data should be read in conjunction with the "Unaudited Pro Forma
Condensed Combined Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements of CFP Group, Inc. and Quality Foods and related notes thereto,
included elsewhere in this Prospectus. The data set forth below is not
necessarily indicative of the results that actually would have been achieved had
such transactions been consummated as of the dates indicated or that may be
achieved in future periods.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA SIX MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31,
1996 1997
------------- --------------
<S> <C> <C>
(IN THOUSANDS EXCEPT RATIOS
AND PER POUND DATA)
PRO FORMA STATEMENT OF OPERATIONS DATA:
Net sales.................................................................... $ 156,645 $ 81,578
Cost of sales................................................................ 123,079 70,429
------------- --------------
Gross profit................................................................. 33,573 11,149
Operating expenses........................................................... 15,635 8,006
Other charges(1)............................................................. 6,284 339
------------- --------------
Income from operations..................................................... 11,654 2,804
Interest expense............................................................. 16,790 8,212
------------- --------------
Loss before income taxes................................................... (5,136) (5,408)
(Benefit) for income taxes................................................... (1,839) (1,143)
------------- --------------
Net loss................................................................... $ (3,297) $ (4,265)
------------- --------------
------------- --------------
OTHER PRO FORMA DATA:
Pounds sold.................................................................. 90,734 50,790
Average net sales price per pound............................................ $ 1.73 $ 1.61
Average gross profit per pound............................................... .37 .22
Pro forma EBITDA(2).......................................................... 24,598 8,281
Depreciation and amortization................................................ 5,862 3,566
Cash interest expense(3)..................................................... 15,713 7,935
Expansion capital expenditures(4)............................................ 9,067 1,383
Maintenance capital expenditures............................................. 2,002 291
Ratio of earnings to fixed charges(5)........................................ -- --
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
13
<PAGE>
(1) At the time of the acquisition of Custom Foods by CFP Holdings in 1993,
Custom Foods entered into an agreement (the "Sales Brokerage Agreement")
with one of the sellers in that transaction, under which such seller agreed
to provide certain sales and marketing support in exchange for commissions
on most of the sales of pre-cooked products sold by Custom Foods. In January
1996, the parties agreed to terminate the Sales Brokerage Agreement in
exchange for a one-time $5.0 million cash payment by Custom Foods and the
execution of a one-year consulting agreement. Other charges also include
facility start-up and relocation costs of $1.3 million and $339,000
associated with the Philadelphia Consolidation for the year ended September
30, 1996 and the six months ended March 29, 1997, respectively.
(2) For the year ended September 30, 1996, pro forma EBITDA consists of EBITDA,
adjusted to eliminate the following non-recurring charges: (i) costs of $5.7
million associated with the termination of the Sales Brokerage Agreement by
Custom Foods consisting of (a) the $5.0 million cash payment, (b)
commissions of $570,000 and other costs of $99,000 paid under the Sales
Brokerage Agreement during the fiscal year and prior to the termination, (c)
$75,000 associated with the consulting agreement, less (d) the incremental
costs associated with an additional in-house salesperson of $65,000, (ii)
the facility start-up and relocation costs related to the Philadelphia
Consolidation of $1.3 million and (iii) the start-up costs for a new
production line located in Custom Foods' Kentucky facility of $119,000. For
the six months ended March 31, 1997, pro forma EBITDA consists of EBITDA,
adjusted to eliminate the following non-recurring charges: (i) $65,000
associated with a consulting agreement entered into in connection with the
termination of the Sales Brokerage Agreement, (ii) the facility start-up and
relocation costs related to the Philadelphia Consolidation of $339,000 and
(iii) the elimination of the impact on cost of sales of the purchase
accounting write-up of Quality Foods inventory of $1.5 million. EBITDA is
the sum of income before income taxes and interest, depreciation and
amortization expense. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service indebtedness. However,
EBITDA should not be considered as an alternative to income from operations
or to cash flows from operating activities (as determined in accordance with
generally accepted accounting principles) and should not be construed as an
indication of a company's operating performance or as a measure of
liquidity.
(3) Cash interest expense for the year ended September 30, 1996 consists of
interest expense of $16.8 million less amortization of deferred financing
costs of $1.0 million and is exclusive of capitalized interest paid of
$593,000. Cash interest expense for the six months ended March 31, 1997
consists of interest expense of $8.2 million less amortization of deferred
financing costs of $277,000.
(4) Reflects increased capital expenditures of $7.5 million related to the
Philadelphia Consolidation and $1.5 million related to the expansion of the
Custom Foods' Kentucky facility for the year ended September 30, 1996. For
the six months ended March 31, 1997, capital expenditures include $1.3
million related to the Philadelphia Consolidation and $34,000 related to the
expansion of Custom Foods' Kentucky facility. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity
and Financial Resources."
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest (which includes amortization of
deferred financing costs) whether expensed or capitalized and one-third of
rental expense, deemed representative of that portion of rental expense
estimated to be attributable to interest. Pro forma earnings were inadequate
to cover fixed charges by $5.7 million for the year ended September 30, 1996
and $5.4 million for the six months ended March 31, 1997.
14
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA OF QUALITY FOODS
The following Summary Historical Financial Data should be read in
conjunction with the financial statements and related notes of Quality Foods and
other financial data included elsewhere in this Prospectus. The balance sheet
data presented below as of December 31, 1992, 1993, 1994, 1995 and 1996 and
statement of operations data presented below for the period July 20, 1992 to
December 31, 1992 and the years ended December 31, 1993, 1994, 1995 and 1996 are
derived from the audited financial statements of Quality Foods. The balance
sheet data as of July 19, 1992 and the statement of operations data for the
period from January 1, 1992 to July 19, 1992 are derived from the audited
financial statements of William Cohen and Son Co., Inc., Quality Foods'
predecessor.
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY(1) QUALITY FOODS
------------------- ---------------------------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, JULY 20, 1992
1992 TO YEAR ENDED DECEMBER 31,
TO JULY 19, DECEMBER 31, ------------------------------------------
1992 1992 1993 1994 1995 1996
------------------- ------------- --------- --------- --------- ---------
(DOLLARS IN (DOLLARS IN THOUSANDS)
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 29,376 $ 26,225 $ 71,195 $ 84,817 $ 84,694 $ 90,582
Cost of sales................................... 25,232 22,314 61,040 72,162 67,930 71,448
------- ------------- --------- --------- --------- ---------
Gross profit.................................... 4,144 3,911 10,155 12,655 16,764 19,134
Operating expenses.............................. 1,861 2,085 5,266 6,887 6,926 7,519
Other charges................................... -- -- -- -- -- 4,716(2)
------- ------------- --------- --------- --------- ---------
Income from operations........................ 2,283 1,826 4,889 5,768 9,838 6,899
Interest expense................................ 177 1,001 2,450 2,616 2,129 1,871
------- ------------- --------- --------- --------- ---------
Income before income taxes and extraordinary
items....................................... 2,106 825 2,439 3,152 7,709 5,028
Provision for income taxes...................... 1,023 -- -- -- -- --
------- ------------- --------- --------- --------- ---------
Income before extraordinary items............. 1,083 825 2,439 3,152 7,709 5,028
Extraordinary loss on early extinguishment of
debt.......................................... -- -- -- 1,771 130 546
------- ------------- --------- --------- --------- ---------
Net income.................................... 1,083 825 2,439 1,381 7,579 4,482
Pro forma income taxes(3)....................... -- 330 976 553 3,032 1,793
------- ------------- --------- --------- --------- ---------
Pro forma net income.......................... $ 1,083 $ 495 $ 1,463 $ 828 $ 4,547 $ 2,689
------- ------------- --------- --------- --------- ---------
------- ------------- --------- --------- --------- ---------
OTHER DATA:
EBITDA(4)....................................... $ 2,471 $ 2,172 $ 5,640 $ 6,523 $ 10,703 $ 8,206
EBITDA as a percentage of net sales............. 8.4% 8.3% 7.9% 7.7% 12.6% 9.1%
Net cash provided by (used in) operating
activities.................................... 1,322 50 (88) 4,549 5,598 9,947
Net cash used in investing activities........... (278) (11,724) (471) (5,277) (2,332) (4,556)
Net cash (used in) provided by financing
activities.................................... (1,070) 11,796 695 688 (3,379) (5,106)
Depreciation and amortization................... $ 188 $ 346 $ 751 $ 755 $ 865 1,307
Capital expenditures(5)......................... 278 89 524 858 4,102 7,190
Ratio of earnings to fixed charges(6)........... 9.53x 1.78x 1.94x 2.12x 3.76x 3.64x
BALANCE SHEET DATA:
Working capital................................. $ 3,367 $ 802 $ 1,189 $ 886 $ 4,032 $ 8,440
Total assets.................................... 11,781 19,828 25,097 28,684 33,814 35,592
Total debt...................................... 947 15,636 17,694 22,137 20,225 5,728
Total stockholders' equity/partners' capital.... 6,798 1,841 2,917 2,521 8,888 7,260
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
15
<PAGE>
(1) Predecessor Company reflects the operations of William Cohen and Son Co.,
Inc.
(2) Other charges of $4.7 million consist of $1.6 million facility start-up and
relocation costs associated with the Philadelphia Consolidation and $3.1
million of acquisition related costs.
(3) Quality Foods was taxed as a partnership for federal and state income tax
purposes prior to the Acquisition. Pro forma provision for income taxes and
pro forma net income reflect the pro forma effect of income taxes as if it
had been taxed as a C corporation for all periods presented. Included in pro
forma income tax expense for the years ended December 31, 1994, 1995 and
1996 is an income tax benefit of $708,000, $52,000 and $218,000,
respectively, relating to the extraordinary item--early extinguishment of
debt.
(4) EBITDA is the sum of income before income taxes and interest, depreciation
and amortization expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of a company's operating performance or as a
measure of liquidity.
(5) Capital expenditures for the year ended December 31, 1995 included $3.6
million related to the Philadelphia Consolidation and $506,000 of
maintenance capital expenditures. Capital expenditures for the year ended
December 31, 1996 included $6.8 million related to the Philadelphia
Consolidation and $413,000 of maintenance capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Financial Resources."
(6) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest.
16
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF CFP GROUP
The following Summary Historical Consolidated Financial Data of CFP Group
should be read in conjunction with the consolidated financial statements and
related notes of CFP Group and other financial data included elsewhere in this
Prospectus. The balance sheet data presented below as of September 30, 1993,
1994, 1995 and 1996 and March 31, 1997 and the statement of operations data
presented below for the six months ended September 30, 1993 and March 31, 1997
and for the years ended September 30, 1994, 1995 and 1996 are derived from the
audited consolidated financial statements of CFP Group. The balance sheet data
presented below as of September 30, 1992 and March 31, 1993 and the statement of
operations data presented below for the year ended September 30, 1992 and the
six months ended March 31, 1993 have been derived from the combination of the
unaudited financial statements of CFP Group's predecessors, Center of the Plate
Foods, Inc. and Best Western Foods, Inc. The balance sheet data as of March 31,
1996 and the statement of operations data for the six months ended March 31,
1996 have been derived from CFP Group's unaudited financial statements.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY(1) CFP GROUP(2)
------------------------ -----------------------------------------------------------
SIX MONTHS
YEAR ENDED SIX MONTHS SIX MONTHS ENDED
SEPTEMBER ENDED ENDED YEAR ENDED SEPTEMBER 30, -----------
30, MARCH 31, SEPTEMBER 30, ------------------------------- MARCH 31,
1992 1993 1993 1994 1995 1996 1996
----------- ----------- ------------- --------- --------- --------- -----------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 71,591 $ 38,332 $ 44,285 $ 86,598 $ 61,543(3) $ 65,996 $ 30,335
Cost of sales.................... 63,373 34,169 40,352 76,485 49,868 53,818 23,766
----------- ----------- ------------- --------- --------- --------- -----------
Gross profit..................... 8,218 4,163 3,933 10,113 11,675 12,178 6,569
Operating expenses............... 4,580 1,892 2,052 5,957 6,700 5,512 2,944
Other charges.................... 28,755(4) -- -- -- -- 4,996(5) 4,996(5)
----------- ----------- ------------- --------- --------- --------- -----------
Income (loss) from
operations................... (25,117) 2,271 1,881 4,156 4,975 1,670 (1,371)
Interest expense................. 3,717 1,906 1,307 2,443 2,632 3,232 1,512
----------- ----------- ------------- --------- --------- --------- -----------
Income (loss) before income
taxes and extraordinary
item......................... (28,834) 365 574 1,713 2,343 (1,562) (2,883)
Provision (benefit) for income
taxes......................... 650 463 265 851 1,189 (409) (662)
----------- ----------- ------------- --------- --------- --------- -----------
Income (loss) before
extraordinary item............ (29,484) (98) 309 862 1,154 (1,153) (2,221)
Extraordinary (loss) on early
extinguishment of debt........ -- -- -- -- -- -- --
----------- ----------- ------------- --------- --------- --------- -----------
Net income (loss).............. $ (29,484) $ (98) $ 309 $ 862 $ 1,154 $ (1,153) $ (2,221)
----------- ----------- ------------- --------- --------- --------- -----------
----------- ----------- ------------- --------- --------- --------- -----------
OTHER DATA:
EBITDA(6)........................ $ 6,220 $ 3,070 $ 2,582 $ 6,003 $ 6,685 $ 3,758 $ (2,406)
EBITDA as a percentage of net
sales......................... 8.7% 8.0% 5.8% 6.9% 10.9% 5.7% (7.9)%
Net cash provided by (used in)
operating activities.......... 3,123 278 (427) 4,375 4,382 135 (1,102)
Net cash used in investing
activities.................... (7,576) (2,186) (606) (666) (1,785) (1,811) (1,921)
Net cash (used in) provided by
financing activities.......... 5,997 523 308 (3,499) (2,807) 2,168 3,869
Depreciation and amortization.... $ 2,582 $ 799 $ 701 $ 1,847 $ 1,710 $ 2,088 $ 1,035
Interest expense................. 3,717 1,906 1,307 2,443 2,632 3,232 1,512
Capital expenditures............. 19 1,214 445 1,515 5,054 3,009 545
Ratio of earnings to fixed
charges(7).................... -- 1.18x 1.41x 1.64x 1,83x -- --
BALANCE SHEET DATA:
Working capital.................. $ 6,057 $ 9,225 $ 4,408 $ 4,309 $ 2,754 $ 3,153 $ 3,420
Total assets..................... 23,979 25,811 27,660 27,709 30,148 32,203 30,697
Total debt, redeemable preferred
stock and redeemable common
stock......................... 46,187 46,755 20,369 18,847 19,526 23,223 23,782
Total stockholders' equity
(deficiency).................. (23,999)(4) (24,240)(4) 4,026 4,828 5,884 4,020 3,932
<CAPTION>
MARCH 31,
1997
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 60,529
Cost of sales.................... 52,276
-----------
Gross profit..................... 8,253
Operating expenses............... 7,474
Other charges.................... --
-----------
Income (loss) from
operations................... 779
Interest expense................. 4,681
-----------
Income (loss) before income
taxes and extraordinary
item......................... (3,902)
Provision (benefit) for income
taxes......................... (541)
-----------
Income (loss) before
extraordinary item............ (3,361)
Extraordinary (loss) on early
extinguishment of debt........ (4,489)
-----------
Net income (loss).............. $ (7,850)
-----------
-----------
OTHER DATA:
EBITDA(6)........................ $ 3,026
EBITDA as a percentage of net
sales......................... 5.0%
Net cash provided by (used in)
operating activities.......... 3,477
Net cash used in investing
activities.................... (67,293)
Net cash (used in) provided by
financing activities.......... 65,462
Depreciation and amortization.... $ 2,236
Interest expense................. 4,681
Capital expenditures............. 1,674
Ratio of earnings to fixed
charges(7).................... --
BALANCE SHEET DATA:
Working capital.................. $ 14,702
Total assets..................... 132,822
Total debt, redeemable preferred
stock and redeemable common
stock......................... 142,174
Total stockholders' equity
(deficiency).................. (19,383)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
17
<PAGE>
(1) Predecessor Company reflects the combined operations of Center of the Plate
Foods, Inc. and Best Western Foods, Inc. which were under common management
and common control for the periods presented.
(2) CFP Group became the parent of CFP Holdings on December 31, 1996 after the
recapitalization of CFP Holdings in a series of transactions whereby each
person owning capital stock (or options to acquire capital stock) of CFP
Holdings exchanged their equity interests for equivalent interests of
capital stock (or options to acquire capital stock) of CFP Group. CFP
Holdings commenced operations on April 1, 1993 after acquiring all of the
outstanding stock of Center of the Plate Foods, Inc. and all significant
operating assets of Best Western Foods, Inc. The CFP Group financial
information includes the operations of Quality Foods from the date of the
Acquisition.
(3) Sales declined during the year ended September 30, 1995 as a result of the
decline in sales to the Arby's restaurant chain. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(4) During the year ended September 30, 1992, Best Western Foods, Inc., one of
CFP Group's predecessors, wrote off goodwill of $28.8 million, which also
resulted in the stockholders' deficiency as of September 30, 1992 and March
31, 1993.
(5) Represents one-time costs associated with the termination of the Sales
Brokerage Agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(6) EBITDA is the sum of income before income taxes and interest, depreciation
and amortization expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of a company's operating performance or as a
measure of liquidity.
(7) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest (which includes amortization of deferred financing costs) and
one-third of rental expense, deemed representative of that portion of rental
expense estimated to be attributable to interest. Earnings were inadequate
to cover fixed charges by $28.8 million and $1.6 million for the years ended
September 30, 1992 and 1996, respectively, and by $2.9 million and $3.9
million for the six months ended March 31, 1996 and 1997, respectively.
18
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the specific factors set
forth below, as well as the other information included in this Prospectus, prior
to making a decision to tender their Old Notes in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange the Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, the Company believes that the New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such holder
has no arrangement with any person to participate in the distribution of such
New Notes and neither such holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes. Since the Commission has
not considered the Exchange Offer in the context of a no-action letter, there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer. Any Holder who is an affiliate
of the Company or who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes cannot rely on such
interpretations by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a resale transaction. Notwithstanding the foregoing, each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with any resale of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities (other than
Old Notes acquired directly from the Company). The Company has agreed that, for
a period of 120 days from the date of this Prospectus, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution." However, the ability of any Holder to resell
the New Notes is subject to applicable state securities laws as described in
"Risk Factors-- Blue Sky Restrictions on Resale of New Notes."
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, Holders of Old Notes must transmit a properly
completed Letter of Transmittal or an Agent's Message, including all other
documents required by such Letter of Transmittal, to the Exchange Agent at one
of the addresses set forth below under "The Exchange Offer -- Exchange Agent" on
or prior to the Expiration Date. In addition, either (i) certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company pursuant to the procedure for book-entry transfer
described herein, must be received by the Exchange
19
<PAGE>
Agent prior to the Expiration Date or (iii) the Holder must comply with the
guaranteed delivery procedures described herein. See "The Exchange Offer."
BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES
In order to comply with the securities laws of certain jurisdictions, the
New Notes may not be offered or resold by any Holder unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the requirements of such
exemption have been satisfied. The Company does not currently intend to register
or qualify the resale of the New Notes in any such jurisdictions. However, an
exemption is generally available for sales to registered broker-dealers and
certain institutional buyers. Other exemptions under applicable state securities
laws may also be available.
SIGNIFICANT LEVERAGE AND INDEBTEDNESS SERVICE
The Company incurred substantial indebtedness in connection with the
financing of the Acquisition and is highly leveraged following the Offering. As
of March 31, 1997, the Company had total consolidated indebtedness (including
capitalized lease obligations) of approximately $139.9 million and a
stockholders' deficiency of $19.4 million. In addition, subject to the
restrictions in the Bank Credit Agreement and the Indenture, the Company and its
subsidiaries may incur additional indebtedness from time to time to finance
capital expenditures and acquisitions and for other general corporate purposes.
Further, the Company's earnings on a pro forma basis, for the six months ended
March 31, 1997, were inadequate to cover fixed charges by $3.9 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Financial Resources."
The degree to which the Company is leveraged will have important
consequences to the holders of the New Notes, including: (i) limitations on the
Company's future ability to obtain additional financing for working capital or
other purposes; (ii) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of the principal of and interest on
its indebtedness, thereby reducing funds available for operations; (iii) certain
of the Company's borrowings, including the borrowings under the Bank Credit
Agreement, will be at variable rates of interest which will cause the Company to
be vulnerable to increases in interest rates; (iv) making the Company more
vulnerable to economic downturns and limiting its ability to withstand
competitive pressures; and (v) the New Notes will mature after substantially all
of the Company's other indebtedness. See "Description of Bank Credit Agreement."
The Company's ability to make scheduled payments on the principal of, or
interest on, or to refinance, its indebtedness will depend on its future
operating performance and cash flow, which are subject to prevailing economic
conditions, prevailing interest rate levels, and financial, competitive,
business and other factors, many of which are beyond its control, as well as the
availability of borrowings under the Bank Credit Agreement or successor
facilities. However, based upon the current and anticipated level of operations,
the Company believes that its cash flow from operations, together with amounts
available under the Bank Credit Agreement and its other sources of liquidity,
will be adequate to meet its anticipated cash requirements for at least the next
several years for working capital, capital expenditures, interest payments and
scheduled principal payments. There can be no assurance, however, that the
Company's business will continue to generate cash flow at or above current
levels. If the Company is unable to generate sufficient cash flow from
operations in the future to service its indebtedness, it will be required to
refinance all or a portion of its existing indebtedness, including the Notes, or
to obtain additional financing. There can be no assurance that any such
refinancing would be possible or that any additional financing could be
obtained. The inability to obtain additional financing would have a material
adverse effect on the Company. Finally, it is anticipated that in order to pay
the principal balance of the Notes due at maturity, the Company will have to
obtain alternative financing.
20
<PAGE>
IMPORTANCE OF KEY CUSTOMERS
Certain customers are material to the business and operations of the
Company. On a pro forma basis, Subway, Arby's and Chef America accounted for
26.4%, 20.2% and 16.7% of the Company's net sales, respectively, in fiscal 1996
and 25.7%, 18.8% and 18.1%, respectively, in fiscal 1995. No other customer
accounted for as much as 4.5% of the Company's net sales during either year.
The Company's prospects will continue to depend upon the success of the
Subway and Chef America products that incorporate meats provided by the Company,
as well as Subway's and Chef America's retention of the Company as a major
supplier. Although the Company believes that it has excellent relationships with
these customers and that such relationships are mutually beneficial, the Company
does not have long-term contracts with either Subway or Chef America, and the
loss of either as a customer, or a significant reduction in the Company's
business with either of them, would have a material adverse effect on the
Company. During 1996, certain major Subway franchisees, operating with the
support of Subway, assisted in the formation of a purchasing co-operative with
the goal of improving the consistency of the products served in Subway stores on
a national basis, reducing total product costs to the Subway chain through more
efficient chain purchasing, and, to a lesser extent, improving distribution of
products within the Subway system. While the Company believes that its product
quality and relationships with Subway position it well to respond to potential
new requirements, if any, that may be introduced by the new co-operative, there
can be no assurance that Subway's purchasing philosophy and system will not
change in the future.
While Arby's is one of the Company's three largest customers, sales to
Arby's produce relatively low profit margins, compared to other higher margin
value-added products of the Company, and require a high level of the Company's
working capital relative to the profit margins produced. Accordingly, the
Company believes that while it maintains an excellent relationship with Arby's,
the loss of this customer would not have a material adverse effect.
COMPETITION
The Company operates in highly competitive markets with a significant number
of companies of varying sizes, including divisions or subsidiaries of larger
companies. The Company's sales to Arby's and its sales of hamburger patties and
meatball items to other customers, because of their low value-added nature are
the most price sensitive and competitive areas in which the Company competes. A
number of the Company's competitors have multiple product lines, substantially
greater financial and other resources available to them and are, to varying
degrees, vertically integrated. There can be no assurance that the Company can
continue to compete successfully with such other companies. Competitive
pressures or other factors would cause the Company's products to lose market
share or result in significant price erosion, which would have a material
adverse effect on the Company.
GENERAL RISKS OF FOOD INDUSTRY
The food industry, and the markets within the food industry in which the
Company competes, are subject to various risks, including: adverse changes in
general economic conditions; evolving consumer preferences; nutritional and
health-related concerns; federal, state and local food inspection and processing
controls; consumer product liability claims; risks of product tampering; and the
availability and expense of liability insurance. The meat and poultry industries
have recently been subject to increasing scrutiny due to the association of meat
and poultry products with recent outbreaks of illness, and on rare occasions
even death, caused by foodborne pathogens such as E. COLI, Salmonella and others
which are found in raw and improperly cooked meat. Consumer demand for meat and
poultry fluctuates as the result of such outbreaks of illness. Product recalls
are sometimes required in the meat and poultry industries to withdraw
contaminated or mislabeled products from the market.
21
<PAGE>
SUPPLIERS AND RAW MATERIALS
The Company purchases large quantities of commodity beef, pork and poultry.
Historically, market prices for products processed by the Company have
fluctuated in response to a number of factors, including changes in the United
States government farm support programs, changes in international agricultural
and trading policies, weather and other conditions during the growing and
harvesting seasons. The Company historically has been able to pass through some
increases in the prices of beef, pork and poultry to end users. Failure to pass
on significant price increases to its customers for a prolonged period of time
would have a material adverse effect on the Company. Further, certain of the
Company's customers, including Subway and Chef America, have fixed price
arrangements for certain products in which the sale price is fixed for periods
of up to one year. Although the fixed price arrangements are for a targeted
quantity of products, there is no requirement to deliver the products until a
purchase order is issued establishing quantity and delivery time. Should the
prices of raw materials increase substantially for a prolonged period of time,
the Company could be required to deliver products to these customers at lower
gross margins than historically achieved.
The Company has longstanding relationships with numerous major beef, pork
and other suppliers. The Company purchases most if its beef, pork and poultry
products directly from suppliers. In fiscal 1996, on a pro forma basis, the
Company purchased approximately 40.9% of the dollar value of its meat and
poultry requirements from divisions of ConAgra, Inc. Although the supply of meat
products is concentrated, it is a commodity market and the Company believes that
supplies at required standards are readily available on a competitive basis from
a variety of sources.
GOVERNMENT REGULATION
The operations of the Company are subject to extensive inspection and
regulation by the United States Department of Agriculture ("USDA") and by other
federal, state and local authorities, regarding the processing, packaging,
storage, transportation, distribution and labeling of products that are
manufactured, produced and processed by the Company. The Company's processing
facilities and products are subject to frequent inspection by USDA and/or other
federal, state and local authorities. On July 25, 1996, the USDA issued strict
new policies against contamination by foodborne pathogens such as E. COLI and
Salmonella, and established a new system of regulation known as the Hazard
Analysis Critical Control Points ("HACCP") program. The HACCP program requires
all meat and poultry processing plants to develop and implement sanitary
operating procedures by January 27, 1997. Other HACCP program requirements begin
going into effect on January 26, 1998. As the USDA's HACCP requirements are
relatively new, and not fully implemented, their impact on the meat and poultry
industries is not yet fully known. However, the Company believes that it is
currently in substantial compliance with all material governmental laws and
regulations (including the January 1997 HACCP requirements), and that it
maintains all material permits and licenses relating to its operations.
Nevertheless, there can be no assurance that the Company will be able to
maintain compliance with existing laws or regulations or that it will be able to
comply with any future laws and regulations. Failure by the Company to comply
with applicable laws and regulations would subject it to civil remedies,
including withdrawal of necessary USDA inspection, fines, injunctions, recalls
or seizures, as well as potential criminal sanctions, any of which would have a
material adverse effect on the Company. See "Business -- Government Regulatory
Matters."
The business operations of the Company and the past and present ownership
and operation of real property by Custom Foods and Quality Foods are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes (including solid and hazardous wastes) or
otherwise relating to protection of the environment. Compliance with federal,
state and local environmental laws and regulations is not expected to have a
material impact on the Company's capital expenditures, earnings or competitive
position. No assurance can be given, however, that additional environmental
issues relating to presently known matters or identified sites or to other
matters or sites will not require additional, currently unanticipated
investigation, assessment or expenditures.
22
<PAGE>
DEPENDENCE ON KEY MANAGEMENT
The Company's executive officers and certain other key employees have been
primarily responsible for the development and expansion of the Company's
business, and the loss of the services of one or more of these individuals could
have an adverse effect on the Company. Furthermore, the Acquisition combined two
separate management teams under the ownership of one Company. The Company's
future success will be dependent in part upon its continued ability to recruit,
motivate and retain qualified personnel, as well as the successful integration
of the two management teams. There can be no assurance that the Company will be
successful in this regard. The Company has employment and non-competition
agreements with certain key personnel. See "Management."
INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control as defined in the Indenture, the Company will be
required to offer to repurchase all outstanding Notes at 101% of the principal
amount thereof plus accrued and unpaid interest to the date of repurchase.
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of Notes
tendered, or that restrictions in the Bank Credit Agreement will allow the
Company to make such required repurchases. Notwithstanding these provisions, the
Company could enter into certain transactions, including certain
recapitalizations, that would not constitute a Change of Control but would
increase the amount of debt outstanding at such time. See "Description of Notes
- -- Certain Covenants -- Purchase of Notes Upon a Change of Control."
RANKING OF NEW NOTES
The New Notes, the Subsidiary Guarantees and the Parent Guarantee will be
senior unsecured obligations and will rank PARI PASSU in right of payment with
all other existing and future senior obligations of the Company, the Subsidiary
Guarantors and CFP Group, respectively. Loans under the Bank Credit Agreement
will be secured by substantially all of the Company's assets, including a pledge
of all the stock of Quality Foods and Custom Foods, will be guaranteed by the
Company's subsidiaries, which guarantees will be secured by substantially all of
the assets of the Company's subsidiaries, and will be guaranteed by CFP Group,
which guarantee will be secured by a pledge of all of the stock of the Company.
Accordingly, the New Notes and the Guarantees will be effectively subordinated
to the loans outstanding under the Bank Credit Agreement and the guarantees by
the subsidiaries and CFP Group of such loans, to the extent of the value of the
assets securing such loans and guarantees.
FRAUDULENT CONVEYANCE CONSIDERATIONS
Each Subsidiary Guarantor's guarantee of the obligations of the Company
under the Notes may be subject to review under relevant federal and state
fraudulent conveyance statutes (the "Fraudulent Conveyance Statutes") in a
bankruptcy, reorganization or rehabilitation case or similar proceeding or a
lawsuit by or on behalf of unpaid creditors of such Subsidiary Guarantors. If a
court were to find under relevant Fraudulent Conveyance Statutes that, at the
time the Old Notes were issued, (a) a Subsidiary Guarantor guaranteed the Old
Notes with the intent of hindering, delaying or defrauding current or future
creditors or (b)(i) a Subsidiary Guarantor received less than reasonably
equivalent value or fair consideration for guaranteeing the Old Notes and
(ii)(A) was insolvent or was rendered insolvent by reason of such Note
Guarantee, (B) was engaged, or about to engage, in a business or transaction for
which its assets constituted unreasonably small capital, (C) intended to incur,
or believed that it would incur, obligations beyond its ability to pay as such
obligations matured (as all of the foregoing terms are defined in or interpreted
under such Fraudulent Conveyance Statutes) or (D) was a defendant in an action
for money damages, or had a judgment for money damages docketed against it (if,
in either case, after final judgment, the judgment is unsatisfied), such court
could avoid or subordinate such guarantee of the Notes to presently existing and
future indebtedness of such Subsidiary Guarantor and take other action
detrimental to the holders of the Notes, including, under certain circumstances,
invalidating such guarantee of the Notes.
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The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or state law that is being applied in any such
proceeding. Generally, however, a Subsidiary Guarantor would be considered
insolvent if, at the time it incurred its Subsidiary Guarantee, either (i) the
fair market value (or fair saleable value) of its assets is less than the amount
required to pay the probable liability on its total existing indebtedness and
liabilities (including contingent liabilities) as they become absolute and
mature or (ii) it is incurring obligations beyond its ability to pay as such
obligations mature or become due.
The Boards of Directors and management of each of the Company, Custom Foods
and Quality Foods believed, at the time of issuance of the Notes and the
guarantees of the Notes, that each Subsidiary Guarantor (i) was (a) neither
insolvent nor rendered insolvent thereby, (b) in possession of sufficient
capital to meet its obligations as the same mature or become due and to operate
its business effectively and (c) incurring obligations within its ability to pay
as the same mature or become due and (ii) had sufficient assets to satisfy any
probable judgment against it in any pending action. There can be no assurance,
however, that such beliefs will prove to be correct or that a court passing on
such questions would reach the same conclusions.
CONTROLLING STOCKHOLDER
Atlantic Equity Partners, L.P., a Delaware limited partnership ("AEP"), of
which First Atlantic is the investment manager, owns 48.8% and 97.2% of CFP
Group's fully-diluted common stock and voting common stock, respectively. As
controlling stockholder, AEP is able, subject to certain contractual
limitations, to determine the outcome of any corporate transaction or other
matter submitted to the stockholders of CFP Group for approval, including
mergers, consolidations or the sale of all or substantially all of the assets of
CFP Group, or any of its subsidiaries (including the Company). In addition, AEP
has the ability to elect a majority of CFP Group's Board of Directors and the
Boards of Directors of its subsidiaries (including the Company). See "Principal
Stockholders" and "Certain Transactions -- Stockholders' Agreement."
RESTRICTIVE COVENANTS AND ASSET ENCUMBRANCES
The Bank Credit Agreement and the Indenture contain numerous restrictive
covenants, which limit the discretion of the management of CFP Group and the
Company with respect to certain business matters. These covenants place
significant restrictions on, among other things, the ability of CFP Group and
the Company to incur additional indebtedness, to create liens or other
encumbrances, to pay dividends or make other restricted payments, to make
investments, loans and guarantees and to sell or otherwise dispose of a
substantial portion of assets to, or merge or consolidate with, another entity.
The Bank Credit Agreement also contains a number of financial covenants that
require CFP Group and the Company to meet certain financial ratios and tests and
provide that a "change of control" will constitute an event of default. See "The
Quality Foods Acquisition" and "Description of Notes -- Certain Covenants." A
failure to comply with the obligations contained in the Bank Credit Agreement or
the Indenture, if not cured or waived, could permit acceleration of the related
indebtedness and acceleration of indebtedness under other instruments that
contain cross-acceleration or cross-default provisions. In addition, the
obligations of CFP Group and the Company under the Bank Credit Agreement are
secured by substantially all of their respective assets. In the case of an event
of default under the Bank Credit Agreement, the lenders under the Bank Credit
Agreement would be entitled to exercise the remedies available to a secured
lender under applicable law. If CFP Group or the Company were obligated to repay
all or a significant portion of its indebtedness, there can be no assurance that
CFP Group or the Company would have sufficient cash to do so or that CFP Group
or the Company could successfully refinance such indebtedness. Other
indebtedness of CFP Group and the Company that may be incurred in the future may
contain financial or other covenants more restrictive than those applicable to
the Bank Credit Agreement or the Notes.
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ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
The Old Notes are designated for trading in the PORTAL market. There is no
established trading market for the New Notes. Although the Initial Purchasers
have advised the Company that they currently intend to make a market in the New
Notes, they are not obligated to do so and it may discontinue such market-making
at any time without notice. The Company does not currently intend to list the
New Notes on any securities exchange or to seek approval for quotation through
any automated quotation system. Accordingly, there can be no assurance as to the
development of any market or the liquidity of any market that may develop for
the New Notes. If such a market were to exist, no assurance can be given as to
the trading prices of the New Notes. Future trading prices of the New Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on January 28, 1997 (the "Issue
Date") to the Initial Purchasers, who placed the Old Notes with institutional
investors. In connection therewith, the Company and the Initial Purchasers
entered into the Registration Rights Agreement, pursuant to which the Company
agreed, for the benefit of the Holders of the Old Notes, that the Company would,
at its sole cost, (i) within 90 days following the original issuance of the Old
Notes, file with the Commission a Registration Statement (of which this
Prospectus is a part) under the Securities Act with respect to an issue of a
series of new notes of the Company identical in all material respects to the
series of Old Notes (except that such New Notes would not contain terms with
respect to transfer restrictions) and (ii) cause such Registration Statement to
be declared effective under the Securities Act within 150 days following the
original issuance of the Old Notes. Upon the effectiveness of the Registration
Statement, the Company will offer, pursuant to this Prospectus, to the Holders
of the Old Notes the opportunity to exchange their Old Notes for a like
principal amount of New Notes, to be issued without a restrictive legend and
which may, generally, be reoffered and resold by the holder without restrictions
or limitations under the Securities Act. The term "Holder" with respect to the
Exchange Offer means any person in whose name Old Notes are registered on the
books of the Company or any other person who has obtained a properly completed
bond power from the registered holder.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by any holder of
such New Notes (other than any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 promulgated under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, PROVIDED that such New Notes are acquired in the ordinary course
of such Holder's business, such Holder has no arrangement or understanding with
any person to participate in the distribution of such New Notes and neither such
Holder nor any other such person is engaging in or intends to engage in a
distribution of such New Notes. Since the Commission has not considered the
Exchange Offer in the context of a no-action letter, there can be no assurance
that the staff of the Commission would make a similar determination with respect
to the Exchange Offer. Any Holder who is an affiliate of the Company or who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes cannot rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a resale transaction.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company). The
Company has agreed that, for a period of 120 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect the Exchange
Offer, (ii) the Exchange Offer is not
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consummated within 180 days of the Issue Date unless the Exchange Offer has
commenced, in which case, the Exchange Offer is not consummated within 30 days
after the date on which the Exchange Offer commenced, (iii) in certain
circumstances, the Initial Purchasers so request after the consummation of the
Exchange Offer or (iv) in certain circumstances, any Holder that is not eligible
to participate in the Exchange Offer or any Holder that participates in the
Exchange Offer and such Holder does not receive New Notes on the date of the
exchange that may be sold without restriction under state and Federal securities
laws (other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act) and so notifies the Company
within 60 days after such Holder first becomes aware of such restriction and
provides the Company with a reasonable basis for its conclusion, in the case of
each of clauses (i)-(iv) of this sentence, then the Company will promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
Notice") and, at its cost, (a) as promptly as practicable, file a shelf
registration statement covering resales of the Notes (the "Shelf Registration
Statement"), (b) use all reasonable efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act by the 60th day
after the delivery of the Shelf Notice (or promptly in the event of a request by
the Initial Purchaser) and (c) use all reasonable efforts to keep the Shelf
Registration Statement effective until three years after its effective date, or
such shorter period ending when (i) all Notes covered by the Shelf Registration
Statement have been sold in the manner set forth and as contemplated therein or
(ii) a subsequent Shelf Registration Statement covering all unregistered Old
Notes has been declared effective under the Securities Act. The Company will, in
the event of the filing of a Shelf Registration Statement, provide to each
Holder of the Old Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such Holder when the Shelf Registration
Statement for the Old Notes has become effective and take certain other actions
as are required to permit unrestricted resales of the Old Notes. A Holder of Old
Notes that sells such Old Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such a Holder (including certain
indemnification obligations). In addition, each Holder of the Old Notes will be
required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have its Old Notes included in the Shelf Registration Statement and
to benefit from the provisions regarding liquidated damages set forth in the
following paragraph.
In the event that either (i) the Registration Statement is not filed with
the Commission on or prior to the 90th calendar day following the Issue Date or
(ii) the Exchange Offer is not consummated, or the Shelf Registration Statement
is not declared effective on or prior to the 180th calendar day following the
Issue Date, the Company will pay increased cash interest to each Holder of the
Old Notes during the first 30 days following the 90-day period referred to in
(i) above or the first 90 days following the 180-day period referred to in (ii)
in an amount equal to 0.25% per annum on the Old Notes. The amount of the cash
interest will increased by an additional 0.25% per annum for each subsequent
30-day period in the case of (i) above or 90-day period in the case of (ii)
above, up to a maximum amount of additional cash interest of 1.50% per annum.
All accrued cash interest shall be paid to record holders of the Old Notes by
wire transfer of immediately available funds or by federal funds check by the
Company on each Interest Payment Date. Upon (x) the filing of the Registration
Statement in the case of clause (i) above, (y) the effectiveness of the
Registration Statement in the case of clause (ii) above or (z) the consummation
of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as
the case may be, in the case of clause (iii) above, and provided that none of
the conditions set forth in clauses (i), (ii) and (iii) above continues to
exist, such additional interest shall cease to accrue on the Old Notes from the
date of such filing, effectiveness or consummation.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the
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Registration Rights Agreement, a copy of which has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
The Old Notes are designated for trading in the PORTAL market. To the extent
Old Notes are tendered and accepted in the Exchange Offer, the principal amount
of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, Holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement and such Old Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for the Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes have
been registered under the Securities Act and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing for
an increase in the interest rate on the Old Notes under certain circumstances
relating to the Registration Rights Agreement, which provisions will terminate
upon the consummation of the Exchange Offer. The New Notes will evidence the
same debt as the Old Notes and will be entitled to the benefits of the Indenture
under which the Old Notes were, and the New Notes will be, issued.
As of the date of this Prospectus, $115,000,000 aggregate principal amount
of the Old Notes are outstanding. The Company has fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will initially be sent. As of such date, there were registered
Holders of the Old Notes.
Holders of the Old Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law (the "DGCL") or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral notice (confirmed in writing) oral or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of the exchange of Old Notes.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering Holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"The Exchange Offer--Fees and Expenses."
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EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., New York City
time, on the next business day after each previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under "The Exchange Offer--Conditions" shall not have
been satisfied, to terminate the Exchange Offer, by giving oral notice
(confirmed in writing) or written notice of such delay, extension or termination
to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any
manner. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by a public announcement thereof. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Exchange Offer for a period of five to 10 business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five- to 10-business-day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from January 28, 1997. No interest will be
paid on the Old Notes accepted for exchange.
PROCEDURES FOR TENDERING
The tender of Old Notes by a Holder thereof pursuant to one of the
procedures set forth below and the acceptance thereof by the Company will
constitute a binding agreement between such Holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal. This Prospectus, together with the Letter of Transmittal, will
first be sent on or about , 1997, to all Holders of Old Notes known
to the Company and the Exchange Agent.
Only a Holder of the Old Notes may tender such Old Notes in the Exchange
Offer. A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, or an Agent's Message, including any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) the certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Old Notes, Letter of
Transmittal or Agent's Message and other required documents must be received by
the Exchange Agent at the address set forth below under "Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration Date.
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The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND PROPER INSURANCE BE
OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD
NOTES SHOULD BE SENT TO THE COMPANY.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on such beneficial owner's own behalf, such beneficial owner
must, prior to completing and executing the Letter of Transmittal or delivering
an Agent's Message and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered Holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined herein) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered Holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
promulgated under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered Holder
as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, adminstrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent
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nor any other person shall incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that the Company determines are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
By tendering, each Holder will represent to the Company, among other things,
that (i) the New Notes acquired by the Holder and any beneficial owners of Old
Notes pursuant to the Exchange Offer are being obtained in the ordinary course
of business of the persons receiving such New Notes, (ii) neither the Holder nor
such beneficial owner has an arrangement with any person to participate in the
distribution of such New Notes, (iii) neither the Holder nor such beneficial
owner nor any such other person is engaging in or intends to engage in a
distribution of such New Notes and (iv) neither the Holder nor any such other
person is an "affiliate," as defined under Rule 405 promulgated under the
Securities Act, of the Company. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company), may
participate in the Exchange Offer but may be deemed an "underwriter" under the
Securities Act and, therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, or
an Agent's Message, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at one of the addresses set forth below under "The Exchange
Offer--Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) or an Agent's Message, together with
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the certificate(s) representing the Old Notes, or a Book-Entry Confirmation,
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) or an Agent's Message, as well as the certificate(s)
representing all tendered Old Notes in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and all other document required by
the Letter of Transmittal are received by the Exchange Agent within three
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the persons withdrawing the tender and (iv) specify the name in which any
such Old Notes are to be registered, if different from that of the Depositor. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company in its sole discretion, which determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no New Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered
by following one of the procedures described above under "The Exchange Offer--
Procedures for Tendering" at any time prior to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Old Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
(a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or
32
<PAGE>
(b) any action or proceeding is instituted or threatened in any court or
by any governmental agency that might materially impair the ability of the
Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect
to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall deem necessary for the consummation of the Exchange Offer.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering Holders (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer procedures described
above, such Old Notes will be credited to an account maintained with such Book-
Entry Transfer Facility), (ii) extend the Exchange Offer and retain all Old
Notes tendered prior to the expiration of the Exchange Offer, subject, however,
to the rights of Holders to withdraw such Old Notes (see "The Exchange Offer--
Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect
to the Exchange Offer and accept all properly tendered Old Notes which have not
been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and the Company
will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during such
five- to 10-business-day period.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND TO 4:30 P.M.: BY OVERNIGHT COURIER AND BY
United States Trust Company United States Trust Company HAND AFTER 4:30 P.M.:
of New York of New York United States Trust Company
P.O. Box 843 111 Broadway of New York
Cooper Station New York, New York 10006 770 Broadway, 13th Floor
New York, New York 10276 Attention: Lower Level New York, New York 10003
Attention: Corporate Trust Corporate Trust Window Attention: Corporate Trust
Services Redemption Unit
FOR INFORMATION CALL:
800-548-6565
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
33
<PAGE>
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other person) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less accrued original issue discount, as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. The expenses of the Exchange
Offer and the unamortized expenses related to the issuance of the Old Notes will
be amortized over the term of the New Notes.
34
<PAGE>
THE QUALITY FOODS ACQUISITION
THE ACQUISITION
On December 31, 1996, CFP Holdings completed the acquisition of Quality
Foods pursuant to the Acquisition Agreement among Quality Foods, the limited
partners of Quality Foods, the stockholders of the two general partners of
Quality Foods (the "General Partners"), CFP Holdings and the other signatories
thereto. Pursuant to the Acquisition Agreement, CFP Holdings acquired all of the
issued and outstanding capital stock of the General Partners and substantially
all of the limited partnership interests of Quality Foods owned by its limited
partners. The remaining limited partnership interests were exchanged by certain
members of management of Quality Foods for common stock of CFP Group, which
represents, in the aggregate, approximately 7.4% of the fully-diluted common
stock of CFP Group. Immediately following the acquisition of all such interests,
CFP Group contributed the Rollover Interests to CFP Holdings and CFP Holdings
then contributed the limited partnership interests acquired pursuant to the
Acquisition Agreement and the Rollover Interests to QF Acquisition Corp. The
Quality Foods partnership thereby terminated and QF Acquisition Corp. became a
wholly-owned subsidiary of CFP Holdings. Simultaneously with the consummation of
the foregoing, each person owning capital stock of CFP Holdings exchanged each
share of capital stock held by such person for an equivalent share of capital
stock of CFP Group (the "Recapitalization"). See "Principal Stockholders." In
addition, in connection with the consummation of the Acquisition, CFP Group
assumed all obligations of CFP Holdings pursuant to the CFP Holdings 1995 Stock
Option Plan, whereupon each issued and outstanding option to acquire nonvoting
capital stock of CFP Holdings was converted into an option to acquire equivalent
shares of nonvoting common stock of CFP Group.
The Company initially paid $64.0 million for the issued and outstanding
shares of the General Partners and all the limited partnership interests
(excluding the Rollover Interests) of Quality Foods, and refinanced and assumed
$23.2 million of indebtedness of Quality Foods. The Acquisition Agreement
provided for a dollar-for-dollar post-closing adjustment of the purchase price
in the event that closing working capital of Quality Foods was less than or
greater than $10.1 million. "Closing working capital" is defined as total
current assets less total current liabilities of Quality Foods and the General
Partners (on a combined basis), subject to certain specified exceptions.
Pursuant to such post-closing adjustment provisions, the cash purchase price
paid to the Sellers was reduced by $354,000 to $63.7 million.
The Acquisition Agreement contains certain customary representations,
warranties and covenants. With certain exceptions, the representations and
warranties expire 30 days following the receipt by CFP Holdings of Quality
Foods' audited consolidated financial statements for the fiscal year ending
December 31, 1997 (the "Initial Survival Date"). The Acquisition Agreement
requires the stockholders of the General Partners and the limited partners of
Quality Foods (collectively, the "Sellers") to indemnify CFP Holdings and its
affiliates for inaccuracies in the representations and warranties in the
Acquisition Agreement, and for the failure of any such party to comply with
covenants made in the Acquisition Agreement. In order to secure the indemnity
obligations of the Sellers, $5.0 million of the purchase price otherwise payable
to the Sellers was placed in escrow until (i) the seventh anniversary of the
closing of the Acquisition, subject to the release of $2.9 million (less any
claims previously made against the escrow, plus interest accrued thereon) after
the Initial Survival Date and (ii) the release on the fifth anniversary of the
closing of the Acquisition of all but $1.0 million (plus the sum of (x) any
claims previously made against the escrow and (y) $100,000, to the extent
certain environmental matters relating to the Philadelphia facility have not
been resolved by such time, plus interest accrued thereon) of the remaining
escrowed amount. Subject to certain exceptions, the indemnification obligations
of the Sellers with respect to inaccuracies in representations and warranties
and breaches of covenants is subject to a deductible of $500,000 and an
aggregate maximum liability of $7.0 million.
35
<PAGE>
FINANCING OF THE ACQUISITION
In connection with the Acquisition and certain other transactions referred
to herein, $113.3 million was required, the sources and uses of which were as
follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
Sources of Funds:
Cash on hand................................................................. $ 6,629
Bank Credit Agreement(1)
Revolving Credit Facility.................................................. 3,686
Term Loans................................................................. 76,000
Bridge Notes................................................................. 25,000
Rollover Interests........................................................... 1,500
Equity investment in CFP Group by Quality Foods' management.................. 500
-------------
Total sources............................................................ $ 113,315
-------------
-------------
Uses of Funds:
Cash purchase price paid to Sellers--net of post-closing adjustment.......... $ 63,680
Rollover Interests........................................................... 1,500
Refinance Quality Foods' and CFP Holdings' indebtedness...................... 37,585
Repurchase of CFP Holdings' outstanding common stock(2)...................... 2,044
Loans to Quality Foods' management for equity investment..................... 343
Payment of estimated transaction fees and expenses(3)........................ 8,163
-------------
Total uses............................................................... $ 113,315
-------------
-------------
</TABLE>
- ------------------------
(1) For a description of the Revolving Credit Facility and the Term Loans, see
"Description of Bank Credit Agreement."
(2) Represents purchase of equity interests of certain former employees and
stockholders of CFP Holdings.
(3) Includes fees and expenses paid by the Company in connection with the
Acquisition, the Bridge Notes and the Bank Credit Agreement.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds received by the Company from the sale of the Old Notes were $109.8
million after deducting underwriting discounts and offering expenses. The net
proceeds from the issuance of the Old Notes were used (i) to repay $66.0 million
principal amount of the Term Loans, (ii) to repay $25.0 million of Bridge Notes,
(iii) to fund the payment of a $16.0 million cash distribution to the holders of
CFP Group's Class A Voting and Nonvoting Common Stock (the "Distribution") and
(iv) to repay $2.8 million of borrowings under the Revolving Credit Facility.
The following is a description of the sources and uses of proceeds of the
Offering.
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
Sources:
Old Notes Offering........................................................... $ 109,844
-------------
-------------
Uses:
Repay Term Loans............................................................. $ 66,000
Repay Bridge Notes........................................................... 25,000
Fund the Distribution........................................................ 16,000
Repay borrowings under the Revolving Credit Facility......................... 2,844
-------------
Total uses............................................................. $ 109,844
-------------
-------------
</TABLE>
Borrowings under the Revolving Credit Facility and the Term Loan A mature in
June 2002. On the date hereof, the Term Loan A bears interest at the rate of
10 1/4% per annum and borrowings under the Revolving Credit Facility bear
interest at the rate of 7 31/32% per annum.
36
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of CFP Group
at March 31, 1997. The Exchange Offer will not affect the Company's
capitalization.
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
<S> <C>
(IN THOUSANDS)
Short-term debt, including current maturities of long-term debt................................... $ 1,991
--------------
--------------
Long-term debt:
Capital lease obligations....................................................................... 5,862
Industrial revenue bonds and other debt......................................................... 7,877
Bank Credit Agreement
Term Loans.................................................................................... 8,625
Revolving Credit Facility..................................................................... 500
11 5/8% Senior Guaranteed Notes Due 2004........................................................ 115,000
--------------
Total long-term debt(1)....................................................................... 137,864
--------------
Redeemable common stock........................................................................... 2,319
Common stockholders' deficiency................................................................... (19,383)
--------------
Total capitalization............................................................................ $ 120,800
--------------
--------------
</TABLE>
- ------------------------
(1) For a description of the Company's long-term debt, see Note 7 to CFP Group's
Consolidated Financial Statements.
37
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
The Unaudited Pro Forma Condensed Combined Statements of Operations for the
year ended September 30, 1996 and for the six months ended March 31, 1997 give
effect to the Acquisition, the Offering and the application of the net proceeds
therefrom and the other transactions referred to herein, as if each of the
foregoing had occurred on October 1, 1995. The acquisition of Quality Foods has
been accounted for as a purchase.
The Unaudited Pro Forma Condensed Combined Statements of Operations should
be read in conjunction with the "Use of Proceeds," "Capitalization," "Selected
Historical Financial Statements of CFP Group," "Selected Historical Financial
Statements of Quality Foods" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
Prospectus. The pro forma data do not purport to represent what the Company's
actual results of operations would have been had such transactions in fact
occurred on such dates. The pro forma statement of operations also does not
purport to project the results of operations of the Company for the current year
or for any other period.
38
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
CFP GROUP QUALITY FOODS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS (1) PRO FORMA
----------- ------------- --------------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales...................................................... $ 65,996 $ 90,649 $ 156,645
Cost of sales.................................................. 53,818 69,254 123,079
----------- ------------- -----------
Gross profit................................................... 12,178 21,395 33,573
Operating expenses............................................. 5,512 7,720 $ 2,696(2) 15,635
(293)(3)
Other charges.................................................. 4,996(4) 1,288(5) 6,284
----------- ------------- ------- -----------
Income (loss) from operations................................ 1,670 12,387 (2,403) 11,654
Interest expense............................................... 3,232 1,851 11,707(6) 16,790
----------- ------------- ------- -----------
Income (loss) before income taxes............................ (1,562) 10,536 (14,110) (5,136)
Provision (benefit) for income taxes........................... (409) 4,214(7) (5,644)(8) (1,839)
----------- ------------- ------- -----------
Net income (loss)............................................ $ (1,153) $ 6,322 $ (8,466) $ (3,297)
----------- ------------- ------- -----------
----------- ------------- ------- -----------
OTHER DATA:
Pro forma EBITDA (9)......................................... $ 24,598
Depreciation and amortization................................ 5,862
Cash interest expense (10)................................... 15,713
Ratio of earnings to fixed charges (11)...................... --
</TABLE>
<TABLE>
<CAPTION>
CFP GROUP QUALITY FOODS
HISTORICAL HISTORICAL
SIX MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, DECEMBER 31, PRO FORMA
1997 1996 ADJUSTMENTS (1) PRO FORMA
----------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Net sales...................................................... $ 60,529 $ 21,049 $ 81,578
Cost of sales.................................................. 52,276 18,153 70,429
----------- ------------- -----------
Gross profit................................................... 8,253 2,896 11,149
Operating expenses............................................. 7,474 1,729 $ 665(2) 8,006
(1,862)(3)
Other charges.................................................. 3,325 (2,986)(3) 339
----------- ------------- ------- -----------
Income from operations....................................... 779 (2,158) 4,183 2,804
Interest expense............................................... 4,681 503 3,028(6) 8,212
----------- ------------- ------- -----------
Income (loss) before income taxes............................ (3,902) (2,661) 1,155 (5,408)
Provision (benefit) for income taxes........................... (541) (1,064) (7) 462(8) (1,143)
----------- ------------- ------- -----------
Net income (loss)............................................ $ (3,361) $ (1,597) $ 693 $ (4,265)
----------- ------------- ------- -----------
----------- ------------- ------- -----------
OTHER DATA:
Pro forma EBITDA(9).......................................... $ 8,281
Depreciation and amortization................................ 3,566
Cash interest expense(10).................................... 7,935
Ratio of earnings to fixed charges(11)....................... --
</TABLE>
39
<PAGE>
CFP GROUP
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) The Acquisition occurred on December 31, 1996, and the results of operations
of CFP Group include the operations of Quality Foods from that date.
Simultaneous with the Acquisition, each person owning capital stock (or
options to acquire capital stock) of CFP Holdings exchanged their equity
interests for equivalent interests of capital stock (or options to acquire
capital stock) of CFP Group.
(2) For the year ended September 30, 1996, reflects the amortization expense of
$3.1 million per year for the amortization over 20 years of the excess of
the purchase cost of Quality Foods over net assets acquired ($62.6) million
less the historical amortization of Quality Foods' goodwill and organization
costs of $468,000 per year. For the six months ended March 31, 1997,
reflects amortization expense of $782,000 for the amortization of the excess
of the purchase cost of Quality Foods over net assets acquired, which would
have been recorded in the three months ended March 31, 1996, prior to the
acquisition, less the historical amortization of Quality Foods' goodwill and
organization costs of $117,000 recorded in the three months ended December
31, 1996.
(3) For the year ended September 30, 1996, reflects the net elimination of
$293,000 of expenses as follows: (i) legal and accounting fees and other
expenses of Quality Foods and CFP Holdings relating to the Acquisition of
$235,000 and (ii) the contractual decrease in management and consultant fees
of $128,000, offset by contractually increased executive salaries of
management of Quality Foods of $70,000. For the six months ended March 31,
1997, reflects the net elimination of $1.9 million from operating expenses
as follows: (i) closing bonuses to CFP Holdings' and Quality Foods'
management of $500,000, (ii) the contractual decrease in management and
consultant fees of $20,000, (iii) elimination of CFP Holdings' compensation
charges of $1.4 million relating to the repurchase of common stock issued in
connection with the exercise of stock options, offset by (iv) contractually
increased executive salaries of management of Quality Foods of $10,000. Also
for the quarter ended December 31, 1996, reflects the elimination of $3.0
million from other charges for expenses related to the acquisition of
Quality Foods.
(4) Represents the termination payment associated with the Sales Brokerage
Agreement.
(5) Represents facility start-up and relocation costs associated with the
Philadelphia Consolidation.
(6) Reflects the estimated increase in interest expense as if the Acquisition,
the Offering and the application of the estimated net proceeds therefrom and
the other transactions referred to herein had occurred on October 1, 1995.
In as much as the Bridge Notes and $66.0 million of the Term Loans, which
are being repaid from the net proceeds of the Offering, were not in
existence during the year ended September 30, 1996, no effect is given to
such borrowings. Pro forma interest expense is comprised of the following:
40
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, 1996 MARCH 31, 1997
------------------ ------------------
<S> <C> <C>
(IN THOUSANDS)
Interest expense on the Notes in the principal amount
of $115.0 million and Term Loans in the principal
amount of $10.0 million with an estimated weighted
average interest rate of 11.40%..................... $ 14,219 $ 3,554
Assumed average utilization of Revolving Credit
Facility............................................ (76) (36)
Amortization of deferred financing costs related to
the Offering and a portion of the Bank Credit
Agreement........................................... 1,026 277
Less interest expense and amortization related to
retired debt........................................ (3,462) (767)
------- -------
Net adjustment........................................ $ 11,707 $ 3,028
------- -------
------- -------
</TABLE>
A 1/8% increase in the assumed interest rates applicable to the Bank Credit
Agreement would increase pro forma interest expense by $14,000 per year.
(7) Quality Foods was taxed as a partnership for federal and state income tax
purposes prior to the Acquisition. Pro forma provision for income taxes and
pro forma net income reflect the pro forma effect of income taxes as if it
had been taxed as a C corporation.
(8) The provision (benefit) for income taxes is computed by applying the
estimated combined statutory rate of 40%.
(9) For the year ended September 30, 1996, pro forma EBITDA consists of EBITDA,
adjusted to eliminate the following non-recurring charges: (i) costs of $5.7
million associated with the termination of the Sales Brokerage Agreement by
Custom Foods consisting of (a) the $5.0 million cash payment, (b)
commissions of $570,000 and other costs of $99,000 paid under the Sales
Brokerage Agreement during the fiscal year and prior to the termination, (c)
$75,000 associated with a consulting agreement entered into in connection
with the termination, less (d) the incremental costs associated with an
additional in-house salesperson of $65,000; (ii) the facility start-up and
relocation costs related to the Philadelphia Consolidation of $1.3 million;
and (iii) the start-up costs for a new production line located in Custom
Foods' Kentucky facility of $119,000. For the six months ended March 31,
1997, pro forma EBITDA consists of EBITDA, adjusted to eliminate the
following non-recurring charges: (i) $65,000 associated with a consulting
agreement entered into in connection with the termination of the Sales
Brokerage Agreement; (ii) the elimination of the impact on cost of sales of
the purchase accounting write-up of Quality Foods inventory of $1.5 million;
and (iii) the facility start-up and relocation costs related to the
Philadelphia Consolidation of $339,000. EBITDA is the sum of income before
income taxes and interest, depreciation and amortization expense. EBITDA is
presented because it is a widely accepted financial indicator of a company's
ability to service indebtedness. However, EBITDA should not be considered as
an alternative to income from operations or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity. The Company's pro forma
EBITDA is derived as follows:
41
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, 1996 MARCH 31, 1997
------------------ -----------------
<S> <C> <C>
(IN THOUSANDS)
Loss before income taxes............................... $ (5,136) $ (5,408)
Non-recurring charges and expenses:
Custom Foods:
Net impact of the termination of the Sales
Brokerage Agreement by Custom Foods.............. 5,675 65
Start-up costs for new production line............. 119 --
Quality Foods:
Philadelphia Consolidation start-up and
relocation....................................... 1,288 339
Elimination of the impact on cost of sales of the
purchase accounting write-up of Quality Foods
inventory........................................ 1,507
Depreciation and amortization.......................... 5,862 3,566
Interest expense....................................... 16,790 8,212
------- -------
Pro forma EBITDA....................................... $ 24,598 $ 8,281
------- -------
------- -------
</TABLE>
(10) Cash interest expense for the year ended September 30, 1996, consists of
interest expense of $16.8 million less amortization of deferred financing
costs of $1.0 million and is exclusive of capitalized interest paid of
$593,000. Cash interest expense for the six months ended March 31, 1997,
consists of interest expense of $8.2 million less amortization of deferred
financing costs of $277,000.
(11) In calculating the ratio of earnings to fixed charges, earnings consist of
income before taxes plus fixed charges (excluding capitalized interest).
Fixed charges consist of interest expense (which includes amortization of
deferred financing costs) whether expensed or capitalized and one-third of
rental expense, deemed representative of that portion of rental expense
attributable to interest. Pro forma earnings were inadequate to cover fixed
charges by $5.7 million for the year ended September 30, 1996, and $5.4
million for the six months ended March 31, 1997.
42
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF QUALITY FOODS
The following Selected Historical Financial Data should be read in
conjunction with the financial statements and related notes of Quality Foods and
other financial data included elsewhere in this Prospectus. The balance sheet
data presented below as of December 31, 1992, 1993, 1994, 1995 and 1996 and the
statement of operations data presented below for the period July 20, 1992 to
December 31, 1992 and the years ended December 31, 1993, 1994, 1995 and 1996 are
derived from the audited financial statements of Quality Foods. The balance
sheet data as of July 19, 1992 and the statement of operations data for the year
ended December 31, 1991 and the period from January 1, 1992 to July 19, 1992 are
derived from the audited financial statements of William Cohen and Son Co.,
Inc., Quality Foods' predecessor.
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY(1) QUALITY FOODS
------------- ---------------------------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, JULY 20, 1992
1992 TO YEAR ENDED DECEMBER 31,
TO JULY 19, DECEMBER 31, -------------------------------
1992 1992 1993 1994 1995 1996
------------- ------------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................... $ 29,376 $ 26,225 $ 71,195 $ 84,817 $ 84,694 $ 90,582
Cost of sales..................................... 25,232 22,314 61,040 72,162 67,930 71,448
------------- ------------- --------- --------- --------- ---------
Gross profit...................................... 4,144 3,911 10,155 12,655 16,764 19,134
Operating expenses................................ 1,861 2,085 5,266 6,887 6,926 7,519
Other charges..................................... -- -- -- -- -- 4,716(2)
------------- ------------- --------- --------- --------- ---------
Income from operations.......................... 2,283 1,826 4,889 5,768 9,838 6,899
Interest expense.................................. 177 1,001 2,450 2,616 2,129 1,871
------------- ------------- --------- --------- --------- ---------
Income before income taxes and extraordinary
items......................................... 2,106 825 2,439 3,152 7,709 5,028
Provision for income taxes........................ 1,023 -- -- -- -- --
------------- ------------- --------- --------- --------- ---------
Income before extraordinary items............... 1,083 825 2,439 3,152 7,709 5,028
Extraordinary loss on early extinguishment of
debt............................................ -- -- -- 1,771 130 546
------------- ------------- --------- --------- --------- ---------
Net income...................................... 1,083 825 2,439 1,381 7,579 4,482
Pro forma income taxes(3)......................... -- 330 976 553 3,032 1,793
------------- ------------- --------- --------- --------- ---------
Pro forma net income............................ $ 1,083 $ 495 $ 1,463 $ 828 $ 4,547 $ 2,689
------------- ------------- --------- --------- --------- ---------
------------- ------------- --------- --------- --------- ---------
OTHER DATA:
EBITDA(4)......................................... $ 2,471 $ 2,172 $ 5,640 $ 6,523 $ 10,703 $ 8,206
EBITDA as a percentage of net sales............... 8.4% 8.3% 7.9% 7.7% 12.6% 9.1%
Net Cash provided by (used in) operating
activities...................................... 1,322 50 (88) 4,549 5,598 9,947
Net Cash used in investing activities............. (278) (11,724) (471) (5,277) (2,332) (4,556)
Net Cash (used in) provided by financing
activities...................................... (1,070) 11,796 695 688 (3,379) (5,106)
Depreciation and amortization..................... $ 188 $ 346 $ 751 $ 755 $ 865 $ 1,307
Capital expenditures(5)........................... 278 89 524 858 4,102 7,190
Ratio of earnings to fixed charges(6)............. 9.53x 1.78x 1.94x 2.12x 3.76x 3.64x
BALANCE SHEET DATA:
Working capital................................... $ 3,367 $ 802 $ 1,189 $ 886 $ 4,032 $ 8,440
Total assets...................................... 11,781 19,828 25,097 28,684 33,814 35,592
Total debt........................................ 947 15,636 17,694 22,137 20,225 5,728
Total stockholders' equity/partners' capital...... 6,798 1,841 2,917 2,521 8,888 7,260
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
43
<PAGE>
(1) Predecessor Company reflects the operations of William Cohen and Son Co.,
Inc.
(2) Other charges of $4.7 million consist of $1.6 million facility start-up and
relocation costs associated with the Philadelphia Consolidation and $3.1
million of acquisition related costs.
(3) Quality Foods was taxed as a partnership for federal and state income tax
purposes prior to the Acquisition. Pro forma provision for income taxes and
pro forma net income reflect the pro forma effect of income taxes as if it
had been taxed as a C corporation for all periods presented. Included in pro
forma income tax expense for the years ended December 31, 1994, 1995 and
1996 is an income tax benefit of $708,000, $52,000 and $218,000,
respectively, relating to the extraordinary item -- early extinguishment of
debt.
(4) EBITDA is the sum of income before income taxes and interest, depreciation
and amortization expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of a company's operating performance or as a
measure of liquidity.
(5) Capital expenditures for the year ended December 31, 1995 included $3.6
million related to the Philadelphia Consolidation and $506,000 of
maintenance capital expenditures. Capital expenditures for the year ended
December 31, 1996 included $6.8 million related to the Philadelphia
Consolidation and $413,000 of maintenance capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Financial Resources."
(6) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest.
44
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CFP GROUP
The following Selected Historical Consolidated Financial Data of CFP Group
should be read in conjunction with the consolidated financial statements and
related notes of CFP Group and other financial data included elsewhere in this
Prospectus. The balance sheet data presented below as of September 30, 1993,
1994, 1995 and 1996 and March 31, 1997 and the statement of operations data
presented below for the six months ended September 30, 1993 and March 31, 1997
and for the years ended September 30, 1994, 1995 and 1996 are derived from the
audited consolidated financial statements of CFP Group. The balance sheet data
presented below as of September 30, 1992 and March 31, 1993 and the statement of
operations data presented below for the year ended September 30, 1992 and the
six months ended March 31, 1993 have been derived from the combination of the
unaudited financial statements of CFP Group's predecessors, Center of the Plate
Foods, Inc. and Best Western Foods, Inc. The balance sheet data as of March 31,
1996 and the statement of operations data for the six months ended March 31,
1996 have been derived from CFP Group's unaudited financial statements.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY(1) CFP GROUP(2)
-------------------------- ------------------------------------------------------------------------
YEAR SIX MONTHS SIX MONTHS SIX MONTHS ENDED
ENDED ENDED ENDED YEAR ENDED SEPTEMBER 30, -----------------------
SEPTEMBER 30, MARCH 31, SEPTEMBER 30, -------------------------------- MARCH 31, MARCH 31,
1992 1993 1993 1994 1995 1996 1996 1997
------------- ----------- ------------- --------- --------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............. $ 71,591 $ 38,332 $ 44,285 $ 86,598 $ 61,543(3) $ 65,996 $ 30,335 $ 60,529
Cost of sales.......... 63,373 34,169 40,352 76,485 49,868 53,818 23,766 52,276
------------- ----------- ------------- --------- --------- ---------- ---------- -----------
Gross profit........... 8,218 4,163 3,933 10,113 11,675 12,178 6,569 8,253
Operating expenses..... 4,580 1,892 2,052 5,957 6,700 5,512 2,944 7,474
Other charges.......... 28,755(4) -- -- -- -- 4,996(5) 4,996(5) --
------------- ----------- ------------- --------- --------- ---------- ---------- -----------
Income (loss) from
operations......... (25,117) 2,271 1,881 4,156 4,975 1,670 (1,371) 779
Interest expense....... 3,717 1,906 1,307 2,443 2,632 3,232 1,512 4,681
------------- ----------- ------------- --------- --------- ---------- ---------- -----------
Income (loss) before
income taxes and
extraordinary
items.............. (28,834) 365 574 1,713 2,343 (1,562) (2,883) (3,902)
Provision (benefit) for
income taxes......... 650 463 265 851 1,189 (409) (662) (541)
------------- ----------- ------------- --------- --------- ---------- ---------- -----------
Income (loss) before
extraordinary
item............... (cx 29,484) (98) 309 862 1,154 (1,153) (2,221) (3,361)
Extraordinary (loss) on
early extinguishment
of debt.............. -- -- -- -- -- -- -- (4,489)
------------- ----------- ------------- --------- --------- ---------- ---------- -----------
Net income (loss).... $ (29,484) $ (98) $ 309 $ 862 $ 1,154 $ (1,153) $ (2,221) $ (7,850)
------------- ----------- ------------- --------- --------- ---------- ---------- -----------
------------- ----------- ------------- --------- --------- ---------- ---------- -----------
OTHER DATA:
EBITDA(6).............. $ 6,220 $ 3,070 $ 2,582 $ 6,003 $ 6,685 $ 3,758 $ (2,406) $ 3,026
EBITDA as a percentage
of net sales......... 8.7% 8.0% 5.8% 6.9% 10.9% 5.7% (7.9)% 5.0%
Net cash provided by
(used in) operating
activities........... 3,123 278 (427) 4,375 4,382 135 (1,102) 3,477
Net cash used in
investing
activities........... (7,576) (2,186) (606) (666) (1,785) (1,811) (1,921) (67,293)
Net cash (used in)
provided by financing
activities........... 5,997 523 308 (3,499) (2,807) 2,168 3,869 65,462
Depreciation and
amortization......... $ 2,582 $ 799 $ 701 $ 1,847 $ 1,710 $ 2,088 $ 1,035 $ 2,236
Interest expense....... 3,717 1,906 1,307 2,443 2,632 3,232 1,512 4,681
Capital expenditures... 19 1,214 445 1,515 5,054 3,009 545 1,674
Ratio of earnings to
fixed charges(7)..... -- 1.18x 1.41x 1.64x 1.83x -- -- --
BALANCE SHEET DATA:
Working capital........ $ 6,057 $ 9,225 $ 4,908 $ 4,309 $ 2,754 $ 3,153 $ 3,420 $ 14,702
Total assets........... 23,979 25,811 27,660 27,709 30,148 32,203 30,697 132,822
Total debt, redeemable
preferred stock and
redeemable common
stock................ 46,187 46,755 20,369 18,847 19,526 23,223 23,782 142,174
Total stockholders'
equity
(deficiency)......... (23,999)(4) (24,240)(4) 4,026 4,828 5,884 4,020 3,932 (19,383)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
45
<PAGE>
(1) Predecessor Company reflects the combined operations of Center of the Plate
Foods, Inc. and Best Western Foods, Inc. which were under common management
and common control for the periods presented.
(2) CFP Group became the parent of CFP Holdings on December 31, 1996 after the
recapitalization of CFP Holdings in a series of transactions whereby each
person owning capital stock (or options to acquire capital stock of CFP
Holdings) exchanged their equity interests for equivalent interest of
capital stock (or options to acquire capital stock) of CFP Group. CFP
Holdings commenced operations on April 1, 1993 after acquiring all of the
outstanding stock of Center of the Plate Foods, Inc., and all significant
operating assets of Best Western Foods, Inc. The CFP Group financial
information includes the operations of Quality Foods from the date of the
Acquisition.
(3) Sales declined during the year ended September 30, 1995 as a result of the
decline in sales to the Arby's restaurant chain. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(4) During the year ended September 30, 1992, Best Western Foods, Inc., one of
CFP Group's predecessors, wrote off goodwill of $28.8 million which resulted
in the stockholders' deficiency as of September 30, 1992 and March 31, 1993.
(5) Represents one-time costs associated with the termination of a Sales
Brokerage Agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(6) EBITDA is the sum of income before income taxes and interest, depreciation
and amortization expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of a company's operating performance or as a
measure of liquidity.
(7) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest (which includes amortization of deferred financing costs) and
one-third of rental expense, deemed representative of that portion of rental
expense estimated to be attributable to interest. Earnings were inadequate
to cover fixed charges by $28.8 million and $1.6 million for the years ended
September 30, 1992 and 1996, respectively, and by $2.9 million and $3.9
million for the six months ended March 31, 1996 and 1997, respectively.
46
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following should be read in conjunction with the Financial Statements of
CFP Group and Quality Foods and the notes thereto and the Unaudited Pro Forma
Condensed Combined Statements of Operations and notes thereto.
Prior to the Acquisition, Quality Foods maintained a December 31 fiscal year
end and reported interim results of thirteen equal four-week accounting periods.
Custom Foods' fiscal year end was the 52-or 53-week period ending on the
Saturday nearest to September 30 and its interim fiscal quarters were the
13-week periods ending on the Saturday nearest to December 31, March 31 and June
30. For ease of presentation, the Company has indicated the historical and pro
forma results for the periods ending near September 30 included herein as ending
on September 30. Following the Acquisition and the Recapitalization, the Company
changed its fiscal year end to the Saturday nearest to March 31.
IMPACT OF ACQUISITION
As of December 31, 1996, the Company acquired Quality Foods which became a
wholly owned subsidiary of CFP Holdings, Inc. Management believes the
Acquisition has positioned the Company as a leading developer, manufacturer and
marketer of value-added meat and poultry products sold to the food service
industry and manufacturers of packaged foods.
Following the Acquisition and consummation of the Offering, the Company's
results of operations will be significantly impacted by additional amortization
expense of approximately $3.1 million per year for 20 years arising from the
excess of purchase cost of Quality Foods over the net assets acquired and
increased interest expense related to the Offering. See "Liquidity and Financial
Resources."
CFP Group
The Company develops, manufactures and markets pre-cooked meat and poultry
products sold primarily to manufacturers of branded and private label packaged
foods and is a major supplier of frozen uncooked beef products to the Arby's
restaurant chain. The Company's pre-cooked operations have experienced
significant growth since 1992, due to strong growth in sales to Chef America and
other customers.
The Company's sales to Arby's declined significantly in fiscal 1995. Prior
to fiscal 1995, the Company supplied Arby's on a national basis. However, in the
first quarter of fiscal 1995, the Company entered into an 18-month contract to
supply Arby's on a regional basis, reducing the scope of its arrangement due to
a new competitive bidding process and a freight advantage enjoyed by certain
other suppliers. Under this contract, sales to Arby's declined from $61.0
million in fiscal 1994 to $26.2 million in fiscal 1995, resulting in an overall
28.9% decrease in the Company's net sales. Nevertheless, the Company's income
from operations during this period increased 19.7%, reflecting significant
growth in its higher margin, pre-cooked operations. In June 1996, following
completion of the expansion of its Kentucky facility, the Company entered into a
new three-year contract to once again supply Arby's on a national basis.
The Company's average net sales price per pound has declined each year since
1994, principally due to the reduction in beef costs, which were passed through
to Arby's pursuant to a cost-plus contract. Average gross profit per pound
increased in fiscal 1995 due to a change in product mix, lower pounds sold to
Arby's and increased pounds sold of higher margin value-added products. The
decline in average gross profit per pound in fiscal 1996 resulted principally
from increased pounds sold to Arby's, which carry a lower margin.
Due to capacity constraints and the growing needs of its customers, the
Company significantly broadened its manufacturing operations and created a
direct sales and marketing organization. As a result
47
<PAGE>
of this strategy, on January 8, 1996, the Company terminated the Sales Brokerage
Agreement and made a termination payment of $5.0 million in lieu of annual
commission payments. In connection with the termination of the Sales Brokerage
Agreement, the Company hired a salesperson who was previously employed by the
broker.
CFP Group and its subsidiary, CFP Holdings, are holding companies which have
no operations of their own and rely exclusively on their operating subsidiaries
for their cash flows. There are no restrictions on the payment of dividends by
the Company's operating subsidiaries to the Company.
CFP GROUP--RESULTS OF OPERATIONS
The following table set forth certain historical information for the years
ended September 30, 1994, 1995 and 1996, and the six month periods ended March
31, 1996 and 1997.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31, MARCH 31,
------------------------------- ------------ ------------
1994 1995 1996 1996 1997
--------- --------- --------- ------------ ------------
(IN THOUSANDS EXCEPT PER POUND DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................ $ 86,598 $ 61,543 $ 65,996 $ 30,335 $ 60,529
Cost of sales............................................ 76,485 49,868 53,818 23,766 52,276
--------- --------- --------- ------------ ------------
Gross profit............................................. 10,113 11,675 12,178 6,569 8,253
Operating expenses....................................... 5,957 6,700 5,512 2,944 7,474
Other charges............................................ -- -- 4,996 4,996 --
--------- --------- --------- ------------ ------------
Income from operations................................. 4,156 4,975 1,670 (1,371) 779
Interest expense......................................... 2,443 2,632 3,232 1,512 4,681
--------- --------- --------- ------------ ------------
Income (loss) before income taxes and extraordinary
items................................................ 1,713 2,343 (1,562) (2,883) (3,902)
Provision (benefit) for income taxes..................... 851 1,189 (409) (662) (541)
--------- --------- --------- ------------ ------------
Income (loss) before extraordinary item................ 862 1,154 (1,153) (2,221) (3,361)
Extraordinary (loss) on early extinguishment of debt..... - -- -- -- (4,489) (8)
--------- --------- --------- ------------ ------------
Net income (loss)...................................... $ 862 $ 1,154 $ (1,153) $ (2,221) $ (7,850)
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
OTHER DATA:
Net sales:
Value-added............................................ $ 25,628 $ 35,294 $ 36,391 $ 20,566 $ 41,486
Arby's................................................. 60,970 26,249 29,605 9,769 19,043
--------- --------- --------- ------------ ------------
Total................................................ $ 86,598 $ 61,543 $ 65,996 $ 30,335 $ 60,529
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
Pounds sold.............................................. 56,823 43,371 50,417 22,673 41,300
Average net sales price per pound........................ $ 1.52 $ 1.42 $ 1.31 $ 1.34 $ 1.47
Average gross profit per pound........................... $ 0.18 $ 0.27 $ 0.24 $ .29 $ .20
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31, MARCH 31,
------------------------------------- --------------- ---------------
1994 1995 1996 1996 1997
----------- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................................... 88.3 81.0 81.5 78.3 86.4
----- ----- ----- ----- -----
Gross profit............................................ 11.7 19.0 18.5 21.7 13.6
Operating expenses...................................... 6.9 10.9 8.4 9.7 12.3
Other charges........................................... -- -- 7.6 16.5 --
----- ----- ----- ----- -----
Income from operations................................ 4.8 8.1 2.5 (4.5) 1.3
Interest expense........................................ 2.8 4.3 4.9 5.0 7.7
----- ----- ----- ----- -----
Income (loss) before income taxes and extraordinary
item................................................ 2.0 3.8 (2.4) (9.5) (6.4)
Provision (benefit) for income taxes.................... 1.0 1.9 (0.6) (2.2) (0.9)
Income (loss) before extraordinary item............... 1.0 1.9 (1.8) (7.3) (5.5)
Extraordinary (loss) on early extinguishment of debt.... -- -- -- -- (7.4)
----- ----- ----- ----- -----
Net income (loss)..................................... 1.0% 1.9% (1.8)% (7.3)% (12.9)%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO SIX MONTHS ENDED MARCH 31, 1996.
NET SALES. Net sales increased to $60.5 million in the six month ended March
31, 1997 from $30.3 million in the six month period ended March 31, 1996.
Approximately $18.3 million of this $30.2 million increase was due to the
inclusion of Quality Foods' sales subsequent to the Acquisition. Net sales to
Arby's increased $9.3 million during this period as a result of increases in
sales to several Eastern U.S. markets pursuant to the new three-year contract.
Sales of Custom Food's value-added products increased moderately over the prior
period, principally as a result of increased sales to new and existing
customers. Total pounds sold by the Company increased 82% while the average net
sales price per pound increased 10%. Pounds sold increased primarily due to the
Quality Foods' results being included for three months and the increased Arby's
sales. The net sales price per pound increased primarily from Quality Foods'
sales which are at higher per pound prices than the sales to Custom Foods'
customers.
GROSS PROFIT. Gross profit increased to $8.3 million for the six months
ended March 31, 1997 from $6.6 million for the six months ended March 31, 1996.
All of the increase in gross profit was attributable to Quality Foods. The gross
margin decreased to 13.6% for the six months ended March 31, 1997 from 21.7% for
the six months ended March 31, 1996. The decline of the gross margin as a
percent of sales was a result of increased costs for raw materials of Custom
Foods' value added products which were not passed on to customers, an increase
in sales to Arby's that have a relatively lower gross margin compared to sales
to other customers, and lower margins on sales by Quality Foods. In connection
with the purchase accounting adjustments made for the acquisition of Quality
Foods, the Company increased the carrying value of the Quality Foods work in
process and finished goods inventory by $1.5 million to reflect the fair value
of the inventory purchased. The subsequent sale of this higher valued inventory
at lower margins reduced the overall gross profit for the quarter ended March
31, 1997.
OPERATING EXPENSES. Operating expenses increased to $7.5 million for the
six months ended March 31, 1997, from $2.9 million for the six months ended
March 31, 1996, principally attributable to (i) the inclusion of Quality Foods
operating expenses from the December 31, 1996 acquisition date forward of
approximately $1.8 million; (ii) compensation expense of $1.4 million recorded
in connection with the Company's repurchase of common stock from employees
immediately subsequent to their exercise of stock options; (iii) Acquisition and
Offering closing bonuses to CFP Holdings and Quality Foods management of
$500,000; and (iv) amortization of goodwill related to the Acquisition of
$782,000.
49
<PAGE>
OTHER CHARGES. Other charges for the six months ended March 31, 1996
consisted of $5.0 million for termination of the Sales Brokerage Agreement in
January 1996.
INCOME FROM OPERATIONS. Income from operations increased to $800,000 for
the six months ended March 31, 1997 from a loss of $1.4 million for the six
months ended March 31, 1996, as a result of the lower gross margins being offset
by the lack of other charges as discussed above.
INTEREST EXPENSE. Interest expense increased to $4.7 million for the six
months ended March 31, 1997 compared to $1.5 million for the six months ended
March 31, 1996, primarily attributable to the Offering and the indebtedness
incurred to finance the Acquisition.
PROVISION FOR INCOME TAXES. The benefit for income taxes decreased from
$662,000 for the six months ended March 31, 1996 to $541,000 for the six months
ended March 31, 1997. The income tax benefit for the six months ended March 31,
1996 was less than the statutory rate due primarily to non-deductible expenses
including officer's life insurance and goodwill amortization. The income tax
benefit for the six months ended March 31, 1997 was less than the statutory rate
due primarily to the Company providing a valuation allowance against the
deferred tax asset.
EXTRAORDINARY LOSS. The extraordinary loss of $4.5 million for the six
months ended March 31, 1997 primarily represents the write-off of deferred
financing costs due to early payment of long-term debt, partially offset by
discounts gained due to early repayment of certain long-term debt.
NET LOSS. Net loss increased to $7.9 million for the six months ended March
31, 1997 from $2.2 million for the six months ended March 31, 1996 due to the
net impact of the foregoing items.
FISCAL YEAR ENDED SEPTEMBER 30, 1996 ("FISCAL 1996") COMPARED TO FISCAL YEAR
ENDED SEPTEMBER 30, 1995 ("FISCAL 1995")
NET SALES. Net sales increased to $66.0 million in fiscal 1996 from $61.5
million in fiscal 1995, as a result of increases in sales to Arby's and other
customers. Sales to Arby's increased in fiscal 1996 as a result of additional
sales to several Eastern U.S. markets pursuant to the new three-year contract.
Sales of value-added products by Custom Food Products increased slightly over
the prior year, principally as a result of sales to new and existing customers.
Total pounds sold by the Company increased 16.2% while the average selling price
declined 7.7%. The average selling price decline primarily as a result of a
reduction in beef prices from 1995 to 1996, which were passed through to Arby's
under the cost-plus pricing structure of the contract.
GROSS PROFIT. Gross profit increased to $12.2 million in fiscal 1996 from
$11.7 million in fiscal 1995. The gross margin declined slightly to 18.5% in
fiscal 1996 from 19.0% in fiscal 1995 principally as a result of increased sales
to Arby's which are lower margin sales.
OPERATING EXPENSES. Operating expenses decreased to $5.5 million in fiscal
1996 from $6.7 million in fiscal 1995, a 17.7% decrease, principally
attributable to the net effect of the elimination of sales commissions as a
result of the termination of the Sales Brokerage Agreement.
OTHER CHARGES Other charges in fiscal 1996 consisted of $5.0 million for
termination of the Sales Brokerage Agreement in January 1996.
INCOME FROM OPERATIONS. Income from operations decreased to $1.7 million in
fiscal 1996 from $5.0 million in fiscal 1995, primarily due to other charges
noted above.
INTEREST EXPENSE. Interest expense increased to $3.2 million in fiscal 1996
from $2.6 million in fiscal 1995, a 22.8% increase, primarily as a result of
increased capitalized lease obligations.
PROVISION (BENEFIT) FOR INCOME TAXES. Benefit for income taxes was $400,000
for fiscal 1996, a decrease of $1.6 million from the $1.2 million provision for
income taxes for fiscal 1995, calculated using our effective tax rates on income
(loss) before income taxes. The effective tax rate benefit of 26.2% for fiscal
1996 changed from the effective income tax rate provision of 50.7% for fiscal
1995 principally as a result of the loss before income taxes in fiscal 1996 as
compared to the income before income taxes in fiscal
50
<PAGE>
1995. The effective tax rate of the income tax benefit in fiscal 1996 differed
from the statutory rate as a result of non-deductible goodwill amortization,
officers' life insurance and other non-deductible expenses.
NET INCOME. A net loss of $1.2 million was incurred in fiscal 1996. This
was a decrease of $2.4 million from the $1.2 million net income in fiscal 1995,
due to the net impact of the foregoing items.
FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO THE FISCAL YEAR ENDED
SEPTEMBER 30, 1994
NET SALES. Net sales declined to $61.5 million in fiscal year 1995 from
$86.6 million in fiscal 1994, a 28.9% decrease, attributable to a decline in
sales to Arby's, partially offset by increases in sales of value-added products
to other customers. Net sales of value-added products increased to $35.3 million
in fiscal 1995 from $25.6 million in fiscal 1994, a 37.7% increase, primarily
attributable to increased sales to Chef America, as well as increased sales of
new products to new and existing customers. Net sales to Arby's decreased to
$26.2 million in fiscal 1995 from $61.0 million in fiscal 1994, a 56.9%
decrease, as a result of the Company's change from a national to a regional
supplier to the Arby's restaurant chain.
GROSS PROFIT. Gross profit increased to $11.7 million in fiscal 1995 from
$10.1 million in fiscal 1994. Gross profit from value-added products increased
substantially in fiscal 1995, attributable to the increase in net sales, a
reduction in the overall cost of raw materials, and an improvement in
manufacturing operations and packaging costs as the Company commenced operations
at its Kentucky facility in April 1995. On the other hand, gross profit from
Arby's decreased substantially in fiscal 1995 due to the decreased volume
associated with the 18-month contract entered into in the beginning of fiscal
1995. The gross margin increased to 19.0% in fiscal 1995 from 11.7% in fiscal
1994.
OPERATING EXPENSES. Operating expenses increased to $6.7 million in fiscal
1995 from $6.0 million in fiscal 1994, principally attributable to increases in
general and administrative expenses due to a newly created bonus plan and the
hiring of additional management personnel. Operating expenses as a percentage of
net sales increased to 10.9% in fiscal 1995 from 6.9% in fiscal 1994.
INCOME FROM OPERATIONS. Income from operations increased to $5.0 million in
fiscal 1995 from $4.2 million in fiscal 1994, a 19.7% increase, as a result of
the factors discussed above.
INTEREST EXPENSE. Interest expense increased to $2.6 million in fiscal 1995
from $2.4 million in fiscal 1994, a 7.7% increase, due to higher outstanding
debt balances.
PROVISION FOR INCOME TAXES. Income tax provision increased to $1.2 million
in fiscal 1995 from $0.8 million in fiscal 1994. The effective tax rate
increased to 50.7% for fiscal 1995 from 49.7% for fiscal 1994 principally as a
result of the effect of non-deductible goodwill amortization, officers' life
insurance and other non-deductible expenses on differing levels of income.
QUALITY FOODS
Quality Foods is one of the country's leading manufacturers of pre-cooked
and uncooked, thinly-sliced beef used primarily in Philadelphia-style steak
sandwiches. It also supplies sliced chicken products and lines of pre-cooked and
uncooked meatballs and hamburger patties. Quality Foods has experienced
significant growth in sales and operating profit since 1991, primarily due to
the growth of its pre-cooked beef product, which is principally sold to the
Subway restaurant chain, and to increases in sales of uncooked steak sandwich
products. From fiscal 1993 to fiscal 1994, total pounds sold increased 22.0%.
However, volume growth in 1995 was relatively flat due to a change in the timing
and content of Subway's Fall steak and cheese sandwich promotion and capacity
constraints at Quality Foods' Camden facility. Recently, Subway has run Spring
and Fall steak and cheese sandwich promotions, the timing and success of which
can significantly impact Quality Foods' net sales. For fiscal 1996, total pounds
sold increased 9.9% over the prior fiscal year. Quality Foods' average net sales
price per pound has declined each year since fiscal 1993, while the average
gross profit per pound has increased each year during this period. Quality
Foods' average net sales price per pound has declined because of a significant
decline in its raw material cost, some of which was passed on to customers, and,
to a lesser extent, a change in product mix. Average gross profit per pound has
continued to increase because of the decline in raw material cost.
51
<PAGE>
In the past two years, Quality Foods has been capacity constrained in its
Camden facility for its pre-cooked product, relying on third-party co-packing
arrangements for between 45% and 55% of its cooking requirements. To alleviate
this problem, in November 1996, Quality Foods substantially completed its $11.0
million Philadelphia Consolidation, comprised of the purchase, retrofit and
renovation of a 150,000 square foot manufacturing facility in Philadelphia, and
the consolidation of the manufacturing operations at the Penns Grove, New Jersey
facility and the Collingswood, New Jersey administrative offices into the
Philadelphia facility. In addition, the majority of the manufacturing
capabilities and resources from Quality Foods' Camden, New Jersey facility were
relocated to Philadelphia, with only certain limited slicing and cold storage
functions remaining in Camden. The Company anticipates that by September 1997
all manufacturing and cold storage will have been relocated, after which the
Camden facility will be closed and divested. During fiscal 1996, Quality Foods
experienced facility start-up and relocation costs of $1.6 million. The Company
believes the Philadelphia Consolidation may generate approximately $4.5 million
in annual cost savings as a result of the improvements in Quality Foods'
production processes through the use of new cooking equipment, the elimination
of its historic dependence on outside co-packing arrangements, the reduction in
overtime through productivity improvements and the elimination of redundant
facility costs.
QUALITY FOODS--RESULTS OF OPERATIONS
The following tables sets forth certain historical information for Quality
Foods for the years ended December 31, 1993, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1993 1994
----------- -----------
<S> <C> <C>
(IN THOUSANDS EXCEPT PER
POUND DATA)
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................................ $ 71,195 $ 84,817
Cost of sales.................................................................................... 61,040 72,162
----------- -----------
Gross profit..................................................................................... 10,155 12,655
Operating expenses............................................................................... 5,266 6,887
Other charges.................................................................................... -- --
----------- -----------
Income from operations......................................................................... 4,889 5,768
Interest expense................................................................................. 2,450 2,616
----------- -----------
Income before extraordinary item............................................................... 2,439 3,152
Extraordinary loss on early extinguishment of debt............................................... -- 1,771
----------- -----------
Net income..................................................................................... 2,439 1,381
Pro forma income taxes........................................................................... 976 553
----------- -----------
Pro forma net income........................................................................... $ 1,463 $ 828
----------- -----------
----------- -----------
OTHER DATA:
Pounds sold...................................................................................... 29,712 36,258
Average net sales price per pound................................................................ $ 2.40 $ 2.34
Average gross profit per pound................................................................... 0.34 0.35
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................................ $ 84,694 $ 90,582
Cost of sales.................................................................................... 67,930 71,448
----------- -----------
Gross profit..................................................................................... 16,764 19,134
Operating expenses............................................................................... 6,926 7,519
Other charges.................................................................................... -- 4,716
----------- -----------
Income from operations......................................................................... 9,838 6,899
Interest expense................................................................................. 2,129 1,871
----------- -----------
Income before extraordinary item............................................................... 7,709 5,028
Extraordinary loss on early extinguishment of debt............................................... 130 546
----------- -----------
Net income..................................................................................... 7,579 4,482
Pro forma income taxes........................................................................... 3,032 1,793
----------- -----------
Pro forma net income........................................................................... $ 4,547 $ 2,689
----------- -----------
----------- -----------
OTHER DATA:
Pounds sold...................................................................................... 36,905 40,542
Average net sales price per pound................................................................ $ 2.29 $ 2.23
Average gross profit per pound................................................................... 0.45 0.47
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1993 1994
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................................ 100.0% 100.0%
Cost of sales.................................................................................... 85.7 85.1
----------- -----------
Gross profit..................................................................................... 14.3 14.9
Operating expenses............................................................................... 7.4 8.1
Other charges.................................................................................... -- --
----------- -----------
Income from operations......................................................................... 6.9 6.8
Interest expense................................................................................. 3.4 3.1
----------- -----------
Income before extraordinary item............................................................... 3.5 3.7
Extraordinary loss on early extinguishment of debt............................................... -- 2.1
----------- -----------
Net income..................................................................................... 3.5 1.6
Pro forma income taxes........................................................................... 1.4 0.6
----------- -----------
Pro forma net income........................................................................... 2.1% 1.0%
----------- -----------
----------- -----------
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................................ 100.0% 100.0%
Cost of sales.................................................................................... 80.2 78.9
----------- -----------
Gross profit..................................................................................... 19.8 21.1
Operating expenses............................................................................... 8.2 8.3
Other charges.................................................................................... -- 5.2
----------- -----------
Income from operations......................................................................... 11.6 7.6
Interest expense................................................................................. 2.5 2.0
----------- -----------
Income before extraordinary item............................................................... 9.1 5.6
Extraordinary loss on early extinguishment of debt............................................... 0.1 .6
----------- -----------
Net income..................................................................................... 9.0 5.0
Pro forma income taxes........................................................................... 3.6 2.0
----------- -----------
Pro forma net income........................................................................... 5.4% 3.0%
----------- -----------
----------- -----------
</TABLE>
52
<PAGE>
FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1995
NET SALES. Net sales increased $5.9 million to $90.6 million in fiscal 1996
as compared to $84.7 in fiscal 1995. Volumes increased 10% across all product
lines offset by a 3% decrease in average selling price. Pre-cooked product
volumes were impacted favorably by additional promotional activity of Quality
Foods' product at Subway as compared to the prior year.
GROSS PROFIT. Gross profit increased to $19.1 million in fiscal 1996 from
$16.8 million in fiscal 1995, an increase of $2.3 million, due principally to
declines in average raw material prices exceeding the declines in average
selling prices.
OPERATING EXPENSES. Operating expenses increased $0.6 million to $7.5
million in fiscal 1996 from $6.9 million in fiscal 1995. Operating expenses as a
percentage of net sales increased slightly to 8.3% in fiscal 1996 as compared to
8.2% for fiscal 1995.
OTHER CHARGES. Other charges of $4.7 million consist of $1.6 million
facility start-up and relocation costs associated with the Philadelphia
Consolidation and $3.1 million of acquisition related costs.
INCOME FROM OPERATIONS. Income from operations decreased $2.9 million to
$6.9 million in fiscal 1996 from $9.8 million in 1995 as described above.
INTEREST EXPENSES. Interest expense declined to $1.9 million in fiscal 1996
from $2.1 million in fiscal 1995 due to lower outstanding debt balances.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. In fiscal 1996, Quality
Foods prepaid certain debt in connection with its acquisition by the Company
including prepayment premiums of $99,000 and wrote off related unauthorized
financing fees of $447,000. In fiscal 1995, Quality Foods incurred a loss of
$130,000 on the redemption of a tax exempt industrial revenue bond prior to
maturity.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1994
NET SALES. Net sales remained essentially unchanged at $84.7 million in
fiscal 1995 compared to $84.8 million in fiscal 1994, principally due to
operations being adversely affected by capacity constraints in the Camden
facility, a decline in pre-cooked products sold due to changes in the timing and
content of Subway's promotions of Quality Foods' products, the elimination of
sandwich programs within certain Domino's regions and a 2.1% decrease in average
selling prices, largely offset by growth in volume of uncooked sandwich steak
products and chicken products sold to other customers.
GROSS PROFIT. Gross profit increased to $16.8 million in fiscal 1995 from
$12.7 million in fiscal 1994, a 32.5% increase, principally due to the decline
in average raw material prices which exceeded the decline in average selling
prices, partially offset by the increased use of overtime and outside processing
and storage fees used due to capacity limitations. The gross margin increased to
19.8% in fiscal 1995 from 14.9% in fiscal 1994.
OPERATING EXPENSES. Operating expenses remained substantially unchanged at
$6.9 million in fiscal 1995 and fiscal 1994.
INCOME FROM OPERATIONS. Income from operations increased to $9.8 million in
fiscal 1995 from $5.8 million in fiscal 1994, a 70.6% increase, principally due
to the increase in gross margin and stable operating expenses.
INTEREST EXPENSE. Interest expense decreased to $2.1 million in fiscal 1995
from $2.6 million in fiscal 1994, a 18.6% decrease, due to lower outstanding
debt balances and lower interest rates under a new senior debt agreement.
53
<PAGE>
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. In fiscal 1995, Quality
Foods incurred a $130,000 loss on the redemption of a tax exempt industrial
revenue bond prior to maturity. In fiscal 1994, Quality Foods incurred a loss of
$1.8 million on the redemption prior to maturity of the debt outstanding under a
senior debt agreement.
CFP GROUP-LIQUIDITY AND FINANCIAL RESOURCES
The Acquisition has had a major impact on the Company's financial condition.
At September 30, 1996, Quality Foods had total indebtedness of $20.0 million and
at December 28, 1996 CFP Holdings had total indebtedness of $26.0 million. After
giving effect to the Acquisition, the Offering and the Recapitalization and the
application of the net proceeds therefrom, the Company's total consolidated
indebtedness was $139.9 million at March 31, 1997. Interest payments on the
Notes and anticipated interest and principal payments under the Bank Credit
Agreement represent significantly increased obligations of the Company. The New
Notes will require semi-annual interest payments commencing in July 1997.
Borrowings under the Bank Credit Agreement bear interest at floating rates and
require quarterly interest payments. The Bank Credit Agreement provides the
Company with (i) a $10.0 million Term Loan, which requires a $1.4 million
principal repayment in fiscal year 1998 and increasing principal repayments in
later years, and matures in 2002, and (ii) a Revolving Credit Facility of $20.0
million with $500,000 outstanding at March 31, 1997. Approximately $5.0 million
of the Revolving Credit Facility is reserved to provide letters of credit
supporting the industrial revenue bond issue with respect to Quality Foods'
Philadelphia facility and other obligations. All amounts under the Revolving
Credit Facility outstanding will mature in 2002. See "The Quality Foods
Acquisition" and "Description of Bank Credit Agreement."
In addition to its debt service obligations, the Company requires liquidity
for working capital and capital expenditures. The Company experiences seasonal
increases in its working capital as a result of large product promotions and
planned inventory increases based upon seasonally low raw material prices. In
fiscal 1998, the Company expects its working capital to be at its lowest level
in the Winter and to peak between May and September. Historically, the Company
has experienced minimal bad debts with respect to accounts receivable and has
experienced no material inventory obsolescence or shrinkage losses.
For the fiscal year ended September 30, 1996, the Company spent $11.1
million on capital expenditures. Of this amount, approximately $7.5 million was
spent by Quality Foods on the Philadelphia Consolidation and $1.5 million was
spent by Custom Foods on an expansion of its Kentucky facility, which was
financed principally through an increase in its capital lease facility. These
projects were of a non-recurring nature that resulted in a substantial increase
in the Company's capacities sufficient to sustain anticipated growth over the
next several years. Excluding these items, the Company would have spent
approximately $2.0 million during fiscal 1996, an amount which the Company
believes is more reflective of historic levels of recurring annual capital
spending of maintenance capital expenditures. For the six month fiscal year
ended March 31, 1997, the Company spent $1.7 million on capital expenditures,
including $1.3 million related to the Philadelphia Consolidation.
The Company's primary sources of liquidity are cash flows from operations
and borrowings under the Revolving Credit Facility. At March 31, 1997
approximately $9.9 million was available to the Company for borrowings under the
Revolving Credit Facility, subject to inventory and accounts receivable levels.
The Company anticipates that its working capital requirements, capital
expenditures and debt service requirements for fiscal 1998 will be satisfied
through a combination of cash flow from operations and funds available under the
Revolving Credit Facility.
EFFECTS OF INFLATION
Inflation has not had a significant effect on the operations of the Company.
See "Risk Factors-- Suppliers and Raw Materials" and "Business--Raw Materials
and Suppliers."
54
<PAGE>
BUSINESS
GENERAL
The Company is a leading developer, manufacturer and marketer of value-added
meat and poultry products sold to the foodservice industry and manufacturers of
packaged foods. The Company provides a wide range of pre-cooked and uncooked
products, including beef and chicken sandwich steaks; beef, pork and poultry
meat rolls used in further processing; charbroiled products and crumble
toppings; barbecue-flavored meats; and meatballs. The Company principally
manufactures higher margin specialty products that provide superior quality and
performance for the end-user and that are typically custom-formulated to meet
specific customer requirements. In the foodservice industry, the Company
supplies some of the country's leading restaurant chains and outlets, including
Subway, Great Steak & Potato Co., International House of Pancakes, Inc.,
Domino's Pizza, Inc., Wal-Mart Stores, Inc., Nathan's Famous Inc., Blimpie
International, Inc. and Arby's. The Company also serves many of the country's
leading packaged foods manufacturers, including Chef America, H. J. Heinz Co.,
Inc. Foodbrands America, Inc., Schwan's Sales Enterprises Inc., Kraft Foods Inc.
and McLane Company, Inc. The Company believes that its proprietary recipes and
manufacturing processes, national presence and long-standing customer
relationships pose barriers to entry for other manufacturers seeking to provide
competitive products. The Company is comprised of two operating subsidiaries,
Quality Foods, which was acquired on December 31, 1996, and Custom Foods. For
the 12-month period ended September 30, 1996, the Company would have had pro
forma net sales of $156.6 million, and for the six month fiscal year ended March
31, 1997, after giving effect to the Acquisition, the Offering and the
application of the net proceeds therefrom and the other transactions referred to
herein, the Company would have had pro forma net sales of $81.6 million.
Quality Foods is one of the country's leading manufacturers of pre-cooked
and uncooked, thinly-sliced beef used primarily in Philadelphia-style steak
sandwiches. It also supplies sliced chicken products and pre-cooked and uncooked
meatballs and hamburger patties. Quality Foods serves the foodservice industry,
with particular emphasis on QSRs, sandwich chains and family dining
establishments. For over ten years, Quality Foods has been the primary supplier
of pre-cooked beef to the Subway restaurant chain for its popular steak and
cheese sandwich. Quality Foods employs a proprietary forming and freezing
process that, the Company believes, produces a product with excellent flavor and
visual appearance, as well as superior yield when cooked. Because of its product
quality and performance, Quality Foods has historically been able to charge a
premium price for its uncooked sandwich steak products.
From fiscal 1991 to fiscal 1995, Quality Foods experienced compound annual
growth in net sales and operating profit of 14.5% and 26.1%, respectively, and
for the nine months ended September 30, 1996 net sales and operating profit
increased 9.4% and 39.2%, respectively, compared to the same period in 1995. The
Company believes this growth has been due to Quality Foods' superior product
quality, the expanding national presence of the Philadelphia-style steak
sandwich on restaurant menus, increased demand by its customers for high
value-added products and a continued focus on improving its proprietary low-cost
manufacturing processes. Quality Foods sells its products through an established
network of independent foodservice brokers and its direct sales force to over
400 foodservice distributors located in 42 states and six Canadian provinces.
Quality Foods has recently developed and introduced several complementary beef
and chicken products which, the Company believes, can be successfully marketed
through these established distribution channels.
In November 1996, Quality Foods completed the $11.0 million Philadelphia
Consolidation which has more than doubled Quality Foods' production capacity and
will enable it to meet its anticipated manufacturing needs for at least the next
five years. The Company believes the Philadelphia Consolidation may generate
approximately $4.5 million in annual cost savings as a result of the
improvements in Quality Foods' production processes through the use of new
cooking equipment, the elimination of its historic dependence on outside
co-packing arrangements, the reduction in overtime through productivity
improvements and the elimination of redundant facility costs.
55
<PAGE>
Custom Foods develops, manufactures and markets pre-cooked meat and poultry
products sold primarily to manufacturers of branded and private label packaged
foods, also referred to as "industrial" users, and is also a major supplier of
frozen, uncooked beef product to the Arby's restaurant chain. Custom Foods'
pre-cooked products include a variety of pork, beef, chicken and turkey items,
such as meat rolls used in further processing; barbecue products; Mexican
specialties; charbroiled patties and crumble toppings. Custom Foods focuses on
sales to manufacturers of frozen and refrigerated convenience foods, including
items in the fast-growing hand-held foods segment. In its more profitable
pre-cooked operations, Custom Foods is the largest supplier of custom-formulated
meat and poultry fillings to Chef America for use in substantially all of its
microwaveable sandwich product lines. Chef America has accounted for a majority
of Custom Foods' sales of pre-cooked products for each of the past three years
and, according to Packaged Facts, Chef America is the country's leading
manufacturer of frozen hand-held entrees. From fiscal 1992 to fiscal 1996,
Custom Foods experienced compound annual growth in net sales and gross profit of
29.7% and 40.2%, respectively, in its pre-cooked operations, due to strong
growth in Chef America's business and growth in demand from other industrial
users for pre-cooked, cost-effective meat and poultry products. Due to capacity
constraints and the growing needs of its customers, Custom Foods has, over the
past two years, significantly broadened its operations with the opening and
subsequent expansion of a new facility in Kentucky. With capacity expansions
completed, Custom Foods recently created a direct sales and marketing
department. Custom Foods has developed over 400 proprietary product
formulations, many of which, the Company believes, can now be successfully
marketed through this sales group.
Custom Foods and its predecessors have supplied beef products to Arby's for
over 20 years. Prior to fiscal 1995, Custom Foods supplied Arby's on a national
basis. However, in the first quarter of fiscal 1995, Custom Foods entered into
an 18-month contract to supply Arby's on a regional basis, reducing the scope of
its arrangement due to a new competitive bidding process and a freight advantage
enjoyed by certain other suppliers. Under this contract, sales to Arby's
declined from $61.0 million in fiscal 1994 to $26.2 million in fiscal 1995,
resulting in an overall 28.9% decrease in Custom Foods' net sales. Nevertheless,
Custom Foods' income from operations during this period increased 19.7%,
reflecting significant growth in its more profitable pre-cooked operations. In
June 1996, following completion of the expansion of its Kentucky facility,
Custom Foods entered into a new three-year contract to once again supply Arby's
on a national basis. Despite increased sales and profitability associated with
the new Arby's contract, Custom Foods plans to continue to focus on its faster
growing, higher margin pre-cooked product operations.
HISTORY
CFP Holdings was formed in 1993 by First Atlantic, a private investment firm
specializing in acquiring and building middle market companies, to acquire the
business of Best Western Foods, Inc. ("Best Western") and Center of the Plate
Foods, Inc. ("Center of the Plate"). Best Western was a leading supplier of
uncooked beef to the Arby's restaurant chain while Center of the Plate
constituted what is today Custom Foods' value-added operations. Under First
Atlantic's sponsorship, Custom Foods focused on building its core value-added
product line by expanding its manufacturing facilities, enhancing its product
development capabilities and developing a growth strategy aimed at diversifying
its customer base. On December 31, 1996 CFP Holdings acquired Quality Foods.
Founded in the 1940s as William Cohen and Son Co., Inc., Quality Foods has a
50-year history of supplying the foodservice industry. In 1992, Quality Foods
was acquired by the Sellers, including David Cohen, an executive officer and
director of the Company and grandson of Quality Foods' original founders. Under
that ownership, Quality Foods focused on increasing sales of its sandwich steak
products, and expanding and improving its proprietary manufacturing
capabilities. Quality Foods is one of the leading manufacturers of sandwich
steak products in the United States.
56
<PAGE>
INDUSTRY
Value-Added Meat and Poultry Processors
Value-added meat and poultry processors such as the Company purchase raw
cuts of beef, pork, chicken and turkey and process them into packaged form for
further processing or for distribution into the foodservice and retail markets.
Various steps including blending, forming, cooking, slicing and mixing with
vegetables and flavorings are employed to create consistent products that
fulfill specific preparation or processing needs of customers. Industry trends
have increased the demand for value-added meat and poultry products like those
provided by the Company, including the desire for more uniform and consistent
end-products, continuous focus on reduced preparation and/or reduced
manufacturing costs and increased food safety concerns. The Company believes
that it is well positioned among value-added meat and poultry processors to
capitalize on these trends as a result of its national distribution, broad
pre-cooked product capabilities, multiple modern manufacturing facilities and a
diversified focus on both foodservice and industrial markets.
Foodservice
The foodservice industry is composed of establishments that serve food
outside the home and includes restaurants; the food operations of healthcare
providers, schools and other institutions, hotels, resorts and corporations; and
other non-traditional foodservice outlets. The foodservice industry generated
$300 billion in revenues in 1995 and experienced compound annual growth of 4.7%
from 1990 to 1995, according to Restaurants and Institutions, an industry
publication. This growth has been driven by the increase in away-from-home meal
preparation, which has accompanied the expanding number of both dual income and
single-parent households. According to Technomic, Inc., the foodservice industry
in the United States captured 51% of all consumer food expenditures in 1995,
surpassing traditional retail supermarkets and outlets. Another trend within the
foodservice industry is the growth in the number of non-traditional foodservice
outlets such as, convenience stores, retail stores, supermarkets and food
kiosks. These non-traditional locations often lack extensive cooking, storage or
preparation facilities, resulting in a need for pre-cooked and prepared foods
similar to those provided by the Company. The expansion in the foodservice
industry has also been accompanied by the continued consolidation and growth of
broadline and specialty foodservice distributors, many of which are
long-standing customers of the Company.
Industrial
The majority of the Company's existing and targeted industrial customers are
involved in the manufacture of branded and private label packaged foods. The
same trends which have contributed to the increase in away-from-home meal
preparation have also fueled the growth in easy to prepare, microwaveable frozen
and refrigerated convenience foods. Among the fastest growing segments is the
approximately $1.2 billion frozen and refrigerated hand-held foods market.
According to Packaged Facts, a consumer product research publications firm, this
market, which consists of burritos and other wrap sandwiches, pocket-style
sandwiches, hand-held appetizers and other similar hand-held entree items, grew
at a compound annual rate of 9.1% from 1993 to 1995, and is projected to grow at
a compound annual rate of 8.0% from 1995 to 2000. This growth has been driven by
improved product quality and variety and the increasing need for inexpensive,
yet hearty, food items which require minimal preparation. Despite its rapid
growth, many categories of frozen and refrigerated hand-held foods have achieved
less than 20% household penetration. The Company believes it has been successful
in establishing and maintaining supply relationships with many of the leading
manufacturers in this market, including Chef America, and that it is well-suited
to service this customer base with a broad line of value-added products which
meet its customers needs.
57
<PAGE>
PRODUCTS
The Company manufactures and markets a wide variety of value-added beef,
pork and poultry products for both foodservice and industrial customers.
Products are provided in either "solid-muscle," or natural cut form, and
"restructured" form, whereby natural cuts are ground, blended or emulsified to
provide a generally more consistent and lower cost end product. The Company
manufactures both pre-cooked and uncooked products in both portion-controlled
and bulk form, depending upon the specific preparation, storage or manufacturing
needs of the end customer. Various sauces, spices, marinades and vegetable
mixtures are also used in certain of the Company's products.
The following charts depict the Company's net sales by product category and
meat variety, respectively, on a pro forma basis for the fiscal year ended
September 30, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PRO FORMA NET SALES
<S> <C>
Fiscal Year Ended
September 30, 1996
Pork 10%
Beef (Uncooked Arby's) 19%
Beef (Other) 61%
Poultry 10%
Arby's Uncooked Beef 19%
Uncooked Hamburger Patties and Meatballs 1%
Charbroiled Products and Crumble Toppings 3%
Meat Rolls and Other Value-added 20%
Sandwich Steaks 57%
</TABLE>
Foodservice
The Company's primary foodservice products are thinly-sliced beef and
chicken used in Philadelphia-style sandwiches. Sandwich steaks are marketed
principally under the Quality Foods' Philly-Quik and Blue Diamond brand names
and are sold in both uncooked, portion-controlled form and in pre-cooked, bulk
packaged form. The Company employs a proprietary forming and freezing process
for its sandwich steak products that, the Company believes, produces a product
with excellent flavor and visual appearance, as well as superior product yield
when cooked. Because of its product quality and performance, the Company has
historically been able to charge a premium price for its uncooked sandwich steak
products. The Company's pre-cooked sandwich steak meat has historically been
sold principally to Subway. With the substantial completion of the Philadelphia
Consolidation, the Company will have sufficient capacity to begin marketing this
product to other large QSRs and foodservice operators. In addition, new products
under development include portion-controlled, pre-cooked versions of its current
products for QSRs and non-traditional foodservice operators, as well as a
pre-cooked chicken product.
The Company's foodservice products also include a variety of pre-cooked
items including charbroiled hamburger patties, chicken breasts, pork-rib patties
and other sandwich meats; meat crumble toppings and meatballs; stripped, sliced
and diced meats used in salad bars and entree dishes; barbecue meats in a
variety of regional sauces; and Mexican specialties including fajita meats and
taco fillings. These products
58
<PAGE>
are provided principally pre-cooked and are packaged in either
portion-controlled or bulk form. In addition, the Company is currently
installing a new, multi-purpose cooking oven in its Montebello, California
facility, capable of producing a broad array of pre-cooked crumble toppings and
meatballs.
The Company also manufactures certain other uncooked meat products for the
foodservice industry including an uncooked restructured beef product for the
Arby's restaurant chain, as well as meatballs and hamburger patties.
Industrial
The Company provides pre-cooked meat and poultry products to manufacturers
of packaged foods. Industrial products are typically manufactured using
"least-cost" formulations and are generally sold in restructured, as opposed to
natural cut form. This involves blending various cuts of meat or poultry with
seasonings, vegetable-based binders and other ingredients to produce a product
that will retain a high degree of consistency through the customer's
manufacturing process. These products are often subjected to multiple further
processing steps, including blending, re-heating and re-freezing by the
Company's customers and thus are typically formulated with taste, performance,
nutritional and cost characteristics specific to each customer's requirements.
The majority of the Company's industrial products are sold in roll-form, which
the customer then slices, dices or otherwise processes to produce an end
product. Increasingly, the Company has provided its products in sliced, diced or
stripped form, some of which are blended with seasonings and sauces, in
accordance with the manufacturing requirements of its customers. With the added
production capacity afforded by recent capital improvements to its facilities,
the Company will be able to expand its processing capabilities to take advantage
of what it believes is a growing demand among packaged food manufacturers for
more highly processed products.
CUSTOMERS AND END PURCHASERS
The Company serves over 600 active customers including broad line and
specialty foodservice distributors, packaged foods manufacturers and major
national and regional restaurant chains. On a pro forma basis, Subway, Arby's
and Chef America accounted for 26.4%, 20.2% and 16.7% of the Company's net
sales, respectively, in fiscal 1996. No other customer accounted for as much as
4.5% of the Company's net sales during that year. See "Risk Factors--Importance
of Key Customers."
The Company supplies its foodservice customers generally through
distributors which take title to the product and resell it. Among the Company's
customers are many of the country's largest broad line and specialty food
service distributors including Sysco Corporation, Alliant Food Service, Inc.,
PYA/Monarch, Inc., Rykoff/Sexton, Pro Source Distribution, Inc. and J.P.
Foodservice. While the sale is made to the distributor, the Company maintains
active customer relationships with many large end purchasers including Subway,
Great Steak & Potato Co., International House of Pancakes, Inc., Domino's Pizza,
Inc., Nathan's Famous Inc., Blimpie International, Inc. and Arby's. For these
and other large end purchasers, the Company's products generally go through
extensive qualification procedures and its manufacturing capabilities are
subjected to thorough review by the end purchasers prior to the Company's
approval as a vendor. Large end purchasers typically select suppliers that can
consistently meet increased volume requirements on a national basis during peak
promotional periods. In its value-added operations, the Company believes that
its manufacturing flexibility, national presence and long-standing customer
relationships pose barriers to entry for other manufacturers seeking to provide
similar products to the Company's current large foodservice end purchasers.
The Company's industrial customers comprise some of the leading packaged
foods manufacturers in the country, including Chef America, H.J. Heinz Co.,
Inc., Foodbrands America, Inc., Schwan's Sales Enterprises, Inc., Kraft Foods,
Inc. and McLane Company. Given the highly customized nature of the Company's
products, relationships are generally maintained at various levels within the
Company. The Company believes that it has been able to maintain and expand these
relationships through its attention to customer service, by providing products
that consistently meet the changing needs of its customers and by
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<PAGE>
remaining cost competitive. The Company believes that once its value-added
products are approved as principal ingredients in its customers' end products,
there exist high barriers to entry for other manufacturers as long as the
Company's overall quality, costs and product support remain competitive.
SALES AND MARKETING
Prior to the Acquisition, Quality Foods and Custom Foods maintained separate
sales and marketing efforts. The Company plans to divide its sales and marketing
efforts between the foodservice and industrial markets in order to better serve
its target markets.
Direct Sales Force
The Company has a 16-person direct sales force consisting of ten
professionals with extensive experience in the value-added meat industry, and
six sales support personnel. Direct sales and marketing efforts differ
substantially between foodservice and industrial accounts.
In its foodservice sales operations, the Company employs ten sales and sales
support personnel, located in Colorado, Florida, Maryland and Pennsylvania.
These individuals develop and maintain the Company's relationships with large
end purchasers, including Subway and its various franchisee groups, QSRs,
sandwich chains and major distributors. Sales personnel also interface with the
Company's independent foodservice distributor network, principally for the
purposes of developing new accounts for existing products as well as developing
new products to market through the existing channels.
Industrial sales are conducted by six in-house sales and sales support
personnel, located in Arizona, California, Maryland and Texas. In this segment,
sales are generally made without the use of foodservice brokers, and involve a
high degree of customer service and interaction with the product development,
manufacturing and purchasing personnel of the end purchaser. Due to historical
capacity constraints in the Company's pre-cooked product lines, a formal
industrial sales and marketing effort was not established until early in
calendar year 1996. The Company intends to continue to add experienced direct
salespeople in this area to increase its sales penetration among packaged foods
manufacturers on a national basis.
Independent Broker Network
The Company maintains a network of 44 independent foodservice brokers
covering 42 states and six Canadian provinces all of which are compensated on a
commission basis. The Company estimates that these brokers employ over 200
individual sales personnel. The Company believes that its broker relationships
are a valuable asset providing significant new product and customer
opportunities. The brokers perform several significant functions for the Company
including identifying and developing new business opportunities and providing
customers service and support to the Company's distributors and end purchasers.
MANUFACTURING AND PROCESSING
The Company purchases whole cuts of raw meat and poultry in either fresh or
frozen form and subjects them to various processing steps including blending,
forming, cooking and, in some cases, further processing including shredding,
cubing, slicing and the addition of sauces and vegetables. The Company has
developed highly specialized products for customers which include proprietary
recipes and manufacturing processes that the Company believes would be difficult
for a competitor to duplicate. Custom Foods usually develops the recipes and
manufacturing processes for its customers, or receives general requirements and
then develops a product formulation and manufacturing process to produce a
product that meets the needs of its customers. These requirements can include
specific fat and nutritional content, taste, texture, and various performance
characteristics specific to the customer's manufacturing process.
The Company generally retains ownership of its proprietary manufacturing
processes and generally retains ownership of its product recipes. Although the
customer often specifies the ultimate "label"
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<PAGE>
requirements and product specifications, the actual manufacturing steps and
processes typically remain confidential and proprietary to the Company.
RAW MATERIALS AND SUPPLIERS
The Company's principal raw materials consist of fresh and frozen cuts of
beef, pork and poultry, purchased from a variety of local, national and foreign
suppliers. The Company often makes forward volume commitments on raw materials
to lock in availability and pricing consistent with its production expectations.
The Company also purchases a variety of spices, binders, sauces and other
product additives used in the manufacturing process.
The Company typically utilizes a variety of meat and poultry cuts in the
manufacture of its restructured products. In its sandwich steak product lines,
however, the Company generally purchases beef lifter and loin tail cuts to
ensure product quality and consistency throughout the manufacturing process.
Lifter meat, and to a lesser extent loin tail, have historically experienced
significant price fluctuations during the course of the year based on seasonal
buying patterns of large users and product availability relative to other cuts
of beef, with prices typically lowest from May to August and highest in the
Spring and Fall. Historically, the Company has purchased larger quantities
during the low points in the seasonal cycle, formed the product into an
intermediate stage and frozen it for further processing as production
requirements dictate.
The Company believes that its beef, pork and poultry raw materials are
available from a number of sources at market prices and quantities sufficient to
meet its anticipated production needs. The Company does, however, concentrate
certain beef and pork purchases to ensure the highest quality and consistency of
product and to improve its overall costs. For fiscal 1996 on a pro forma basis,
the Company purchased 40.9% of the dollar value of its meat and poultry
requirements from divisions of ConAgra, Inc.
PATENTS AND TRADEMARKS
The Company has no material patents or trademarks on which its business
depends.
COMPETITION
The Company competes in highly competitive markets with a significant number
of companies of various sizes, including divisions or subsidiaries of larger
companies. The principle competitive factors in its markets are product quality
and consistency, price, customer service, ability to produce highly specialized
products to meet specific customer requirements. Many of the Company's
competitors are larger and have greater financial resources.
The Company competes with various local and regional manufacturers,
including Liberty Bell Meat Co. and Devault Meat Co. in sales of the uncooked
Phildelphia-style steak sandwich products. In its pre-cooked sandwich steak
line, the Company competes with Waltham Beef and Provision and Allied Meat Co.
The markets for the Company's industrial products are very fragmented and the
Company generally competes with a number of national and regional competitors in
those markets, a number of which are significantly larger than the Company. In
sales to Arby's, the Company competes with Cargill, IBP, Inc. and Emmbers.
GOVERNMENT REGULATORY MATTERS
The Company is subject to federal, state and local health laws and
regulations that establish standards for the manufacture, storage, labeling and
transport of foodstuffs. The USDA is the regulatory body that is primarily
responsible for monitoring the Company's operations. Beef, pork and poultry
inspection is mandatory, under the jurisdiction of the Food Safety and
Inspection Service (a division of the USDA), for meat that is transported across
state lines or is otherwise placed in interstate commerce.
The Company operates USDA-approved facilities. The Company's programs are
designed to assure that its Company's products are manufactured under conditions
that meet or exceed all applicable government standards. Such programs are
monitored by federal inspectors and include: (i) inspection of
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meat at various stages of processing, (ii) temperature monitoring for both fresh
and cooked meat, (iii) review and approval of labelling and (iv) controlling and
monitoring the use of additives.
The operations and the products of the Company are also subject to state and
local regulation through such measures as licensing of plants, enforcement of
health standards and inspection of the facilities. Enforcement actions for
violations of federal, state and local regulations may include seizure and
condemnation of violative products, cease and desist orders, injunctions,
monetary penalties and/or impoundment. The Company believes that its facilities
and practices are sufficient to maintain compliance with applicable government
regulations, although there can be no assurances in this regard.
EMPLOYEES
As of March 31, 1997, the Company had 568 employees, 494 of whom were
engaged in manufacturing and warehousing, 16 were engaged in sales and marketing
and 58 were engaged in administration.
The Company's unionized employees include 196 employees at Quality Foods'
Philadelphia facility who are represented by the Teamsters Union. In addition,
the Company has 46 employees at Custom Foods' Montebello facility who are
represented by the Teamsters Union under a contract that expires on March 31,
2000. Neither Quality Foods nor Custom Foods has had a strike during the past
ten years.
PROPERTIES
The following table sets forth the Company's principal facilities:
<TABLE>
<CAPTION>
SQUARE
LOCATION PURPOSE OWNED/LEASED FOOTAGE
- ------------------------------------------------------------ ------------------------- ------------- ---------
<S> <C> <C> <C>
Philadelphia, PA............................................ Manufacturing and Owned 150,000
Administrative Offices
Camden, NJ.................................................. Manufacturing Owned 45,000
Montebello, CA.............................................. Manufacturing and Leased 32,000
Administrative Offices
Owingsville, KY............................................. Manufacturing Leased 38,000
Vernon, CA.................................................. Manufacturing Leased 20,000
</TABLE>
ENVIRONMENTAL MATTERS
The business operations of the Company and the operation of real property by
Custom Foods and Quality Foods are subject to extensive and changing federal,
state and local environmental laws and regulations pertaining to the discharge
of materials into the environment, the handling and disposition of wastes
(including solid and hazardous wastes) or otherwise relating to protection of
the environment. Compliance with federal, state and local environmental laws and
regulations is not expected to have a material impact on the Company's capital
expenditures, earnings or competitive position. No assurance can be given,
however, that additional environmental issues relating to presently known
matters or identified sites or to other matters or sites will not require
additional, currently unanticipated investigation, assessment or expenditures.
Environmental assessment audits conducted prior to Quality Foods'
acquisition of the Philadelphia facility revealed the presence there of
petroleum hydrocarbon contamination from former underground storage tank
operations. The facility's former owner has conducted assessment and remedial
work at the site under the oversight of the Pennsylvania Department of
Enviromental Protection. Soil and groundwater remediation is substantially
complete. Pursuant to an agreement among the facility's former owner, Quality
Foods, and the Commonwealth of Pennsylvania, subject to certain exceptions,
Quality Foods is not responsible to the Commonwealth of Pennsylvania for
identified environmental contamination that occurred on the site prior to
Quality Foods' acquisition of the facility.
LEGAL PROCEEDINGS
The Company is not involved in any legal matters within or outside of the
normal course of business which would have a material impact on the operations
or financial position of the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names, ages and positions of the directors,
executive officers and significant employees of the Company. All directors hold
office until the next annual meeting of stockholders of the Company and until
their successors are duly elected and qualified, and all executive officers hold
office at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Roberto Buaron....................................... 51 Director, Chairman
Robert Gioia......................................... 48 Director, President and Chief Executive Officer
Richard Griffith..................................... 64 Director, Vice Chairman
David Cohen.......................................... 33 Director, Executive Vice President
Eric Ek.............................................. 41 Director, Vice President, Chief Financial Officer and
Secretary
James Long........................................... 54 Director, Vice Chairman and Treasurer
Andrew Kohn.......................................... 29 Director
Keith Pennell........................................ 30 Director
James Schubauer II................................... 33 Director
SIGNIFICANT EMPLOYEES
Robert Capobianco.................................... 42 Director of Operations--Quality Foods
Larry Davis.......................................... 41 Chief Financial Officer--Quality Foods
Steven Diener........................................ 52 Vice President--Sales and Marketing--Custom Foods
Gerald Harger........................................ 48 Vice President of National Accounts--Quality Foods
Jeffry Kohlhoff...................................... 48 Vice President--Manufacturing--Custom Foods
</TABLE>
ROBERTO BUARON has been the Chairman and a director of CFP Holdings since
December 1996. He is the Chairman and Chief Executive Officer of First Atlantic,
which he founded in 1989. From 1987 to 1989, he was an Executive Vice President
with Overseas Partners, Inc., an investment management firm. Mr. Buaron is
currently a director of BPC Holding Corporation.
ROBERT GIOIA has been the President, Chief Executive Officer and a director
of CFP Holdings since December 1996. He has been the Chairman and Chief
Executive Officer of Quality Foods and of a corporation (of which he is the sole
stockholder) which was a partner of Quality Foods since July 1992. He has held
management positions in the food processing industry for over 22 years. Prior to
joining Quality Foods, Mr. Gioia was responsible for sales and marketing of the
foodservice division, both restaurant and institutional, of the Red Wing
Company, a national food manufacturer and processor. In addition, Mr. Gioia held
several positions, including Vice President, with the Gioia Macaroni Company, a
national pasta manufacturer founded by the Gioia family in 1910.
RICHARD GRIFFITH has been the Vice Chairman of CFP Holdings since December
1996 and a director of CFP Holdings since March 1993. He has been the President
and Chief Executive Officer of Custom Foods since March 1993. Prior to the
formation of the Company, Mr. Griffith served as President and Chief Executive
Officer of the Company's predecessors, Best Western and Center of the Plate
since November 1991. Mr. Griffith was the founding Chairman of Arcop, Inc., the
purchasing cooperative of the Arby's restaurant chain.
DAVID COHEN has been the Executive Vice President and a director of CFP
Holdings since December 1996. He has been President and Chief Operating Officer
of Quality Foods since July 1992 and president of a corporation (of which he is
the sole stockholder) which was a partner of Quality Foods. Mr. Cohen joined
Quality Foods in 1983 and has served in numerous positions, including National
Sales Manager, before becoming Chief Operating Officer.
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<PAGE>
ERIC EK has been the Vice President and Chief Financial Officer of the
Company since July 1993 and a director of CFP Holdings since December 1996.
Previously, Mr. Ek was a Managing Director at Takenaka & Company, a Pacific Rim
focused investment banking firm from 1990 to 1993. At Takenaka, Mr. Ek was the
Chief Financial Officer of a residential home builder and a Chief Administrative
Officer for a manufacturing firm. Prior to joining Takenaka, Mr. Ek was employed
by KPMG Peat Marwick and Ernst & Young. Mr. Ek is a Certified Public Accountant.
JAMES LONG has been the Vice Chairman and Treasurer of CFP Holdings since
December 1996 and a director of the Company since March 1993. He has been an
Executive Vice President of First Atlantic since March 1991. From January 1990
to February 1991, Mr. Long was an Executive Vice President at Kleinwort Benson
Equity Fund, a leveraged buyout fund. Mr. Long is currently a director of BPC
Holding Corporation.
ANDREW KOHN has been a director of CFP Holdings since December 1996. Mr.
Kohn is a Vice President of First Atlantic, with which he has been employed
since 1994. Previously, Mr. Kohn was employed by Berkshire Partners, a private
equity investment firm, and Bear Stearns & Co.
KEITH PENNELL has been a director of CFP Holdings and Assistant Secretary
since January 1994. Mr. Pennell is a Vice President of First Atlantic with which
he has been associated since 1992. From 1989 to 1992, Mr. Pennell worked in the
investment banking department of Dean Witter Reynolds, Inc.
JAMES SCHUBAUER II has been a director of CFP Holdings and Assistant
Secretary since December 1996. He joined First Atlantic as a Senior Vice
President in September 1996. Prior to that, Mr. Schubauer was a Senior Vice
President with the private equity investment firm Rosecliff, Inc., prior to
which he worked in various positions at SG Warburg & Co., CS First Boston and
Morgan Stanley & Co., Inc.
ROBERT CAPOBIANCO has worked for Quality Foods since December 1989 and been
the Director of Operations of Quality Foods since October 1992. Prior to joining
Quality Foods, Mr. Capobianco worked as Operations Manager at Southern Best
Foods. Mr. Capobianco has over 17 years of experience in the meat industry.
STEVEN DIENER has been the Vice President--Sales and Marketing of Custom
Foods since December 1996. Prior to joining Custom Foods in 1995, Mr. Diener was
the Vice President--Sales and Marketing for Wilshire Meat Sales. Previously, Mr.
Diener was the President of McLane Foods, Inc.
LARRY DAVIS has been the Chief Financial Officer of Quality Foods since
March 1995, having joined Quality Foods in July 1994. He was most recently a
Senior Manager with Ernst & Young LLP, an international accounting and
consulting firm, where he was employed for 15 years. Mr. Davis is a Certified
Public Accountant.
GERALD HARGER has been the Vice President of National Accounts of Quality
Foods since October 1993. He most recently worked as President and Chief
Operating Officer of Tavilla Marketing, the North American Import Division of
Albert Fisher, Inc., an international produce holding corporation. Mr. Harger
has over ten years of experience with foodservice national accounts, and was
National Accounts Manager for Leprino Foods.
JEFFRY KOHLHOFF has been the Vice President--Manufacturing of Custom Foods
since December 1994. Prior to joining Custom Foods, Mr. Kohlhoff was the
Director of Quality Assurance for Chef America from 1993 to 1994. Prior to that,
Mr. Kohlhoff was the Vice President of Quality Management for Stokely USA, Inc.
from 1986 to 1993.
COMPENSATION OF DIRECTORS
All directors are reimbursed for their usual and customary expenses incurred
in attending all Board of Directors and committee meetings. Directors of the
Company receive no remuneration for serving as directors.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation earned by the
Company's Chief Executive Officer and its four other most highly compensated
executive officers (collectively, the "Named Executive Officers") for services
rendered in all capacities during the last fiscal year.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
ALL
OPTIONS LTIP OTHER
FISCAL SALARY BONUS GRANTED PAYOUTS COMPENSATION
NAME OF EXECUTIVE OFFICER YEAR ($) ($) (#) ($) ($)
- ------------------------------------------------- ----------- --------- --------- ----------- ----------- -------------
Robert Gioia..................................... 1997 231,761(2) 380,222(3) 0 0 1,159(4)
--------------------------------------------------------------------------
Richard Griffith................................. 1997 300,000 196,200(5) 0 0 7,015(6)
--------------------------------------------------------------------------
David Cohen...................................... 1997 165,696(7) 248,016(8) 0 0 13,159(9)
--------------------------------------------------------------------------
Eric Ek.......................................... 1997 151,884 120,100 10) 0 0 7,015(11)
--------------------------------------------------------------------------
Jeffry Kohlhoff.................................. 1997 129,392 119,127 12) 0 0 0
</TABLE>
- ------------------------
(1) For purposes of this table, the fiscal year referred to herein means the
12-month period ended March 31, 1997.
(2) Consists of $151,097 of compensation received for the first 9 months of the
fiscal year from Quality Foods and $80,664 of compensation received for the
last 3 months of the period from the Company. Mr. Gioia's base compensation
under his employment agreement with the Company is $325,000.
(3) Consists of (i) $147,722 of bonus received for the first 9 months of the
period from Quality Foods, (ii) $12,500 of bonus earned for the last 3
months of the period from the Company, (iii) $120,000 of bonus received from
Quality Foods in connection with the consummation of the Acquisition and
(iv) $100,000 of bonus received in connection with the consummation of the
Offering.
(4) Consists of $1,159 excess term life insurance.
(5) Includes (i) $42,857 of bonus received in connection with the consummation
of the Acquisition and (ii) $107,143 of bonus received in connection with
the consummation of the Offering.
(6) Consists of $7,015 of value of personal use of the Company's automobile.
(7) Consists of $106,814 of compensation received for the first 9 months of the
period from Quality Foods and $58,882 of compensation received for the last
3 months of the period from the Company. Mr. Cohen's base compensation under
his employment agreement with the Company is $240,000.
(8) Consists of (i) $105,516 of bonus received for the first 9 months of the
period from Quality Foods, (ii) $12,500 of bonus earned for the last 3
months of the period from the Company, (iii) $120,000 of bonus received from
Quality Foods in connection with the consummation of the Acquisition and
(iv) $10,000 of bonus received in connection with the consummation of the
Offering.
(9) Consists of $1,159 excess term life insurance and $12,000 car allowance.
(10) Includes (i) $28,571 of bonus received in connection with the consummation
of the Acquisition and (ii) $71,429 of bonus received in connection with the
consummation of the Offering.
(11) Consists of $4,545 of disability insurance, $370 excess term life insurance
and $2,100 of car allowance.
(12) Includes (i) $28,571 of bonus received in connection with the consummation
of the Acquisition and (ii) $71,429 of bonus received in connection with the
consummation of the Offering.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted to any of the Named Executive Officers in the
last fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
The following table sets forth information with respect to each exercise of
stock options during the last fiscal year. by each of the Named Executive
Officers and the number of options held at fiscal year end and the aggregate
value of in-the-money options held at fiscal year end.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS AT
OPTIONS AT FY-END
FY-END (#) ($)(1)
SHARES VALUE ------------- -------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Robert Gioia........................................... -- -- 0/0 0/0
Richard Griffith....................................... 2,296 929,880 0/1,149 0/465,345
David Cohen............................................ -- -- 0/0 0/0
Eric Ek................................................ 935 378,675 0/444 0/179,820
Jeffry Kohlhoff........................................ 459 185,895 0/230 0/93,150
</TABLE>
- ------------------------
(1) Based on the fair market value of the Common Stock at March 31, 1997
($694.00 per share), as determined by the Company's Board of Directors.
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<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Gioia (the
"Gioia Employment Agreement") that expires on December 31, 2001 or on an earlier
date in accordance with the terms of the Gioia Employment Agreement. Base
compensation under the Gioia Employment Agreement is $325,000 per year plus an
annual adjustment beginning in January 1998 based on the Consumer Price Index.
Mr. Gioia is also eligible to participate in the Company's annual cash bonus
plan which is based upon the Company's achievement of certain annual performance
targets, subject to the right to receive a minimum annual cash bonus of $50,000.
The Company may terminate Mr. Gioia at any time for "cause" or after a specified
period upon a "disability" (as such terms are defined in the Gioia Employment
Agreement). If the Company terminates Mr. Gioia "without cause" (as such term is
defined in the Gioia Employment Agreement), Mr. Gioia is entitled to receive,
among other things, the aggregate of his base salary and the pro rata portion of
his minimum annual bonus payable through the later of December 31, 2001 or 18
months from the date of termination by the Company "without cause." In
connection with the Gioia Employment Agreement, upon the adoption of the 1997
Stock Option Plan Mr. Gioia will be granted options to purchase up to that
number of shares of Class B Nonvoting Common Stock, $.01 par value, of CFP Group
(the "Class B Nonvoting Common Stock") equal to 1.25% of the total number of
issued and outstanding shares of common stock of CFP Group (determined on a
fully-diluted basis).
The Company has entered into an employment agreement with Mr. Griffith (the
"Griffith Employment Agreement") that expires on December 31, 1999 or on an
earlier date in accordance with the terms of the Griffith Employment Agreement.
Base compensation under the Griffith Employment Agreement is $300,000 per year
plus an annual adjustment beginning in July 1997 based on the Consumer Price
Index. Mr. Griffith is also eligible to participate in the Company's annual cash
bonus plan which is based upon Custom Foods' achievement of certain annual
performance targets. The Company may terminate Mr. Griffith at any time for
"cause" or after a specified period upon a "disability" (as such terms are
defined in the Griffith Employment Agreement). If the Company terminates Mr.
Griffith "without cause" (as such term is defined in the Griffith Employment
Agreement), Mr. Griffith is entitled to receive, among other things, the
aggregate of his base salary payable through the earlier of December 31, 1999 or
18 months from the date of termination by the Company "without cause" and the
pro rata portion of his annual bonus for the fiscal year in which such
termination occurred.
The Company has entered into an employment agreement with Mr. Cohen (the
"Cohen Employment Agreement") that expires on December 31, 1999 or on an earlier
date in accordance with the terms of the Cohen Employment Agreement. Base
compensation under the Cohen Employment Agreement is $240,000 per year plus an
annual adjustment beginning in January 1998 based on the Consumer Price Index.
Mr. Cohen is also eligible to participate in the Company's annual cash bonus
plan which is based upon Quality Food's achievement of certain annual
performance targets, subject to the right to receive a minimum annual cash bonus
of $50,000. The Company may terminate Mr. Cohen at any time for "cause" or after
a specified period upon a "disability" (as such terms are defined in the Cohen
Employment Agreement). If the Company terminates Mr. Cohen "without cause" (as
such term is defined in the Cohen Employment Agreement), Mr. Cohen is entitled
to receive, among other things, the aggregate of his base salary and the pro
rata portion of his minimum annual bonus through the later of December 31, 1999
or 18 months from the date of termination by the Company "without cause." In
connection with the Cohen Employment Agreement, upon the adoption of the 1997
Stock Option Plan Mr. Cohen will be granted options to purchase up to that
number of shares of Class B Nonvoting Common Stock of CFP Group equal to 1.25%
of the total number of issued and outstanding shares of common stock of CFP
Group (determined on a fully-diluted basis).
The Company has entered into an employment agreement with Mr. Ek (the "Ek
Employment Agreement") that expires on December 31, 1999 or on an earlier date
in accordance with the terms of the Ek Employment Agreement. Base compensation
under the Ek Employment Agreement is $165,200 per
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<PAGE>
year plus an annual adjustment beginning in July 1997 based on the Consumer
Price Index. Mr. Ek is also eligible to participate in the Company's annual cash
bonus plan which is based upon Custom Foods' achievement of certain annual
performance targets. The Company may terminate Mr. Ek at any time for "cause" or
after a specified period upon a "disability" (as such terms are defined in the
Ek Employment Agreement). If the Company terminates Mr. Ek "without cause" (as
such term is defined in the Ek Employment Agreement), Mr. Ek is entitled to
receive, among other things, the aggregate of his base salary payable for 12
months from the date of termination by the Company "without cause" and the pro
rata portion of his annual bonus for the fiscal year in which such termination
occurred.
PUT RIGHTS OF MESSRS. GIOIA, COHEN AND GRIFFITH
Under the terms of their respective employment agreements, each of Messrs.
Gioia, Cohen and Griffith have the right, in connection with the termination of
their employment under certain circumstances, to sell to CFP Group, and CFP
Group is obligated to purchase, the shares of Class A Nonvoting Common Stock (in
the case of Mr. Griffith) and Class B Nonvoting Common Stock (in the case of
Messrs. Gioia and Cohen) owned by them. The price at which such shares may be
purchased and sold is intended to be the fair market value thereof as determined
pursuant to a formula (in the case of Mr. Griffith) and an appraisal (in the
case of Messrs. Gioia and Cohen). The right of such individuals to sell their
shares to CFP Group is subject to the terms and conditions of the then
outstanding credit facilities of CFP Group and its subsidiaries.
In addition, under the terms of the Griffith Employment Agreement, CFP Group
has the right, under certain circumstances, to require Mr. Griffith to sell the
shares of Class A Nonvoting Common Stock owned by him to CFP Group. The price at
which such shares may be purchased and sold is intended to be the fair market
value thereof as determined pursuant to a formula. The right of CFP Group to
purchase Mr. Griffith's shares is also subject to the terms and conditions of
the then outstanding credit facilities of CFP Group and its subsidiaries.
EMPLOYEE STOCK OPTION PLAN
1995 STOCK OPTION PLAN
The Company's 1995 Stock Option Plan (the "Option Plan"), which was assumed
by CFP Group in December, 1996, provides for the grant of both incentive stock
options ("ISOs") and non-qualifying stock options ("NSOs") to directors and
employees of, and independent consultants and contractors to, the Company and
its subsidiaries. A total of 11,586 shares of nonvoting common stock has been
authorized and reserved for issuance under the Option Plan, subject to
adjustment to reflect changes in capitalization resulting from stock splits,
stock dividends and similar events.
The Option Plan is administered by the Board of Directors or a Stock Option
Committee (the "Committee") appointed by the Board of Directors. The Committee
has the authority to interpret the Option Plan, to determine the persons to whom
options will be granted, to determine the basis upon which the options will be
granted, and to determine the exercise price, duration and other terms of the
options to be granted under the Option Plan, provided, among other things, that
(a) the exercise price of ISOs granted under the Option Plan may not be less
than the fair market value of the stock subject to the option on the date of
grant (110% of fair market value if the employee is the beneficial owner of 10%
or more of CFP Group's voting securities), (b) the exercise price must be paid
in cash, by personal or certified check or by surrendering previously owned
shares of nonvoting common stock upon the exercise of the option, (c) the term
of the option may not exceed ten years (or five years in the case of an ISO
granted to an employee who is the beneficial owner of 10% or more of CFP Group's
voting securities), (d) no option is transferrable other than by will or the
laws of descent and distribution and (e) no option may be granted to a member of
the Committee.
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<PAGE>
Upon the termination of an optionee's employment (other than by death or
disability), such person's options may be exercised during the three-month
period following the date of such termination. In the event of the death or
disability of an optionee, the option may be exercised by such person or his
personal representative during the six month period following the date the
optionee ceases to be an employee of the Company by reason of such death or
disability. In the event of a Corporate Transaction (as such term is defined in
the Option Plan), each outstanding option under the Option Plan which is not
assumed or replaced with a comparable option from the successor corporation will
automatically terminate.
ISOs may not be granted under the plan to any individual if the effect of
such grant would be to permit that person to have the first opportunity to
exercise such options, in any calendar year, for the purchase of shares having a
fair market value (at the time of the grant of such options) in excess of
$100,000. ISOs granted under the Option Plan are intended to have the federal
income tax consequences of a qualified stock option. An employee to whom an
incentive stock option ("ISO") which qualifies under Section 422 of the Code is
granted will not recognize income at the time of grant or exercise of such
Option. However, upon the exercise of an ISO, any excess in the fair market
price of the Common Stock over the Option Price constitutes a tax preference
item which may have alternative minimum tax consequences for the employee. If
the employee sells such shares more than one year after the date of transfer of
such shares and more than two years after the date of grant of such ISO, the
employee will generally recognize a long-term capital gain or loss equal to the
difference, if any, between the sale prices of such shares and the Option Price.
In such case, CFP Group will not be entitled to a federal income tax deduction
in connection with the grant or exercise of the ISO. If the employee does not
hold such shares for the required period, when the employee sells such shares,
the employee will recognize ordinary compensation income and possibly capital
gain or loss (long-term or short-term, depending on the holding period of the
stock sold) in such amounts as are prescribed by the Code and the regulations
thereunder, and CFP Group will generally be entitled to a Federal income tax
deduction in the amount of such ordinary compensation income recognized by the
employee.
An employee to whom a nonqualified stock option ("NSO") is granted will not
recognize income at the time of grant of such Option. When such employee
exercises such NSO, the employee will recognize ordinary compensation income
equal to the excess, if any, of the fair market value, as of the date of Option
exercise, of the shares the employee receives upon such exercise over the Option
Price paid. The tax basis of such shares to such employee will be equal to the
Option Price paid plus the amount, if any, includible in the employee's gross
income, and the employee's holding period for such shares will commence on the
date on which the employee recognizes taxable income in respect of such shares.
Gain or loss upon a subsequent sale of any Common Stock received upon the
exercise of a NSO generally would be taxed as capital gain or loss (long-term or
short-term, depending upon the holding period of the stock sold). Certain
additional rules apply if the Option Price is paid in shares previously owned by
the participant. Subject to the applicable provisions of the Code and
regulations thereunder, CFP Group will generally be entitled to a Federal income
tax deduction in respect of a NSO in an amount equal to the ordinary
compensation income recognized by the employee. This deduction will, in general,
be allowed for the taxable year of CFP Group in which the participant recognizes
such ordinary income. The Board of Directors may amend the Option Plan without
stockholder approval in any respect other than any amendment that requires
stockholder approval by law or pursuant to the rules of the Code regarding
qualified stock options.
PROPOSED 1997 STOCK OPTION PLAN
CFP Group intends to establish a new incentive stock option program the
("1997 Stock Option Plan") which will include the existing management of the
Company, as well as key senior executives and management of Quality Foods and
Custom Foods.
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<PAGE>
PRINCIPAL STOCKHOLDERS
All of the outstanding capital stock of CFP Holdings is owned by CFP Group.
The following table sets forth certain information regarding the ownership of
the capital stock of CFP Group as of March 1, 1997 with respect to (i) each
person known by CFP Group to own beneficially more than 5% of the outstanding
shares of any class of its voting capital stock, (ii) each of CFP Group's
directors, (iii) the Named Executive Officers and (iv) all directors and
officers as a group. Except as otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares beneficially owned.
Unless otherwise indicated, the address for each stockholder is c/o CFP Group,
Inc., 1117 West Olympic Boulevard, P.O. Box 1027, Montebello, California 90640.
<TABLE>
<CAPTION>
SHARES OF
SHARES OF NONVOTING PERCENTAGE OF
VOTING PERCENTAGE OF COMMON STOCK(1) ALL CLASSES OF
COMMON STOCK(1) VOTING -------------------- COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER CLASS A COMMON STOCK CLASS A CLASS B (FULLY-DILUTED)
- ------------------------------------------ ---------------- ----------------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Atlantic Equity Partners, L.P.(2) 14,293 97.2 % -- -- 48.8%
Roberto Buaron(3)......................... 14,293 97.2 -- -- 48.8
Richard Griffith(4)....................... -- -- 3,161 -- 10.7
Robert Gioia(5)........................... -- -- -- 1,081 3.7
Eric Ek................................... -- -- 1,066 -- 3.6
David Cohen(6)............................ -- -- -- 1,081 3.7
Jeffry Kohlhoff........................... -- -- 459 -- 1.6
Andrew Kohn............................... -- -- -- -- --
James Long(7)............................. 173 1.2 -- -- *
Keith Pennell(7).......................... 17 * -- -- *
James Schubauer II........................ -- -- -- -- --
All officers and directors as a group
(10 persons)............................ 14,483 98.5 4,686 2,162 86.4
</TABLE>
- ------------------------
* Less than one percent.
(1) The authorized capital stock of CFP Group consists of 160,000 shares of
capital stock, including 150,000 shares of Common Stock, $.01 par value (the
"Common Stock") and 10,000 shares of Preferred Stock, $.01 par value (the
"Preferred Stock"). Of the 150,000 shares of Common Stock, 100,000 shares
are designated Class A Voting Common Stock (the "Class A Voting Stock"),
25,000 shares are designated Class A Nonvoting Stock (the "Class A Nonvoting
Stock"), and 25,000 shares are designated Class B Nonvoting Common Stock
(the "Class B Nonvoting Stock"). Of the 10,000 shares of Preferred Stock,
3,528 shares are designated Series A Preferred Stock (the "Series A
Preferred Stock"). The Series A Preferred Stock was redeemed upon the
closing of the Offering.
(2) Address is P.O. Box 847, One Capital Place, Fourth Floor, Grand Cayman,
Cayman Islands, British West Indies. Atlantic Equity Associates, L.P.
("AEA") is the sole general partner of AEP and as such exercises voting
and/or investment power over shares of capital stock owned by AEP, including
the shares of Common Stock held by AEP (the "AEP Shares"). Mr. Buaron is the
sole stockholder of Buaron Capital Corporation ("BCC"). BCC is the managing
general partner of AEA. Retni Limited ("Retni"), an indirect wholly owned
subsidiary of Akros Finanziana S.p.a ("Akros"), is also a general partner of
AEA. As general partners of AEA, BCC and Retni share voting and/or
investment power over, and may be deemed to beneficially own, the AEP
Shares. BCC and Retni disclaim any beneficial ownership of any shares of
capital stock owned by AEP, including the AEP Shares. Through their
70
<PAGE>
respective affiliations with BCC, Retni and AEA, Mr Buaron and Akros control
the sole general partner of AEP and therefore have the authority to control
voting and/or investment power over, and may be deemed to beneficially own,
the AEP Shares. Mr. Buaron and Akros disclaim any beneficial ownership of
any of the AEP Shares. Certain present and former employees of First
Atlantic, an affiliate of AEP, owning an additional 412 shares of Class A
Voting Stock, have granted AEP the right to vote the shares of Class A
Voting Stock beneficially owned by them.
(3) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York,
New York 10022. Represents shares of Common Stock to be owned and controlled
by AEP. Mr. Buaron is the sole shareholder of BCC. BCC is the managing
general partner of AEA. AEA is the sole general partner of AEP and as such,
exercises voting and/or investment power over shares of capital stock owned
and controlled by AEP, including the AEP Shares. Mr. Buaron, as the sole
shareholder and Chief Executive Officer of BCC, and Retni, as a general
partner of AEA, control the sole general partner of AEP and therefore share
voting and/or investment power over, and may be deemed to beneficially own,
the AEP Shares. Mr. Buaron disclaims any beneficial ownership of the AEP
Shares.
(4) Includes 70 shares of Class A Nonvoting Stock owned by Mr. Griffith's Profit
Sharing Trust and 150 shares of Class A Nonvoting Stock owned by Mr.
Griffith's wife.
(5) Represents 1,081 shares of Class B Nonvoting Stock owned by RDG Food Corp.,
Inc. ("RDG"). Mr. Gioia, as the sole shareholder of RDG, controls the voting
and disposition of the shares owned by RDG and, therefore, is deemed to
beneficially own the Class B Nonvoting Stock owned by RDG.
(6) Represents 1,081 shares of Class B Nonvoting Stock of Amjor Holdings, Inc.
("AHI"). Mr. Cohen, as the sole stockholder of AHI, controls the voting and
disposition of the shares owned by AHI and, therefore, is deemed to
beneficially own the Class B Nonvoting Stock owned by AHI.
(7) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York,
New York, 10022.
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<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH CERTAIN STOCKHOLDERS
Effective December 31, 1996, the Company entered into a new management
consulting agreement with First Atlantic which provides for the annual payment
of compensation in the amount of $600,000 plus out of pocket expenses to First
Atlantic in exchange for providing management consulting services to the Company
and its subsidiaries. Such agreement will continue until December 31, 2003
unless extended pursuant to its terms.
On December 31, 1996, CFP Group entered into a Stockholders' Agreement (as
defined) with NationsCredit Commercial Corporation, an affiliate of NCMI (as
defined), and certain other stockholders of CFP Group.
CFP Holdings paid Robert Gioia, an executive officer, director and
beneficial owner of common stock of CFP Group and an executive officer and
director of CFP Holdings, $100,000 (less amounts required to be withheld by law)
and David Cohen, a beneficial owner of common stock of CFP Group and an
executive officer and director of CFP Holdings, $10,000 (less amounts required
to be withheld by law), upon the consummation of the Offering. In addition,
Custom Foods paid certain of its executive officers (two of whom are also
executive officers, directors and stockholders of CFP Group) the following
amounts (less amounts required to be withheld by law), upon consummation of the
Offering, as indicated:
<TABLE>
<CAPTION>
AMOUNT
PAID UPON
CONSUMMATION
NAME OF THE OFFERING
- ----------------------------------------------------------------------------- ---------------
<S> <C>
Richard Griffith............................................................. $ 107,143
Eric Ek...................................................................... 71,429
Jeffry Kohlhoff.............................................................. 71,429
</TABLE>
Pursuant to the terms of the Acquisition Agreement, Robert Gioia and David
Cohen, and entities controlled by them, received cash consideration for their
interests in Quality Foods upon the closing of the Acquisition of $6,232,945 and
$5,131,366, respectively, and are entitled to receive their respective pro rata
shares, with the other Sellers, of any amounts, if and when released, of the
part of the purchase price escrowed at closing. Immediately prior to the
consummation of the Acquisition, Quality Foods paid a bonus to Robert Gioia in
the amount of $120,000 and David Cohen in the amount of $120,000. Upon
consummation of the Acquisition, CFP Holdings paid a bonus to (i) Rick Griffith
in the amount of $42,857, (ii) Eric Ek in the amount of $28,571 and (iii) Jeffry
Kohlhoff in the amount of $28,571.
Pursuant to an agreement between CFP Holdings and First Atlantic dated as of
December 30, 1996, CFP Holdings paid First Atlantic an investment banking fee of
$750,000 on the consummation of the Acquisition.
STOCKHOLDERS' AGREEMENT
CFP Group, AEP, NationsCredit Commercial Corporation, Richard Griffith,
Robert Gioia, David Cohen, Eric Ek and the other Stockholders named therein
entered into a Stockholders' Agreement (the "Stockholders' Agreement") dated as
of December 31, 1996, which contains certain restrictions with respect to the
transfer of CFP Group's capital stock, certain rights granted by CFP Group with
respect to such shares and certain voting and other arrangements. The rights and
obligations of each party to the Stockholders' Agreement shall terminate as to
such stockholder upon the earliest to occur of (i) the transfer of all stock of
CFP Group owned by such stockholder, (ii) the twentieth anniversary of the date
of the Stockholders' Agreement, (iii) a sale of all or substantially all of the
stock of CFP Group in a single transaction or (d) the consummation of an initial
public offering of the common stock of CFP Group which results in net proceeds
to CFP Group of at least $100 million dollars.
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<PAGE>
The Stockholders' Agreement provides that CFP Group's Board of Directors
shall consist of at least nine directors, including Richard Griffith, Eric Ek,
Robert Gioia, David Cohen (for so long as each such individual shall remain an
employee and shall own stock of CFP Group) and the remainder of which shall be
designated by AEP.
The Stockholders' Agreement provides that all of the parties to the
Stockholders' Agreement other than AEP (each such other party being referred to
herein as the "Selling Group") are prohibited from transferring any stock to any
person engaged in a business which competes in any manner with the business
conducted by CFP Group and its subsidiaries. In addition, subject to certain
exceptions, no Selling Group may transfer any stock prior to the third
anniversary of the date of the Stockholders' Agreement and thereafter no Selling
Group may transfer stock unless it first offers such stock to CFP Group. Should
CFP Group fail to accept all or any part of the stock offered for sale, AEP will
have the right to purchase all or any part of the stock offered but not accepted
for purchase by CFP Group. Should AEP fail to accept all such stock offered for
sale, then the Selling Group may transfer the stock so offered to an
Institutional Investor (as such term is defined in the Stockholders' Agreement)
or to such other purchaser as shall be approved by AEP (and its transferees).
In the event that AEP receives an offer from an unaffiliated third party to
purchase that number of shares of stock of CFP Group which constitutes, in the
aggregate, more than 50% of the total number of shares then outstanding, AEP
shall not transfer any stock unless the terms of such offer are extended to the
other stockholders and the other stockholders are given the opportunity to
participate on a pro rata basis in such sale.
Pursuant to the Stockholders' Agreement, if at any time AEP shall approve
(i) a proposal from a person that is not an affiliate of AEP for the transfer of
all of the stock of CFP Group, (ii) the merger or consolidation of CFP Group
with or into another person that is not an affiliate of AEP in which the
stockholders will receive cash or securities for their shares or (iii) the sale
by CFP Group or its subsidiaries of all or substantially all of their assets to
a person that is not an affiliate of AEP, then each stockholder shall be
required to participate in such transaction and to take all necessary action to
cause CFP Group to consummate such transaction.
In the event of a Termination of Relationship of a Management Investor (as
such terms are defined in the Stockholders' Agreement), CFP Group shall have the
right to repurchase all or any part of the stock owned by such Management
Investor. The price at which such shares are to be purchased shall be either the
lesser of the price paid by such terminated Management Investor or the fair
value per share of the stock (as determined in accordance with the provisions of
the Stockholders' Agreement), depending on whether the Management Investor was
terminated for "cause" (as defined in the Stockholders' Agreement) or for any
reason other than "cause."
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Certificates of Incorporation of CFP Holdings, CFP Group, Custom Foods
and Quality Foods contain provisions eliminating the personal liability of
directors for monetary damages for breaches of their duty of care, except in
certain prescribed circumstances. The Bylaws of CFP Holdings, CFP Group, Custom
Foods and Quality Foods also provide that directors and officers will be
indemnified to the fullest extent authorized by Delaware law or California law,
as the case may be, as it now exists or may in the future be amended, against
all expenses and liabilities reasonably incurred in connection with service for
or on behalf of CFP Holdings, CFP Group, Custom Foods or Quality Foods (as the
case may be). The Bylaws of CFP Holdings, CFP Group and Custom Foods provide
that the right of directors and officers to indemnification is not exclusive of
any other right now possessed or hereinafter acquired under any statute,
agreement or otherwise.
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<PAGE>
DESCRIPTION OF BANK CREDIT AGREEMENT
The Company and CFP Group have entered into a Credit Agreement dated as of
December 30, 1996 (the "Bank Credit Agreement") with NationsBank of Texas, N.A.
(the "Agent") individually and certain lenders, which provides the Company with
a new 5 1/2 year revolving credit facility (the "Revolving Credit Facility")
under which up to an aggregate principal amount of $20.0 million (subject to a
borrowing base) are available for borrowing, a 5 1/2 year $10.0 million term
loan (the "Term Loan A"), a 5 1/2 year $41.0 million term loan (the "Tranche A
Term Loan") and a 7-year $25.0 million term loan (the "Tranche B Term Loan").
Proceeds of the Term Loan A, the Tranche A Term Loan and the Tranche B Term
Loan, together with a portion of the amount available under the Revolving Credit
Facility, were used, together with the net proceeds of the Bridge Notes, to
complete the Acquisition, to refinance certain indebtedness of Custom Foods and
Quality Foods and to pay transaction costs related thereto. The balance of the
Revolving Credit Facility is available for general corporate purposes. Upon the
consummation of the Offering and the application of the net proceeds thereof as
provided in "Use of Proceeds," the Tranche A Term Loan and the Tranche B Term
Loan were repaid in full, the amount outstanding under the Revolving Credit
Facility was reduced, and the principal amount under the Term Loan A remained
outstanding.
The following summaries of the material provisions of the Bank Credit
Agreement do not purport to be complete, and such provisions, including
definitions of certain terms, are qualified in their entirety by reference to
the Bank Credit Agreement. Capitalized terms used below and not defined in this
Prospectus have the meanings assigned to such terms in the Credit Agreement.
GENERAL
The Revolving Credit Facility matures in June 2002, at which time all
outstanding borrowings will be due. Up to $3.0 million of the Revolving Credit
Facility will be available for the issuance of standby letters of credit.
Availability under the Revolving Credit Facility will also be reduced for so
long as, and to the extent that, the Agent is party to a participation and
reimbursement agreement supporting the $4.4 million original principal amount of
certain taxable revenue bonds of Quality Foods. The Term Loan A matures in June
2002, and is payable in quarterly installments beginning in June 1997 as set
forth below. The Company will also be required to make mandatory prepayments of
principal from fixed percentages of excess cash flow (based on a leverage test)
and upon the occurrence of certain events such as asset sales and certain
issuances of securities. The Company is permitted to make voluntary prepayments
at any time.
The annual amortization schedule for principal on the Term Loan A (payable
quarterly) will be as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR TERM LOAN A
- ------------------------------------------------------------------------------- -----------------
<S> <C>
1997........................................................................ $ 1,000,000
1998........................................................................ 1,500,000
1999........................................................................ 2,000,000
2000........................................................................ 2,100,000
2001........................................................................ 2,200,000
2002........................................................................ 1,200,000
</TABLE>
INTEREST RATE AND FEES
Loans under the Revolving Credit Facility initially bear interest at a rate
equal to 1.25% per annum over the Agent's Base Rate or 2.50% per annum over the
Eurodollar Rate. The Term Loan A initially bears interest at a rate equal to
2.00% per annum over the Agent's Base Rate or 3.00% over the Eurodollar Rate.
Interest rates on the loans under the Revolving Credit Facility and the Term
Loan A may be reduced if the Company achieves certain leverage ratios.
Eurodollar Rates will be calculated for interest periods of one, two, three or
six months, as applicable.
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<PAGE>
The Bank Credit Agreement provides that the Company will pay certain fees
and commissions to the Lenders, including an annual administrative fee, an
underwriting fee payable to the Agent, a commitment fee payable to the Lenders
and letter of credit fees shared by the Agent and the Lenders.
GUARANTEES AND SECURITY
Borrowings and other obligations under the Bank Credit Agreement are
guaranteed on a senior secured basis by CFP Group and by Custom Foods, Quality
Foods and each other subsidiary of the Company.
Loans and other obligations under the Bank Credit Agreement and the
guarantees are secured by substantially all of the assets of the Company, CFP
Group and the Company's subsidiaries, including a pledge of the stock of the
Company and the Company's subsidiaries.
COVENANTS; EVENTS OF DEFAULT
The Bank Credit Agreement contains a number of customary covenants,
including, among other things, (i) prohibitions and/or limitations on the
incurrence of debt, liens, payment of dividends or distributions, redemptions of
capital stock, investments, transactions with affiliates, mergers, acquisitions
and asset dispositions and (ii) financial covenants covering interest coverage,
fixed charge coverage, leverage, cash flow, net worth and capital expenditures.
The Bank Credit Agreement also contains customary events of default, including
an event of default if a "change of control" occurs.
CONDITIONS
The Bank Credit Agreement contains a number of conditions to any subsequent
funding by the Lenders.
75
<PAGE>
DESCRIPTION OF NOTES
The Old Notes were, and the New Notes will be, issued under an indenture
dated as of January 28, 1997 (the "Indenture") among the Company, as issuer, the
Guarantors referred to below and United States Trust Company of New York,
trustee (the "Trustee"). The following summary of the material provisions of the
Indenture does not purport to be complete and is subject to, and qualified in
its entirety by, reference to the provisions of the Indenture, including the
definitions of certain terms contained therein and those terms made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended. For
definitions of certain capitalized terms used in the following summary, see
"Certain Definitions" below.
GENERAL
The terms of the New Notes are identical in all material respects to the Old
Notes, except that the New Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting their transfer and will not
contain certain provisions providing for an increase in the interest rate on the
Old Notes under certain circumstances relating to the Registration Rights
Agreement, which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer.
The Notes will mature on January 15, 2004, will be limited to $115,000,000
aggregate principal amount and will be senior unsecured obligations of the
Company. Except as otherwise described below, each Note will bear interest at
the rate set forth on the cover page hereof from January 28, 1997 or from the
most recent interest payment date to which interest has been paid or duly
provided for, payable semiannually on January 15 and July 15 in each year,
commencing July 15, 1997, until the principal thereof is paid or duly provided
for, to the person in whose name the Note (or any predecessor Note) is
registered at the close of business on the December 31 or June 30 next preceding
such interest payment date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The principal of and premium, if any, and interest on the Notes will be
payable, and the Notes will be exchangeable and transferable, at the office or
agency of the Company in The City of New York maintained for such purposes
(which initially will be the office of the Trustee located at 114 West 47th St.,
New York, New York 10036) or, at the option of the Company, interest may be paid
by check mailed to the address of the person entitled thereto as such address
appears in the security register; PROVIDED that all payments with respect to
Global Notes and Certificated Notes (as such terms are defined below under the
caption "Book Entry, Delivery and Form") the holders of which have given wire
transfer instructions to the Trustee will be required to be made by wire
transfer of immediately available funds to the accounts specified by the holders
thereof. The Notes will be issued only in registered form without coupons and
only in denominations of $1,000 and any integral multiple thereof. No service
charge will be made for any registration of transfer or exchange or redemption
of Notes, but the Company may require payment in certain circumstances of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
As of the Closing Date, all of the Company's Subsidiaries were Restricted
Subsidiaries. However, under certain circumstances, the Company will be able to
designate current or future Subsidiaries, other than Custom Foods and Quality
Foods, as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be
subject to many of the restrictive covenants set forth in the Indenture.
Notes that remain outstanding after the consummation of the Exchange Offer
and Exchange Notes issued in connection with the Exchange Offer will be treated
as a single class of securities under the Indenture.
Payment of the Notes will be guaranteed by the Subsidiary Guarantors and CFP
Group on a senior unsecured basis. See "Guarantees."
The Notes will not be entitled to the benefit of any sinking fund.
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<PAGE>
GUARANTEES
Payment of the principal of (and premium, if any, on) and interest on the
Notes, when and as the same become due and payable, will be guaranteed, jointly
and severally, on a senior unsecured basis (the "Subsidiary Guarantees") by all
of the existing Subsidiaries of the Company, including Custom Foods and Quality
Foods (the "Subsidiary Guarantors" and, together with CFP Group, the
"Guarantors"). The Indenture will provide that each Subsidiary formed or
acquired after the Closing Date will become a Subsidiary Guarantor. The
obligations of the Subsidiary Guarantors under the Subsidiary Guarantees will be
limited so as not to constitute a fraudulent conveyance under applicable law.
See "Risk Factors -- Fraudulent Conveyance Considerations." The Notes will also
be unconditionally guaranteed (the "Parent Guarantee" and, together with the
Subsidiary Guarantees, the "Guarantees") by CFP Group.
The Indenture provides that, in the event of a sale, transfer or other
disposition of all of the Capital Stock of a Subsidiary Guarantor to a person
that is not an Affiliate of the Company in compliance with the terms of the
Indenture, or in the event all or substantially all of the assets of a
Subsidiary Guarantor are sold, transferred or otherwise disposed of to a person
that is not an Affiliate of the Company in compliance with the terms of the
Indenture, then such Subsidiary Guarantor will be deemed automatically and
unconditionally released and discharged from all of its obligations under its
Subsidiary Guarantee without any further action on the part of the Trustee or
any holder of the Notes; provided that the Net Proceeds of such sale, transfer
or other disposition are applied in accordance with the "Limitation on Certain
Asset Sales" covenant. In addition, any Subsidiary Guarantor that is designated
as an Unrestricted Subsidiary in accordance with the terms of the Indenture may
be released and relieved of its obligations under its Subsidiary Guarantee.
The Parent Guarantee further provides that CFP Group will not enter into or
conduct any business or engage in any activity, other than holding capital stock
of the Company or guaranteeing Indebtedness of the Company or any of its
Subsidiaries.
RANKING
The Notes, the Subsidiary Guarantees and the Parent Guarantee will be senior
unsecured obligations of the respective obligors and will rank PARI PASSU in
right of payment with all other existing and future senior obligations of the
Company, the Subsidiary Guarantors and CFP Group, respectively. Loans under the
Bank Credit Agreement will be secured by substantially all of the Company's
assets, will be guaranteed by the Company's subsidiaries, which guarantees will
be secured by substantially all of the assets of the Company's subsidiaries, and
will be guaranteed by CFP Group, which guarantee will be secured by a pledge of
all of the stock of the Company. Accordingly, the Notes and the Guarantees will
be effectively subordinated to the loans outstanding under the Bank Credit
Agreement and the guarantees by the subsidiaries and CFP Group of such loans, to
the extent of the value of the assets securing such loans and guarantees. As of
March 31, 1997, the Company had $24.9 million of indebtedness outstanding other
than the Notes, all of which was secured. Subject to certain limitations, the
Company and its Subsidiaries may incur additional Indebtedness in the future.
REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable, at the option of the
Company, as a whole or from time to time in part, at any time on or after
January 15, 2001, on not less than 30 nor more than 60 days' prior notice at the
redemption prices (expressed as percentages of principal amount) set forth
below, together with accrued interest, if any, to the redemption date, if
redeemed during the 12-month period
77
<PAGE>
beginning on January 15 of the years indicated below (subject to the right of
holders of record on the relevant record date to receive interest due on an
interest payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ------------------------------------------------------------- -----------
<S> <C>
2001......................................................... 105.813%
2002......................................................... 102.906
</TABLE>
and thereafter at 100% of the principal amount, together with accrued interest,
if any, to the redemption date.
In addition, at any time or from time to time prior to January 15, 2000, the
Company may redeem up to $40 million aggregate principal amount of the Notes
within 90 days of an Equity Offering by CFP Group with the net proceeds of such
offering (that have been invested in the equity of the Company) at a redemption
price equal to 110% of the principal amount thereof, plus accrued interest, if
any, to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on an interest payment date);
provided that, immediately after giving effect to such redemption, at least $75
million aggregate principal amount of the Notes remains outstanding.
If less than all the Notes are to be redeemed, the particular Notes to be
redeemed will be selected not more than 60 days prior to the redemption date by
the Trustee by such method as the Trustee deems fair and appropriate.
PURCHASE OF NOTES UPON CHANGE OF CONTROL OR ASSET SALE. Each holder of the
Notes will have certain rights to require the Company to purchase such holder's
Notes upon the occurrence of a Change of Control. See "Certain Covenants --
Purchase of Notes upon a Change of Control" below. Under certain circumstances,
the Company will be required to make an offer to purchase all or a portion of
the Notes with proceeds received from an Asset Sale. See "Certain Covenants --
Limitation on Certain Asset Sales" below.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any
Restricted Subsidiary to, create, issue, assume, guarantee or in any manner
become directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Indebtedness (including Acquired Indebtedness and
the issuance of Disqualified Stock), except that the Company or any Subsidiary
Guarantor may incur Indebtedness if, at the time of such event, the Fixed Charge
Coverage Ratio for the immediately preceding four full fiscal quarters for which
internal financial statements are available, taken as one accounting period,
would have been equal to at least 2.0 to 1.0 through January 15, 1999 and 2.25
to 1.0 thereafter.
In making the foregoing calculation for any four-quarter period which
includes the Closing Date, pro forma effect will be given to the Offering and
the Acquisition, as if such transactions had occurred at the beginning of such
four-quarter period. In addition (but without duplication), in making the
foregoing calculation, pro forma effect will be given to: (i) the incurrence of
such Indebtedness and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such Indebtedness
was incurred and the application of such proceeds occurred at the beginning of
such four-quarter period, (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company or its Restricted Subsidiaries since the first
day of such four-quarter period as if such Indebtedness was incurred, repaid or
retired at the beginning of such four-quarter period and (iii) the acquisition
(whether by purchase, merger or otherwise) or disposition (whether by sale,
merger or otherwise) of any company, entity or business acquired or disposed of
by the Company or its Restricted Subsidiaries, as the case may be, since the
first day of such four-quarter period, as if such acquisition or disposition
occurred at the beginning of such four-quarter period. In making a computation
under the foregoing clause (i) or (ii), (A) the amount of Indebtedness under a
revolving credit facility will be computed based on the average
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daily balance of such Indebtedness during such four-quarter period, (B) if such
Indebtedness bears, at the option of the Company, a fixed or floating rate of
interest, interest thereon will be computed by applying, at the option of the
Company, either the fixed or floating rate and (C) the amount of any
Indebtedness that bears interest at a floating rate will be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Hedging Obligations applicable to such
Indebtedness if such Hedging Obligations have a remaining term at the date of
determination in excess of 12 months).
Notwithstanding the foregoing, the Company may, and may permit its
Restricted Subsidiaries to, incur the following Indebtedness ("Permitted
Indebtedness"):
(i) Indebtedness of the Company under the Bank Credit Agreement or one
or more other credit facilities (and the incurrence by any Restricted
Subsidiary of guarantees thereof) in an aggregate principal amount at any
one time outstanding not to exceed $30.0 million, less any amounts applied
to the permanent reduction of such credit facilities pursuant to the
"Limitation on Certain Asset Sales" covenant, plus an amount equal to the
excess, if any, at the time of incurrence of such Indebtedness of (A) 85% of
the net book value of accounts receivable of the Company and its Restricted
Subsidiaries and 60% of the net book value of inventories of the Company and
its Restricted Subsidiaries as set forth on the most recently available
quarterly or annual consolidated balance sheet of the Company and its
Restricted Subsidiaries, over (B) $20.0 million;
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Closing Date and listed on a schedule to the Indenture
(other than Indebtedness described under clause (i) above);
(iii) Indebtedness owed by the Company to any Restricted Subsidiary or
owed by any Restricted Subsidiary to the Company or any other Restricted
Subsidiary (provided that such Indebtedness is held by the Company or such
Restricted Subsidiary);
(iv) Indebtedness represented by the Notes and the Subsidiary
Guarantees;
(v) Indebtedness of the Company or any Restricted Subsidiary under
Hedging Obligations entered into in the ordinary course of business or
required by the Bank Credit Agreement or another credit facility referred to
in clause (i) above;
(vi) Indebtedness of the Company or any Restricted Subsidiary consisting
of guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock;
(vii) Indebtedness of the Company or any Restricted Subsidiary not
permitted by any other clause of this definition, in an aggregate principal
amount not to exceed $5.0 million at any one time outstanding; and
(viii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Indebtedness, other than Indebtedness incurred pursuant to
clause (i), (iii), (v), (vi) or (vii) of this definition, including any
successive refinancings thereof, so long as (A) any such new Indebtedness is
in a principal amount that does not exceed the principal amount so
refinanced, plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the Indebtedness refinanced
or the amount of any premium reasonably determined by the Company as
necessary to accomplish such refinancing, plus the amount of the expenses of
the Company incurred in connection with such refinancing, (B) in the case of
any refinancing of Subordinated Indebtedness, such new Indebtedness is made
subordinate to the Notes at least to the same extent as the Indebtedness
being refinanced and (C) such refinancing Indebtedness does not have an
Average Life less than the Average Life of the Indebtedness being refinanced
and does not have a final scheduled maturity earlier than the final
scheduled maturity, or permit redemption at the option of the holder earlier
than the earliest date of redemption at the option of the holder, of the
Indebtedness being refinanced.
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Limitation on Restricted Payments. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, take any of the
following actions:
(a) declare or pay any dividend on, or make any distribution to holders
of, any shares of the Capital Stock of the Company or any Restricted
Subsidiary, other than (i) dividends or distributions payable solely in
Qualified Equity Interests, (ii) dividends or distributions by a Restricted
Subsidiary payable to the Company or another Restricted Subsidiary or (iii)
pro rata dividends or distributions on common stock of Restricted
Subsidiaries held by minority stockholders, provided that such dividends do
not in the aggregate exceed the minority stockholders' pro rata share of
such Restricted Subsidiaries' net income from the first day of the Company's
fiscal quarter during which the Closing Date occurs;
(b) purchase, redeem or otherwise acquire or retire for value, directly
or indirectly, any shares of Capital Stock (other than Disqualified Stock)
of the Company, CFP Group or any Restricted Subsidiary, or any options,
warrants or other rights to acquire such shares of Capital Stock (other than
any such Capital Stock owned by the Company or any of its Restricted
Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness
(other than the repayment of the Bridge Notes on the Closing Date); and
(d) make any Investment (other than a Permitted Investment) in any
person
(such payments or other actions described in (but not excluded from) clauses (a)
through (d) being referred to as "Restricted Payments"), unless at the time of,
and immediately after giving effect to, the proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph of the "Limitation on Indebtedness" covenant
and
(iii) the aggregate amount of all Restricted Payments made after the
Closing Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Adjusted Net Income of the
Company during the period (taken as one accounting period) from the first
day of the Company's fiscal quarter during which the Closing Date occurs
to the last day of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
proposed Restricted Payment (or, if such aggregate cumulative
Consolidated Adjusted Net Income is a loss, minus 100% of such amount),
plus
(B) the aggregate net cash proceeds received by the Company after
the Closing Date from the issuance or sale (other than to a Restricted
Subsidiary) of either (1) Qualified Equity Interests of the Company
(excluding proceeds of an Equity Offering the proceeds of which are used
to redeem Notes as discussed above) or (2) debt securities or
Disqualified Stock that have been converted into or exchanged for
Qualified Stock of the Company, together with the aggregate net cash
proceeds received by the Company at the time of such conversion or
exchange.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take the following actions, so long as (with respect to clause (e), (f) or
(h) below) no Default or Event of Default has occurred and is continuing or
would occur:
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have
been prohibited by the foregoing provisions;
(b) the repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or out
of the net cash proceeds of a substantially
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concurrent issuance and sale (other than to a Restricted Subsidiary) of,
Qualified Equity Interests of the Company;
(c) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and sale
(other than to a Restricted Subsidiary) of, shares of Qualified Equity
Interests of the Company;
(d) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out of
the net cash proceeds of a substantially concurrent issuance or sale (other
than to a Restricted Subsidiary) of, Subordinated Indebtedness, so long as
the Company or a Restricted Subsidiary would be permitted to refinance such
original Subordinated Indebtedness with such new Subordinated Indebtedness
pursuant to clause (viii) of the definition of Permitted Indebtedness;
(e) the repurchase of any Subordinated Indebtedness at a purchase price
not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a change of control in accordance with
provisions similar to the "Change of Control" covenant; provided that, prior
to or simultaneously with such repurchase, the Company has made the Change
of Control Offer as provided in such covenant with respect to the Notes and
has repurchased all Notes validly tendered for payment in connection with
such Change of Control Offer;
(f) the payment of cash dividends by the Company to CFP Group in an
amount equal to the aggregate cash consideration paid by CFP Group for the
purchase, redemption, acquisition, cancellation or other retirement for
value of shares of Capital Stock of CFP Group, options on any such shares or
related stock appreciation rights or similar securities held by officers or
employees or former officers or employees (or their estates or beneficiaries
under their estates) or by any employee benefit plan, upon death,
disability, retirement or termination of employment or pursuant to the terms
of any employee benefit plan or any other agreement under which such shares
of stock or related rights were issued; provided no such payment of cash
dividends shall be made pursuant to this clause (f) prior to the end of the
Company's fiscal year ending nearest the second anniversary of the Closing
Date and thereafter that the aggregate payment of cash dividends pursuant to
this clause (f) does not exceed $1.0 million in any fiscal year;
(g) the payment on or promptly after the Closing Date of the
Distribution; and
(h) the payment of Management Fees to First Atlantic.
The actions described in clauses (b), (c), (e) and (f) of this paragraph will be
Restricted Payments that will be permitted to be taken in accordance with this
paragraph but will reduce the amount that would otherwise be available for
Restricted Payments under clause (iii) of the first paragraph of this covenant
and the actions described in clauses (a), (d), (g) and (h) of this paragraph
will be Restricted Payments that will be permitted to be taken in accordance
with this paragraph and will not reduce the amount that would otherwise be
available for Restricted Payments under clause (iii) of the first paragraph of
this covenant.
Notwithstanding the foregoing, the Company may not pay a dividend that
constitutes a Restricted Payment prior to the second anniversary of the Closing
Date.
For the purpose of making any calculations under the Indenture (i) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will
be deemed to have made an Investment in an amount equal to the fair market value
of the net assets of such Restricted Subsidiary at the time of such designation
as determined by the Board of Directors of the Company, whose good faith
determination will be conclusive, (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company, whose good
faith determination will be conclusive and (iii) subject to the foregoing, the
amount of any Restricted
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Payment, if other than cash, will be determined by the Board of Directors of the
Company, whose good faith determination will be conclusive.
If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the lesser of (x) the net asset value of such Subsidiary at the
time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in the
Company's Consolidated Adjusted Net Income; provided that the total amount by
which the aggregate amount of all Restricted Payments may be reduced may not
exceed the lesser of (x) the cash proceeds received by the Company and its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.
In computing the Consolidated Adjusted Net Income of the Company under the
foregoing clause (iii)(A), (i) the Company may use audited financial statements
for the portions of the relevant period for which audited financial statements
are available on the date of determination and unaudited financial statements
and other current financial data based on the books and records of the Company
for the remaining portion of such period and (ii) the Company will be permitted
to rely in good faith on the financial statements and other financial data
derived from its books and records that are available on the date of
determination. If the Company makes a Restricted Payment that, at the time of
the making of such Restricted Payment, would in the good faith determination of
the Company be permitted under the requirements of the Indenture, such
Restricted Payment will be deemed to have been made in compliance with the
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Consolidated Adjusted Net Income of the
Company for any period.
Purchase of Notes upon a Change of Control. If a Change of Control occurs
at any time, then each holder of Notes will have the right to require that the
Company purchase such holder's Notes, in whole or in part in integral multiples
of $1,000, at a purchase price in cash equal to 101% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of purchase,
pursuant to the offer described below (the "Change of Control Offer") and the
other procedures set forth in the Indenture.
Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Notes by first-class mail, postage prepaid, at its address appearing in the
security register, stating, among other things, (i) the purchase price and the
purchase date, which will be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed or such later date as is
necessary to comply with requirements under the Exchange Act; (ii) that any Note
not tendered will continue to accrue interest; (iii) that, unless the Company
defaults in the payment of the purchase price, any Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest after the
Change of Control purchase date; and (iv) certain other procedures that a holder
of Notes must follow to accept a Change of Control Offer or to withdraw such
acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be tendered by holders of the Notes seeking to accept
the Change of Control Offer. The failure of the Company to make or consummate
the Change of Control Offer or pay the applicable Change of Control purchase
price when due would result in an Event of Default and would give the Trustee
and the holders of the Notes the rights described under "Events of Default."
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Under the Bank Credit Agreement, it is an event of default if a change of
control thereunder occurs, where the definition of change of control is the same
as the definition of Change of Control hereunder.
One of the events that constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Notes elect to require the Company to purchase the
Notes and the Company elects to contest such election, there can be no assurance
as to how a court interpreting New York law would interpret the phrase in many
circumstances.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction that constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to repurchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "Certain Definitions" below for the definition of
"Change of Control." A transaction involving the Company's management or its
affiliates, or a transaction involving a recapitalization of the Company, would
result in a Change of Control if it is the type of transaction specified in such
definition.
The Company will comply with the applicable tender offer rules including
Rule-14e under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer.
The Company will not, and will not permit any Restricted Subsidiary to,
create any restriction (other than restrictions existing under Indebtedness as
in effect on the Closing Date or in refinancings of such Indebtedness) that
would materially impair the ability of the Company to make a Change of Control
Offer to purchase the Notes or, if such Change of Control Offer is made, to pay
for the Notes tendered for purchase.
LIMITATION ON CERTAIN ASSET SALES. (a) The Company will not, and will not
permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) the
consideration received by the Company or such Restricted Subsidiary for such
Asset Sale is not less than the fair market value of the assets sold (as
determined by the Board of Directors of the Company, whose good faith
determination will be conclusive) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or cash equivalents.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may, at its option, within 12 months after such Asset Sale, (i)
apply all or a portion of the Net Cash Proceeds to the permanent reduction of
amounts outstanding under the Bank Credit Agreement or to the repayment of other
senior Indebtedness of the Company or a Restricted Subsidiary or (ii) invest (or
enter into a legally binding agreement to invest) all or a portion of such Net
Cash Proceeds in properties and assets to replace the properties and assets that
were the subject of the Asset Sale or in properties and assets that will be used
in businesses of the Company or its Restricted Subsidiaries, as the case may be,
existing on the Closing Date. If any such legally binding agreement to invest
such Net Cash Proceeds is terminated, the Company may, within 90 days of such
termination or within 12 months of such Asset Sale, whichever is later, invest
such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the
parenthetical contained in such clause (ii)) above. The amount of such Net Cash
Proceeds not so used as set forth above in this paragraph (b) constitutes
"Excess Proceeds."
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(c) When the aggregate amount of Excess Proceeds exceeds $5.0 million, the
Company will, within 30 days thereafter, make an offer to purchase from all
holders of Notes, on a pro rata basis, in accordance with the procedures set
forth in the Indenture, the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase
price in cash equal to 100% of the principal amount thereof, plus accrued
interest, if any, to the date such offer to purchase is consummated. To the
extent that the aggregate principal amount of Notes tendered pursuant to such
offer to purchase is less than the Excess Proceeds, the Company may use such
deficiency for general corporate purposes. If the aggregate principal amount of
Notes validly tendered and not withdrawn by holders thereof exceeds the Excess
Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds will be
reset to zero.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction with, or for the benefit of, any Affiliate of
the Company unless (a) such transaction is on terms that are no less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
that could have been obtained in an arm's length transaction with third parties
who are not Affiliates and (b) the Company delivers to the Trustee (i) with
respect to any transaction or series of transactions entered into after the
Closing Date involving aggregate payments in excess of $1.0 million, a
resolution of the Board of Directors of the Company set forth in an officers'
certificate certifying that such transaction or transactions complies with
clause (a) above and that such transaction or transactions have been approved by
the Board of Directors (including a majority of the Disinterested Directors) of
the Company and (ii) with respect to a transaction or series of transactions
involving aggregate payments equal to or greater than $5.0 million, a written
opinion as to the fairness to the Company or such Restricted Subsidiary of such
transaction or series of transactions from a financial point of view issued by
an investment banking, accounting or appraisal firm of national standing.
The foregoing covenant will not restrict
(A) transactions among the Company and/or its Restricted Subsidiaries;
(B) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary; and
(C) transactions permitted by the provisions of the "Limitations on
Restricted Payments" covenant.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock, (b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (c) make loans or advances to the Company or any other Restricted
Subsidiary, (d) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary or (e) guarantee any Indebtedness of the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of:
(i) any agreement in effect on the Closing Date;
(ii) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary;
(iii) the refinancing or successive refinancing of Indebtedness incurred
under the agreements in effect on the Closing Date, so long as such
encumbrances or restrictions are no less favorable to the Company or any
Restricted Subsidiary than those contained in such original agreement; or
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(iv) any agreement or other instrument of a person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company (a) will not permit any Restricted Subsidiary to
issue any Capital Stock (other than to the Company or a wholly owned Restricted
Subsidiary) and (b) will not permit any person (other than the Company or a
wholly owned Restricted Subsidiary) to own any Capital Stock of any Restricted
Subsidiary; provided, however, that this covenant will not prohibit (i) the sale
or other disposition of all, but not less than all, of the issued and
outstanding Capital Stock of a Restricted Subsidiary owned by the Company and
its Restricted Subsidiaries in compliance with the other provisions of the
Indenture, (ii) the ownership by directors of director's qualifying shares or
the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law or (iii) the ownership by
any person of Capital Stock of a Restricted Subsidiary issued prior to the time
such entity became a Restricted Subsidiary provided that such Capital Stock was
not issued in anticipation of such transaction.
UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company
nor any Restricted Subsidiary is directly or indirectly liable for any
Indebtedness of such Subsidiary, (ii) no default with respect to any
Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity, (iii) any
Investment in such Subsidiary made as a result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of the "Limitation on
Restricted Payments" covenant, (iv) neither the Company nor any Restricted
Subsidiary has a contract, agreement, arrangement, understanding or obligation
of any kind, whether written or oral, with such Subsidiary other than those that
might be obtained at the time from persons who are not Affiliates of the Company
and (v) neither the Company nor any Restricted Subsidiary has any obligation to
subscribe for additional shares of Capital Stock or other equity interest in
such Subsidiary, or to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve certain levels of operating
results. Notwithstanding the foregoing, the Company may not designate Custom
Foods or Quality Foods as an Unrestricted Subsidiary and may not sell, transfer
or otherwise dispose of any properties or assets of Custom Foods or Quality
Foods to an Unrestricted Subsidiary, other than in the ordinary course of
business.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that such designation will be
deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
will only be permitted if (i) such Indebtedness is permitted under the
"Limitation on Indebtedness" covenant and (ii) no Default or Event of Default
will have occurred and be continuing following such designation.
LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind on or with respect to any of its property
or assets, including any shares of stock or debt of any Restricted Subsidiary,
whether owned at the Closing Date or thereafter acquired, or any income, profits
or proceeds therefrom, or assign or otherwise convey any right to receive income
thereon, unless (a) in the case of any Lien securing Subordinated Indebtedness,
the Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Lien and (b) in the case of any other Lien, the Notes
are equally and ratably secured with the obligation or liability secured by such
Lien.
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Notwithstanding the foregoing, the Company may, and may permit any
Subsidiary to, incur the following Liens ("Permitted Liens"):
(i) Liens (other than Liens securing Indebtedness under the Bank Credit
Agreement) existing as of the Closing Date;
(ii) Liens on property or assets of the Company or any Restricted
Subsidiary securing Indebtedness under the Bank Credit Agreement or one or
more other credit facilities in a principal amount not to exceed the
principal amount of the outstanding Indebtedness permitted by clause (i) of
the definition of "Permitted Indebtedness;"
(iii) Liens on any property or assets of a Restricted Subsidiary granted
in favor of the Company or any wholly owned Restricted Subsidiary;
(iv) Liens securing the Notes;
(v) any interest or title of a lessor under any Capitalized Lease
Obligation or Sale and Leaseback Transaction that was not entered into in
violation of the "Limitation on Indebtedness" covenant;
(vi) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the Company or any Restricted Subsidiary; provided that such Lien does
not extend to any property or assets of the Company or any Restricted
Subsidiary other than the property and assets acquired in connection with
the incurrence of such Acquired Indebtedness;
(vii) Liens securing Hedging Obligations permitted to be incurred
pursuant to clause (v) of the definition of "Permitted Indebtedness;"
(viii) Liens arising from purchase money mortgages and purchase money
security interests incurred in the ordinary course of the business of the
Company; provided that (A) the related Indebtedness is not secured by any
property or assets of the Company or any Restricted Subsidiary other than
the property and assets so acquired, (B) the Lien securing such Indebtedness
is created with 60 days of such acquisition and (C) the related Indebtedness
was not incurred in violation of the "Limitation on Indebtedness" covenant;
(ix) statutory Liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings
and, if required by GAAP, a reserve or other appropriate provision has been
made therefor;
(x) Liens for taxes, assessments, government charges or claims that are
being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and, if required by GAAP, a reserve or other
appropriate provision has been made therefor;
(xi) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts for
the payment of money);
(xii) easements, rights-of-way, restrictions and other similar charges or
encumbrances not interfering in any material respect with the business of
the Company or any Restricted Subsidiary incurred in the ordinary course of
business;
(xiii) Liens arising by reason of any judgment, decree or order of any
court, so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the
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review of such judgment, decree or order have not been finally terminated or
the period within which such proceedings may be initiated has not expired;
and
(xiv) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (i) through (xiii); provided that
any such extension, renewal or replacement is no more restrictive in any
material respect than the Lien so extended, renewed or replaced and does not
extend to any additional property or assets.
REPORTS. The Company will be required to file on a timely basis with the
Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that the
Company would be required to file if it were subject to Section 13 or 15(d) of
the Exchange Act. The Company will also be required (a) to file with the
Trustee, and provide to each holder of Notes, without cost to such holder,
copies of such reports and documents within 15 days after the date on which the
Company files such reports and documents with the Commission or the date on
which the Company would be required to file such reports and documents if the
Company were so required and (b) if filing such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the Exchange
Act, to supply at the Company's cost copies of such reports and documents to any
prospective holder of Notes promptly upon written request.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not, and may not permit any Restricted Subsidiary to, in a
single transaction or series of related transactions, consolidate or merge with
or into (other than the consolidation or merger of a Restricted Subsidiary of
the Company with another Restricted Subsidiary of the Company or into the
Company) (whether or not the Company or such Restricted Subsidiary is the
surviving corporation), or directly and/or indirectly through its Subsidiaries
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole) in one or more
related transactions to, another corporation, person or entity unless:
(a) either (i) the Company, in the case of a transaction involving the
Company, or such Restricted Subsidiary, in the case of a transaction
involving a Restricted Subsidiary, is the surviving corporation or (ii) in
the case of a transaction involving the Company, the entity or the person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (the "Surviving Entity") is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia and assumes all the obligations of
the Company under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee;
(b) immediately after giving effect to such transaction and treating any
obligation of the Company or a Restricted Subsidiary in connection with or
as a result of such transaction as having been incurred as of the time of
such transaction, no Default or Event of Default has occurred and is
continuing;
(c) the Company (or, in the case of a transaction involving the Company,
the Surviving Entity if the Company is not the continuing obligor under the
Indenture) could, at the time of such transaction and after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the first
paragraph of the "Limitation on Indebtedness" covenant;
(d) if the Company is not the continuing obligor under the Indenture,
each Subsidiary Guarantor, unless it is the other party to the transaction
described above, has by supplemental indenture
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confirmed that its Subsidiary Guarantee applies to the Surviving Entity's
obligations under the Indenture and the Notes;
(e) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of the "Limitation on Liens" covenant are complied with; and
(f) the Company delivers, or causes to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the requirements of the Indenture;
provided, however, that any sale, transfer or disposition of all of the Capital
Stock, or all or substantially all of the assets, of a Subsidiary Guarantor will
not be restricted by the foregoing provisions but will be governed by the
provisions described under "Subsidiary Guarantees."
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in the
case of a lease, be discharged from all its obligations and covenants under the
Indenture and Notes.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(a) default in the payment of any interest on any Note when it becomes
due and payable, and continuance of such default for a period of 30 days;
(b) default in the payment of the principal of (or premium, if any, on)
any Note when due;
(c) failure to perform or comply with the Indenture provisions described
under "Consolidation, Merger and Sale of Assets;"
(d) default in the performance, or breach, of any covenant or agreement
of the Company, any Subsidiary Guarantor or CFP Group contained in the
Indenture, any Subsidiary Guarantee or the Parent Guarantee (other than a
default in the performance, or breach, of a covenant or agreement that is
specifically dealt with elsewhere herein), and continuance of such default
or breach for a period of 60 days after written notice has been given to the
Company by the Trustee or to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the Notes then outstanding;
(e) (i) an event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of
Indebtedness of the Company or any Restricted Subsidiary, which issue has an
aggregate outstanding principal amount of not less than $2.0 million, and
such default has resulted in such Indebtedness becoming, whether by
declaration or otherwise, due and payable prior to the date on which it
would otherwise become due and payable or (ii) a default in any payment when
due at final maturity of any such Indebtedness;
(f) failure by the Company or any of its Restricted Subsidiaries to pay
one or more final judgments the uninsured portion of which exceeds in the
aggregate $2.0 million, which judgment or judgments are not paid, discharged
or stayed for a period of 60 days;
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(g) any Guarantee ceases to be in full force and effect or is declared
null and void or any Guarantor denies that it has any further liability
under its Guarantee, or gives notice to such effect (other than by reason of
the termination of the Indenture or the release of any such Guarantee in
accordance with the Indenture), and such condition has continued for a
period of 30 days after written notice of such failure requiring the
Guarantor and the Company to remedy the same has been given (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the holders
of 25% in aggregate principal amount of the Notes then outstanding; or
(h) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary; or
(i) CFP Group fails to own all of the Capital Stock of the Company,
unless the Company and CFP Group have been merged.
If an Event of Default (other than as specified in clause (h) above) occurs
and is continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may declare the principal of and
accrued interest on all of the outstanding Notes immediately due and payable
and, upon any such declaration, such principal and such interest will become due
and payable immediately.
If an Event of Default specified in clause (h) above occurs and is
continuing, then the principal of and accrued interest on all of the outstanding
Notes will IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Notes.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if (i) the Company or any Guarantor has
paid or deposited with the Trustee a sum sufficient to pay (A) all overdue
interest on all Notes, (B) all unpaid principal of (and premium, if any, on) any
outstanding Notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, (C) to the
extent that payment of such interest is lawful, interest upon overdue interest
and overdue principal at the rate borne by the Notes and (D) all sums paid or
advanced by the Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel; and
(ii) all Events of Default, other than the non-payment of amounts of principal
of (or premium, if any, on) or interest on the Notes that have become due solely
by such declaration of acceleration, have been cured or waived. No such
rescission will affect any subsequent default or impair any right consequent
thereon.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding within 60 days after receipt of such notice and the Trustee,
within such 60-day period, has not received directions inconsistent with such
written request by holders of a majority in aggregate principal amount of the
outstanding Notes. Such limitations do not apply, however, to a suit instituted
by a holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on such Note on or after the respective due dates
expressed in such Note.
The holders of not less than a majority in aggregate principal amount of the
outstanding Notes may, on behalf of the holders of all of the Notes, waive any
past defaults under the Indenture, except a default in the payment of the
principal of (and premium, if any) or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within five days after the
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occurrence thereof. Except in the case of a Default or an Event of Default in
payment of principal of (and premium, if any, on) or interest on any Notes, the
Trustee may withhold the notice to the holders of the Notes if a committee of
its trust officers in good faith determines that withholding such notice is in
the interests of the holders of the Notes.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Subsidiary Guarantors of their
obligations under the Indenture and as to any default in such performance. The
Company is also required to notify the Trustee within five days of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations of
the Company and the Subsidiary Guarantors with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company will be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payments in respect of the principal of (and premium, if any, on) and interest
on such Notes when such payments are due, (ii) the Company's obligations to
issue temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes, maintain an office or agency for
payments in respect of the Notes and segregate and hold such payments in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee and (iv)
the defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to terminate the obligations of the Company and
any Subsidiary Guarantor with respect to certain covenants set forth in the
Indenture under "Certain Covenants" above, and any omission to comply with such
obligations would not constitute a Default or an Event of Default with respect
to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (a) the
Company must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Notes, money in an amount, or U.S.
Government Obligations (as defined in the Indenture) that through the scheduled
payment of principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the outstanding Notes at maturity (or upon
redemption, if applicable) of such principal or installment of interest; (b) no
Default or Event of Default has occurred and is continuing on the date of such
deposit or, insofar as an event of bankruptcy under clause (h) of "Events of
Default" above is concerned, at any time during the period ending on the 91st
day after the date of such deposit; (c) such defeasance or covenant defeasance
may not result in a breach or violation of, or constitute a default under, the
Indenture or any material agreement or instrument to which the Company or any
Subsidiary Guarantor is a party or by which it is bound; (d) in the case of
defeasance, the Company must deliver to the Trustee an opinion of counsel
stating that the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or since the date hereof, there has been a
change in applicable federal income tax law, to the effect, and based thereon
such opinion must confirm that, the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred; (e) in the case of covenant defeasance, the Company
must have delivered to the Trustee an opinion of counsel to the effect that the
Holders of the Notes outstanding will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had not
occurred; and (f) the Company must have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
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SATISFACTION AND DISCHARGE
Upon the request of the Company, the Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in the Indenture) and the Trustee, at the
expense of the Company, will execute proper instruments acknowledging
satisfaction and discharge of the Indenture when (a) either (i) all the Notes
theretofore authenticated and delivered (other than mutilated, destroyed, lost
or stolen Notes that have been replaced or paid and Notes that have been subject
to defeasance under "Defeasance or Covenant Defeasance of Indenture") have been
delivered to the Trustee for cancellation or (ii) all Notes not theretofore
delivered to the Trustee for cancellation (A) have become due and payable, (B)
will become due and payable at maturity within one year or (C) are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company, and the Company has irrevocably deposited or caused to
be deposited with the Trustee funds in trust for the purpose in an amount
sufficient to pay and discharge the entire Indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any, on) and interest on the Notes to the date of such deposit (in
the case of Notes that have become due and payable) or to the Stated Maturity or
redemption date, as the case may be; (b) the Company has paid or caused to be
paid all sums payable under the Indenture by the Company; and (c) the Company
has delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided in the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture and any Guarantee may be made
by the Company, any affected Guarantor and the Trustee with the consent of the
holders of a majority in aggregate outstanding principal amount of the Notes;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby,
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof, or
change the coin or currency in which any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof (or, in
the case of redemption, on or after the redemption date);
(b) reduce the percentage in principal amount of outstanding Notes, the
consent of whose holders is required for any waiver of compliance with
certain provisions of, or certain defaults and their consequences provided
for under, the Indenture;
(c) modify any provisions relating to "Amendments and Waivers" except to
increase the percentage of outstanding Notes required for such actions or to
provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the holder of each outstanding Note affected
thereby; or
(d) release any Subsidiary Guarantor that is a Significant Subsidiary
from any of its obligations under its Subsidiary Guarantee or the Indenture
other than in accordance with the terms of the Indenture.
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
THE TRUSTEE
The United States Trust Company of New York, the Trustee under the
Indenture, will be the initial paying agent and registrar for the Notes. The
Company and its Affiliates maintain customary banking relationships with the
Trustee.
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The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. If an Event of Default has occurred and is continuing, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein, contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that, if it
acquires any conflicting interest (as defined), it must eliminate such conflict
upon the occurrence of an Event of Default or else resign.
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes will initially be
issued in the form of one Global Note (the "Global Note"). The Global Note will
be deposited with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Note and (ii) ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to own, transfer or pledge Notes evidenced
by the Global Note will be limited to such extent. For certain other
restrictions on the transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or
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liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days or (ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Notes in the form of Certificated Securities
under the Indenture then, upon surrender by the Global Note Holder of its Global
Note, Certificated Notes will be issued to each person that the Global Note
Holder and the Depositary identify as being the beneficial owner of the related
Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, and interest) be made
by wire transfer of immediately available funds to the accounts specified by the
Global Note Holder. With respect to Certificated Notes, the Company will make
all payments of principal, premium, if any, and interest by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearinghouse or next-day funds. In
contrast, the Notes represented by the Global Note are expected to be eligible
to trade in the PORTAL market and to trade in the Depositary's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
Notes will, therefore, be required by the Depositary to be settled in
immediately available funds. The Company expects that secondary trading in the
Certified Notes will also be settled in immediately available funds.
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CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) existing at the
time such person becomes a Subsidiary or (b) assumed in connection with the
acquisition of assets from such person.
"Affiliate" means, with respect to any specified person, (a) any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person or (b) any other person that
owns, directly or indirectly, 10% or more of such specified person's Capital
Stock or any executive officer or director of any such specified person or other
person or, with respect to any natural person, any person having a relationship
with such person by blood, marriage or adoption not more remote than first
cousin. For the purposes of this definition, "control", when used with respect
to any specified person, means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of merger, consolidation or
Sale and Leaseback Transaction or similar arrangement) (collectively, a
"transfer") by the Company or any Restricted Subsidiary other than in the
ordinary course of business, whether in a single transaction or a series of
related transactions, other than (a) inventory sold in the ordinary course of
business and (b) any such other assets to the extent that the aggregate value of
such assets sold in any single transaction or related series of transactions
does not exceed $250,000 and in all transactions during any 12-month period does
not exceed $1.0 million. For the purposes of this definition, the term "Asset
Sale" does not include any transfer of properties or assets (i) that is governed
by the provisions of the Indenture described under "Consolidation, Merger and
Sale of Assets", (ii) between or among the Company and its Restricted
Subsidiaries pursuant to transactions that do not violate any other provision of
the Indenture, (iii) representing obsolete or permanently retired equipment and
facilities or (iv) to an Unrestricted Subsidiary, if permitted under the
"Limitation on Restricted Payments" covenant.
"Average Life" means, as of the date of determination with respect to any
Indebtedness or Disqualified Stock, the quotient obtained by dividing (a) the
sum of the products of (i) the number of years from the date of determination to
the date or dates of each successive scheduled principal or liquidation value
payment of such Indebtedness or Disqualified Stock, respectively, multiplied by
(ii) the amount of each such principal or liquidation value payment by (b) the
sum of all such principal or liquidation value payments.
"Bank Credit Agreement" means the credit agreement dated as of December 30,
1996 among the Company, the Banks and NationsBank, N.A., as agent, as such
agreement may be amended, restated, supplemented, refinanced or otherwise
modified from time to time.
"Banks" means the banks and other financial institutions that from time to
time are lenders under the Bank Credit Agreement.
"Capital Stock" of any person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such person's equity interest (however designated) and any rights
(other than debt securities convertible into capital stock), warrants or options
exercisable or exchangeable for or convertible into such capital stock, whether
now outstanding or issued after the Closing Date.
"Capitalized Lease Obligation" means, with respect to any person, an
obligation incurred or assumed in the ordinary course of business under or in
connection with any capital lease of real or personal property that, in
accordance with GAAP, has been recorded as a capitalized lease.
"Change of Control" means the occurrence of any of the following events:
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(a) Prior to an Initial Public Offering, Atlantic Equity Partners, L.P.
and/or its Affiliates shall cease to beneficially own and control (x) at
least 66 2/3% of the shares of Capital Stock (excluding the redeemable
preferred stock owned by Atlantic Equity Partners, L.P. and its Affiliates)
of CFP Group (as such number of shares may be adjusted to take into account
stock splits, reverse stock splits, dividends payable in shares of Capital
Stock and similar transactions) beneficially owned and controlled by such
Persons as of the Closing Date and (y) a majority of the issued and
outstanding Voting Stock of CFP Group;
(b) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Atlantic Equity Partners, L.P.,
its Affiliates and/or management employees of CFP Group or any of its
Subsidiaries is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than 50% of the
voting power of all classes of Voting Stock of CFP Group;
(c) CFP Group, either individually or in conjunction with one or more of
its subsidiaries, sells, assigns, conveys, transfers, leases or otherwise
disposes of, or such subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, all or substantially all of the properties of CFP
Group and its subsidiaries, taken as a whole (either in one transaction or a
series of related transactions), including Capital Stock of such
subsidiaries, to any person (other than the Company or a Restricted
Subsidiary);
(d) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of CFP Group
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of CFP Group was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of CFP Group then in office;
or
(e) CFP Group or the Company is liquidated or dissolved or adopts a plan
of liquidation or dissolution, (other than as a result of a merger of the
Company into CFP Group or CFP Group into the Company).
"Closing Date" means the date on which the Notes are originally issued under
the Indenture.
"Consolidated Adjusted Net Income" means, for any period, the net income (or
net loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any Restricted
Subsidiary has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any Restricted
Subsidiary in cash during such period, (d) the net income (or loss) of any
person combined with the Company or any Restricted Subsidiary on a "pooling of
interests" basis attributable to any period prior to the date of combination and
(e) the net income (but not the net loss) of any Restricted Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Restricted Subsidiary is at the date of determination restricted, directly
or indirectly, except to the extent that such net income could be paid to the
Company or a Restricted Subsidiary thereof by loans, advances, intercompany
transfers, principal repayments or otherwise.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, (a) Consolidated Adjusted Net Income for such period, PLUS (b)
Fixed Charges for such period, PLUS (c) the provision for federal, state, local
and foreign income taxes of the Company and its Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP, PLUS (d)
the aggregate depreciation, amortization and other non-cash expenses of the
Company and its Restricted Subsidiaries for such
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period, determined on a consolidated basis in accordance with GAAP (excluding
any such non-cash charge that requires an accrual of or reserve for cash charges
for any future period), to the extent deducted in computing Consolidated
Adjusted Net Income, PLUS (e) any other non-cash charges reducing Consolidated
Adjusted Net Income for such period, and minus non-cash credits increasing
Consolidated Adjusted Net Income for such period, other than non-cash charges or
credits resulting from changes in prepaid assets or accrued liabilities in the
ordinary course of business.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series of
transactions in respect of which the Board of Directors is required to deliver a
resolution of the Board of Directors under the Indenture, a member of the Board
of Directors who does not have any material direct or indirect financial
interest in or with respect to such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that, either
by its terms, by the terms of any security into which it is convertible or
exchangeable or by contract or otherwise (i) is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes, (ii) is redeemable at the option of the holder
thereof, at any time prior to such final Stated Maturity or (iii) at the option
of the holder thereof is convertible into or exchangeable for debt securities at
any time prior to such final Stated Maturity.
"Distribution" means a cash distribution on the capital stock of the Company
in an amount not to exceed $17.25 million in order to permit CFP Group to make a
cash distribution of up to $16.0 million on the Class A Common Stock of CFP
Group and to effect redemption of an aggregate of up to $1.25 million of the
outstanding redeemable preferred stock of CFP Group.
"Equity Offering" means an underwritten primary offering of common stock
(which is Qualified Stock) of CFP Group.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Fixed Charges for such period.
"Fixed Charges" means, for any period, without duplication, the sum of (a)
the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost of interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs and (v) the interest component of Capitalized Lease Obligations
of the Company and its Restricted Subsidiaries, plus (b) cash dividends paid on
Preferred Stock and Disqualified Stock by the Company and any Restricted
Subsidiary (to any person other than the Company and its Restricted
Subsidiaries), computed on a tax effected basis, plus (c) all interest on any
Indebtedness of any person guaranteed by the Company or any of its Restricted
Subsidiaries or secured by a lien on the assets of the Company or any of its
Restricted Subsidiaries; provided, however, that Fixed Charges will not include
any gain or loss from extinguishment of debt, including the write-off of debt
issuance costs.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the Closing Date.
"Hedging Obligations" means the obligations of any person under (i) interest
rate swap agreements, interest rate cap agreements and interest rate collar
agreements and (ii) other agreements or arrangements designed to protect such
person against fluctuations in interest rates or the value of foreign
currencies.
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"Indebtedness" means (without duplication), with respect to any person,
whether recourse is to all or a portion of the assets of such person and whether
or not contingent, (a) every obligation of such person for money borrowed, (b)
every obligation of such person evidenced by bonds, debentures, notes or other
similar instruments, (c) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person, (d) every obligation of such person issued or
assumed as the deferred purchase price of property or services, (e) the
attributable value of every Capitalized Lease Obligation and Sale and Leaseback
Transaction of such person, (f) all Disqualified Stock of such person valued at
its maximum fixed repurchase price, plus accrued and unpaid dividends, (g) all
obligations of such person under or in respect of Hedging Obligations and (h)
every obligation of the type referred to in clauses (a) through (g) of another
person and all dividends of another person the payment of which, in either case,
such person has guaranteed. For purposes of this definition, the "maximum fixed
repurchase price" of any Disqualified Stock that does not have a fixed
repurchase price will be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were purchased on any date on
which Indebtedness is required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Stock, such fair market value will be determined in good faith by
the board of directors of the issuer of such Disqualified Stock. Notwithstanding
the foregoing, trade accounts payable and accrued liabilities arising in the
ordinary course of business and any liability for federal, state or local taxes
or other taxes owed by such person will not be considered Indebtedness for
purposes of this definition.
"Initial Public Offering" means a public offering of the common stock of CFP
Group that first results in the common stock of CFP Group becoming listed for
trading on the New York Stock Exchange, the American Stock Exchange or the
NASDAQ National Market.
"Investment" means, (i) directly or indirectly (whether by means of a cash
payment or otherwise), any advance, loan (including, without limitation, by way
of guarantee or similar arrangement) or other extension of credit or capital
contribution to, the purchase of any stock, bonds, notes, debentures or other
securities of, the acquisition, by purchase or otherwise, of all or
substantially all of the business or assets or stock or other evidence of
beneficial ownership of, any person or making of any investment in any person,
(ii) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary
and (iii) the transfer of any assets or properties from the Company or a
Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of
assets or properties made in the ordinary course of business. Investments will
exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, now owned or hereafter
acquired. A person will be deemed to own subject to a Lien any property that
such person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Management Fees" means management fees not in excess of $600,000 in any
single fiscal year plus reimbursement of actual out-of-pocket expenses.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or cash equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary), net of any bona fide direct costs incurred in connection
with such Asset Sale, including, without limitation, (i) taxes reasonably
estimated to be actually payable in connection with such Asset Sale, (ii)
payment of liabilities relating to assets sold at the time of, or within 30 days
after the date of such Asset Sale, (iii) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness (other
than under the Bank Credit Agreement) that is secured by a lien on the stock or
assets in question and that is
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required to be repaid under the terms thereof as a result of such Asset Sale and
(iv) reasonable and customary fees, commissions, expenses and other costs paid
by the Company or any of its Subsidiaries to any person (other than an Affiliate
of the Company) in connection with such Asset Sale.
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one year or less
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of one year or less
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus of not less than $500.0 million; (iii)
any shares of money market mutual or similar funds having assets in excess
of $500.0 million; and (iv) commercial paper with a maturity of one year or
less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District
of Columbia and having a rating (A) from Moody's Investors Service, Inc. of
at least P-1 or (B) from Standard & Poor's Ratings Services of at least A-1;
(b) Investments by the Company or any Restricted Subsidiary in another
person, if as a result of such Investment (i) such other person becomes a
Restricted Subsidiary or (ii) such other person is merged or consolidated
with or into, or transfers or conveys all or substantially all of its assets
to, the Company or a Restricted Subsidiary;
(c) Investments by the Company or any Restricted Subsidiary in any one
of the other of them;
(d) Investments in property or assets to be used in any line of business
in which the Company or any Restricted Subsidiary is engaged on the Closing
Date;
(e) Investments in existence on the Closing Date;
(f) promissory notes received as a result of Asset Sales permitted under
the "Limitations on Certain Asset Sales" covenant; and
(g) other Investments that do not exceed $1.0 million at any time
outstanding.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, partnership interests, participations, rights in or other equivalents
(however designated) of such person's preferred or preference stock, whether now
outstanding or issued after the Closing Date, and including, without limitation,
all classes and series of preferred or preference stock of such person.
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any person means any and all Capital Stock of such
person, other than Disqualified Stock.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which a person sells or transfers any property or asset
in connection with the leasing, or the resale against installment payments, of
such property or asset to the seller or transferor.
"Significant Subsidiary" means any Restricted Subsidiary of the Company that
together with its Subsidiaries, (a) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated net sales of the
Company and its Subsidiaries or (b) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the
most recently available consolidated financial statements of the
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Company for such fiscal year or (c) was organized or acquired since the end of
such fiscal year and would have been a Significant Subsidiary if it had been
owned during such fiscal year.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or any installment of interest
thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor that is subordinated in right of payment to the Notes or
the Subsidiary Guarantees issued by such Subsidiary Guarantor, as the case may
be.
"Subsidiary" means any person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more other Subsidiaries of the Company.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary in accordance
with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary of an
Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, stock of any other
class or classes has, or might have, voting power by reason of the happening of
any contingency).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Based upon the assumptions, qualifications, and limitations set forth in the
tax opinion attached as Exhibit 8 to the Registration Statement of which this
Prospectus is a part, the following discussion, in the opinion of O'Sullivan
Graev & Karabell, LLP, counsel to CFP Group, fairly presents a summary of
certain Federal income tax considerations relevant to the exchange of Old Notes
for New Notes pursuant to the Exchange Offer, and of the ownership of the New
Notes. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), existing, temporary, and proposed Treasury Regulations, laws,
Internal Revenue Service ("IRS") rulings and pronouncements and decisions now in
effect, all of which are subject to change. Any such changes may be applied
retroactively in a manner that could adversely affect a Holder of the New Notes.
This summary deals only with Holders that will hold New Notes as "capital
assets" (within the meaning of Section 1221 of the Code) and that are (i)
citizens or residents of the United States, (ii) domestic corporations, or (iii)
otherwise subject to United States federal income taxation on a net income basis
in respect of a New Note. This summary does not address tax considerations
applicable to investors that may be subject to special tax rules, such as banks,
tax-exempt organizations, insurance companies, dealers in securities or
currencies, or persons that will hold New Notes as a position in a hedging
transaction, "straddle" or "conversion transaction" for tax purposes. This
summary does not consider the effect of any applicable foreign, state, local or
other tax laws.
CFP Group has not sought and will not seek any rulings from the IRS with
respect to the positions discussed below. There can be no assurance that the IRS
will not take a different position concerning the tax consequences of the
purchase, ownership or disposition of the New Notes or that any such position
would not be sustained.
THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, INVESTORS
CONSIDERING THE EXCHANGE OF OLD NOTES FOR NEW NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND
ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR
UNDER ANY APPLICABLE TAX TREATY.
Although the matter is not entirely free from doubt, the exchange of an Old
Note for a New Note pursuant to the Exchange Offer should not be treated as an
exchange or otherwise as a taxable event for Federal income tax purposes.
Accordingly, the New Notes should have the same issue price as the Old Notes and
each Holder should have the same adjusted basis and holding period in the New
Notes as it had in the Old Notes immediately before the consummation of the
Exchange Offer. It is assumed, for purposes of the following discussion, that
the consummation of the Exchange Offer will not be treated as a taxable event to
Holders.
Notwithstanding the foregoing, the IRS might attempt to treat the Exchange
Offer as an "exchange" for federal income tax purposes. In such event the
Exchange Offer could be treated as a taxable transaction in which case a Holder
would be required to recognize gain or loss equal to the difference between such
Holder's tax basis in the Notes and the issue price of the Exchange Notes and,
in some cases, a Holder could be required to recognize original issue discount,
taxable as ordinary income.
PAYMENT OF INTEREST
Interest on a New Note generally will be includable in the income of a
Holder as ordinary income at the time such interest is received or accrued, in
accordance with such Holder's method of accounting for United States federal
income tax purposes.
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OPTIONAL REDEMPTION OR REPAYMENT
The New Notes will not have original issue discount ("OID") because they
will have the same issue price as the Old Notes, which were issued at par. For
purposes of determining OID, Treasury Regulations provide that (i) the Holder's
right to require redemption of the New Notes upon the occurrence of a Change of
Control will not be taken into account unless, based on all the facts and
circumstances as of the issue date, it is significantly more likely than not
that a Change of Control giving rise to the redemption will occur and (ii) the
Company will be deemed to exercise its option to redeem the New Notes in a
manner that minimizes the yield on the New Notes. In the event of a Change of
Control, each Holder of New Notes will have the right to require the Company to
repurchase all or a part of such Holder's New Notes as described in "Description
of Notes--Repurchase at the Option of Holders--Change of Control." The Company
may also redeem the New Notes in certain circumstances, pursuant to the terms of
the New Notes. The Company does not believe that pursuant to the Treasury
Regulations discussed above, either the repurchase or the redemption provisions
of the New Notes will cause the New Notes to be issued with OID, or otherwise
affect the computation of the yield to maturity of the New Notes. See
"Description of Notes--Redemption--Optional Redemption."
MARKET DISCOUNT ON RESALE OF NEW NOTES
A Holder of a New Note should be aware that the purchase or resale of a New
Note may be affected by the "market discount" provisions of the Code. The market
discount rules generally provide that if a Holder of a New Note purchases the
New Note at a market discount (i.e., a discount other than at original issue),
any gain recognized upon the disposition of the New Note by the Holder will be
taxable as ordinary interest income, rather than as capital gain, to the extent
such gain does not exceed the accrued market discount on such New Note at the
time of such disposition. "Market discount" generally means the excess, if any,
of a New Note's stated redemption price at maturity over the price paid by the
Holder therefor, unless a DE MINIMIS exception applies. A Holder who acquires a
New Note at a market discount also may be required to defer the deduction of a
portion of the amount of interest that the Holder paid or accrued during the
taxable year on indebtedness incurred or maintained to purchase or carry such
New Note, if any. If a Holder makes a gift of a New Note, accrued market
discount, if any, will be recognized as if such Holder had sold such New Note
for a price equal to its fair market value.
The New Notes provide for optional redemption, in whole or in part, and, in
the case of Change of Control, a mandatory offer to redeem, prior to maturity.
If the New Notes were redeemed, a Holder generally would be required to include
in gross income as ordinary income, for Federal income tax purposes, the portion
of the payment that is attributable to accrued market discount on the New Notes,
if any.
Any principal payment on a New Note acquired by a Holder at a market
discount will be included in gross income as ordinary income (generally, as
interest income) to the extent that it does not exceed the accrued market
discount at the time of such payment. The amount of the accrued market discount
for purposes of determining the tax treatment of subsequent payments on, or
dispositions of, a New Note is to be reduced by the amounts so treated as
ordinary income.
A Holder of a New Note acquired at a market discount may elect to include
market discount in gross income, for federal income tax purposes, as such market
discount accrues, either on a straight-line basis or on a constant interest rate
basis. This current inclusion election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS. If a Holder of a New Note makes such an election, the foregoing
rules regarding the recognition of ordinary interest income on sales and other
dispositions and the receipt of principal payments with respect to such New
Note, and regarding the deferral of interest deductions on indebtedness incurred
or maintained to purchase or carry such New Note, will not apply.
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AMORTIZABLE BOND PREMIUM
A subsequent Holder that purchases a New Note for an amount in excess of the
sum of all amounts payable on the New Note after the purchase date, other than
stated interest, will be considered to have purchased the New Note at a
"premium." A Holder generally may elect to amortize the premium over the
remaining term of the New Note on a constant yield method. The amount amortized
in any year will be treated as a reduction of the Holder's interest income from
the New Note. Bond premium on a New Note held by a Holder that does not make
such an election will decrease the gain or increase the loss otherwise
recognized on the disposition of the New Note. The election to amortize premium
on a constant yield method once made applies to all debt obligations held or
subsequently acquired by the electing Holder on or after the first day of the
first taxable year to which the election applies and may not be revoked without
the consent of the IRS.
SALE, EXCHANGE OR RETIREMENT OF THE NEW NOTES
In general, subject to the market discount provisions and the amortizable
bond premium provisions discussed above, upon the sale, exchange or redemption
of a New Note, a Holder generally will recognize capital gain or loss equal to
the difference between (i) the amount of cash proceeds and the fair market value
of any property received on the sale, exchange or redemption (except to the
extent such amount is attributable to accrued interest income not previously
included in income, which amount is taxable as ordinary income) and (ii) such
Holder's adjusted tax basis in the New Note. A Holder's initial tax basis in a
New Note received in exchange for an Old Note will be equal to the basis such
Holder had in the Old Note. With respect to Holders who purchase New Notes other
than at their original issuance, their tax basis in the New Notes will generally
be equal to their purchase price. Such capital gain or loss will be long-term
capital gain or loss if the Holder's holding period in the New Note is more than
one year at the time of sale, exchange or redemption.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a New Note and payments of the
proceeds of the sale of a New Note to certain noncorporate Holders, and a 31%
backup withholding tax may apply to such payments if the Holder (i) fails to
furnish or certify his correct taxpayer identification number to the payor in
the manner required, (ii) is notified by the IRS that he has failed to report
payments of interest and dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that he
is subject to backup withholding for failure to report interest and dividend
payments. Any amounts withheld under the backup withholding rules from a payment
to a Holder will be allowed as a credit against such Holder's United States
federal income tax and may entitle the Holder to a refund, provided that the
required minimum information is furnished to the IRS.
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PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 promulgated under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
PROVIDED that such New Notes are acquired in the ordinary course of such
holder's business, such holder has no arrangement with any person to participate
in the distribution of such New Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes.
Accordingly, any holder who is an affiliate of the Company or any holder using
the Exchange Offer to participate in a distribution of the New Notes will not be
able to rely on such interpretations by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a resale transaction. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with any resale of New Notes received in exchange
for Old Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of one year from
the date of this Prospectus, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 1997 (90 days from the date of this
Prospectus), all dealers effecting transactions in the New Notes may be required
to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker-dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver, and by delivering, a
prospectus as required, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of one year from the date of this Prospectus, the Company will
send a reasonable number of additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company will pay all the
expenses incident to the Exchange Offer (which shall not include the expenses of
any holder in connection with resales of the New Notes). The Issuer has agreed
to indemnify the Initial Purchasers and any broker-dealers participating in the
Exchange Offer against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by O'Sullivan Graev & Karabell, LLP, New York, New York.
103
<PAGE>
EXPERTS
The consolidated financial statements of CFP Group, Inc. and subsidiaries at
September 30, 1995 and 1996 and March 31, 1997 and for each of the three years
in the period ended September 30, 1996 and the six months ended March 31, 1997
included in this Prospectus and the related financial statement schedule
included elsewhere in the Registration Statement, have been audited by Deloitte
& Touche LLP, independent auditors, as set forth in their reports appearing
herein and elsewhere in the Registration Statement, and are included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of Quality Foods, L.P. at December 31, 1995 and for
each of the two years in the period ended December 31, 1995, appearing in this
Prospectus and the Registration Statement to which this Prospectus forms a part,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The financial statements of Quality Foods, L.P. at December 31, 1996 and for
the year ended December 31, 1996, included in this Prospectus and the related
financial statement schedule included elsewhere in the Registration Statement
have been audited by Deloitte & Touche LLP, independent auditors, as set forth
in their reports appearing herein and elsewhere in the Registration Statement,
and are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
104
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CFP GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets at September 30, 1995 and 1996 and March 31, 1997.............................. F-3
Consolidated Statements of Operations for the years ended September 30, 1994, 1995 and 1996 and the six
months ended March 31, 1996 and 1997..................................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficiency) for the years ended September 30, 1994, 1995
and 1996 and the six months ended March 31, 1997......................................................... F-5
Consolidated Statements of Cash Flows for the years ended September 30, 1994, 1995 and 1996 and the six
months ended March 31, 1996 and 1997..................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-8
</TABLE>
QUALITY FOODS, L.P.
<TABLE>
<S> <C>
Independent Auditors' Report......................................................... F-20
Report of Independent Auditors....................................................... F-21
Balance Sheets at December 31, 1995 and 1996......................................... F-22
Statements of Operations for the years ended December 31, 1994, 1995 and 1996........ F-23
Statements of Partners' Capital for the years ended December 31, 1994, 1995 and
1996............................................................................... F-24
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996........ F-25
Notes to Financial Statements........................................................ F-26
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
CFP Group, Inc.:
We have audited the accompanying consolidated balance sheets of CFP Group,
Inc. and subsidiaries (the "Company") as of September 30, 1995 and 1996 and
March 31, 1997, and the related consolidated statements of operations,
stockholders' equity (deficiency), and cash flows for each of the three years in
the period ended September 30, 1996 and the six months ended March 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of CFP Group, Inc. and
subsidiaries as of September 30, 1995 and 1996 and March 31, 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1996 and the six months ended March 31, 1997 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
June 16, 1997
F-2
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS (NOTE 7)
<S> <C> <C> <C>
SEPTEMBER 30,
-------------------- MARCH 31,
1995 1996 1997
--------- --------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash......................................................... $ 1 $ 493 $ 2,139
Accounts receivable, net of allowance for doubtful accounts
of $138,000, $50,000 and $93,000 at September 30, 1995 and
1996, and March 31, 1997, respectively (Note 2)............ 3,999 4,656 10,719
Inventories (Notes 2 and 4).................................. 3,429 3,908 11,340
Prepaid expenses and other current assets.................... 919 302 2,526
Deferred income taxes (Notes 2 and 12)....................... -- 136 --
Income taxes receivable...................................... -- 86 --
--------- --------- -----------
Total current assets..................................... 8,348 9,581 26,724
Property and equipment, net (Notes 2 and 5).................... 8,258 10,049 25,402
Costs in excess of net assets acquired, net
(Notes 1 and 2).............................................. 10,659 10,375 72,021
Intangible and other assets, net (Notes 2 and 6)............... 2,883 2,198 8,675
--------- --------- -----------
Total.................................................. $ 30,148 $ 32,203 $ 132,822
--------- --------- -----------
--------- --------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<S> <C> <C> <C>
Current liabilities:
Current portion of long-term obligations (Note 7)............ $ 2,310 $ 3,665 $ 1,991
Accounts payable............................................. 2,062 2,146 4,964
Accrued expenses and other current liabilities............... 909 617 5,055
Income taxes payable......................................... 313 -- 12
--------- --------- -----------
Total current liabilities................................ 5,594 6,428 12,022
--------- --------- -----------
Long-term obligations (Note 7)................................. 15,987 18,378 137,864
--------- --------- -----------
Deferred income taxes (Notes 2 and 12)......................... 555 681 --
--------- --------- -----------
Stock warrant purchase obligations (Note 7).................... 899 1,516 --
--------- --------- -----------
Commitments and contingencies (Notes 13 and 14)
Redeemable preferred stock (Note 9)............................ 1,229 1,180 --
--------- --------- -----------
Redeemable common stock (Note 10).............................. -- -- 2,319
--------- --------- -----------
Stockholders' equity (deficiency) (Note 11):
Preferred stock, $.01 par value; 6,472 shares authorized,
none issued and outstanding.
Voting common stock - Class A, $.01 par value; 100,000 shares
authorized, 14,705 shares issued and outstanding........... 3,196 3,196 3,196
Nonvoting common stock - Class A, $.01 par value; 25,000
shares authorized, 2,725, 2,725 and 11,241 (inclusive of
3,011 shares classified as redeemable common stock) shares
issued and outstanding at September 30, 1995 and 1996 and
March 31, 1997, respectively............................... 592 592 2,204
Nonvoting common stock - Class B, $.01 par value; 25,000
shares authorized, 3,321 shares (inclusive of 2,162 shares
classified as redeemable common stock) issued and
outstanding at March 31, 1997.............................. -- -- 805
Stockholders' notes receivable............................... -- -- (337)
Retained earnings (deficit).................................. 2,096 232 (25,251)
--------- --------- -----------
Total stockholders' equity (deficiency).................. 5,884 4,020 (19,383)
--------- --------- -----------
Total.................................................. $ 30,148 $ 32,203 $ 132,822
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, --------------------------
------------------------------- MARCH 31, MARCH 31,
1994 1995 1996 1996 1997
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS) (UNAUDITED)
Sales (Note 2)..................................... $ 86,598 $ 61,543 $ 65,996 $ 30,335 $ 60,529
Cost of sales...................................... 76,485 49,868 53,818 23,766 52,276
--------- --------- --------- ------------ ------------
Gross profit....................................... 10,113 11,675 12,178 6,569 8,253
Selling, general and administrative
expenses (Note 8)................................ 5,957 6,700 5,512 2,944 7,474
Sales brokerage agreement termination costs (Note
8)............................................... -- -- 4,996 4,996 --
--------- --------- --------- ------------ ------------
Income (loss) from operations.................... 4,156 4,975 1,670 (1,371) 779
Interest expense (Note 7).......................... 2,443 2,632 3,232 1,512 4,681
--------- --------- --------- ------------ ------------
Income (loss) before income taxes and
extraordinary item............................. 1,713 2,343 (1,562) (2,883) (3,902)
Provision (benefit) for income taxes (Notes 2 and
12).............................................. 851 1,189 (409) (662) (541)
--------- --------- --------- ------------ ------------
Income (loss) before extraordinary item.......... 862 1,154 (1,153) (2,221) (3,361)
Extraordinary (loss) on early extinguishment of
debt (Note 7).................................... -- -- -- -- (4,489)
--------- --------- --------- ------------ ------------
Net income (loss).................................. $ 862 $ 1,154 $ (1,153) $ (2,221) $ (7,850)
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996 AND THE SIX MONTHS ENDED MARCH 31,
1997
<TABLE>
<CAPTION>
VOTING NONVOTING- NONVOTING-
CLASS A CLASS A CLASS B
COMMON-STOCK COMMON STOCK COMMON STOCK SHAREHOLDER RETAINED
------------------------ ------------------------ ------------------------ NOTES EARNINGS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT RECEIVABLE (DEFICIT)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Balance, October 1,
1993................. 14,705 $ 3,196 2,595 $ 554 $ 275
Sale of common
stock.............. 130 38
Net income........... 862
Redeemable preferred
dividends.......... (97)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30,
1994................. 14,705 3,196 2,725 592 1,040
Net income........... 1,154
Redeemable preferred
dividends.......... (98)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30,
1995................. 14,705 3,196 2,725 592 2,096
Net loss............. (1,153)
Redeemable preferred
dividends.......... (94)
Increase in carrying
value of stock
warrant purchase
obligations........ (617)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30,
1996................. 14,705 3,196 2,725 592 232
Net loss............. (7,850)
Redeemable preferred
dividends.......... (27)
Increase in carrying
value of stock
warrant purchase
obligations........ (207)
Exercise of stock
warrants........... 4,538 1,723
Exercise of stock
options............ 7,487 2,163
Issuance of common
stock.............. 1 1 3,321 $ 2,305 $ (343)
Repayment of stock-
holder notes....... 6
Repurchase of common
stock.............. (3,510) (1,456)
Distribution to
stockholders....... (17,399)
Shares reclassified
to
redeemable common
stock.............. (3,011) (819) (2,162) (1,500)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31,
1997................. 14,705 $ 3,196 8,230 $ 2,204 1,159 $ 805 $ (337) $ (25,251)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
TOTAL
---------
<S> <C>
Balance, October 1,
1993................. $ 4,025
Sale of common
stock.............. 38
Net income........... 862
Redeemable preferred
dividends.......... (97)
---------
Balance, September 30,
1994................. 4,828
Net income........... 1,154
Redeemable preferred
dividends.......... (98)
---------
Balance, September 30,
1995................. 5,884
Net loss............. (1,153)
Redeemable preferred
dividends.......... (94)
Increase in carrying
value of stock
warrant purchase
obligations........ (617)
---------
Balance, September 30,
1996................. 4,020
Net loss............. (7,850)
Redeemable preferred
dividends.......... (27)
Increase in carrying
value of stock
warrant purchase
obligations........ (207)
Exercise of stock
warrants........... 1,723
Exercise of stock
options............ 2,163
Issuance of common
stock.............. 1,963
Repayment of stock-
holder notes....... 6
Repurchase of common
stock.............. (1,456)
Distribution to
stockholders....... (17,399)
Shares reclassified
to
redeemable common
stock.............. (2,319)
---------
Balance, March 31,
1997................. $ (19,383)
---------
---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, ------------------------
-------------------------------- MARCH 31, MARCH 31,
1994 1995 1996 1996 1997
--------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................... $ 862 $ 1,154 $ (1,153) $ (2,221) $ (7,850)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization..................... 1,847 1,710 2,088 1,035 2,236
Amortization of deferred financing costs and
original issue discount......................... 588 602 630 316 389
Deferred income taxes............................. 403 (171) (10) (74) (546)
Extraordinary loss on early extinguishment of
debt............................................ -- -- -- -- 4,489
Changes in assets and liabilities, net of the
effects from the acquisition of Quality Foods
L.P.:
Accounts receivable............................. 503 (18) (658) 318 (170)
Inventories..................................... 345 430 (479) (185) 1,802
Prepaid expenses and other current assets....... (109) (362) 324 427 (963)
Income taxes receivable/payable................. (160) 473 (399) (900) 98
Accounts payable................................ 251 (57) 84 363 289
Accrued expenses and other current
liabilities................................... (155) 621 (292) (181) 3,703
--------- ---------- --------- ----------- -----------
Net cash provided by (used in) operating
activities.................................. 4,375 4,382 135 (1,102) 3,477
--------- ---------- --------- ----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment............... (739) (1,821) (1,432) (468) (1,674)
Acquisition of Quality Foods L.P.................... -- -- -- -- (65,647)
Proceeds from sale of property and equipment........ 53 -- -- -- 44
Other assets........................................ 20 36 (379) (1,453) (16)
--------- ---------- --------- ----------- -----------
Net cash used in investing activities......... (666) (1,785) (1,811) (1,921) (67,293)
--------- ---------- --------- ----------- -----------
Cash flows from financing activities:
Borrowings under revolving loan facility............ 9,000 8,300 9,725 5,300 14,821
Repayment of revolving loan facilities.............. (10,500) (9,050) (9,975) (5,600) (15,821)
Proceeds from issuance of long-term debt............ -- 8,800 5,681 5,681 218,500
Repayment of long-term debt and capitalized lease
obligations....................................... (2,037) (10,857) (3,120) (1,369) (122,847)
Deferred financing costs............................ (11,455)
Proceeds from sale of common stock.................. 38 -- -- -- 157
Purchase of redeemable preferred stock.............. -- -- (143) (143) (1,207)
Collection of shareholder notes receivable.......... 6
Purchase of common stock............................ -- -- -- -- (692)
Distributions to shareholders....................... -- -- -- -- (16,000)
--------- ---------- --------- ----------- -----------
Net cash (used in) provided by financing
activities.................................. (3,499) (2,807) 2,168 3,869 65,462
--------- ---------- --------- ----------- -----------
Net increase (decrease) in cash....................... 210 (210) 492 846 1,646
Cash, beginning of period............................. 1 211 1 1 493
--------- ---------- --------- ----------- -----------
Cash, end of period................................... $ 211 $ 1 $ 493 $ 847 $ 2,139
--------- ---------- --------- ----------- -----------
--------- ---------- --------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, ------------------------
-------------------------------- MARCH 31, MARCH 31,
1994 1995 1996 1996 1997
--------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest........................................... $ 2,024 $ 1,831 $ 2,265 $ 1,203 $ 2,099
Income taxes....................................... 690 973 -- 32 (93)
Supplemental disclosures of noncash investing and
financing activity:
Acquisition of property and equipment through capital
leases............................................. $ 776 $ 3,233 $ 1,577 $ 77 --
Accrued dividends on redeemable preferred stock...... 97 98 94 45 $ 27
Issuance of common stock in exchange for equity
interest in Quality Foods L.P...................... -- -- -- -- 1,500
Issuance of employee notes in exchange for non-voting
Class B common stock............................... 343
Exercise price of stock options for which the cost to
exercise was deducted from the distribution to
stockholders....................................... -- -- -- -- 1,399
Issuance of nonvoting Class B common stock to a
financial institution for services rendered........ 305
</TABLE>
During the year ended September 30, 1996, and the six months ended March 31,
1996 and 1997, the carrying value of the stock warrant purchase obligations was
increased by $617,000, $288,000 and $207,000, respectively, with a corresponding
charge to retained earnings. During the six months ended March 31, 1997, the
stock warrant purchase obligations with a carrying value of $1,723,000 were
redeemed for non-voting Class A common stock.
On December 31, 1996, the Company acquired all of the equity interests in
Quality Foods L.P. and its two general partners which are now operated as QF
Acquisition Corp. ("Quality Foods") for a purchase price of $65.6 million. (See
Note 3)
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
CFP Group, Inc. (the "Company") was incorporated on November 26, 1996 as New
CFP Holdings, Inc. and subsequently changed its name to CFP Group, Inc. The
Company was formed to recapitalize CFP Holdings, Inc. On December 31, 1996, each
person owning capital stock (or options to acquire capital stock) of CFP
Holdings, Inc. exchanged their equity interests for equivalent interests of
capital stock (or options to acquire capital stock) of the Company. Accordingly,
these consolidated financial statements include the historical results of CFP
Holdings, Inc. for all periods presented. CFP Group, Inc. and CFP Holdings, Inc.
are companies which have no operations of their own and rely on CFP Holdings,
Inc.'s subsidiaries for their cash flows.
CFP Group, Inc., through its wholly owned subsidiaries, develops,
manufactures and markets pre-cooked and uncooked meat products sold primarily to
manufacturers of branded and private label packaged foods, foodservice
distributors, and restaurants.
On December 31, 1996, the Company acquired all of the equity interests in
Quality Foods. Quality Foods is a Pennsylvania-based manufacturer primarily of
pre-cooked and uncooked, thinly-sliced beef used in "Philadelphia-style" steak
sandwiches. The financial statements include the operations of Quality Foods
from the date of acquisition (See Note 3.)
On March 31, 1993, the Company acquired substantially all the assets of Best
Western Foods, Inc. and all the outstanding stock of Center of the Plate Foods,
Inc. The acquisitions were accounted for as purchases. The cost in excess of net
assets acquired related to the purchase of the assets of Best Western Foods,
Inc. and a portion of the stock of Center of the Plate Foods, Inc. were based on
the fair values of the identifiable assets acquired and liabilities assumed.
However, because certain shares of the stock of Center of the Plate Foods, Inc.
were purchased from a stockholder of the Company, a portion of the cost in
excess of net assets acquired was reduced to reflect the historical basis of the
stockholder's continuing interest in the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of CFP Group, Inc. and its wholly owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
FISCAL YEAR-END--During March 1997, the Company changed its year-end from
the Saturday closest to September 30 to the Saturday closest to March 31. All
full years presented are 52 weeks; the six months ended March 31 consist of 26
weeks. For clarity of presentation, the Company describes its prior year-ends as
September 30 and its prior quarter-end and current year-end as March 31. The
Company's fiscal quarter end is the Saturday closest to the calendar
quarter-end.
CONCENTRATION OF CREDIT RISK--Financial instruments that subject the Company
to credit risk consist primarily of accounts receivable. The Company performs
ongoing credit evaluations of its customers and maintains an allowance for
potential credit losses. The Company has two significant customers that
accounted for more than 10% of its sales. Sales to one customer totaled 71%,
46%, 48% and 35%, and sales to another customer totaled 25%, 44%, 40% and 23% of
total sales for the years ended September 30, 1994, 1995 and 1996, and the six
months ended March 31, 1997 respectively. Accounts receivable from these
customers totaled 81%, 64%, and 22% of total accounts receivable at September
30, 1995 and 1996 and March 31, 1997, respectively. In addition, during the six
months ended March 31, 1997, approximately
F-8
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
11% of sales were ultimately purchased by retail units of an international
franchising operation offering a menu of submarine sandwiches.
INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost. The
Company uses the straight-line method of depreciation for buildings and
leasehold improvements and both the straight-line and the double-declining
method for all other property and equipment. Depreciation is provided for over
the estimated useful lives of the related assets, ranging from 3 to 40 years.
Leasehold improvements are amortized over the shorter of their useful lives or
the term of the lease.
INTANGIBLE AND LONG-LIVED ASSETS--The Company reviews the recoverability of
intangible and long-lived assets whenever events or changes in circumstances
indicate that the carrying value of such assets may not be recoverable. If the
expected future cash flows from the use of such assets (undiscounted and without
interest charges) are less than the carrying value, the Company's policy is to
record a writedown that is determined based on the difference between the
carrying value of the asset and its estimated fair value.
COST IN EXCESS OF NET ASSETS ACQUIRED--Cost in excess of net assets acquired
is amortized over periods of 20 to 40 years. Accumulated amortization was
$711,000, $995,000 and $1,919,000 at September 30, 1995 and 1996 and March 31,
1997, respectively (see Note 3).
COVENANTS NOT TO COMPETE--Covenants not to compete are stated at cost and
are amortized on a straight-line basis over five years. Accumulated amortization
was $1,198,000, $1,776,000 and $2,065,000 at September 30, 1995 and 1996 and
March 31, 1997, respectively.
INCOME TAXES--Deferred income taxes are determined based on temporary
differences between the financial reporting and income tax bases of assets and
liabilities at the balance sheet date, multiplied by the applicable tax rates.
Future tax benefits are recognized to the extent that realization of such
benefits is more likely than not.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts of accounts
receivable and accounts payable approximate fair value because of their
short-term nature. The carrying amounts of substantially all of the Company's
outstanding long-term obligations approximate fair value because their interest
rates are based on variable reference rates or rates currently available to the
Company for debt with similar terms.
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.
STOCK OPTIONS--Statement of Financial Accounting Standards ("SFAS") No. 123
regarding accounting for stock-based compensation is effective for the Company
beginning October 1, 1996. SFAS No. 123 requires expanded disclosure of
stock-based compensation arrangements and encourages, but does not require,
compensation cost to be measured based on the fair value of the equity
instrument awarded. The Company will continue to account for its stock-based
compensation arrangements under Accounting Principles Board ("APB") Opinion No.
25.
INTERIM FINANCIAL DATA (UNAUDITED)--The financial statements and disclosures
included herein for the six months ended March 31, 1996 are unaudited; however,
in the opinion of management, all adjustments,
F-9
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial statements for the interim period have been
included. The results of operations for interim periods are not necessarily
indicative of the results to be obtained for any other interim period or for the
entire fiscal year.
3. BUSINESS ACQUISITIONS
On December 31, 1996 pursuant to a securities purchase agreement, the
Company acquired all of the equity interests in Quality Foods for a total
purchase price of $67.1 million which was composed of cash payments to sellers
of $64.0 million, less a purchase price adjustment refund received from the
sellers of $354,000, the exchange of certain equity interests valued at $1.5
million, plus acquisition costs of $2.6 million less cash assumed of $600,000.
Funds for the acquisition, the repayment of certain existing indebtedness, and
for working capital were primarily provided by $76.0 million in term loans, a
$20.0 million revolving credit facility and $25.0 million of subordinated bridge
loans. This acquisition has been accounted for under the purchase method and the
results of the operations of Quality Foods have been included in the
consolidated financial statements since the date of acquisition. The purchase
price has been allocated, on a preliminary basis, to the assets acquired and
liabilities assumed based on estimated fair values at the date of acquisition.
This resulted in an excess of cost over net assets acquired of $62.6 million
which is being amortized on a straight line basis over 20 years.
If the acquisition and the related equity and debt transactions had occurred
on October 1, 1995, the results on a pro forma basis for the combined operations
of the Company and Quality Foods for the year ended September 30, 1996 and for
the six months ended March 31, 1997 would have been as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1996 1997
------------- -----------
<S> <C> <C>
Net sales.......................................................... $ 156,645 $ 81,578
(Loss) income before extraordinary item............................ (4,201) (3,361)
</TABLE>
The fair value of the assets acquired was $95.4 million, the cash paid was
$65.6 million, the fair value of Common Stock issued was $1.5 million and
liabilities assumed or paid upon the Acquisition were $28.3 million.
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
-------------------- -----------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials.................................................. $ 2,126 $ 2,157 $ 4,498
Work-in-process................................................ 81 96 2,157
Finished goods................................................. 1,222 1,655 4,685
--------- --------- -----------
Total.......................................................... $ 3,429 $ 3,908 $ 11,340
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-10
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
-------------------- -----------
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Land......................................................... $ 30 $ 187 $ 376
Building..................................................... 4,030 5,471 17,232
Machinery and equipment...................................... 4,022 5,018 9,590
Office furniture and fixtures................................ 127 228 492
Leasehold improvements....................................... 1,513 1,816 2,479
Construction in progress..................................... -- -- 185
--------- --------- -----------
9,722 12,720 30,354
Accumulated depreciation and amortization.................... (1,464) (2,671) (4,952)
--------- --------- -----------
Property and equipment, net.................................. $ 8,258 $ 10,049 $ 25,402
--------- --------- -----------
--------- --------- -----------
</TABLE>
6. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
-------------------- -----------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Covenants not to compete..................................... $ 2,643 $ 2,643 $ 2,643
Deferred financing costs..................................... 2,379 2,428 12,231
Other assets................................................. 170 495 210
--------- --------- -----------
5,192 5,566 15,084
Accumulated amortization..................................... (2,309) (3,368) (6,409)
--------- --------- -----------
Total........................................................ $ 2,883 $ 2,198 $ 8,675
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-11
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
---------------------- ----------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Long-term obligations consisted of the following:
Senior notes payable, interest at 11 5/8% payable semiannually, principal due
January 2004................................................................ $ 115,000
Term note payable to a bank, interest at a reference rate (8.5% at March 31,
1997) plus 2% or Eurodollar rate (5.8% at March 31, 1997) plus 3% payable
semiannually, principal payable quarterly at $1.0 million increasing to $2.2
million with the remaining balance due in June 2002......................... 10,000
Revolving loan payable to a bank, interest at a reference rate (8.5% at March
31, 1997) plus 1.25% or Eurodollar rate (5.8% at March 31, 1996) plus 2.5%
payable quarterly, expires June 2002........................................ 500
Debt assumed in connection with the acquisition of Quality Foods:
Revenue bond payable to a government financing authority, interest at a
reference rate (5.85% at March 31, 1997) not to exceed 18% payable
monthly, principal payable annually at $100,000 increasing to $400,000
through December 2014..................................................... 4,300
Notes payable to a government agency, interest at 2%, payable with principal
monthly through April 2012, collateralized in a second position on the
Company's Philadelphia facility........................................... 2,154
Note payable to a government agency, interest at 0.5% payable monthly
beginning April 1999 through October 2005, principal and interest payable
in equal monthly installments from November 2005 through April 2010,
collateralized in a shared third position on the Company's Philadelphia
facility.................................................................. 1,000
Notes payable to a government agency, interest at 5.25% payable monthly with
principal through February 2012, collateralized in a shared third position
on the Company's Philadelphia facility.................................... 747
Capital lease obligations payable in varying monthly installments through
2019, collateralized by buildings and equipment with a net book value of
$4,129,000, $6,209,000 and $6,042,000, at September 30, 1995, 1996 and March
31, 1997, respectively...................................................... $ 4,107 $ 6,315 6,154
Debt retired in connection with financing obtained for the Quality Foods
acquisition:
Senior notes payable and revolving loan payable, interest at commercial
paper rate (5.0% and 5.5% at September 30, 1995 and 1996, respectively)
plus 4.25%................................................................ 5,886 7,668 --
Senior note payable, interest at the greater of 12% or the commercial paper
rate plus 8%, net of unamortized discount of $390,000 and $234,000 at
September 30, 1995 and 1996, respectively................................. 2,610 2,766 --
Subordinated notes payable, interest at 10%................................. 5,694 5,294 --
---------- ---------- ----------
Total......................................................................... 18,297 22,043 139,855
Less current portion.......................................................... (2,310) (3,665) (1,991)
---------- ---------- ----------
Long-term debt................................................................ $ 15,987 $ 18,378 $ 137,864
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-12
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM OBLIGATIONS (CONTINUED)
The senior notes payable are senior unsecured obligations that rank PARI
PASSU in the right of payment with all other existing and future senior debt of
the Company. The senior notes payable provide limitations on the sale or
transfer of the Company's subsidiaries and also provide for the holders of the
notes to require the Company to purchase the notes upon a change in control of
the Company. The senior notes payable contain certain financial covenants
including limitations on incurring additional debt, payments to stockholders,
capital stock transactions and transactions with affiliates. At March 31, 1997,
no amounts were available for dividend payments. The Company may redeem the
notes prior to maturity subject to certain redemption premiums. The senior notes
payable are jointly and severally, and unconditionally guaranteed in full by
each of the Company's subsidiaries. The Company has filed a registration
statement with the Securities and Exchange Commission for the purpose of
registering new notes ("New Notes") that will be exchanged for the Company's
outstanding senior notes. The New Notes are expected to have similar terms as
the existing senior notes. In the event that the registration statement relating
to the New Notes is not effective by dates specified, the interest rate on the
senior notes could increase up to 1.5%.
The Company has entered into a bank credit agreement for a revolving note
payable and a term loan payable ("Bank Debt"). Maximum borrowings under the
revolving loan payable are $20.0 million subject to a borrowing base. Available
borrowings at March 31, 1997 were $9.9 million. The revolving loan payable also
provides for standby letters of credit of up to $3.0 million and for the
reduction of available borrowings equal to the amount outstanding under the
revenue bond payable. The Bank Debt is collaterialized by substantially all of
the Company's assets and is guaranteed jointly and severally, and
unconditionally in full by each of the Company's subsidairies. The bank credit
agreement provides for the maintenance of certain financial ratios and other
financial covenants and also includes limitations on capital expenditures,
incurrance of additional debt, payment of dividends, capital stock transactions
and asset dispositions. At March 31, 1997, no amounts were available for
dividend payments. The interest rates for the revolving loan payable and term
loan are reduced when the Company achieves certain leverage ratios.
The revenue bond payable provides for monthly escrow deposits in amounts
sufficient to fund annual sinking fund requirements. Mandatory sinking fund
redemptions are required each December 1 through final redemption in 2014. The
bonds are supported by an irrevocable letter of credit which is backed by a
guarantee provided by a commercial lender. The letter of credit and guarantee
are collateralized by a first priority lien on the Company's Philadelphia real
property. The commercial lender also has a lien on certain production equipment
owned by the Company.
One of the notes payable to a government agency requires that the Company
obtain a letter of credit for $750,000.
One of the subordinated notes payable was issued in connection with the
acquisition of the assets of Best Western Foods, Inc. The note provided for a
reduction in the principal balance at certain annual measurement dates if the
number of customer facilities serviced decreased. The Company recorded the
liability associated with this debt only when the number of customer facilities
serviced became certain. Accordingly, the Company recorded a liability of
$994,000 at March 31, 1994 with a corresponding increase in cost in excess of
net assets acquired.
In connection with a loan agreement and a capital lease, the Company issued
warrants, which contained antidilution provisions, to purchase 2,700 and 412
shares, respectively of common stock at $0.01 per share. The stock warrant
purchase obligations were initially recorded at their estimated fair value at
the date of issuance. Adjustments to the carrying value of the stock warrants
purchase obligations to the
F-13
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM OBLIGATIONS (CONTINUED)
estimated redemption price were recognized during the period from the date of
issuance to the earliest put date of the warrants. During the years ended
September 30, 1994 and 1995 no adjustments to the carrying value of the stock
warrant purchase obligations were required. As of September 30, 1996, the
Company had increased the carrying value of the warrants from $899,000 to
$1,516,000 with at corresponding charge to retained earnings of $617,000. During
the six months ended March 31, 1997, the carrying value of the warrants were
increased by $207,000 and the warrants were converted into 4,538 nonvoting
shares of Class A common stock.
As part of the acquisition of Quality Foods, the Company borrowed $76.0
million under term loans and $25.0 million under bridge notes. The bridge notes,
$66.0 million of the term notes and certain other long-term obligations were
repaid upon the issuance of the senior notes payable resulting in an
extraordinary loss of $4.5 million. No income tax benefit was allocated to the
extraordinary loss as the Company's income tax benefit was fully allocated to
the loss from operations.
Minimum principal payments of long-term obligations as of March 31, 1997 are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31, (IN THOUSANDS)
- ------------------------------------------------------------------------------ --------------
<S> <C>
1998.......................................................................... $ 1,991
1999.......................................................................... 2,234
2000.......................................................................... 2,598
2001.......................................................................... 2,621
2002.......................................................................... 2,653
Thereafter.................................................................... 127,758
-------
Total......................................................................... 139,855
-------
-------
</TABLE>
8. RELATED PARTY TRANSACTIONS
The Company had a sales brokerage agreement with a stockholder under which
the stockholder was paid a specified commission based on sales of certain
products to certain customers. The agreement was terminated in January 1996 for
a fee of $4,996,000. Commission expense under this agreement was $1,536,000,
$2,142,000 and $570,000 for the years ended September 30, 1994, 1995 and 1996,
respectively. Upon termination of the sales brokerage agreement, the Company
entered into a consulting agreement that provides for a one-year contract with
an option to extend for one additional year. The consulting agreement provides
for annual payments of $100,000 with an additional bonus of $100,000 at the
discretion of the Company. During December 1996, the Company purchased 865
nonvoting Class A Common shares from this stockholder for $692,000.
Effective December 31, 1996 the Company entered into a new management
consulting agreement with an affiliate of a stockholder under which the Company
is obligated to pay $600,000 per year plus expenses through December 2003, at
which time the agreement is automatically extended annually, until terminated by
the Company or the stockholder. Consulting expense under this and a preceeding
agreement was $396,000, $393,000, $400,000 and $292,000, including reimbursed
expenses, for the years ended September 30, 1994, 1995 and 1996 and the six
months, ended March 31, 1997, respectively. The Company paid an investment
banking fee of $750,000 to the same affiliate of a stockholder upon consummation
of the Acquisition.
The Company and certain of its shareholders have entered into a shareholder
agreement that restricts the transfer or sale of the Company's stock. Among
other provisions, the shareholder agreement provides for the right of first
refusal upon sale of the stock in addition to providing for the election of
certain directors of the Company.
F-14
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has entered into employment agreements with certain of its
executive officers which expire at various dates through December 2001. Such
agreements provided for minimum salary levels, adjusted annually for
cost-of-living changes, as well as for incentive bonuses which are payable if
specified management goals are attained and for the issuance of stock options.
The aggregate commitment for future salaries and minimum bonuses at March 31,
1997, was approximately $4.0 million through December 2001.
9. REDEEMABLE PREFERRED STOCK
In May 1993, the Company sold 4,000 shares of its $.01 par value Series A
preferred stock for $1.0 million or $250 per share. Total redeemable Series A
preferred stock authorized is 5,000 shares. Annual cash dividends range from 8%
to 12% and are cumulative. The dividends were accrued using the interest method
through the date of mandatory redemption.
On November 22, 1995, the Company redeemed 472 shares of this preferred
stock. The total redemption price was $143,000, which included $118,000 of
principal and $25,000 in accrued dividends. On December 31, 1996, the Company
redeemed the remaining outstanding shares of the redeemable preferred stock. The
total redemption price was $1.2 million, which included $882,000 of principal
and $325,000 in accrued dividends.
10. REDEEMABLE COMMON STOCK
During December 1996, in connection with the execution of certain employment
agreements (see Note 8) three management shareholders were granted the right to
sell certain shares of common stock and shares to be issued upon the exercise of
certain stock options, back to the Company. With respect to 3,011 shares of
Redeemable Nonvoting-Class A common stock, the redemption price is determined by
a formula specified in the agreement. With respect to 2,162 shares of Redeemable
Nonvoting-Class B common stock, the redemption price is the fair value of shares
or in certain circumstances the higher of the price paid for the stock or the
fair value. The redemption amounts are payable in cash or, in certain
circumstances, subordinated notes payable. With respect to the 3,011 shares, in
certain circumstances, the Company has the right to purchase the stock from the
management shareholder at a formula driven price as determined in the agreement.
11. STOCK OPTION PLAN
In connection with the recapitalization, the Company assumed all obligations
of CFP Holdings under the CFP Holdings Stock Option Plan. Under the Plan, which
is administered by the Board of Directors, 11,586 shares of nonvoting common
stock were reserved for the issuance of incentive stock options or nonqualified
stock options to directors, employees and consultants of the Company. The price,
terms and conditions of each issuance are determined based on the provisions of
the plan. During the year ended September 30, 1995, 11,239 options were granted
at an exercise price of $289 per share, of which 3,871 and 7,437 options were
exercisable as of September 30, 1995 and 1996, respectively. In December 1996,
7,487 options at $289 per share were exercised for nonvoting common stock.
Thereafter, the Company repurchased 2,645 shares of these newly issued shares
for $2.1 million less the exercise cost of $764,000 for net cash paid of
$1,352,000 that was recorded as compensation expense. At March 31, 1997, a total
of 3,752 unvested options at an exercise price of $289 per share were
outstanding.
The Company has adopted the disclosure-only provision of SFAS 123,
"Accounting for Stock-Based Compensation." The estimated fair value of options
granted during 1995 pursuant to SFAS 123 was
F-15
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLAN (CONTINUED)
$664,000. Had compensation cost for the Company's stock option plan been
determined based on their fair value at the date of grant consistent with the
provisions of SFAS 123, the Company's pro-forma net income (loss) would have
been $1.2 million, $(1.1) million, and $(8.0) million for the years ended
September 30, 1995 and 1996, and for the six months ended March 31, 1997,
respectively. The fair value of each option grant was estimated using the
Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield and volatility of zero, a risk free interest rate of
6.28% and expected option lives of 3.7 years.
In connection with employment agreements entered into with certain
management stockholders, upon the adoption of a 1997 stock option plan, the
Company has agreed to grant to these management shareholders options to purchase
Class B nonvoting common stock equal to a total of 2.5% of the issued and
outstanding shares of common stock of the Company.
12. INCOME TAXES
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
------------------------------- -----------
1994 1995 1996 1997
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Current:
Federal.............................................. $ 358 $ 1,092 $ (401)
State................................................ 90 268 2 $ 5
--------- --------- --------- -----
448 1,360 (399) 5
--------- --------- --------- -----
Deferred:
Federal.............................................. 286 (135) 39 (427)
State................................................ 117 (36) (49) (119)
--------- --------- --------- -----
403 (171) (10) (546)
--------- --------- --------- -----
Total provision (benefit)............................ $ 851 $ 1,189 $ (409) $ (541)
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>
The major elements contributing to the difference between the federal
statutory income tax rate and the effective income tax rate relating to income
(loss) before income taxes and extraordinary item are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
------------------------------- -----------
1994 1995 1996 1997
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Statutory rate................................... 35.0% 35.0% (35.0)% (35.0 )%
Officer's life insurance and other nondeductible
expenses....................................... 2.2 1.8 4.0 0.7
Goodwill amortization............................ 5.3 4.3 6.4 1.2
State taxes, net................................. 7.2 9.6 (1.6) 1.9
Valuation allowance.............................. 17.3
--------- --------- --------- -----------
Effective tax rate............................... 49.7% 50.7% (26.2)% (13.9 )%
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
F-16
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
-------------------- -----------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred income tax assets:
Federal net operating loss carryforwards............. $ 2,894
State taxes.......................................... $ 53 $ 26 --
Accrued vacation..................................... 29 39 114
Expense accruals..................................... 12 21 38
State net operating loss carryforwards............... -- 43 627
AMT credit carryforward.............................. -- 189 126
Valuation allowances................................. -- -- (3,149)
--------- --------- -----------
$ 94 $ 318 $ 650
--------- --------- -----------
--------- --------- -----------
Deferred income tax liabilities:
Depreciation and amortization........................ $ 555 $ 681 $ 405
Prepaid expenses..................................... 53 51 101
Other................................................ 41 131 144
--------- --------- -----------
$ 649 $ 863 $ 650
--------- --------- -----------
--------- --------- -----------
</TABLE>
At March 31, 1997, the Company has federal net operating loss carryforwards
of $8.2 million that are available ratably over the next six fiscal years and
that expire in 2012. At March 31, 1997, the Company has various state operating
loss carryforwards aggregating $6.8 million that expire in 2002 through 2017.
During the six months ended March 31, 1997, the Company established a
valuation allowance equal to the net deferred tax asset of $3.1 million.
F-17
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS
The Company leases its facilities and certain equipment under both capital
and noncancelable operating leases that expire through November 2019. Rent
expense under operating leases totaled $652,000, $618,000, $618,000, and
$444,000 for the years ended September 30, 1994, 1995 and 1996, and the six
months ended March 31, 1997 respectively. Certain of the leases require the
payment of related property taxes, insurance, maintenance and other costs.
Minimum future lease payments under both capital and operating leases,
together with the present value of the net minimum lease payments under capital
leases as of March 31, 1997, are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
MARCH 31 LEASES LEASES
- ----------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
(IN THOUSANDS)
1998................................................................... $ 1,151 $ 839
1999................................................................... 1,104 656
2000................................................................... 1,037 576
2001................................................................... 841 555
2002................................................................... 841 468
Thereafter............................................................. 15,267 423
---------- -----------
Total minimum lease payments........................................... 20,241 $ 3,517
-----------
-----------
Amount representing interest........................................... (14,087)
----------
Present value of net minimum lease payments............................ $ 6,154
----------
----------
</TABLE>
14. BENEFIT PLAN
One of the Company's subsidiaries has a defined contribution profit-sharing
salary reduction plan covering substantially of its employees not otherwise
covered under a collective bargaining agreement. Company contribution to the
profit-sharing plan are determined by the board of directors and are a
percentage of each participant's compensation. Benefit plan expense recorded by
the Company was $29,000 for the six months ended March 31, 1997.
F-18
<PAGE>
CFP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUMMARIZED FINANCIAL INFORMATION
Summarized financial information of CFP Group, Inc. and CFP Holdings, Inc.
as of March 31, 1997 and for the six months ended March 31, 1997 was as follows:
<TABLE>
<CAPTION>
CFP GROUP,
CFP HOLDINGS INC. CFP GROUP, INC.
CONSOLIDATED INC. ELIMINATIONS CONSOLIDATED
----------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
MARCH 31, 1997
-----------------------------------------------------------
Total current assets................................. $ 26,724 $ 26,724
Total non-current assets............................. 106,098 106,098
Investment in subsidiary............................. -- $ 1,828 $ (1,828) --
-------- ----------- ------------- ------------
Total................................................ $ 132,822 $ 1,828 $ (1,828) $ 132,822
-------- ----------- ------------- ------------
-------- ----------- ------------- ------------
Total current liabilities............................ $ 12,022 $ 12,022
-------- ------------
Total non-current liabilities........................ 137,864 137,864
-------- ------------
Intercompany payable (receivable).................... (18,892) $ 18,892 --
-------- ----------- ------------
Redeemable preferred stock........................... 1,228 -- $ (1,228) --
-------- ----------- ------------- ------------
Common stock subject to redemption................... -- 2,319 -- 2,319
-------- ----------- ------------- ------------
Stockholder's equity (deficiency)
Voting common stock................................ 3,196 3,196 (3,196) 3,196
Nonvoting common stock............................. 6,655 3,009 (6,655) 3,009
Stockholders notes receivable...................... -- (337) -- (337)
Retained earnings (accumulated deficit)............ (9,251) (25,251) 9,251 (25,251)
-------- ----------- ------------- ------------
Total stockholders' equity (deficiency).......... 600 (19,383) (600) (19,383)
-------- ----------- ------------- ------------
Total................................................ $ 132,822 $ 1,828 $ (1,828) $ 132,822
-------- ----------- ------------- ------------
-------- ----------- ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
CFP GROUP,
CFP HOLDINGS INC. CFP GROUP, INC.
CONSOLIDATED INC. ELIMINATIONS CONSOLIDATED
----------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED MARCH 31, 1997
-----------------------------------------------------------
Sales................................................ $ 60,529 $ 60,529
Cost of sales........................................ 52,276 52,276
-------- ------------
Gross profit......................................... 8,253 8,253
Selling, general and administrative expenses......... 7,474 7,474
-------- ------------
Income from operations 779 779
Equity in loss of subsidiary -- $ (7,850) $ 7,850 --
Interest expense..................................... 4,681 -- -- 4,681
-------- ----------- ------------- ------------
(Loss) income before income taxes and extraordinary
item............................................. (3,902) (7,850) 7,850 (3,902)
Benefit for income taxes (541) -- -- (541)
Loss (income) before extraordinary item.............. (3,361) (7,850) 7,850 (3,361)
Extraordinary loss on early extinguishment of debt... (4,489) -- -- (4,489)
-------- ----------- ------------- ------------
Net (loss) income.................................. $ (7,850) $ (7,850) $ 7,850 $ (7,850)
-------- ----------- ------------- ------------
-------- ----------- ------------- ------------
</TABLE>
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Quality Foods, L.P.:
We have audited the accompanying balance sheet of Quality Foods, L.P.
("Quality Foods") as of December 31, 1996, and the related statements of
operations, partners' capital, and cash flows for the year then ended. These
financial statements are the responsibility of Quality Foods' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Quality Foods as of December
31, 1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
February 14, 1997
F-20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
Quality Foods, L.P.
We have audited the accompanying balance sheet of Quality Foods, L.P. as of
December 31, 1995, and the related statements of operations, partners' capital,
and cash flows for each of the two years in the period ended December 31, 1995.
Our audits also included the financial statement schedule listed in the Index at
Item 21(b). These financial statements and schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Quality Foods, L.P. at
December 31, 1995, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Philadelphia, PA
February 12, 1996
F-21
<PAGE>
QUALITY FOODS, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1995 1996
--------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................................................... $ 105 $ 390
Accounts receivable, net of allowance for doubtful accounts of $35,000 and $50,000 at
December 31, 1995 and 1996, respectively.............................................. 5,944 5,892
Inventory............................................................................... 9,689 7,727
Prepaid expenses and other current assets............................................... 991 1,547
--------- -----------
Total current assets...................................................................... 16,729 15,556
Property, plant, and equipment, net....................................................... 8,772 15,395
Construction funds........................................................................ 2,649 15
Intangible and other assets............................................................... 5,664 4,626
--------- -----------
Total assets.............................................................................. $ 33,814 $ 35,592
--------- -----------
--------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Revolving line of credit................................................................ $ 5,146 $ --
Current portion of long-term debt....................................................... 2,850 189
Accounts payable........................................................................ 3,521 6,392
Accrued expenses........................................................................ 1,180 535
--------- -----------
Total current liabilities................................................................. 12,697 7,116
Long-term debt............................................................................ 12,229 5,539
Advances from CFP Holdings, Inc. ......................................................... -- 15,677
Partners' capital:
General partners........................................................................ 90 73
Limited partners........................................................................ 8,798 7,187
--------- -----------
Total partners' capital................................................................... 8,888 7,260
--------- -----------
Total liabilities and partners' capital................................................... $ 33,814 $ 35,592
--------- -----------
--------- -----------
</TABLE>
See accompanying notes to the financial statements.
F-22
<PAGE>
QUALITY FOODS, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales........................................................................ $ 84,817 $ 84,694 $ 90,582
Cost of sales.................................................................... 72,162 67,930 71,448
--------- --------- ---------
Gross profit..................................................................... 12,655 16,764 19,134
Operating expenses............................................................... 6,887 6,926 7,519
Acquisition costs................................................................ -- -- 3,088
Facility start-up and relocation expense......................................... -- -- 1,628
--------- --------- ---------
Income from operations......................................................... 5,768 9,838 6,899
Interest expense................................................................. 2,616 2,129 1,871
--------- --------- ---------
Income before extraordinary item............................................... 3,152 7,709 5,028
Extraordinary loss on early extinguishment of debt............................... 1,771 130 546
--------- --------- ---------
Net income..................................................................... 1,381 7,579 4,482
Pro forma provision for income taxes............................................. 553 3,032 1,793
--------- --------- ---------
Pro forma net income............................................................. $ 828 $ 4,547 $ 2,689
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to the financial statements.
F-23
<PAGE>
QUALITY FOODS, L.P.
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
----------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Partners' capital--January 1, 1994................................................ $ 26 $ 2,891 $ 2,917
Net income...................................................................... 17 1,364 1,381
Distributions................................................................... (18) (1,759) (1,777)
--- --------- ---------
Partners' capital--December 31, 1994.............................................. 25 2,496 2,521
Net income...................................................................... 77 7,502 7,579
Distributions................................................................... (12) (1,200) (1,212)
--- --------- ---------
Partners' capital--December 31, 1995.............................................. 90 8,798 8,888
Net income...................................................................... 45 4,437 4,482
Distributions................................................................... (62) (6,048) (6,110)
--- --------- ---------
Partners' capital--December 31, 1996.............................................. $ 73 $ 7,187 $ 7,260
--- --------- ---------
--- --------- ---------
</TABLE>
See accompanying notes to the financial statements.
F-24
<PAGE>
QUALITY FOODS, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................................................... $ 1,381 $ 7,579 $ 4,482
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization............................................... 1,025 1,038 1,510
Loss on disposal of equipment............................................... 130 37 14
Extraordinary loss on early extinguishment of debt.......................... 1,771 130 546
Changes in operating assets and liabilities:
Accounts receivable....................................................... (353) (366) 52
Inventory................................................................. 1,823 (3,016) 1,962
Prepaid expenses and other assets......................................... (769) 55 (556)
Accounts payable and accrued expenses..................................... (459) 141 1,937
--------- --------- ---------
Net cash provided by operating activities....................................... 4,549 5,598 9,947
--------- --------- ---------
INVESTING ACTIVITIES
Purchases of and deposits on property, plant and equipment...................... (858) (4,102) (7,190)
Change in investment of restricted bond proceeds................................ (4,419) 1,770 2,634
--------- --------- ---------
Net cash used in investing activities........................................... (5,277) (2,332) (4,556)
--------- --------- ---------
FINANCING ACTIVITIES
Partners' distributions......................................................... (1,777) (1,212) (6,110)
Advances from CFP Holdings, Inc. ............................................... -- -- 15,677
Proceeds from issuance of long-term debt........................................ 9,500 5,150 750
Payments of long-term debt...................................................... (4,607) (5,681) (10,101)
Prepayment penalty on early extinguishment of debt.............................. (1,530) -- (99)
Debt issuance costs............................................................. (448) (255) (77)
Change in revolving line of credit.............................................. (450) (1,381) (5,146)
--------- --------- ---------
Net cash provided by (used in) financing activities............................. 688 (3,379) (5,106)
--------- --------- ---------
Net (decrease) increase in cash................................................. (40) (113) 285
Cash at beginning of period..................................................... 258 218 105
--------- --------- ---------
Cash at end of period........................................................... $ 218 $ 105 $ 390
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest.......................................................... $ 2,819 $ 2,203 $ 2,213
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to the financial statements.
F-25
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Quality Foods, L.P. ("Quality Foods") is a manufacturer of pre-cooked and
uncooked, thinly-sliced beef used primarily in "Philadelphia-style" steak
sandwiches. It also supplies chicken products and lines of pre-cooked and
uncooked meatballs and hamburger patties. No individual distributor handled more
than 7% of net sales. Approximately 46% of net sales in each of the years ended
December 31, 1994, 1995 and 1996 were ultimately purchased by retail units of an
international franchising operation offering a menu of submarine sandwiches.
Quality Foods was formed on May 13, 1992 by QF Acquisition Corp. ("QFAC") as
managing general partner, an additional general partner, and four limited
partners (the "Partners"). Operations of Quality Foods commenced July 22, 1992
when QFAC contributed operating assets and certain liabilities of William Cohen
and Son Co., Inc. ("Cohen"), which it acquired on July 22, 1992.
On December 31, 1996, CFP Holdings, Inc. ("Holdings") acquired substantially
all of the limited partnership interests in Quality Foods. The remaining limited
partnership interests that were owned by certain members of management of
Quality Foods ("Rollover Interests") were exchanged for common stock of CFP
Group, Inc., the parent of Holdings. Holdings also acquired all of the issued
and outstanding capital stock of QFAC and the other general partner of Quality
Foods. Immediately following the acquisition of all such partnership interests,
CFP Group, Inc. contributed the Rollover Interests to Holdings. Holdings then
contributed all of the partnership interests in Quality Foods to QFAC. Quality
Foods was then terminated and QFAC became a wholly owned subsidiary of Holdings.
The accompanying 1996 financial statements reflect the financial position and
the results of operations through December 31, 1996 immediately prior to the
transfer or exchange of share or partnership interests and include the reduction
of debt and borrowings from Holdings.
Quality Foods is not subject to federal or state income taxes; instead, any
taxable income or loss is passed through to the partners and reported on their
respective income tax returns. According to the terms of the partnership
agreement, the partners are entitled to receive quarterly distributions from
available funds for tax liabilities based upon taxable income. Income is
allocated based upon the percentage interest owned by the partners and
distributions are allocated based upon the partnership agreement. Pro forma
provision for income taxes and pro forma net income reflect the pro forma effect
of income taxes as if Quality Foods had been taxed as a corporation for all
periods presented at a statutory rate of 40%. Included in pro forma income tax
expense for the years ended December 31, 1994, 1995 and 1996 is an income tax
benefit of $708,000, $52,000 and $218,000, respectively, relating to the
extraordinary loss on the early extinguishment of debt.
2. ACCOUNTING POLICIES
CREDIT RISK Financial instruments that subject Quality Foods to credit risk
consist primarily of accounts receivable. Quality Foods performs ongoing credit
evaluations of its customers and maintains an allowance for potential credit
losses. Quality Foods generally does not require its customers to post
collateral or other security.
INVENTORY Inventory is stated at the lower of cost or market, with cost
determined on a first-in, first-out method.
DEPRECIATION Property, plant, and equipment is carried at cost.
Depreciation is computed by the straight-line method over the estimated useful
lives of the assets, ranging from 3 to 40 years.
F-26
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE AND LONG-LIVED ASSETS Quality Foods reviews the recoverability
of intangible and long-lived assets whenever events or changes in circumstances
indicate that the carrying value of such assets may not be recoverable. If the
expected future cash flows from the use of such assets (undiscounted and without
interest charges) are less than the carrying value, Quality Foods' policy is to
record a writedown that is determined based on the difference between the
carrying value of the asset and its estimated fair value.
INTANGIBLE ASSETS Loan commitment fees and other costs associated with
Quality Foods' financing have been capitalized and are being amortized over the
term of the respective debt instrument. Costs associated with the organization
of Quality Foods have been capitalized and are being amortized by the
straight-line method over five years. The excess of the cost over fair market
value of the assets acquired and from Cohen contributed to Quality Foods by QFAC
and direct costs of the acquisition paid by Quality Foods are being amortized by
the straight-line method over 15 years.
REVENUE RECOGNITION Quality Foods recognizes revenue upon shipment of its
product.
FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of accounts
receivable and accounts payable approximate fair value because of their
short-term nature. The carrying amounts of the revolving line of credit and
senior and subordinated notes payable approximate fair value because their
interest rates are based upon rates currently available to Quality Foods for
debt with similar terms and conditions.
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 amounts reported to the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS Certain reclassifications have been made to Quality
Foods' financial statements for the years ended December 31, 1994 and 1995 to
conform to the 1996 presentation.
3. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Finished products.............................................................................. $ 4,434 $ 3,516
Work in process................................................................................ 4,530 3,150
Meats and other ingredients.................................................................... 445 810
Packaging and shipping materials............................................................... 280 251
--------- ---------
$ 9,689 $ 7,727
--------- ---------
--------- ---------
</TABLE>
F-27
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Land......................................................................................... $ 39 $ 189
Buildings.................................................................................... 2,094 11,150
Machinery and equipment...................................................................... 3,330 5,764
Construction in progress..................................................................... 4,396 176
--------- ---------
9,859 17,279
Less accumulated depreciation................................................................ (1,087) (1,884)
--------- ---------
Property, plant, and equipment, net.......................................................... $ 8,772 $ 15,395
--------- ---------
--------- ---------
</TABLE>
Interest earnings, net of expense on construction funds, of $8,000 was
deferred in 1995. Quality Foods capitalized $161,000 of interest during the year
ended December 31, 1996 in conjunction with its plant expansion.
Outstanding accounts payable for construction in progress on the
Philadelphia facility was $497,000 and $786,000 at December 31, 1995 and 1996,
respectively.
5. INTANGIBLE ASSETS
Intangible assets and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Deferred financing costs....................................................................... $ 1,165 $ 242
Organization costs............................................................................. 257 257
Goodwill....................................................................................... 6,238 6,238
--------- ---------
7,660 6,737
Less accumulated amortization.................................................................. (1,996) (2,111)
--------- ---------
$ 5,664 $ 4,626
--------- ---------
--------- ---------
</TABLE>
F-28
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CREDIT AND DEBT AGREEMENTS
Long term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
PEDFA taxable development revenue bonds, 1995 series D....................................... $ 4,400 $ 4,300
MELF term loan............................................................................... -- 428
PIDC term loan............................................................................... 750 1,000
Term loans................................................................................... 4,083
Senior subordinated notes payable to former shareholders of Cohen............................ 2,596 --
Junior subordinated note payable to a limited partner........................................ 3,250 --
--------- ---------
15,079 5,728
Less current portion......................................................................... (2,850) (189)
--------- ---------
Noncurrent portion of long-term debt......................................................... $ 12,229 $ 5,539
--------- ---------
--------- ---------
</TABLE>
On December 28, 1995, the Pennsylvania Economic Development Financing
Authority ("PEDFA") issued $4,400,000 of taxable development revenue bonds (1995
series D) to refund all outstanding 1994 series B-9 tax exempt bonds.
Unamortized deferred financing costs relating to the 1994 bonds were written off
and are reported as extraordinary charge of $130,000 in 1995. Quality Foods is
obligated to pay all costs of these bond issues pursuant to loan agreements with
PEDFA. Bond proceeds are held by PEDFA's bank trustee for release to Quality
Foods upon submission of documentation evidencing qualifying expenditures to
acquire, construct and equip the Philadelphia Facility.
Interest on the bonds is determined weekly by PEDFA's remarketing agent
(5.8% at December 31, 1995 and 1996), subject to a maximum rate of 18%. Interest
is paid monthly and monthly escrow deposits are required in amounts sufficient
to fund annual sinking fund requirements. Mandatory sinking fund redemptions are
required each December 1 continuing through final redemption in 2014. The bonds
are supported by an irrevocable bank letter of credit which is backed by a
guarantee provided by a commercial lender. The letter of credit and guarantee
are secured by a mortgage creating a first priority lien on the Philadelphia
real property subject to a reimbursement agreement between PEDFA's letter of
credit bank and a commercial lender. Quality Foods pays annual fees of .5% and
1.5% for the letter of credit and guarantee, respectively.
The Pennsylvania Department of Commerce has loaned Quality Foods $500,000
for production equipment installed at the Philadelphia facility through its
Machinery and Equipment Loan Fund program ("MELF"). The loan bears interest at
2% and will mature within a 5-year term. The loan is secured by a perfected pari
passu first lien security interest on program equipment shared with Quality
Foods' former commercial lender.
The Philadelphia Industrial Development Corporation ("PIDC") has committed
to lend Quality Foods up to $1,750,000 in two loans of $1,000,000 and $750,000,
respectively. The $1,000,000 loan has been drawn and is outstanding as of
December 31, 1996 and bears interest at 0.5% with no payments for the first 24
months following final disbursement, interest only payments for months 25
through 102 and level monthly payments of principal and interest for months 103
through 180. The $750,000 commitment will convert into a term loan that is
repayable in 180 equal monthly installments of principal and interest at 5.25%.
Both loans will be secured by a mortgage representing a third priority lien on
the Philadelphia property.
F-29
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CREDIT AND DEBT AGREEMENTS (CONTINUED)
The Pennsylvania Industrial Development Authority ("PIDA") has committed to
lend Quality Foods up to $1,750,000 at 2% with a term of 15 years which will be
secured by a mortgage creating a second priority lien on the Philadelphia real
property. The loan proceeds will be used to reduce other debt then outstanding.
On December 31, 1996, Quality foods retired the 12% senior subordinated
notes payable to former shareholders of Cohen, the 13% junior subordinated note
payable to a limited partner and the term loans and a revolving line of credit
with its former commercial lender. Quality Foods paid prepayment premiums of
$99,000 and wrote off $447,000 of related unamortized deferred financing costs
which are reported as an extraordinary charge. Interest on the revolving line of
credit and term loans was charged at a floating rate of .75% over the lender's
prime rate, at fixed rates of 2.5% over LIBOR for contract periods of 30, 60, 90
or 180 days duration as chosen by Quality Foods, or at a combination of the
floating and fixed rates.
In 1994, Quality Foods replaced senior term debt, incurred a prepayment
premium of $1,530,000 and wrote off related unamortized financing costs of
$241,000 which are reported as an extraordinary charge.
The aggregate scheduled principal maturities for long-term debt are as
follows at December 31, 1996: 1997, $189,000; 1998, $199,000; 1999, $201,000;
2000, $303,000; 2001, $234,000; and thereafter $4,600,000.
7. PENSION PLAN
Quality Foods has a defined contribution profit-sharing salary reduction
plan covering substantially all employees not otherwise covered under a
collective bargaining agreement. Profit-sharing plan contributions are
determined by QFAC and are a percentage of each participant's compensation.
Contribution expense was approximately $65,000 in 1994, $77,000 in 1995 and
$89,000 in 1996.
8. OTHER COSTS
Quality Foods incurred $3,088,000 of costs in connection with its
acquisition by CFP Holdings (see note 1). Facility start-up and relocation
expenses of $1,628,000 relate to the consolidation of three manufacturing and
administrative facilities into one in facility in Philadelphia.
9. COMMITMENTS AND CONTINGENCIES
Quality Foods leases certain equipment and real estate under noncancelable
operating leases that expire in various years through 2002. Rent expense was
approximately $533,000 in 1994, $650,000 in 1995 and $619,000 in 1996.
The following is a schedule of future minimum lease payments as of December
31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997........................................................................ $ 387
1998........................................................................ 263
1999........................................................................ 212
2000........................................................................ 166
2001........................................................................ 131
Thereafter.................................................................. 87
</TABLE>
Quality Foods pays a management fee to an affiliate of one of its partners.
Management fee expense was $250,000, $206,000 and $210,000 for the years ended
December 31, 1994, 1995, and 1996, respectively.
F-30
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. ADVANCES FROM CFP HOLDINGS, INC.
On December 31, 1996, Holdings had advanced to Quality Foods a total of
$16,683,000 to pay certain debt and acquisition related expenses. In addition,
Quality Foods paid certain costs amounting to $1,006,000 on behalf of Holdings.
F-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE INITIAL
PURCHASES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... ii
Prospectus Summary............................. 1
Risk Factors................................... 19
The Exchange Offer............................. 26
The Quality Foods Acquisition.................. 35
Use of Proceeds................................ 36
Capitalization................................. 37
Unaudited Pro Forma Condensed
Combined Financial Statements................
Unaudited Pro Forma Condensed
Combined Balance Sheet.......................
Unaudited Pro Forma Condensed Combined
Statement of Operations...................... 38
Selected Historical Financial Data
of Quality Foods............................. 42
Selected Historical Financial Data
of CFP Holdings.............................. 44
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 47
Business....................................... 55
Management..................................... 63
Principal Stockholders....................... . 70
Certain Transactions........................... 72
Description of Bank Credit Agreement........... 74
Description of Notes........................... 76
Certain Federal Income Tax Considerations...... 100
Plan of Distribution........................... 103
Legal Matters.................................. 103
Experts........................................ 104
Index to Financial Statements.................. F-1
</TABLE>
CFP HOLDINGS, INC.
$115,000,000
11 5/8% SERIES B SENIOR GUARANTEED
NOTES DUE 2004
-----------------
PROSPECTUS
-----------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), the California Corporation Code (the "Code"), Article VII of CFP
Holdings, Inc.'s ("Holdings") Restated Certificate of Incorporation, Article 6
of CFP Group Inc.'s ("CFP Group") Restated Certificate of Incorporation, Article
VI of Custom Food Products, Inc.'s ("Custom Foods") Amended Articles of
Incorporation and Article 6 of QF Acquisition Corp.'s ("QFAC") Restated
Certificate of Incorporation (the "Certificates of Incorporation"), in each case
eliminate the liability of the directors of Holdings, CFP Group, Custom Foods
and QFAC, to Holdings, CFP Group, Custom Foods and QFAC, respectively, or their
respective stockholders, except for liabilities related to breach of duty of
loyalty, actions not in good faith and certain other liabilities.
Section 145 of the DGCL provides for indemnification by Holdings, CFP Group
and QFAC of their respective directors and officers. Section 317 of the Code
provides for indemnification by Custom Foods of its directors and officers. In
addition, Article IX, Section 1 of the By-Laws of Holdings and CFP Group and
Article VI, Section 1 of QFAC's By-Laws (collectively the "By-laws") requires
Holdings, CFP Group and QFAC to indemnify any of their respective current or
former directors or officers to the fullest extent permitted by the DGCL.
Article VI of Custom Foods' By-Laws requires Custom Foods to indemnify any
current or former director or officer to the fullest extent permitted by the
Code. Holdings, CFP Group, Custom Foods and QFAC have also obtained officers'
and directors' liability insurance which insures against liabilities that
officers and directors, respectively of Holdings, CFP Group, Custom Foods and
QFAC may incur in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
**1.1 Purchase Agreement dated January 23, 1997, among CFP Holdings, Inc. (the "Company"), CFP Group, Inc.
("CFP Group"), Custom Food Products, Inc. ("Custom Foods"), QF Acquisition Corp. ("QFAC"),
NationsBanc Capital Markets, Inc. ("NCMI") and Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") relating to the 11 5/8% Senior Guaranteed Notes due 2004.
**3.1 Amended and Restated Certificate of Incorporation of the Company.
**3.2 By-laws of the Company.
*3.3 Amended and Restated Certificate of Incorporation of CFP Group.
*3.4 By-Laws of CFP Group.
*3.5 Amended and Restated Certificate of Incorporation of QFAC.
*3.6 By-laws of QFAC.
*3.7 Amended and Restated Articles of Incorporation of Custom Foods.
*3.8 By-laws of Custom Foods.
**4.1 Indenture dated January 28, 1997, among the Company, CFP Group, Custom Foods, QFAC and United States
Trust Company of New York, as Trustee (the "Trustee") (including the form of Note as Exhibit A and
the other exhibits thereto).
**4.2 Registration Rights Agreement dated January 28, 1997, among the Company, CFP Group, Custom Foods,
QFAC, NCMI and DLJ.
**4.3 Credit Agreement dated December 30, 1996, among the Company, CFP Group, NCMI, NationsBank of Texas,
N.A., Fleet National Bank and the Lenders listed therein.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
**5 Opinion of O'Sullivan Graev & Karabell, LLP (including consent of such firm) regarding legality of
securities being offered.
**8 Opinion of O'Sullivan Graev & Karabell, LLP (including consent of such firm) regarding the material
United States Federal income tax consequences to the holders of the securities being offered.
**10.1 Securities Purchase Agreement dated December 31, 1996, among the Company, Quality Foods, L.P., the
Partners of Quality Foods, L.P., certain additional beneficial owners of Quality Foods, L.P., the
Stockholders of QFAC and the stockholders of QF Management Corp.
**10.2 Employment Agreement dated December 31, 1996, between the Company and David Cohen.
**10.3 Employment Agreement dated December 31, 1996, between the Company and Eric W. Ek.
**10.4 Employment Agreement dated December 31, 1996 between the Company and Robert D. Gioia.
**10.5 Employment Agreement dated December 31, 1996, between the Company and Richard W. Griffith.
**10.7 Management Consulting Agreement dated December 31, 1996, between the Company and First Atlantic
Capital, Ltd. ("FACL").
**10.8 Investment Banking Agreement dated March 1, 1996, between the Company and FACL.
**10.9 Stockholders' Agreement dated December 31, 1996, among CFP Group and the stockholders listed on Annex
I thereto.
**10.10 Standard Industrial Lease dated April 27, 1981, between Philip E. Bauer Properties and Best Western
Foods, Inc. (including material Amendments and Addendums thereto).
**10.11 Standard Industrial Lease--Net dated November 3, 1991, among William I. Altshuler, Maxine Altshulter
and Center of the Plate Foods Inc. (including material Amendments and Addendums thereto).
**10.12 Lease Agreement dated September 30, 1994, between CFP Associates and Custom Foods (Including material
Amendments and Addendums thereto).
**12.1 Computation of Ratio of Earnings to Fixed Charges.
**21 List of Subsidiaries.
**23.1 Consent of O'Sullivan Graev & Karabell, LLP (included as part of its opinions filed as Exhibits 5 and
8 hereto).
*23.2 Consent of Ernst & Young LLP, independent auditors (included on page S-6).
*23.3 Consents of Deloitte & Touche LLP, independent auditors (included on
page S-3 and S-4).
**24.1 Powers of Attorney for the Company.
**24.2 Powers of Attorney for CFP Group, Custom Foods and QFAC.
**24.3 Officers Certificate certifying Resolutions adopted by the Board of Directors of the Company
authorizing signatories to sign the Registration Statement on Form S-4.
**25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of United
States Trust Company of New York, as Trustee.
**99.1 Form of Letter of Transmittal.
**99.2 Form of Notice of Guaranteed Delivery.
**99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
**99.4 Form of Letter to Clients.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
**99.5 Form of Exchange Agent Agreement between the Registrant and United States Trust Company of New York,
as Exchange Agent.
</TABLE>
- ------------------------------
* Filed herewith.
** Filed previously.
(B) FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts -- Three years ended September 30, 1994, 1995 and 1996.... S-1
</TABLE>
Schedules other than the above have been omitted because they are either not
applicable or the required information has been disclosed in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the DGCL, the Certificate of
Incorporation and By-laws, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of that time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial BONA FIDE offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 16th day of June, 1997.
CFP HOLDINGS, INC.
By: *
-----------------------------------------
Roberto Buaron
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed on the 16th day of June,
1997, by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
*
-------------------------------------------
Roberto Buaron Chairman of the Board and Director
*
------------------------------------------- President, Chief Executive Officer and Director
Robert Gioia (Principal Executive Officer)
/s/ ERIC EK Vice President, Chief Financial Officer, Secretary and
------------------------------------------- Director (Principal Financial Officer and Principal
Eric Ek Accounting Officer)
*
-------------------------------------------
Richard Griffith Director
*
-------------------------------------------
James A. Long Director
*
-------------------------------------------
David Cohen Director
*
-------------------------------------------
Andrew Kohn Director
*
-------------------------------------------
Keith Pennell Director
*
-------------------------------------------
James Schubauer II Director
</TABLE>
*By: Eric Ek, Attorney-in-fact
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 16th day of June, 1997.
CFP GROUP, INC.
By: *
-----------------------------------------
Roberto Buaron
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed on the 16th day of June,
1997, by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
*
-------------------------------------------
Roberto Buaron Chairman of the Board and Director
*
------------------------------------------- President, Chief Executive Officer and Director
Robert Gioia (Principal Executive Officer)
/s/ ERIC EK Vice President, Chief Financial Officer, Secretary and
------------------------------------------- Director (Principal Financial Officer and Principal
Eric Ek Accounting Officer)
*
-------------------------------------------
Richard Griffith Director
*
-------------------------------------------
James A. Long Director
*
-------------------------------------------
David Cohen Director
*
-------------------------------------------
Andrew Kohn Director
*
-------------------------------------------
Keith Pennell Director
*
-------------------------------------------
James Schubauer II Director
</TABLE>
*By: Eric Ek, Attorney-in-fact
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 16th day of June, 1997.
CUSTOM FOOD PRODUCTS, INC.
By: *
-----------------------------------------
Roberto Buaron
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed on the 16th day of June,
1997, by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
*
-------------------------------------------
Roberto Buaron Chairman of the Board and Director
*
-------------------------------------------
Robert Gioia Director
/s/ ERIC EK Vice President, Chief Financial Officer, Secretary and
------------------------------------------- Director (Principal Financial Officer and Principal
Eric Ek Accounting Officer)
*
------------------------------------------- President, Chief Executive Officer and Director
Richard Griffith (Principal Executive Officer)
*
-------------------------------------------
James A. Long Director
*
-------------------------------------------
David Cohen Director
*
-------------------------------------------
Andrew Kohn Director
*
-------------------------------------------
Keith Pennell Director
*
-------------------------------------------
James Schubauer II Director
</TABLE>
*By: Eric Ek, Attorney-in-fact
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 16th day of June, 1997.
QF ACQUISITION CORP.
By: *
-----------------------------------------
Roberto Buaron
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed on the 63th day of June,
1997, by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
*
-------------------------------------------
Roberto Buaron Chairman of the Board and Director
*
------------------------------------------- Chief Executive Officer and Director (Principal Executive
Robert Gioia Officer)
/s/ ERIC EK Vice President, Chief Financial Officer, Secretary and
------------------------------------------- Director (Principal Financial Officer and Principal
Eric Ek Accounting Officer)
*
-------------------------------------------
Richard Griffith Director
*
-------------------------------------------
James A. Long Director
*
-------------------------------------------
David Cohen President and Director
*
-------------------------------------------
Keith Pennell Director
*
-------------------------------------------
James Schubauer II Director
</TABLE>
*By: Eric Ek, Attorney-in-fact
II-8
<PAGE>
CFP GROUP INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
AND SIX MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
ADDITIONS
BALANCE ---------------------------- BALANCE
AT BEGINNING CHARGED TO CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS OF PERIOD
- --------------------------------------------------- ------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Accounts Receivable-
Allowance for doubtful accounts
Year ended September 30, 1994................ $ 11 $ -- $ -- $ (2) $ 9
Year ended September 30, 1995................ 9 129 -- -- 138
Year ended September 30, 1996................ 138 12 -- (100) 50
Period ended March 31, 1997.................. 50 22 50 (29) 93
</TABLE>
S-1
<PAGE>
QUALITY FOODS, L.P.,
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
ADDITIONS
BALANCE ---------------------------- BALANCE
AT BEGINNING CHARGED TO CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS OF PERIOD
- --------------------------------------------------- --------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Accounts Receivable --
Allowance for doubtful accounts
Year ended December 30, 1994................... $ 55 $ 46 (46) 55
Year ended December 30, 1995................... 55 85 (105) 35
Year ended December 30, 1996................... 35 82 (67) 50
</TABLE>
S-2
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholders of
CFP Group, Inc.
We consent to the use in this Amendment No. 2 to Registration Statement (No.
333-23893) on Form S-4 of our report dated June 16, 1997, appearing in the
Prospectus, which is a part of this Registration Statement, and to the
references to us under the heading "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of CFP Group, Inc., listed in
Item 21. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
June 16, 1997
S-3
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Partners of Quality Foods, L.P.
We consent to the use in this Amendment No. 2 to Registration Statement (No.
333-23893) on Form S-4 of our report on the financial statements of Quality
Foods, L.P. for the year ended December 31, 1996, dated February 14, 1997,
appearing in the Prospectus, which is part of this Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
Our audit of the financial statements referred to in our aforementioned report
also included the 1996 information contained in the financial statement schedule
of Quality Foods, L.P., listed in Item 21. These financial statements are the
responsibility of Quality Foods' management. Our resonsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
June 16, 1997
S-4
<PAGE>
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 12, 1996 with respect to the financial
statements and schedule of Quality Foods, L.P. included in Amendment No. 2 to
the Registration Statement (Form S-4 No. 333-23893) and related Prospectus for
the registration of $115,000,000 of its 11 5/8% Series B Senior Guaranteed Notes
due 2004.
/s/ ERNST & YOUNG LLP
Philadelphia, Pa
June 16, 1997
S-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
**1.1 Purchase Agreement dated January 23, 1997, among CFP Holdings, Inc. (the "Company"), CFP Group, Inc.
("CFP Group"), Custom Food Products, Inc. ("Custom Foods"), QF Acquisition Corp. ("QFAC"),
NationsBanc Capital Markets, Inc. ("NCMI") and Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") relating to the 11 5/8% Senior Guaranteed Notes due 2004.
**3.1 Amended and Restated Certificate of Incorporation of the Company.
**3.2 By-laws of the Company.
*3.3 Amended and Restated Certificate of Incorporation of CFP Group.
*3.4 By-Laws of CFP Group.
*3.5 Amended and Restated Certificate of Incorporation of QFAC.
*3.6 By-laws of QFAC.
*3.7 Amended and Restated Articles of Incorporation of Custom Foods.
*3.8 By-laws of Custom Foods.
**4.1 Indenture dated January 28, 1997, among the Company, CFP Group, Custom Foods, QFAC and United States
Trust Company of New York, as Trustee (the "Trustee") (including the form of Note as Exhibit A and
the other exhibits thereto).
**4.2 Registration Rights Agreement dated January 28, 1997, among the Company, CFP Group, Custom Foods,
QFAC, NCMI and DLJ.
**4.3 Credit Agreement dated December 30, 1996, among the Company, CFP Group, NCMI, NationsBank of Texas,
N.A., Fleet National Bank and the Lenders listed therein.
**5 Opinion of O'Sullivan Graev & Karabell, LLP (including consent of such firm) regarding legality of
securities being offered.
**8 Opinion of O'Sullivan Graev & Karabell, LLP (including consent of such firm) regarding the material
United States Federal income tax consequences to the holders of the securities being offered.
**10.1 Securities Purchase Agreement dated December 31, 1996, among the Company, Quality Foods, L.P., the
Partners of Quality Foods, L.P., certain additional beneficial owners of Quality Foods, L.P., the
Stockholders of QFAC and the stockholders of QF Management Corp.
**10.2 Employment Agreement dated December 31, 1996, between the Company and David Cohen.
**10.3 Employment Agreement dated December 31, 1996, between the Company and Eric W. Ek.
**10.4 Employment Agreement dated December 31, 1996 between the Company and Robert D. Gioia.
**10.5 Employment Agreement dated December 31, 1996, between the Company and Richard W. Griffith.
**10.7 Management Consulting Agreement dated December 31, 1996, between the Company and First Atlantic
Capital, Ltd. ("FACL").
**10.8 Investment Banking Agreement dated March 1, 1996, between the Company and FACL.
**10.9 Stockholders' Agreement dated December 31, 1996, among CFP Group and the stockholders listed on Annex
I thereto.
**10.10 Standard Industrial Lease dated April 27, 1981, between Philip E. Bauer Properties and Best Western
Foods, Inc. (including material Amendments and Addendums thereto).
**10.11 Standard Industrial Lease--Net dated November 3, 1991, among William I. Altshuler, Maxine Altshulter
and Center of the Plate Foods Inc. (including material Amendments and Addendums thereto).
**10.12 Lease Agreement dated September 30, 1994, between CFP Associates and Custom Foods (Including material
Amendments and Addendums thereto).
**12.1 Computation of Ratio of Earnings to Fixed Charges.
**21 List of Subsidiaries.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
**23.1 Consent of O'Sullivan Graev & Karabell, LLP (included as part of its opinions filed as Exhibits 5 and
8 hereto).
*23.2 Consent of Ernst & Young LLP, independent auditors (included on page S-6).
*23.3 Consents of Deloitte & Touche LLP, independent auditors (included on
page S-3, S-4 and S-5).
**24.1 Powers of Attorney for the Company.
**24.2 Powers of Attorney for CFP Group, Custom Foods and QFAC.
**24.3 Officers Certificate certifying Resolutions adopted by the Board of Directors of the Company
authorizing signatories to sign the Registration Statement on Form S-4.
**25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of United
States Trust Company of New York, as Trustee.
**99.1 Form of Letter of Transmittal.
**99.2 Form of Notice of Guaranteed Delivery.
**99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
**99.4 Form of Letter to Clients.
**99.5 Form of Exchange Agent Agreement between the Registrant and United States Trust Company of New York,
as Exchange Agent.
</TABLE>
- ------------------------------
* Filed herewith.
** Filed previously.
<PAGE>
Exhibit 3.3
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CFP GROUP, INC.
---------------------------
ARTICLE ONE
The name of the corporation is CFP Group, Inc. (the "Corporation").
ARTICLE TWO
The address of the registered office of the Corporation in the State
of Delaware is 9 East Loockerman Street, City of Dover, County of Kent 19901.
The name of the registered agent of the Corporation at such address is National
Registered Agents, Inc.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
ARTICLE FOUR
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 160,000 shares, consisting of (a)
10,000 shares of preferred stock, $.01 par value (the "Preferred Stock"), of
which, 3,528 shares shall be designated Series A Preferred Stock (the "Series A
Preferred Stock") and (b) 150,000 shares of common stock, $.01 par value (the
"Common Stock"), of which (i) 100,000 shares shall be
<PAGE>
designated Class A Voting Common Stock (the "Class A Voting Common Stock"), (ii)
25,000 shares shall be designated Class A Nonvoting Common Stock (the "Class A
Nonvoting Common Stock"), and (iii) 25,000 shares shall be designated Class B
Nonvoting Common Stock (the "Class B Nonvoting Common Stock"). The Class A
Nonvoting Common Stock and the Class B Nonvoting Common Stock are sometimes
herein referred to together as the "Nonvoting Common Stock".
The designations, preferences and relative participating, optional
or other special rights, qualifications, limitations or restrictions of each
class of stock are as follows:
A. Preferred Stock.
1. Undesignated Preferred Stock. The Board of Directors of the
Corporation is hereby expressly authorized to adopt, at any time and from time
to time, a resolution or resolutions providing for the issuance of Preferred
Stock in one or more series, with such voting powers, full or limited, or no
voting powers, and such designations, preferences and relative, participating,
optional or other special rights and qualifications, or restriction thereof, as
shall be stated and expressed in such resolution or resolutions.
2. Series A Preferred Stock.
(a) Ranking. The Series A Preferred Stock shall rank prior to
all other classes of equity securities of the Corporation (collectively, the
"Junior Securities") with respect to dividend rights and rights on any
liquidation, dissolution or winding up of the Corporation (collectively, a
"Liquidation"). No Preferred Stock or other class of equity securities of the
Corporation shall be created which ranks senior to or on a parity with the
Series A Preferred Stock.
(b) Voting Rights. Except as set forth herein or as otherwise
required by law, holders of Series A Preferred Stock shall not be entitled to
vote on any matters to be voted on by the stockholders of the Corporation. On
any matter on which holders of shares of Series A Preferred Stock are entitled
to vote in accordance with the General Corporation Law, the Series A
-2-
<PAGE>
Preferred Stock shall vote as a separate class and each holder of shares of
Series A Preferred Stock shall be entitled to one vote for each share of such
stock held by such holder. Notwithstanding the foregoing, holders of shares of
Series A Preferred Stock shall be entitled to vote as a separate class on any
amendment to this subparagraph 2(b) and on any amendment, repeal or modification
of any provision hereof that adversely affects the powers, preferences or
special rights of holders of the Series A Preferred Stock.
(c) Dividends. (i) General. Commencing on January 1, 1997,
each outstanding share of the Series A Preferred Stock shall entitle the holder
thereof to receive dividends at the rate of 12.00% per annum on the then current
Liquidation Value when, as and if declared by the Board of Directors, out of
funds legally available for the payment of dividends. Such dividends will be
payable quarterly on the last business day (each, a "Dividend Payment Date") of
March, June, September and December of each year during which any share of the
Series A Preferred Stock is outstanding. All dividends on the Series A Preferred
Stock will be paid in cash. Dividends payable on the Series A Preferred Stock
for any period less than a full quarterly dividend period shall be computed on
the basis of a 360-day year of 12 equal months.
(ii) Dividends Cumulative and Compounded. Dividends on
each share of Series A Preferred Stock shall accrue and be cumulative from the
date of issuance of each share. To the extent the Corporation shall fail to
declare or pay dividends on the outstanding shares of Series A Preferred Stock
(whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends), such dividends shall accrue and
be cumulative from the applicable Dividend Payment Date and shall be compounded
such that the Corporation shall pay additional dividends at the rate of 12.00%
per annum on all dividends which are accrued but not paid. The date on which the
Corporation originally issues any share of Series A Preferred Stock will be
deemed to be its "date of issuance" regardless of the number of times transfer
of such share of Series A Preferred Stock is made on the stock records of the
Corporation or the number of certificates which may be issued to evidence such
share of Series A Preferred Stock.
-3-
<PAGE>
(iii) Record Date for Payment of Dividends. Dividends on
the Series A Preferred Stock shall be paid to the holders of shares of the
Series A Preferred Stock as they appear on the stock records of the Corporation
on such date (the "Record Date") as shall be fixed by the Board of Directors.
The Record Date shall not be more than 60 days prior to the Dividend Payment
Date and shall not precede the date upon which the resolution fixing such Record
Date is adopted.
(iv) Distribution of Partial Dividend Payments. If at
any time the Corporation distributes an amount less than the total amount of
dividends then accrued with respect to the outstanding Series A Preferred Stock,
such payment will be distributed among the holders of the Series A Preferred
Stock so that an equal amount will be paid (as nearly as possible) with respect
to each outstanding share of Series A Preferred Stock.
(v) Priority. As long as any share of Series A Preferred
Stock shall remain outstanding, no dividend shall be declared or paid upon or
set apart for any Junior Security nor shall any Junior Security be redeemed or
purchased by the Corporation nor shall any moneys be paid to or made available
for a sinking fund for redemption or purchase of any Junior Security, unless
full dividends on all outstanding shares of Series A Preferred Stock through the
most recent quarterly period shall have been paid or declared and sufficient
funds set aside for payment thereof; provided, however, that the Corporation may
pay the dividend or distribution contemplated by the proviso to subparagraph
B(2) without complying with this subparagraph A(2)(c)(v).
(d) Liquidation. Upon any Liquidation, the holders of Series A
Preferred Stock will be entitled to be paid out of the assets of the Corporation
available for distribution to stockholders (whether from capital, surplus or
earnings), before any distribution or payment is made upon any Junior
Securities, an amount per share equal to $335.00 plus an amount equal to all
accrued but unpaid dividends, if any, to the date of such Liquidation payment
(the "Liquidation Value"). If upon any Liquidation, the assets of the
Corporation to be distributed among holders of Series A Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled, the holders of shares of Series A Preferred Stock
-4-
<PAGE>
shall share ratably in any distribution of assets according to the respective
amounts which would be payable in respect of the shares held by each holder upon
such distribution, if amounts payable on or with respect to such shares were
paid in full. In the event of any Liquidation, after payment shall have been
made to the holders of shares of the Series A Preferred Stock in the full amount
to which they shall be entitled (as set forth in this subparagraph), the holders
of shares of Series A Preferred Stock shall not be entitled to any further
distribution.
(e) Redemption. (i) Mandatory Redemption. (A) Upon the
occurrence of a Redemption Event, the Corporation will promptly redeem all of
the outstanding shares of Series A Preferred Stock at a price per share equal to
the Liquidation Value to the date of such Redemption Event payment.
(B) As used herein, "Redemption Event" means the
earliest to occur of (1) a public offering or public sale of securities of the
Corporation registered under the Securities Act of 1933, as amended (the
"Securities Act"), (2) any sale of securities of the Corporation to a person or
group of persons (within the meaning of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), which is not an affiliate (within the meaning of
the Exchange Act) of Atlantic Equity Partners, L.P., if, after such sale, such
person or group of persons would own or control securities which possess the
ordinary voting power to elect a majority of the Corporation's directors, (3) a
merger, consolidation or similar transaction involving the Corporation if, after
such transaction, a person, or group of persons (within the meaning of the
Exchange Act), which is not an affiliate (within the meaning of the Exchange
Act) of Atlantic Equity Partners, L.P., would own or control securities which
possess the ordinary voting power to elect a majority of the surviving
corporation's directors or (4) May 31, 2000.
(ii) Optional Redemption. At any time, the Corporation may, in
its sole discretion, redeem shares of the Series A Preferred Stock on a pro rata
basis from the holders thereof at a redemption price equal to the Liquidation
Value to the date of redemption (an "Optional Redemption").
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<PAGE>
(iii) Notice of Redemption. The Corporation will mail written
notice of any redemption of Series A Preferred Stock to each record holder
thereof at the address listed on the stock books of the Corporation not more
than 60 nor less than 20 days prior to the Redemption Date. Such notice will
state the number of shares of Series A Preferred Stock held by such holder which
shall be redeemed by the Corporation, the redemption price to be paid therefor
and the date on which the redemption is to occur (the "Redemption Date"). The
notice will also indicate the place or places where such holder is to surrender
certificates representing shares of Series A Preferred Stock to the Corporation
for redemption.
(iv) Payment of Redemption Price. On or before the close of
business on the eighth day prior to any Redemption Date, all funds necessary for
any redemption (including an amount equal to accrued but unpaid dividends, if
any, to the date of such Redemption Date) shall be deposited by the Corporation
in a major national bank located in New York City to be held in trust for the
pro rata benefit of the holders of shares of the Series A Preferred Stock to be
redeemed. If any such deposit is made, then notwithstanding that any certificate
for shares so called for redemption shall not have been surrendered to the
Corporation for cancellation, from and after the fifth day prior to the
Redemption Date (or from and after the Redemption Date if the Corporation shall
fail to give notice to the holders to be redeemed which states that such holders
may redeem their shares at any time after such deposit), all shares with respect
to which such deposit shall have been made shall no longer be deemed
outstanding, and all rights with respect to such shares shall cease and
terminate, except the right of the holders of the certificates upon the
surrender thereof, to receive the redemption price (without interest) for their
shares of Series A Preferred Stock from the funds so deposited. Any interest
accrued on such funds shall be paid from time to time to the Corporation. If
less than all of the shares represented by any certificate are to be redeemed by
the Corporation, the Corporation shall issue a new certificate representing the
shares not redeemed.
(v) Cancellation of Shares Following Redemption. Any shares of
Series A Preferred Stock which are redeemed or otherwise acquired by the
Corporation shall be
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<PAGE>
cancelled and shall not be reissued, sold or otherwise transferred.
B. Common Stock. Except as otherwise provided in this Article Four,
all shares of Class A Voting Common Stock, Class A Nonvoting Common Stock and
Class B Nonvoting Common Stock will be identical and will entitle the holders
thereof to the same rights and privileges, subject to the same qualifications,
limitations and restrictions.
1. Voting Rights
(a) Class A Voting Common Stock. Each holder of Class A Voting
Common Stock shall be entitled to one vote per share of Class A Voting Common
stock held by such holder on all matters to be voted on by the stockholders of
the Corporation.
(b) Class A Nonvoting Common Stock. Except as set forth herein
or as otherwise required by law, holders of Class A Nonvoting Common Stock shall
not be entitled to vote on any matters to be voted on by the stockholders of the
Corporation. On any matter on which holders of shares of Class A Nonvoting
Common Stock are entitled to vote in accordance with the General Corporation
Law, all classes of Common Stock shall vote together as a single class and each
holder of shares of Class A Nonvoting Common Stock shall be entitled to one vote
for each share of such stock held by such holder. Notwithstanding the foregoing,
holders of shares of Class A Nonvoting Common Stock shall be entitled to vote as
a separate class on any amendment to this subparagraph 1(b) and on any
amendment, repeal or modification of any provision (including, without
limitation, subparagraph 4) hereof that adversely affects the powers,
preferences or special rights of holders of the Class A Nonvoting Common Stock.
(c) Class B Nonvoting Common Stock. Except as set forth herein
or as otherwise required by law, holders of Class B Nonvoting Common Stock shall
not be entitled to vote on any matters to be voted on by the stockholders of the
Corporation. On any matter on which holders of shares of Class B Nonvoting
Common Stock are entitled to vote in accordance with the General Corporation
Law, all classes of Common Stock shall
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<PAGE>
vote together as a single class and each holder of shares of Class B Nonvoting
Common Stock shall be entitled to one vote for each share of such stock held by
such holder. Notwithstanding the foregoing, holders of shares of Class B
Nonvoting Common Stock shall be entitled to vote as a separate class on any
amendment to this subparagraph 1(c) and on any amendment, repeal or modification
of any provision (including, without limitation, subparagraph 4) hereof that
adversely affects the powers, preferences or special rights of holders of the
Class B Nonvoting Common Stock.
2. Dividends. Subject to the provisions of subparagraph A(2)(c)(v),
any dividend or distribution on the Common Stock shall be payable on shares of
Class A Voting Common Stock, Class A Nonvoting Common Stock and Class B
Nonvoting Common Stock, share and share alike; provided, however, that the Class
B Nonvoting Common Stock shall not be eligible to participate in the first
$16,000,000 of dividends or distributions (whether in the form of cash or other
property) (the "Class A Dividend Amount") distributed by the Corporation to the
holders of Common Stock.
3. Liquidation Rights. In the event of any Liquidation, the holders
of the Common Stock shall be entitled to share ratably, according to the number
of shares of Common Stock held by them in all assets of the Corporation
available for distribution to the holders of Common Stock; provided, however,
that the holders of the Class B Nonvoting Common Stock shall not be eligible to
share in the first $16,000,000 in proceeds (whether in the form of cash or other
property) from any such Liquidation (the "Class A Liquidation Preference");
provided, further, that the Class A Liquidation Preference shall be reduced on a
dollar for dollar basis for any dividends or distributions (whether in the form
of cash or other property) distributed by the Corporation to the holders of the
Class A Voting Common Stock and the Class A Nonvoting Common Stock to the
exclusion of the Class B Nonvoting Common Stock.
4. Conversion.
(a) Conversion of Class A Voting Common Stock. Shares of Class
A Voting Common Stock shall not be convertible
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into shares of Class A Nonvoting Common Stock or Class B Nonvoting Common Stock.
(b) Conversion of Nonvoting Common Stock.
(i) Upon the occurrence of a Conversion Event, each
share of Nonvoting Common Stock shall automatically and simultaneously convert
into one share of Class A Voting Common Stock without further action on the part
of the holder thereof.
(ii) As used herein, "Conversion Event" means the
earliest to occur of (A) a public offering or public sale of securities of the
Corporation registered under the Securities Act, (B) any sale of securities of
the Corporation to a person or group of persons (within the meaning of the
Exchange Act) which is not an affiliate (within the meaning of the Exchange Act)
of Atlantic Equity Partners, L.P., if, after such sale, such person or group of
persons would own or control securities which possess the ordinary voting power
to elect a majority of the Corporation's directors or (C) a merger,
consolidation or similar transaction involving the Corporation if, after such
transaction, a person or group or persons (within the meaning of the Exchange
Act) which is not an affiliate (within the meaning of the Exchange Act) of
Atlantic Equity Partners, L.P., would own or control securities which possess
the ordinary voting power to elect a majority of the surviving corporation's
directors, in each case after provision has been made for the payment of the
Class A Dividend Amount and the Class A Liquidation Preference to the holders of
Class A Voting Common Stock and Class A Nonvoting Stock immediately prior to the
Conversion Event.
(c) Conversion Procedure. (i) Promptly upon the occurrence of
a Conversion Event, each holder of shares of Nonvoting Common Stock shall
surrender the certificate or certificates representing such shares to the
Corporation at its principal office during normal business hours. Following the
surrender of a certificate, the Corporation shall issue and deliver a
certificate or certificates to the holder thereof for the Class A Voting Common
Stock issuable upon such conversion.
(ii) The issuance of certificates for Class A Voting
Common Stock upon conversion of Nonvoting Common Stock
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<PAGE>
will be made without charge to the holders of such shares for any issuance tax
in respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of Class A Voting Common Stock.
(iii) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Class A Voting
Common Stock, solely for the purpose of issuance upon the conversion of the
Nonvoting Common Stock, such number of shares of Class A Voting Common Stock as
are issuable upon the conversion of all outstanding Nonvoting Common Stock.
(iv) The Corporation shall not close its books against
the transfer of shares of Nonvoting Common Stock in any manner which would
interfere with the timely conversion of any shares of Nonvoting Common Stock.
(d) Regulated Stockholders. The provisions of subparagraphs
(b) and (c) of this paragraph 4 shall not operate to require the conversion of
any Nonvoting Common Stock owned by any Regulated Stockholder and its
Affiliates, and the Corporation will not otherwise convert, or directly or
indirectly redeem, purchase, acquire or take any other action affecting,
outstanding shares of capital stock of the Corporation if such conversion,
redemption, purchase, acquisition or other action will increase the percentage
of outstanding voting securities owned or controlled by any Regulated
Stockholder and its Affiliates (other than a stockholder which waives in writing
its rights under this subparagraph (d)), unless the Corporation gives written
notice (the "Deferral Notice") of such conversion, redemption, purchase,
acquisition or other action to each Regulated Stockholder. The Corporation will
defer making any such conversion, redemption purchase, acquisition, or taking
any such other action, for a period of 20 days (the "Deferral Period") after
giving the Deferral Notice in order to allow each Regulated Stockholder to
determine whether it wishes to convert or take any other action with respect to
the Common Stock it owns, controls or has the power to vote, and if any
Regulated Stockholder then elects to convert any shares of Nonvoting Common
Stock, it shall notify the Corporation in writing within 10 days of the issuance
of the Deferral Notice, in which case the Corporation shall promptly notify from
time to time prior to the end of such 20-day period each other Regulated
Stockholder of each proposed conversion and
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<PAGE>
effect the conversions requested by all Regulated Stockholders at the end of the
Deferral Period. The Corporation will not directly or indirectly redeem,
purchase, acquire or take any other action affecting outstanding shares of
Common Stock of the Corporation if such action will increase over 24.9% the
percentage of outstanding Common Stock owned or controlled by any Regulated
Stockholder and its Affiliates (other than a stockholder which waives in writing
its rights under this subparagraph (d)).
As used herein, the following terms shall have the meanings shown
below:
(i) "Affiliate" shall mean, with respect to any person,
any other person directly or indirectly controlling, controlled by or under
common control with such person. For the purpose of the above definition, the
terms "controlling," "controlled by" and "under common control with"), as used
with respect to any person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or by contract
or otherwise.
(ii) "Regulated Stockholder" shall mean (A) any
stockholder that is subject to the provision of Regulation Y of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 225 (or any successor to
such Regulation) ("Regulation Y") and that holds shares of Common Stock of the
Corporation, or shares issued upon the conversion of such shares, so long as
such stockholder shall hold, and only with respect to, such shares of Common
Stock or shares issued upon conversion of such shares, (B) any Affiliates of any
such Regulated Stockholder that is a transferee of any shares of Common Stock or
shares issued upon conversion of such shares, and (C) any person to which such
Regulated Stockholder or any of its Affiliates has transferred such shares, so
long as such transferee shall hold, and only with respect to, any such shares or
any shares issued upon conversion of such shares but only if such person (or any
Affiliate of such person) is subject to the provisions of Regulation Y.
5. Stock Splits. If the Corporation in any manner subdivides or
combines the outstanding shares of one class of
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<PAGE>
Common Stock, the outstanding shares of the other classes of Common Stock shall
be proportionately subdivided or combined in a similar manner.
6. Notices. All notices referred to herein shall be in writing,
shall be delivered personally or by first class mail, postage prepaid, and shall
be deemed to have been given when so delivered or mailed to the Corporation at
its principal executive offices and to any stockholder at such holder's address
as it appears in the stock records of the Corporation (unless otherwise
specified in a written notice to the Corporation by such holder).
ARTICLE FIVE
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them, or between the Corporation
and its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree on any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
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<PAGE>
ARTICLE SIX
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, but the foregoing provision shall not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (c) under
Section 174 of the General Corporation Law; or (d) for any transaction from
which the director derived any improper personal benefit. If the General
Corporation Law is amended after the date of incorporation of the Corporation to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE SEVEN
The number of directors of the Corporation shall be such as from
time to time shall be fixed in the manner provided in the By-laws of the
Corporation. The election of directors of the Corporation need not be by ballot,
unless so required by the By-laws of the Corporation.
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<PAGE>
Exhibit 3.4
BY-LAWS OF
New CFP Holdings, Inc.
Offices
Registered Office.
The registered office of New CFP Holdings, Inc. (the "Corporation"), in the
State of Delaware shall be at 1013 Centre Road, City of Wilmington, County of
New Castle, 19805 and the registered agent in charge thereof shall be
Corporation Service Company.
Other Offices.
The Corporation may also have an office or offices at any other place or places
within or outside the State of Delaware.
Meeting of Stockholders; Stockholders'
Consent in Lieu of Meeting
SECTION 1. Annual Meetings.
The annual meeting of the stockholders for the election of directors, and for
the transaction of such other business as may properly come before the meeting,
shall be held at such place, date and hour as shall be fixed by the Board of
Directors (the "Board") and designated in the notice or waiver of notice
thereof, except that no annual meeting need be held if all
<PAGE>
actions, including the election of directors, required by the General
Corporation Law of the State of Delaware (the "Delaware Statute") to be taken at
a stockholders' annual meeting are taken by written consent in lieu of meeting
pursuant to Section 10 of this Article II.
SECTION 2. Special Meetings.
A special meeting of the stockholders for any purpose or purposes may be called
by the Board, the Chairman, the President or the record holders of at least a
majority of the issued and outstanding shares of Common Stock of the
Corporation, to be held at such place, date and hour as shall be designated in
the notice or waiver of notice thereof.
SECTION 3. Notice of Meetings.
Except as otherwise required by statute, the Certificate of Incorporation of the
Corporation (the "Certificate") or these By-laws, notice of each annual or
special meeting of the stockholders shall be given to each stockholder of record
entitled to vote at such meeting not less than 10 nor more than 60 days before
the day on which the meeting is to be held, by delivering written notice thereof
to him personally, or by mailing a copy of such notice, postage prepaid,
directly to him at his address as it appears in the records of the Corporation,
or by transmitting such notice thereof to him at such address by telegraph,
cable or other telephonic transmission. Every such notice shall state the place,
the date and hour of the meeting, and, in case of a special meeting, the purpose
or purposes for which the meeting is called. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy, or who shall, in person or by
attorney thereunto authorized, waive such notice in writing, either before or
after such meeting. Except as otherwise provided in these By-laws, neither the
business to be transacted at, nor the purpose of, any meeting of the
stockholders need be specified in any such notice or waiver of notice. Notice of
any adjourned meeting of stockholders shall not be required to be given, except
when expressly required by law.
<PAGE>
SECTION 4. Quorum.
At each meeting of the stockholders, except where otherwise provided by the
Certificate or these By-laws, the holders of a majority of the issued and
outstanding shares of Common Stock of the Corporation entitled to vote at such
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business. In the absence of a quorum, a majority in
interest of the stockholders present in person or represented by proxy and
entitled to vote, or, in the absence of all the stockholders entitled to vote,
any officer entitled to preside at, or act as secretary of, such meeting, shall
have the power to adjourn the meeting from time to time, until stockholders
holding the requisite amount of stock to constitute a quorum shall be present or
represented. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 5. Organization.
Unless otherwise determined by the Board, at each meeting of the stockholders,
one of the following shall act as chairman of the meeting and preside thereat,
in the following order of precedence:
the Chairman;
the President;
any director, officer or stockholder of the Corporation designated by the Board
to act as chairman of such meeting and to preside thereat if the Chairman or the
President shall be absent from such meeting; or
a stockholder of record who shall be chosen chairman of such meeting by a
majority in voting interest of the stockholders present in person or by proxy
and entitled to vote thereat.
The Secretary or, if he shall be presiding over such meeting in accordance with
the provisions of this Section 5 or if he shall be absent from such meeting, the
person (who shall be an Assistant Secretary, if an Assistant Secretary has been
appointed
<PAGE>
and is present) whom the chairman of such meeting shall appoint, shall act as
secretary of such meeting and keep the minutes thereof.
SECTION 6. Order of Business.
The order of business at each meeting of the stockholders shall be determined by
the chairman of such meeting, but such order of business may be changed by a
majority in voting interest of those present in person or by proxy at such
meeting and entitled to vote thereat.
SECTION 7. Voting.
Except as otherwise provided by law, the Certificate or these By-laws, at each
meeting of the stockholders, every stockholder of the Corporation shall be
entitled to one vote in person or by proxy for each share of Common Stock of the
Corporation held by him and registered in his name on the books of the
Corporation on the date fixed pursuant to Section 7 of Article VI as the record
date for the determination of stockholders entitled to vote at such meeting.
Persons holding stock in a fiduciary capacity shall be entitled to vote the
shares so held. A person whose stock is pledged shall be entitled to vote,
unless, in the transfer by the pledgor on the books of the Corporation, he has
expressly empowered the pledgee to vote thereon, in which case only the pledgee
or his proxy may represent such stock and vote thereon. If shares or other
securities having voting power stand in the record of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary shall be
given written notice to the contrary and furnished with a copy of the instrument
or order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:
if only one votes, his act binds all;
if more than one votes, the act of the majority so voting binds all; and
<PAGE>
if more than one votes, but the vote is evenly split on any particular matter,
such shares shall be voted in the manner provided by law.
If the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even-split for the purposes of this Section 7 shall be
a majority or even-split in interest. The Corporation shall not vote directly or
indirectly any share of its own capital stock. Any vote of stock may be given by
the stockholder entitled thereto in person or by his proxy appointed by an
instrument in writing, subscribed by such stockholder or by his attorney
thereunto authorized, delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted after three years from its date, unless
said proxy provides for a longer period. At all meetings of the stockholders,
all matters (except where other provision is made by law, the Certificate or
these By-laws) shall be decided by the vote of a majority in interest of the
stockholders present in person or by proxy at such meeting and entitled to vote
thereon, a quorum being present. Unless demanded by a stockholder present in
person or by proxy at any meeting and entitled to vote thereon, the vote on any
question need not be by ballot. Upon a demand by any such stockholder for a vote
by ballot upon any question, such vote by ballot shall be taken. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted.
SECTION 8. Inspection.
The chairman of the meeting may at any time appoint one or more inspectors to
serve at any meeting of the stockholders. Any inspector may be removed, and a
new inspector or inspectors appointed, by the Board at any time. Such inspectors
shall decide upon the qualifications of voters, accept and count votes, declare
the results of such vote, and subscribe and deliver to the secretary of the
meeting a certificate stating the number of shares of stock issued and
outstanding and entitled to vote thereon and the number of shares voted for and
against the question, respectively. The inspectors need not be stockholders of
the Corporation, and any director or officer of the Corporation may be an
inspector on any question other than a vote for or against his election to any
position with the Corporation
<PAGE>
or on any other matter in which he may be directly interested. Before acting as
herein provided, each inspector shall subscribe an oath faithfully to execute
the duties of an inspector with strict impartiality and according to the best of
his ability.
SECTION 9. List of Stockholders.
It shall be the duty of the Secretary or other officer of the Corporation who
shall have charge of its stock ledger to prepare and make, at least 10 days
before every meeting of the stockholders, a complete list of the stockholders
entitled to vote thereat, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to any such meeting, during ordinary business hours, for
a period of at least 10 days prior to such meeting, either at a place within the
city where such meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting is
to be held. Such list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 10. Stockholders' Consent in Lieu of Meeting.
Any action required by the Delaware Statute to be taken at any annual or special
meeting of the stockholders of the Corporation, or any action which may be taken
at any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, by a consent in writing, as
permitted by the Delaware Statute.
Board of Directors
SECTION 1. General Powers.
The business, property and affairs of the Corporation shall be managed by or
under the direction of the Board, which may exercise all such powers of the
Corporation and do all such
<PAGE>
lawful acts and things as are not by law or by the Certificate directed or
required to be exercised or done by the stockholders.
SECTION 2. Number and Term of Office.
The number of directors shall be fixed from time to time by the Board. Directors
need not be stockholders. Each director shall hold office until his successor is
elected and qualified, or until his earlier death or resignation or removal in
the manner hereinafter provided.
SECTION 3. Election of Directors.
At each meeting of the stockholders for the election of directors at which a
quorum is present, the persons receiving the greatest number of votes, up to the
number of directors to be elected, of the stockholders present in person or by
proxy and entitled to vote thereon shall be the directors; provided, however,
that for purposes of such vote no stockholder shall be allowed to cumulate his
votes. Unless an election by ballot shall be demanded as provided in Section 7
of Article II, election of directors may be conducted in any manner approved at
such meeting.
SECTION 4. Resignation, Removal and Vacancies.
Any director may resign at any time by giving written notice to the Board, the
Chairman, the President or the Secretary. Such resignation shall take effect at
the time specified therein or, if the time be not specified, upon receipt
thereof; unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Any director or the entire Board may be removed, with or without cause, at any
time by vote of the holders of a majority of the shares then entitled to vote at
an election of directors or by written consent of the stockholders pursuant to
Section 10 of Article II.
Vacancies occurring on the Board for any reason may be filled by vote of the
stockholders or by the stockholders' written consent pursuant to Section 10 of
Article II, or by vote of the Board or by the directors' written consent
pursuant to Section 6 of this
<PAGE>
Article III. If the number of directors then in office is less than a quorum,
such vacancies may be filled by a vote of a majority of the directors then in
office.
SECTION 5. Meetings.
Annual Meetings. As soon as practicable after each annual election of directors,
the Board shall meet for the purpose of organization and the transaction of
other business, unless it shall have transacted all such business by written
consent pursuant to Section 6 of this Article III.
Other Meetings. Other meetings of the Board shall be held at such times and
places as the Board, the Chairman, the President or any director shall from time
to time determine.
Notice of Meetings. Notice shall be given to each director of each meeting,
including the time, place and purpose of such meeting. Notice of each such
meeting shall be mailed to each director, addressed to him at his residence or
usual place of business, at least two days before the date on which such meeting
is to be held, or shall be sent to him at such place by telegraph, cable,
wireless or other form of recorded communication, or be delivered personally or
by telephone not later than the day before the day on which such meeting is to
be held, but notice need not be given to any director who shall attend such
meeting. A written waiver of notice, signed by the person entitled thereto,
whether before or after the time of the meeting stated therein, shall be deemed
equivalent to notice.
Place of Meetings. The Board may hold its meetings at such place or places
within or outside the State of Delaware as the Board may from time to time
determine, or as shall be designated in the respective notices or waivers of
notice thereof.
Quorum and Manner of Acting. A majority of the total number of directors then in
office shall be present in person at any meeting of the Board in order to
constitute a quorum for the transaction of business at such meeting, and the
vote of a majority of those directors present at any such meeting at which a
quorum is present shall be necessary for the passage of any resolution or act of
the Board, except as otherwise expressly
<PAGE>
required by law or these By-laws. In the absence of a quorum for any such
meeting, a majority of the directors present thereat may adjourn such meeting
from time to time until a quorum shall be present.
Organization. At each meeting of the Board, one of the following shall act as
chairman of the meeting and preside thereat, in the following order of
precedence:
the Chairman;
the President (if a director); or
any director designated by a majority of the directors present.
The Secretary or, in the case of his absence, an Assistant Secretary, if an
Assistant Secretary has been appointed and is present, or any person whom the
chairman of the meeting shall appoint shall act as secretary of such meeting and
keep the minutes thereof.
SECTION 6. Directors' Consent in Lieu of Meeting.
Any action required or permitted to be taken at any meeting of the Board may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by all the
directors then in office and such consent is filed with the minutes of the
proceedings of the Board.
SECTION 7. Action by Means of Conference Telephone or Similar Communications
Equipment.
Any one or more members of the Board may participate in a meeting of the Board
by means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other, and participation
in a meeting by such means shall constitute presence in person at such meeting.
SECTION 8. Committees.
<PAGE>
The Board may, by resolution or resolutions passed by a majority of the whole
Board, designate one or more committees, each such committee to consist of one
or more directors of the Corporation, which to the extent provided in said
resolution or resolutions shall have and may exercise the powers of the Board in
the management of the business and affairs of the Corporation and may authorize
the seal of the Corporation to be affixed to all papers which may require it,
such committee or committees to have such name or names as may be determined
from time to time by resolution adopted by the Board. A majority of all the
members of any such committee may determine its action and fix the time and
place of its meetings, unless the Board shall otherwise provide. The Board shall
have power to change the members of any such committee at any time, to fill
vacancies and to discharge any such committee, either with or without cause, at
any time.
Officers
SECTION 1. Executive Officers.
The principal officers of the Corporation shall be a Chairman, if one is
appointed (and any references to the Chairman shall not apply if a Chairman has
not been appointed), a President, a Secretary, and a Treasurer, and may include
such other officers as the Board may appoint pursuant to Section 3 of this
Article IV. Any two or more offices may be held by the same person.
SECTION 2. Authority and Duties.
All officers, as between themselves and the Corporation, shall have such
authority and perform such duties in the management of the Corporation as may be
provided in these By-laws or, to the extent so provided, by the Board.
SECTION 3. Other Officers.
The Corporation may have such other officers, agents and employees as the Board
may deem necessary, including one or more Assistant Secretaries, one or more
Assistant Treasurers and one or more Vice Presidents, each of whom shall hold
office for such
<PAGE>
period, have such authority, and perform such duties as the Board, the Chairman,
or the President may from time to time determine. The Board may delegate to any
principal officer the power to appoint and define the authority and duties of,
or remove, any such officers, agents, or employees.
SECTION 4. Term of Office, Resignation and Removal.
All officers shall be elected or appointed by the Board and shall hold office
for such term as may be prescribed by the Board. Each officer shall hold office
until his successor has been elected or appointed and qualified or until his
earlier death or resignation or removal in the manner hereinafter provided. The
Board may require any officer to give security for the faithful performance of
his duties.
Any officer may resign at any time by giving written notice to the Board, the
Chairman, the President or the Secretary. Such resignation shall take effect at
the time specified therein or, if the time be not specified, at the time it is
accepted by action of the Board. Except as aforesaid, the acceptance of such
resignation shall not be necessary to make it effective.
All officers and agents elected or appointed by the Board shall be subject to
removal at any time by the Board or by the stockholders of the Corporation with
or without cause.
SECTION 5. Vacancies.
If the office of Chairman, President, Secretary or Treasurer becomes vacant for
any reason, the Board shall fill such vacancy, and if any other office becomes
vacant, the Board may fill such vacancy. Any officer so appointed or elected by
the Board shall serve only until such time as the unexpired term of his
predecessor shall have expired, unless reelected or reappointed by the Board.
SECTION 6. The Chairman.
The Chairman shall give counsel and advice to the Board and the officers of the
Corporation on all subjects concerning the welfare of the Corporation and the
conduct of its business and
<PAGE>
shall perform such other duties as the Board may from time to time determine.
Unless otherwise determined by the Board, he shall preside at meetings of the
Board and of the Stockholders at which he is present.
SECTION 7. The President.
The President shall be the chief executive officer of the Corporation. The
President shall have general and active management and control of the business
and affairs of the Corporation subject to the control of the Board and shall see
that all orders and resolutions of the Board are carried into effect. The
President shall from time to time make such reports of the affairs of the
Corporation as the Board of Directors may require and shall perform such other
duties as the Board may from time to time determine.
SECTION 8. The Secretary.
The Secretary shall, to the extent practicable, attend all meetings of the Board
and all meetings of the stockholders and shall record all votes and the minutes
of all proceedings in a book to be kept for that purpose. He may give, or cause
to be given, notice of all meetings of the stockholders and of the Board, and
shall perform such other duties as may be prescribed by the Board, the Chairman
or the President, under whose supervision he shall act. He shall keep in safe
custody the seal of the Corporation and affix the same to any duly authorized
instrument requiring it and, when so affixed, it shall be attested by his
signature or by the signature of the Treasurer or, if appointed, an Assistant
Secretary or an Assistant Treasurer. He shall keep in safe custody the
certificate books and stockholder records and such other books and records as
the Board may direct, and shall perform all other duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the Board, the Chairman or the President.
SECTION 9. The Treasurer.
The Treasurer shall have the care and custody of the corporate funds and other
valuable effects, including securities, shall
<PAGE>
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such depositories as may be
designated by the Board. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, shall render to the Chairman, President and directors, at the
regular meetings of the Board, or whenever they may require it, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation and shall perform all other duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board, the Chairman or the President.
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Execution of Documents.
The Board shall designate, by either specific or general resolution, the
officers, employees and agents of the Corporation who shall have the power to
execute and deliver deeds, contracts, mortgages, bonds, debentures, checks,
drafts and other orders for the payment of money and other documents for and in
the name of the Corporation, and may authorize such officers, employees and
agents to delegate such power (including authority to redelegate) by written
instrument to other officers, employees or agents of the Corporation; unless so
designated or expressly authorized by these By-laws, no officer, employee or
agent shall have any power or authority to bind the Corporation by any contract
or engagement, to pledge its credit or to render it liable pecuniarily for any
purpose or amount.
SECTION 2. Deposits.
All funds of the Corporation not otherwise employed shall be deposited from time
to time to the credit of the Corporation or otherwise as the Board or Treasurer,
or any other officer of the Corporation to whom power in this respect shall have
been given by the Board, shall select.
<PAGE>
SECTION 3. Proxies with Respect to Stock or Other Securities of Other
Corporations.
The Board shall designate the officers of the Corporation who shall have
authority from time to time to appoint an agent or agents of the Corporation to
exercise in the name and on behalf of the Corporation the powers and rights
which the Corporation may have as the holder of stock or other securities in any
other corporation, and to vote or consent with respect to such stock or
securities. Such designated officers may instruct the person or persons so
appointed as to the manner of exercising such powers and rights, and such
designated officers may execute or cause to be executed in the name and on
behalf of the Corporation and under its corporate seal or otherwise, such
written proxies, powers of attorney or other instruments as they may deem
necessary or proper in order that the Corporation may exercise its powers and
rights.
Shares and Their Transfer; Fixing Record Date
SECTION 1. Certificates for Shares.
Every owner of stock of the Corporation shall be entitled to have a certificate
certifying the number and class of shares owned by him in the Corporation, which
shall be in such form as shall be prescribed by the Board. Certificates shall be
numbered and issued in consecutive order and shall be signed by, or in the name
of, the Corporation by the Chairman, the President or any Vice President, and by
the Treasurer (or an Assistant Treasurer, if appointed) or the Secretary (or an
Assistant Secretary, if appointed). In case any officer or officers who shall
have signed any such certificate or certificates shall cease to be such officer
or officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates shall have been delivered by
the Corporation, such certificate or certificates may nevertheless be adopted by
the Corporation and be issued and delivered as though the person or persons who
signed such certificate had not ceased to be such officer or officers of the
Corporation.
<PAGE>
SECTION 2. Record.
A record in one or more counterparts shall be kept of the name of the person,
firm or corporation owning the shares represented by each certificate for stock
of the Corporation issued, the number of shares represented by each such
certificate, the date thereof and, in the case of cancellation, the date of
cancellation. Except as otherwise expressly required by law, the person in whose
name shares of stock stand on the stock record of the Corporation shall be
deemed the owner thereof for all purposes regarding the Corporation.
SECTION 3. Transfer and Registration of Stock.
The transfer of stock and certificates which represent the stock of the
Corporation shall be governed by Article 8 of Subtitle 1 of Title 6 of the
Delaware Code (the Uniform Commercial Code), as amended from time to time.
Registration of transfers of shares of the Corporation shall be made only on the
books of the Corporation upon request of the registered holder thereof, or of
his attorney thereunto authorized by power of attorney duly executed and filed
with the Secretary of the Corporation, and upon the surrender of the certificate
or certificates for such shares properly endorsed or accompanied by a stock
power duly executed.
SECTION 4. Addresses of Stockholders.
Each stockholder shall designate to the Secretary an address at which notices of
meetings and all other corporate notices may be served or mailed to him, and, if
any stockholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to him at his post-office address, if any, as
the same appears on the share record books of the Corporation or at his last
known post-office address.
SECTION 5. Lost, Destroyed and Mutilated Certificates.
The holder of any shares of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of the certificate therefor,
and the Board may, in its discretion,
<PAGE>
cause to be issued to him a new certificate or certificates for such shares,
upon the surrender of the mutilated certificates or, in the case of loss or
destruction of the certificate, upon satisfactory proof of such loss or
destruction, and the Board may, in its discretion, require the owner of the lost
or destroyed certificate or his legal representative to give the Corporation a
bond in such sum and with such surety or sureties as it may direct to indemnify
the Corporation against any claim that may be made against it on account of the
alleged loss or destruction of any such certificate.
SECTION 6. Regulations.
The Board may make such rules and regulations as it may deem expedient, not
inconsistent with these By-laws, concerning the issue, transfer and registration
of certificates for stock of the Corporation.
SECTION 7. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, the
Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board, and which
record date shall be not more than 60 nor less than 10 days before the date of
such meeting. If no record date is fixed by the Board, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record
<PAGE>
date is adopted by the Board, and which date shall be not more than 10 days
after the date upon which the resolution fixing the record date is adopted by
the Board. If no record date has been fixed by the Board, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board is required by the Delaware
Statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office in this State, its principal place of business
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board
and prior action by the Board is required by the Delaware Statute, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on which
the Board adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than 60 days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose shall
be at the close of business on the day on which the Board adopts the resolution
relating thereto.
Seal
The Board may provide a corporate seal, which shall be in the form of a circle
and shall bear the full name of the Corporation, the year of incorporation of
the Corporation and the words and figures "Corporate Seal - Delaware."
<PAGE>
Fiscal Year
The fiscal year of the Corporation shall be the calendar year unless otherwise
determined by the Board.
Indemnification and Insurance
SECTION 1. Indemnification.
As provided in the Charter, to the fullest extent permitted by the Delaware
Statute as the same exists or may hereafter be amended, a director of this
Corporation shall not be liable to the Corporation or its stockholders for
breach of fiduciary duty as a director.
Without limitation of any right conferred by paragraph (a) of this Section 1,
each person who was or is made a party or is threatened to be made a party to or
is otherwise involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director, officer or employee of the Corporation or is or was serving at the
request of the Corporation as a director, officer or employee of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity while serving as a director, officer or employee or in any
other capacity while serving as a director, officer or employee, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware Statute, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss (including
attorneys' fees, judgments, fines, excise taxes or amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in
<PAGE>
connection therewith and such indemnification shall continue as to an indemnitee
who has ceased to be a director, officer or employee and shall inure to the
benefit of the indemnitee's heirs, testators, intestates, executors and
administrators; provided, however, that such person acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and with respect to a criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided further, however,
that no indemnification shall be made in the case of an action, suit or
proceeding by or in the right of the Corporation in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
director, officer, employee or agent is liable to the Corporation, unless a
court having jurisdiction shall determine that, despite such adjudication, such
person is fairly and reasonably entitled to indemnification; provided further,
however, that, except as provided in Section 1(c) of this Article IX with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
initiated by such indemnitee was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this Article IX shall be
a contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that,
if the Delaware Statute requires, an advancement of expenses incurred by an
indemnitee in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such indemnitee, including,
without limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section or otherwise.
If a claim under Section (b) of this Article IX is not paid in full by the
Corporation with 60 days after a written claim has
<PAGE>
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be 20 days,
the indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of any undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in the Delaware Statute. Neither the failure of the
Corporation (including the Board, independent legal counsel, or the
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware Statute, nor an actual determination by the Corporation (including
the Board, independent legal counsel, or the stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Section or otherwise shall be on the
Corporation.
The rights to indemnification and to the advancement of expenses conferred in
this Article IX shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, the Charter, agreement, vote of
stockholders or disinterested directors or otherwise.
<PAGE>
SECTION 2. Insurance.
The Corporation may purchase and maintain insurance, at its expense, to protect
itself and any person who is or was a director, officer, employee or agent of
the Corporation or any person who is or was serving at the request of the
Corporation as a director, officer, employer or agent of another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
Statute.
Amendment
Any by-law (including these By-laws) may be adopted, amended or repealed by the
vote of the holders of a majority of the shares then entitled to vote or by the
stockholders' written consent pursuant to Section 10 of Article II, or by the
vote of the Board or by the directors' written consent pursuant to Section 6 of
Article III.
* * * * *
* * *
*
<PAGE>
================================================================================
New CFP Holdings, Inc.
Incorporated under the laws
of the State of Delaware
---------------------------
BY-LAWS
---------------------------
As adopted on November 26, 1996
================================================================================
<PAGE>
Exhibit A
<PAGE>
Exhibit 3.5
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 07/28/1992
922105267 - 2296545
RESTATED
CERTIFICATE OF INCORPORATION
OF
QF ACQUISITION CORP.
QF Acquisition Corp., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies as follows:
1. The name of the Corporation is QF Acquisition Corp.
2. The original Certificate of Incorporation of the Corporation was filed
with the Delaware Secretary of State on May 4, 1992, and a Certificate of
Amendment of the Certificate of Incorporation was filed with the Delaware
Secretary of State on June 3, 1992.
3. This Restated Certificate of Incorporation restates, integrates and
further amends the provisions of the Certificate of Incorporation of the
Corporation pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware.
4. This Restated Certificate of Incorporation and the amendments to the
Certificate of Incorporation contained herein were declared advisable and
adopted by the unanimous written consent of the Board of Directors of the
Corporation and were approved by written consent of the holders of a majority of
outstanding shares of Common Stock of the Corporation pursuant to Section 228 of
the General Corporation Law of the State of Delaware and have thereby been duly
adopted in accordance with Section 245 of the General Corporation Law of the
State of Delaware.
5. The text of the Certificate of Incorporation of the Corporation, as
heretofore amended, is hereby restated, integrated and further amended to read
in its entirety as follows:
<PAGE>
- 2 -
RESTATED CERTIFICATE OF INCORPORATION
OF
QF ACQUISITION CORP.
FIRST: The name of the Corporation is QF ACQUISITION CORP.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, County of
Kent, zip code 19901, and the name of its registered agent at such address is
The Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which a
corporation may be organized under the General Corporation Law of Delaware.
FOURTH: (a) The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is twenty thousand (20,000)
shares, of which: (a) five thousand (5,000) shares shall be Class A Common Stock
and shall have a par value of $.01 per share (hereafter referred to as "Class A
Common Stock"), (b) five thousand (5,000) shares shall be Class B Common Stock
and shall have a par value of $.01 per share (hereafter referred to as "Class B
Common Stock"), and (c) ten thousand (10,000) shares shall be Preferred Stock
and shall have a par value of $.01 per share (hereafter referred to as
"Preferred Stock"). The Class A Common Stock and the Class B Common Stock are
hereafter referred to collectively as the "Common Stock".
(b) To the fullest extent now or hereafter permitted by the General
Corporation Law of Delaware, the Board of Directors of the Corporation is
expressly authorized, by resolution or resolutions (hereafter referred to as a
"Preferred Stock Resolution"), to divide any or all of the authorized shares of
the Preferred Stock into one or more series, to fix and determine the
designation and the number of shares of any such series, and to fix the voting
powers (full or limited or no voting powers) and the designations, preferences
and relative, participating, optional or other special rights, and
qualifications, or restrictions with respect to the Preferred Stock or any such
series. If a Preferred Stock Resolution divides the
<PAGE>
- 3 -
Preferred Stock into one or more series, all shares of any one series of
Preferred Stock shall be alike in every particular, except with respect to the
accrual of dividends prior to the date of issuance. A Preferred Stock Resolution
may provide that the Preferred Stock issued pursuant to such resolution is
senior to and has preference over the rights of the shares of Common Stock or,
to the extent not limited by a Preferred Stock Resolution with respect to a
particular series of Preferred Stock, over the rights of the shares of any other
series.
(c) The rights and powers of the holders of the Class A Common Stock and
the holders of the Class B Common Stock shall be identical except that the
holders of the Class A Common Stock shall be entitled to one vote for each share
of Class A Common Stock held by them of record at the time for determining the
holders thereof entitled to vote, and the holders of the Class B Common Stock
shall not be entitled to any vote with respect to any share of Class B Common
Stock held by them of record at any time. Except for and subject to those rights
expressly granted to the holders of Preferred Stock or any series thereof by a
Preferred Stock Resolution and except as may be provided by the General
Corporation Law of Delaware: (1) the holders of Preferred Stock having voting
rights and the holders of Class A Common Stock shall vote together as one class
and (2) the holders of Common Stock shall have exclusively all other rights of
stockholders.
(d) Shares of Class A Common Stock shall be convertible into shares of
Class B Common Stock in accordance with the terms and conditions set forth
below:
(1) Any Shares of Class A Common Stock held by any Stockholder
affected by an Event described in this paragraph (d)(1) or by any member
of the Stockholder Group of which such Stockholder is a member shall, as
of the date of the occurrence of such Event, be automatically converted
into Shares of Class B Common Stock. For purposes of this paragraph (d)(1)
each of the following events and conditions shall be deemed to constitute
an "Event":
(A) the filing of a petition in bankruptcy by or against any
Stockholder, if within 60 days of such filing, such petition is not
dismissed, or any assignment by any Stockholder for the benefit of
his creditors;
<PAGE>
- 4 -
(B) the death of any Stockholder;
(C) the Permanent Disability of any Stockholder other than the
Employee Stockholder;
(D) any transfer, award, or confirmation of any Shares to any
Stockholder's spouse pursuant to a decree of divorce, dissolution,
or separate maintenance, or pursuant to a property settlement or
separation agreement;
(E) the entry of any decree of divorce, dissolution or
separate maintenance, on the execution or delivery of any property
settlement, or separation agreement with respect to any Stockholder
who is a spouse of an existing or former Stockholder and who holds
Shares as a Permitted Transferee of such existing or former
Stockholder; and
(F) any other event, other than those described in Section 4
of the Stockholders' Agreement, which, were it not for the
provisions of the Stockholders' Agreement, would cause any Shares of
any Stockholder, or any interest therein, to be sold, assigned,
pledged, encumbered, awarded, confirmed, or otherwise transferred,
for consideration or otherwise, to any Person, whether voluntarily,
involuntarily, or by operation of law under circumstances not
constituting approved means of transfer under the Stockholders'
Agreement.
(2) In the event that any holder of Shares transfers shares of Class
A Common Stock to any holder of shares of Class B Common Stock, then all
Shares so transferred shall, upon such transfer, automatically be
converted to shares of Class B Common Stock.
(e) Shares of Class B Common Stock shall be convertible into shares of
Class A Common Stock in accordance with the terms and conditions set forth
below:
(1) In the event that any holder of Shares transfers shares of Class
B Common Stock to any holder of shares of Class A Common Stock, then all
Shares so transferred shall, upon such transfer, automatically be
converted to shares of Class A Common Stock.
<PAGE>
- 5 -
(2) In the event that any holder of Shares transfers shares of Class
B Common Stock to any person (other than a Stockholder) pursuant to
Section 3(c) of the Stockholders' Agreement, then all Shares so
transferred shall, upon such transfer, automatically be converted to
shares of Class A Common Stock.
(f) The procedures for the conversion of shares of Class A Common Stock
and Class B Common Stock shall be as follows:
(1) As promptly as practicable after the automatic conversion of any
Stockholder's shares of Class A Common Stock into shares of Class B Common
Stock, such Stockholder shall surrender the outstanding certificate or
certificates representing the shares of Class A Common Stock that have
been converted to shares of Class B Common Stock, in whole or in part, to
the Corporation at the principal office of the Corporation (or such other
office or agency of the Corporation as the Corporation may designate in a
notice to its Stockholders), and such Stockholder shall thereupon be
entitled to receive in exchange therefor (A) a certificate or certificates
representing the number of shares of Class B Common Stock into which the
shares of Class A Common Stock theretofore represented by the certificate
or certificates so surrendered shall have been converted and (B) to the
extent, if at all, that the certificate or certificates surrendered shall
represent shares of Class A Common Stock that have not been converted into
shares of Class B Common Stock, then a certificate or certificates
representing the number of such shares of Class A Common Stock. Until
surrendered, each outstanding certificate of Class A Common Stock which,
prior to the automatic conversion, represented shares of Class A Common
Stock shall evidence ownership of (A) the number of shares of Class B
Common Stock into which the shares of Class A Common Stock (which, prior
to the date of the automatic conversion were represented thereby) have
been so converted and (B) the number of shares of Class A Common Stock
that were not automatically converted into shares of Class B Common Stock.
So long as any of the Shares of Class A Common Stock are outstanding, the
Corporation shall reserve and keep available out of its authorized but
unissued shares of Class B Common Stock, solely for issuance upon the
conversion of shares of Class A
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Common Stock, sufficient shares of Class B Common Stock to satisfy the
full conversion requirements of the Class A Common Stock.
(2) As promptly as practicable after the automatic conversion of any
Stockholder's shares of Class B Common Stock into shares of Class A Common
Stock, such Stockholder shall surrender the outstanding certificate or
certificates representing the shares of Class B Common Stock that have
been converted to shares of Class A Common Stock, in whole or in part, to
the Corporation at the principal office of the Corporation (or such other
office or agency of the Corporation as the Corporation may designate in a
notice to its Stockholders), and such Stockholder shall thereupon be
entitled to receive in exchange therefor (A) a certificate or certificates
representing the number of shares of Class A Common Stock into which the
shares of Class B Common Stock theretofore represented by the certificate
or certificates so surrendered shall have been converted and (B) to the
extent, if at all, that the certificate or certificates surrendered shall
represent shares of Class B Common Stock that have not been converted into
shares of Class A Common Stock, then a certificate or certificates
representing that number of such shares of Class B Common Stock. Until
surrendered, each outstanding certificate of Class B Common Stock which,
prior to the automatic conversion, represented shares of Class B Common
Stock shall evidence ownership of (A) the number of shares of Class A
Common Stock into which the shares of Class B Common Stock (which, prior
to the date of the automatic conversion were represented thereby) have
been so converted and (B) the number of shares of Class B Common Stock
that were not automatically converted into shares of Class A Common Stock.
So long as any of the Shares of Class B Common Stock are outstanding, the
Corporation shall reserve and keep available out of its authorized but
unissued shares of Class A Common Stock, solely for issuance upon the
conversion of shares of Class B Common Stock, sufficient shares of Class A
Common Stock to satisfy the full conversion requirements of the Class B
Common Stock.
(g) As used in this Article FOURTH, the following terms shall have the
following meanings:
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(1) "Employee Stockholder" shall have the meaning ascribed thereto
in the Stockholders' Agreement.
(2) "Permanent Disability" or "Permanently Disabled" shall have the
meaning ascribed thereto in the Stockholders' Agreement.
(3) "Permitted Transferee" shall have the meaning ascribed thereto
in the Stockholders' Agreement.
(4) "Person" shall mean a natural person, corporation, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business
trust or other organization, whether or not a legal entity, and a
government or agency or political subdivision thereof.
(5) "Shares" shall mean the Common Stock and Preferred Stock of the
Corporation.
(6) "Stockholder" shall mean as of any time, any person who owns
Shares at such time.
(7) "Stockholder Group" shall mean, with respect to any Stockholder,
such Stockholder, each of his Permitted Transferees and each of their
respective successive Permitted Transferees.
(8) "Stockholders' Agreement" shall mean the Stockholders'
Agreement, dated as of July 22, 1992, among the Corporation and each of
the Stockholders on such date, as amended from time to time.
(9) "transfer" shall mean any sale, assignment, transfer, pledge,
hypothecation, gift, encumbrance or other disposition of Shares.
FIFTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and its directors and stockholders, it is
further provided that:
(a) The election of the directors of the Corporation need not be by
written ballot unless the By-laws of the Corporation so require.
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(b) The approval of stockholders holding at least a majority of all
outstanding shares of Class A Common Stock and any shares of Preferred Stock
having voting rights shall be required to authorize the following actions:
(1) any change in the authorized capital stock of the Corporation
(including without limitation any change in the number of authorized
shares of any class of capital stock, the par value of the shares of any
class of capital stock, the powers, designations, preferences or special
rights of any class of capital stock or the voting power of any class of
capital stock) from that in effect on the date hereof, except to the
extent that such change is made pursuant to the authority granted to the
Board of Directors in Section (b) of this Article FOURTH;
(2) the purchase of Shares by the Corporation pursuant to any of its
rights under the Stockholders' Agreement;
(3) any sale or issuance of shares, or grant of options, warrants,
subscriptions or other rights with respect to, or any repurchase, resale
or reissuance (including the transfer, resale or reissuance of treasury
shares) of, any capital stock of the Corporation or any securities
convertible or exchangeable into capital stock of the Corporation, except
for (A) any sale or issuance of capital stock expressly required under the
terms of any such options, warrants, subscriptions or other rights or any
such convertible or exchangeable securities outstanding on the date
hereof, (B) the issuance of any shares pursuant to any conversion of
Shares from shares of Class A Common Stock to shares of Class B Common
Stock or from shares of Class B Common Stock to shares of Class A Common
Stock pursuant to the provisions hereof and of the Stockholders' Agreement
or (C) the issuance of any shares of Preferred Stock pursuant to the
provisions of the Capital Contribution Agreement dated as of the date
hereof, among the Corporation and each of the Stockholders of the
Corporation (the "Capital Contribution Agreement");
(4) any public offering of securities of the Corporation;
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(5) any amendment of the Certificate of Incorporation of the
Corporation (other than an amendment effected by a Certificate of
Designations filed in connection with a Preferred Stock Resolution
authorized by the Board of Directors pursuant to its authority granted
herein);
(6) any merger or consolidation of the Corporation with or into any
other corporation;
(7) any sale or other transfer of all or any part of the
Corporation's interest in Quality Foods, L.P., a Delaware partnership (the
"Partnership"), or the successors and assigns of the Partnership (other
than pursuant to the pledge of such interest to the lenders providing
financing for the Acquisition, as defined in the Amended and Restated
Limited Partnership Agreement of the Partnership dated as of the date
hereof);
(8) the dissolution of the Corporation;
(9) the adoption of a plan of liquidation of the Corporation;
(10) any action by the Corporation to commence any case, proceeding
or other action (A) under any existing or future law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking
to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or making a
general assignment for the benefit of its creditors;
(11) except as otherwise contemplated by the Stockholders'
Agreement, any recapitalization, restructuring or reorganization of the
Corporation, including any change in its capital stock effected by a
combination reclassification, exchange, split or reverse split, conversion
or other change (whether through merger, consolidation, amendment of
certificate of incorporation, retirement or redemption of stock, dividend,
recapitalization or otherwise);
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(12) any declaration of payment of any dividend or other
distribution with respect to the Shares, in securities of the Corporation,
cash or other property, or any distribution to Stockholders, other than
cash dividends which may lawfully be paid out of surplus or earnings of
the Corporation, which dividends are approved by the Board of Directors of
the Corporation and paid pro rata to all holders of the shares of each
class of capital stock on which dividends are declared in proportion to
the number of shares of such class held; and
(13) the sale, transfer, lease, exchange or other disposition of all
or substantially all of the Corporation's assets (based on the fair market
value of such assets at the time of the proposed sale), other than sales
in the ordinary course of business, or any other material change in the
nature of the business conducted by the Corporation.
(c) The approval of stockholders holding at least 70% of all outstanding
shares of Class A Common Stock and any shares of Preferred Stock having voting
rights shall be required to authorize the following actions:
(1) any (A) change in the authorized capital stock of the
Corporation (including without limitation any change in the number of
authorized shares of any class of capital stock, the par value of the
shares of any class of capital stock, the powers, designations,
preferences or special rights of any class of capital stock or the voting
power of any class of capital stock) from that in effect on the date
hereof, except to the extent that such change is made pursuant to the
authority granted to the Board of Directors in Section (b) of this Article
FOURTH, or (B) sale or issuance of shares, including any sale or issuance
of shares incident to a merger or consolidation with another entity, or
grant of options, warrants, subscriptions or other rights with respect to,
or any repurchase, resale or reissuance (including the transfer, resale or
reissuance of treasury shares) of, any capital stock of the Corporation or
any securities convertible or exchangeable into capital stock of the
Corporation, except in the case of each of clause (A) and clause (B)
hereof, for:
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(i) any change, sale or issuance or repurchase of capital
stock expressly required under the terms of any options, warrants,
subscriptions or other rights or any convertible or exchangeable
securities outstanding on the date hereof;
(ii) the issuance of any shares pursuant to any conversion of
shares from shares of Class A Common Stock to shares of Class B
Common Stock or from shares of Class B Common Stock to shares of
Class A Common Stock pursuant to the provisions hereof and of the
Stockholders' Agreement;
(iii) the issuance of any shares of Preferred Stock pursuant
to the provisions of the Capital Contribution Agreement;
(iv) any such sale or issuance or repurchase which is offered
or made on a pro rata basis to all stockholders;
(v) any such repurchase by the Corporation pursuant to any of
its rights or obligations under the Stockholders' Agreement; or
(vi) any such change, sale or issuance or repurchase which is
in connection with a transaction, including without limitation, a
recapitalization, restructuring or reorganization of the Corporation
as described in Section (b)(11) of this Article FIFTH, a public
offering of securities of the Corporation, or a sale, transfer,
lease, exchange or other disposition of all or substantially all of
the Corporation's assets, in which transaction all stockholders will
participate or are offered the opportunity to participate on the
same terms and conditions, in proportion to their interests in the
Corporation;
(2) the approval by the Corporation as a general partner of the
Partnership of any amendment to the Quality Foods, L.P. Amended and
Restated Limited Partnership Agreement, dated as of the date hereof, which
would adversely affect the rights and interests of the Corporation in the
income, losses, capital or distributions of the Partnership, unless such
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amendment is necessary and appropriate to comply with applicable law;
(3) the engaging in any business other than the business of acting
as the General Partner of the Partnership and carrying out the business
and purposes of the Partnership;
(4) the issuance of any shares of Preferred Stock with voting
powers; and
(5) any amendment to Section (c) of Article FIFTH of this Restated
Certification of Incorporation.
(d) In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized:
(1) to adopt, amend or repeal the By-laws of the Corporation; and
(2) to exercise all of the powers of the Corporation except those
which by law or this Certificate of Incorporation expressly require the
consent of the stockholders.
(e) Any vote or votes authorizing the liquidation of the Corporation or
proceedings for its dissolution may provide, subject to the rights of creditors
and the holders of Preferred Stock, if any, for the distribution of the
Corporation's assets pro rata among the holders of Common Stock of the
Corporation (hereafter referred to as the "Common Stockholders"), wholly or in
part, in cash or in kind, whether such assets be in cash or in other property,
and any such vote or votes may authorize the Board of Directors of the
Corporation to determine the valuation of the different assets of the
Corporation for the purpose of such liquidation and may divide or authorize the
Board of Directors to divide such assets or any part thereof among the Common
Stockholders, in such manner that every Common Stockholder will receive a
proportionate amount in value (determined as aforesaid) of cash and/or property
of the Corporation upon such liquidation or dissolution even though each Common
Stockholder may not receive a strictly proportionate part of each such asset.
SIXTH: No director of the Corporation shall be held personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty in his capacity as a director, provided that liability of a
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director shall not be eliminated or limited (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (c) for any transaction from which the director derived an
improper personal benefit, or (d) under Section 174 of the General Corporation
Law of Delaware. Any repeal or amendment of this Article, insofar as it would in
any way enlarge the liability of any director of the Corporation, shall be
ineffective with respect to any acts or omissions occurring prior to the date of
such repeal or amendment.
SEVENTH: The Corporation reserves the right at any time and from time to
time to amend, alter or repeal any provision contained in this Certificate of
Incorporation in the manner now or as hereafter prescribed by law, and all
rights, preferences, and privileges conferred upon stockholders and directors by
or pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are subject to the rights reserved in this Article SEVENTH.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by David M. Zebro, its Vice President, and attested by David F. Herrick,
its Secretary, this 22nd day of July, 1992.
QF ACQUISITION CORP.
By: /s/ David M. Zebro
--------------------------------
David M. Zebro, Vice President
ATTEST: /s/ David F. Herrick
----------------------------
David F. Herrick, Secretary
<PAGE>
Exhibit 3.6
BY-LAWS
OF
QF ACQUISITION CORP.
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meetings. The annual meeting of the stockholders
for the election of directors and the transaction of other business as may come
before the meeting shall be held each year on such day and at such hour as shall
be fixed by the Board of Directors.
Section 2. Special Meetings. A special meeting of the stockholders
may be called at any time by the holders of a majority of the outstanding shares
which would be entitled to vote on the action proposed to be taken at such
meeting or by the Board of Directors and shall be held on such day and at such
hour as is fixed in the call of the meeting.
Section 3. Place of Meetings. Meetings of stockholders shall be held
at the principal office of the Corporation or at such other place, within or
without the State of Delaware, as may be fixed by the Board of Directors.
Section 4. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be
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given which shall state the place, date, and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise required or permitted by law, the written notice of any
meeting shall be given, personally or by mail, not less than ten (10) nor more
than sixty (60) days before the date of the meeting, to each stockholder
entitled to vote at the meeting.
Section 5. Quorum. At each meeting of stockholders, the holders of
shares representing a majority of the votes entitled to be cast thereat, present
in person or by proxy, shall constitute a quorum for the transaction of
business.
Section 6. Organization. At each meeting of stockholders, the
Chairman of the Board, or in his absence, the President of the Corporation, or
in his absence a Vice-President, shall preside and the Secretary, or in the
Secretary's absence an Assistant Secretary, shall act as secretary of the
meeting. If none of those designated to preside or act as secretary of the
meeting shall be present, the stockholders present in person or by proxy and
entitled to vote at the meeting shall select someone to preside or to act as
secretary, as may be needed.
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Section 7. List of Stockholders at Meeting. The officer who has
charge of the stock ledger of the Corporation shall prepare and make, at least
10 days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, either at
a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 8. Voting. Except as otherwise provided by law or by the
Certificate of Incorporation, at each meeting of stockholders, each stockholder
shall be entitled to cast one vote for each share of stock entitled to vote
standing in his name on the books of the Corporation on the record date and the
holders of common
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stock and preferred stock, if any, entitled to vote shall vote together as one
class. All matters shall be determined by a majority of the votes cast, except
that directors shall be elected by a plurality of the votes cast. Voting for
directors shall not be by written ballot unless the stockholders at a meeting so
determine.
Section 9. Proxies. Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after 3 years from its
date, unless the proxy provides for a longer period. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power.
Section 10. Action Without a Meeting. Any action required or
permitted to be taken at any annual or special meeting of stockholders may be
taken without a meeting, without prior notice, and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action
<PAGE>
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at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder who
signed the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the earliest
dated consent delivered to the Corporation in the manner provided herein,
written consents signed by a sufficient number of stockholders to take action
are delivered to the Corporation in the manner provided herein. Prompt notice of
the taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
<PAGE>
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ARTICLE II
BOARD OF DIRECTORS
Section 1. General Power. The property, business and affairs of the
Corporation shall be managed under the direction of its Board of Directors.
Section 2. Number. The Board of Directors shall consist of between
three and seven members, the exact number to be fixed from time to time by the
Board of Directors.
Section 3. Election and Term of Directors. Directors shall be
elected at the annual meeting of stockholders. Each director shall hold office
until the next annual meeting of stockholders and until his successor is elected
and qualified, or until his earlier resignation or removal.
Section 4. Regular Meetings. As soon as practicable after each
annual election of directors, the Board of Directors shall meet for the purposes
of organization, the election of officers, and the transaction of other
business. Other regular meetings of the Board shall be held at such places,
dates, and hours as may be fixed from time to time by the Board of Directors.
Notice of regular meetings need not be given.
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Section 5. Special Meetings. A special meeting of the Board of
Directors may be called by the Chairman of the Board, the President or by any
two directors, and shall be held at such time and place as are fixed in the call
of the meeting. Notice of each special meeting shall be mailed to each director,
addressed to the address last given by each director to the Secretary or, if
none has been given, at the director's residence or usual place of business, at
least five days before the day on which the meeting is to be held, or shall be
sent to the director by telecopy, telegraph, cable, wireless, or similar means
so addressed or shall be delivered personally or by telephone, at least
twenty-four (24) hours before the time the meeting is to be held. Each notice
shall state the time and place of the meeting but need not state the purposes
thereof. Notices of any such meeting need not be given to any director who
submits a signed written waiver of notice, whether before or after the meeting,
or who attends the meeting, except when the person attends a meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
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Section 6. Quorum and Manner of Acting. At each meeting of the Board
of Directors the presence of a majority of the total Board of Directors shall be
required to constitute a quorum for the transaction of business, and the vote of
a majority of the directors present at the time of the vote, if a quorum is
present at that time, shall be the act of the Board. Members of the Board of
Directors or any committee designated by the Board may participate in meetings
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation by such means shall constitute presence in person at a meeting.
Section 7. Written Consent. Any action required or permitted to be
taken by the Board of Directors or any committee of the Board may be taken
without a meeting if all members of the Board or committee consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board.
Section 8. Executive and Other Committees of Directors. The Board of
Directors may, by resolution passed by a majority of the whole Board, designate
an Executive Committee and one or more other committees, each consisting of one
or more directors of the Corporation and
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each having such power and authority as the Board of Directors may by resolution
provide (except as limited by the laws of the State of Delaware). The Board of
Directors may authorize any such committee to exercise all or some of the powers
and authority of the Board of Directors in the management of the property,
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that no such committee shall have the power or authority in reference to:
(a) Amending the Certificate of Incorporation,
(b) Adopting an agreement of merger or consolidation under Section
251 or Section 252 of the Delaware General Corporation Law,
(c) Recommending to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and
assets,
(d) Recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution,
(e) Amending the By-laws of the Corporation,
(f) Declaring dividends,
(g) Authorizing the issuance of stock, or
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(h) Adopting a certificate of ownership and merger pursuant to
Section 253 of the Delaware General Corporation Law.
Subject to any requirements of law, each committee shall take action in
accordance with such rules as are provided by resolution of the Board of
Directors or as the committee members shall unanimously agree upon.
Section 9. Resignation. Any director may resign at any time upon
written notice to the Corporation. Such resignation shall take effect at the
time specified therein or, if no time be specified, then on delivery. Unless
otherwise specified therein, the acceptance of such resignation by the Board of
Directors shall not be needed to make it effective.
Section 10. Removal. Any director or the entire Board of Directors
may be removed, at any time, with or without cause, by the affirmative vote of
the holders of record of shares representing a majority of votes entitled to be
cast at an election of directors, and any vacancy in the Board of Directors
caused by any such removal may be filled by the stockholders at said meeting in
which the vacancy is created or, if not so filled, by the Board of Directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the
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Certificate of Incorporation, this section shall apply to the vote of the
holders of the outstanding shares of that class or series and not to the vote of
the outstanding shares as a whole.
Section 11. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
of the stockholders having the right to vote as a single class may be filled by
a majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors by the Certificate
of Incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected. A director elected to fill a newly created directorship or
vacancy shall hold office until the next annual meeting of stockholders and
until such director's successor is elected and qualified.
<PAGE>
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ARTICLE III
OFFICERS
Section 1. Officers Enumerated. The officers of the Corporation
shall be a Chairman of the Board, a Chief Executive Officer, a President, one or
more Vice Presidents, a Secretary, a Treasurer, and such other officers as the
Board of Directors may in its discretion elect. Any two or more offices may be
held by the same person.
Section 2. Election, Removal and Term of Office. All officers shall
be elected by the Board of Directors at its first meeting held after the annual
meeting of stockholders. Unless elected for a lesser term, each officer shall
hold office until the first meeting of the Board of Directors held after the
next annual meeting of the stockholders and until his successor has been elected
and qualified. Any officer may be removed, at any time, with or without cause,
by action of the Board of Directors.
Section 3. The Chairman of the Board. The Chairman of the Board
shall be a member of the Board and shall preside at its meetings and at all
meetings of stockholders. He shall keep in close touch with the
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administration of the affairs of the Corporation and supervise its general
policies. He shall see that the acts of the executive officers conform to the
policies of the Corporation as determined by the Board and shall perform such
other duties as may from time to time be assigned to him by the Board.
Section 4. The Chief Executive Officer. The Chief Executive Officer
shall have general control over and be responsible for the operations of the
Corporation, subject only to the supervision of the Board of Directors. In the
absence or incapacity of any other officer of the Corporation, except the
Chairman of the Board, he shall have the authority and may perform the duties of
that officer. He shall perform such other duties as the Board of Directors may
prescribe.
Section 5. The President. The President shall consult with and
assist the Chief Executive Officer and shall have general supervision over the
property, business and affairs of the Corporation, subject to the supervision of
the Board of Directors. In the absence or incapacity of the Chairman of the
Board or the Chief Executive Officer of the Corporation, he shall have the
authority and may perform the duties of that officer. He shall perform such
other duties as the Board of Directors may prescribe.
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Section 6. The Vice Presidents. Each Vice President, if any, shall,
in the absence or incapacity of the President and in order of seniority as fixed
by the Board, possess the powers and perform the duties of the President, and
each shall possess such other powers and perform such other duties as the Board
of Directors may prescribe.
Section 7. The Secretary. The Secretary shall issue notices of all
meetings of stockholders and of the directors whenever notice is required. He
shall keep the minutes of all meetings of stockholders and of the Board of
Directors in a book to be kept for that purpose. He shall sign such instruments
as require his signature and shall possess such other powers and perform such
other duties as usually pertain to his office or as the Board of Directors may
prescribe.
Section 8. The Treasurer. The Treasurer shall have the care and
custody of all the moneys and securities of the Corporation. He shall keep or
cause to be kept complete and accurate books of account of all moneys received
and paid on account of the Corporation. He shall sign such instruments as
require his signature and shall possess such other powers and perform such other
duties as usually pertain to his office or as the Board of Directors may
prescribe.
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<PAGE>
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Directors by a resolution or resolutions providing for uncertificated shares.
Every holder of stock represented by certificates shall be entitled to have one
or more certificates, in such form as the Board of Directors may from time to
time prescribe, representing in the aggregate the number of shares of stock of
the Corporation owned by such stockholder, which certificates shall be signed
by, or in the name of, the Corporation by the Chairman of the Board or by the
President or any Vice President and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary. Any or all of the signatures on the
certificate may be a facsimile.
Section 2. Transfers. Shares of stock of the Corporation shall be
transferable on the books of the Corporation by the registered holder thereof in
person or by such holder's duly authorized attorney, but, except as hereinafter
provided in the case of loss, destruction, or mutilation of certificates, no
transfer of shares shall be entered until the previously issued certificate
representing those shares shall have been surrendered and cancelled. Except as
otherwise required by law, the Corporation shall be entitled to treat the person
registered as the holder of shares on its books as the owner thereof for all
purposes regardless of any notice or knowledge to the contrary.
<PAGE>
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Section 3. Lost, Destroyed or Mutilated Certificates. The
Corporation may issue a new certificate of stock of the same tenor and the same
number of shares in place of any certificate theretofore issued by it that is
alleged to have been lost, stolen, or destroyed; provided, however, that the
Board of Directors may require the owner of the lost, stolen or destroyed
certificate, or such owner's legal representative, to give the Corporation a
bond of indemnity, in form and with one or more sureties satisfactory to the
Board, sufficient to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss, theft, or destruction of any
such certificate or the issuance of such new certificate.
ARTICLE V
GENERAL
Section 1. Seal. The seal of the Corporation shall be in the form of
a circle and shall bear the name of the Corporation, the year of incorporation
and any other matters deemed appropriate by the Board of Directors.
Section 2. Fiscal Year. The fiscal year of the Corporation shall end
at the close of business on December 31 of each calendar year.
<PAGE>
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ARTICLE VI
INDEMNIFICATION
Section 1. Indemnification. To the fullest extent authorized or
permitted by law, the Corporation shall indemnify any person who was or is a
party, is threatened to be made a party to, or is involved in (as a party or
otherwise) any threatened, pending or completed action, suit or proceeding, or
any appeal taken therefrom, whether civil, criminal, administrative,
investigative or otherwise, including any action by or in the right of the
Corporation, by reason of the fact that such person ("Indemnified Person"), (a)
is or was a director or officer of the Corporation, or (b) is or was a director
or officer of the Corporation and is or was serving any other corporation or any
partnership, joint venture, trust, or other enterprise in any capacity, at the
request of the Corporation, or (c) is or was serving as a director or officer of
any other corporation or is or was serving any partnership, joint venture,
trust, or other enterprise (including service with respect to employee benefit
plans) in a comparable capacity, at the request of the Corporation, against all
judgments, fines, penalties, amounts paid in settlement (provided the
Corporation shall
<PAGE>
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have consented to such settlement, which consent shall not be unreasonably
withheld by it) and reasonable expenses, including attorneys' fees and costs of
investigation, incurred by such Indemnified Person with respect to any such
threatened, pending or completed action or proceeding, and any appeal taken
therefrom, provided only that (x) acts of the Indemnified Person which were
material to the cause of action so adjudicated or otherwise disposed of were not
(i) committed in bad faith or (ii) the result of active and deliberate
dishonesty, and (y) the Indemnified Person did not personally gain in fact a
financial profit or other advantage to which he was not legally entitled.
Section 2. Advancement of Expenses. All expenses reasonably incurred
by an Indemnified Person in connection with a threatened, pending or completed
action or proceeding, or any appeal taken therefrom, with respect to which such
Indemnified Person is or may be entitled to indemnification under this Article
shall be advanced or promptly reimbursed by the Corporation to him in advance of
the final disposition of such action or proceeding, upon receipt of an
undertaking by him or on his behalf to repay the amount of such advances, if
any, as to which he is ultimately found not to be entitled to indemnification
<PAGE>
- 20 -
or, where indemnification is granted, to the extent such advances exceed the
indemnification to which he is entitled. Such Indemnified Person shall, however,
cooperate in good faith with any request by the Corporation that common counsel
be used by parties to or involved in such action, suit or proceeding who are
similarly situated, unless it would be inappropriate to do so because of actual
or potential conflicts between the interests of such parties.
Section 3. Procedure for Indemnification.
(a) Not later than thirty (30) days following final disposition of
an action, suit or proceeding, or any appeal taken therefrom, with respect to
which the Corporation has received a written request by an Indemnified Person
for indemnification pursuant to this Article, if such indemnification has not
been ordered by a court, the Board of Directors shall meet and determine whether
the Indemnified Person met the standard of conduct set forth in Section 1 of
this Article, and, if it finds that he did, or to the extent it so finds, shall
authorize such indemnification.
(b) Such standard shall be found to have been met unless (i) a
judgment or other final adjudication adverse to the Indemnified Person
establishes that (A)
<PAGE>
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acts of the Indemnified Person were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or (B) the Indemnified Person personally gained in fact a financial
profit or other advantage to which he was not legally entitled; or (ii) if the
action or proceeding was disposed of other than by judgment or other final
adjudication, the Board finds in good faith that, if it had been disposed of by
judgment or other final adjudication, such judgment or other final adjudication
would have been adverse to the Indemnified Person and would have established (A)
or (B) of clause (i) above.
(c) If indemnification is denied, in whole or part, because of such
a finding by the Board in the absence of a judgment or other final adjudication,
or because the Board believes the expenses for which indemnification is
requested to be unreasonable, such action by the Board shall in no way affect
the right of the Indemnified Person to make application therefor in any court
having jurisdiction thereof, and in such action or proceeding the issue shall be
whether the Indemnified Person met the standard of conduct set forth in Section
1 of this Article, or whether the expenses were reasonable, as the case may be;
not whether the finding of the Board
<PAGE>
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with respect thereto was correct; and the determination of such issue shall not
be affected by the Board's finding. If the judgment or other final adjudication
in such action or proceeding establishes that the Indemnified Person met the
standard of conduct set forth in Section 1, or that the disallowed expenses were
reasonable, or to the extent that such judgment or final adjudication
establishes the foregoing, the Board shall then find such standard to have been
met, if it has not done so, and shall grant such indemnification, and shall also
grant to the Indemnified Person indemnification of the expenses incurred by him
in connection with the action or proceeding resulting in the judgment or other
final adjudication that such standard of conduct was met, or if pursuant to such
judgment or other final adjudication such person is entitled to less than the
full amount of indemnification previously denied by the Corporation, the portion
of such expenses proportionate to the amount of such indemnification so awarded.
(d) A finding by the Board that the standard of conduct set forth in
Section 1 of this Article has been met shall mean a finding (i) by a majority
vote of a quorum (based upon the total number of directors) consisting of
directors who are not parties to such
<PAGE>
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action, suit or proceeding, or appeal therefrom, or, (ii) if such a quorum is
not obtainable or if a majority vote of a quorum (based upon the total number of
directors) consisting of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
Section 4. Contractual Article. This Article shall be deemed to
constitute a contract between the Corporation and each person who serves as an
Indemnified Person at any time while this Article is in effect. No repeal or
amendment of this Article, insofar as it reduces the extent of the
indemnification of any person who could be an Indemnified Person, shall without
his written consent be effective as to such person with respect to any event,
act or omission occurring or allegedly occurring prior to (a) the date of such
repeal or amendment, if on that date he is not serving in any capacity for which
he could be an Indemnified Person, or (b) the later of the thirtieth (30th) day
following delivery to him of such notice or the end of the term (for whatever
reason) he is serving as a director or officer of the Corporation or, at the
request of the Corporation, of any other corporation, or is serving in any
comparable capacity for any partnership, joint venture, trust, or other
enterprise, on
<PAGE>
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the date of such repeal or amendment, with respect to being an Indemnified
Person in that capacity. This Article shall be binding on any successor to the
Corporation, including any corporation or other entity which acquires all or
substantially all of the Corporation's assets, and shall inure to the benefit of
the heirs, executors, administrators and other legal representatives of any
Indemnified Person.
Section 5. Insurance. The Corporation may, but need not, maintain
insurance insuring the Corporation or Indemnified Persons for liabilities
against which they are entitled to indemnification under this Article or
insuring Indemnified Persons for liabilities against which they are not entitled
to indemnification under this Article.
Section 6. Non-exclusivity. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which any person
covered hereby may be entitled other than pursuant to this Article. The
Corporation is authorized to enter into agreements with any such person or
persons providing them rights to indemnification or advancement of expenses in
addition to the provisions therefor in this Article to the fullest extent
permitted by law.
<PAGE>
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Section 7. Severability. If any provision of this Article, or
portion thereof, or the application of any such provision to any party or
circumstances shall be determined by any court of competent jurisdiction to be
invalid and unenforceable to any extent, the remainder of this Article or the
application of such provision to any person or circumstances other than those to
which it is so determined to be invalid and unenforceable, shall not be affected
thereby, and each provision hereof shall remain in full force and effect to the
fullest extent permitted by law, and any such invalidity in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
ARTICLE VII
AMENDMENTS
The By-laws of the Corporation may be amended or repealed by vote of
the stockholders at any annual meeting or at any special meeting called for the
purpose or, except as otherwise provided in these By-laws or by law, by vote of
a majority of the authorized number of directors at any regular or special
meeting.
<PAGE>
Exhibit 3.7
EXHIBIT A
RESTATED AND AMENDED
ARTICLES OF INCORPORATION
OF
CUSTOM FOOD PRODUCTS, INC.
(formerly known as Center of the Plate Foods, Inc.)
--------------------------
ARTICLE I
The name of this corporation is CUSTOM FOOD PRODUCTS, INC. (the
"Corporation").
ARTICLE II
The existence of the Corporation is perpetual.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or
activity for which a Corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE IV
The total number of shares which the Corporation is authorized to
issue is 1,000, all of which are of one class and of a par value of $.01 each,
and all of which are common shares.
The Board of Directors of the Corporation may issue any or all of
the aforesaid authorized shares of the Corporation from time to time for such
consideration as it shall determine and may determine from time to time the
amount of such consideration, if any, in excess of the par value of such shares,
to be credited to paid-in surplus.
ARTICLE V
The liability of the directors of this Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
<PAGE>
ARTICLE VI
This Corporation may provide by bylaw, agreement or otherwise for
the indemnification of agents (as defined in Section 317 of the California
Corporations Code) in excess of that expressly permitted by Section 317 for
those agents of the Corporation for breach of duty to the Corporation and its
shareholders to the fullest extent permissible under California law.
-2 -
<PAGE>
Exhibit 3.8
================================================================================
CUSTOM FOOD PRODUCTS, INC.
RESTATED AND AMENDED
BY-LAWS
Incorporated under the General Corporation Law
of the State of California
March 31, 1993
================================================================================
<PAGE>
================================================================================
CUSTOM FOOD PRODUCTS, INC.
BY-LAWS
TABLE OF CONTENTS
================================================================================
Page
----
ARTICLE I CORPORATE OFFICES ........................................ 1
1.1. PRINCIPAL OFFICE ......................................... 1
1.2. OTHER OFFICES ............................................ 1
ARTICLE II MEETINGS OF SHAREHOLDERS ................................. 1
2.1. PLACE OF MEETINGS ........................................ 1
2.2. ANNUAL MEETING ........................................... 1
2.3. SPECIAL MEETING .......................................... 1
2.4. NOTICE OF SHAREHOLDERS' MEETINGS ......................... 2
2.5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ............. 2
2.6. QUORUM ................................................... 3
2.7. ADJOURNED MEETING; NOTICE ................................ 3
2.8. VOTING ................................................... 4
2.9. VALIDATION OF MEETINGS; WAIVER OF NOTICE;
CONSENT .............................................. 5
2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT
A MEETING ........................................... 5
2.11. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING;
GIVING CONSENTS ..................................... 6
2.12. PROXIES .................................................. 7
2.13. INSPECTORS OF ELECTION ................................... 7
ARTICLE III DIRECTORS ................................................ 8
3.1. POWERS ................................................... 8
3.2. NUMBER AND QUALIFICATION OF DIRECTORS ................... 8
3.3. ELECTION AND TERM OF OFFICE OF DIRECTORS ................. 9
3.4. RESIGNATION AND VACANCIES ................................ 9
3.5. PLACE OF MEETINGS; MEETINGS BY TELEPHONE ................. 9
3.6. REGULAR MEETINGS ......................................... 10
3.7. SPECIAL MEETINGS; NOTICE ................................. 10
3.8. QUORUM ................................................... 10
3.9. WAIVER OF NOTICE ......................................... 11
3.10. ADJOURNMENT .............................................. 11
3.11. NOTICE OF ADJOURNMENT .................................... 11
3.12. BOARD ACTION BY WRITTEN CONSENT WITHOUT A
MEETING ............................................. 11
3.13. FEES AND COMPENSATION OF DIRECTORS ....................... 11
3.14. APPROVAL OF LOANS TO OFFICERS ............................ 11
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Page
----
ARTICLE IV COMMITTEES ............................................... 12
4.1. COMMITTEES OF DIRECTORS .................................. 12
4.2. MEETINGS AND ACTION OF COMMITTEES ........................ 13
ARTICLE V OFFICERS ................................................. 13
5.1. OFFICERS ................................................. 13
5.2. ELECTION OF OFFICERS ..................................... 13
5.3. SUBORDINATE OFFICERS ..................................... 13
5.4. REMOVAL AND RESIGNATION OF OFFICERS ...................... 13
5.5. VACANCIES IN OFFICES ..................................... 14
5.6. CHAIRMAN OF THE BOARD .................................... 14
5.7. PRESIDENT ................................................ 14
5.8. VICE PRESIDENTS .......................................... 14
5.9. SECRETARY ................................................ 15
5.10. CHIEF FINANCIAL OFFICER .................................. 15
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS ........................ 16
6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS ................ 16
6.2. INDEMNIFICATION OF OTHERS ................................ 16
6.3. PAYMENT OF EXPENSES IN ADVANCE ........................... 16
6.4. INDEMNITY NOT EXCLUSIVE .................................. 17
6.5. INSURANCE INDEMNIFICATION ................................ 17
6.6. CONFLICTS ................................................ 17
ARTICLE VII RECORDS AND REPORTS ...................................... 17
7.1. MAINTENANCE AND INSPECTION OF SHARE REGISTER ............. 17
7.2. MAINTENANCE AND INSPECTION OF BY-LAWS .................... 18
7.3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS ............................................. 18
7.4. INSPECTION BY DIRECTORS .................................. 19
7.5. ANNUAL REPORT TO SHAREHOLDERS; WAIVER .................... 19
7.6. FINANCIAL STATEMENTS ..................................... 19
7.7. REPRESENTATION OF SHARES OF OTHER
CORPORATIONS ........................................ 20
ARTICLE VIII GENERAL MATTERS .......................................... 20
8.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE
AND VOTING .......................................... 20
8.2. CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS ................ 21
8.3. CORPORATE CONTRACTS AND INSTRUMENTS: HOW
EXECUTED ............................................ 21
8.4. CERTIFICATES FOR SHARES .................................. 21
8.5. LOST CERTIFICATES ........................................ 21
8.6. CONSTRUCTION; DEFINITIONS ................................ 22
ARTICLE IX AMENDMENTS ............................................... 22
9.1. AMENDMENT BY SHAREHOLDERS ................................ 22
9.2. AMENDMENT BY DIRECTORS ................................... 22
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<PAGE>
CUSTOM FOOD PRODUCTS, INC.
BY-LAWS
ARTICLE I
CORPORATE OFFICES
1.1. PRINCIPAL OFFICE. The board of directors shall fix the location
of the principal executive office of the corporation at any place within or
outside the State of California. If the principal executive office is located
outside such state and the corporation has one or more business offices in such
state, then the board of directors shall fix and designate a principal business
office in the State of California.
1.2. OTHER OFFICES. The board of directors may at any time establish
branch or subordinate offices at any place or places where the corporation is
qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside the State of California designated by the board of
directors. In the absence of any such designation, shareholders' meetings shall
be held at the principal executive office of the corporation.
2.2. ANNUAL MEETING. The annual meeting of shareholders shall be
held each year on a date and at a time designated by the board of directors.
However, if such day falls on a legal holiday, then the meeting shall be held at
the same time and place on the next succeeding full business day. At the
meeting, directors shall be elected, and any other proper business may be
transacted.
2.3. SPECIAL MEETING. A special meeting of the shareholders may be
called at any time by the board of directors, or by the chairman of the board,
or by the president, or by one or more shareholders holding shares in the
aggregate entitled to cast not less than ten percent (10%) of the votes at that
meeting.
If a special meeting is called by any person or persons other than
the board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the
<PAGE>
president, any vice president or the secretary of the corporation. The officer
receiving the request shall cause notice to be promptly given to the
shareholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5 of these by-laws, that a meeting will be held at the time requested by
the person or persons calling the meeting, so long as that time is not less than
25 nor more than 45 days after the receipt of the request. If the notice is not
given within 10 days after receipt of the request, then the person or persons
requesting the meeting may give the notice. Nothing contained in this paragraph
of this Section 2.3 shall be construed as limiting, fixing or affecting the time
when a meeting of shareholders called by action of the board of directors may be
held.
2.4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 2.5 of
these by-laws not less than 10 (or, if sent by third-class mail pursuant to
Section 2.5 of these by-laws, 30) nor more than 60 days before the date of the
meeting. The notice shall specify the place, date and hour of the meeting and
(i) in the case of a special meeting, the general nature of the business to be
transacted (no business other than that specified in the notice may be
transacted) or (ii) in the case of the annual meeting, those matters which the
board of directors, at the time of giving the notice, intends to present for
action by the shareholders (but subject to the provisions of the next paragraph
of this Section 2.4 any proper matter may be presented at the meeting for such
action). The notice of any meeting at which directors are to be elected shall
include the name of any nominee or nominees who, at the time of the notice, the
board intends to present for election.
If action is proposed to be taken at any meeting for approval of (i)
a contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the General Corporation Law of the State of
California (the "Code"), (ii) an amendment of the articles of incorporation,
pursuant to Section 902 of the Code, (iii) a reorganization of the corporation,
pursuant to Section 1201 of the Code, (iv) a voluntary dissolution of the
corporation, pursuant to Section 1900 of the Code, or (v) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of the Code, then the notice shall also state
the general nature of that proposal.
2.5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Written notice of
any meeting of shareholders shall be given either (i) personally or (ii) by
first-class mail or (iii) by third-class mail but only if the corporation has
outstanding shares held of record by 500 or more persons (determined as provided
in Section 605 of the Code) on the record date for the shareholders' meeting, or
(iv) by telegraphic or other written communication. Notices not personally
delivered shall be sent
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<PAGE>
charges prepaid and shall be addressed to the shareholder at the address of that
shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other means
of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
Shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of
any shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6. QUORUM. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote thereat constitutes a quorum for the
transaction of business at all meetings of shareholders. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
2.7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to time
by the vote of the majority of the shares represented at that meeting, either in
person or by proxy. In the absence of a quorum, no other business may be
transacted at that meeting except as provided in Section 2.6 of these by-laws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting is
fixed
-3-
<PAGE>
or if the adjournment is for more than 45 days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice of
any such adjourned meeting shall be given to each shareholder of record entitled
to vote at the adjourned meeting in accordance with the provisions of Sections
2.4 and 2.5 of these by-laws. At any adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
2.8. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section
2.11 of these by-laws, subject to the provisions of Sections 702 through 704 of
the Code (relating to voting shares held by a fiduciary, in the name of a
corporation or in joint ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as
may be otherwise provided in the articles of incorporation, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote of the shareholders. Any shareholder entitled to vote on any
matter may vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or, except when the matter is the election of
directors, may vote them against the proposal; but, if the shareholder fails to
specify the number of shares which the shareholder is voting affirmatively, it
will be conclusively presumed that the shareholder's approving vote is with
respect to all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the Code or by the articles of incorporation.
Each shareholder entitled to vote at any election of directors shall
have the right to cumulate his votes and give one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of votes
to which his shares are normally entitled, or to distribute his votes on the
same principle among as many candidates as he desires. No shareholder shall be
entitled to cumulate votes unless the candidate's or candidates' names for whom
he desires to vote have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of his intention
to cumulate his votes. If any one shareholder has given such
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<PAGE>
notice, all shareholders may cumulate their votes for candidates in nomination.
In any election of directors, the candidates receiving the highest number of
affirmative votes of the shares entitled to be voted for them, up to the number
of directors to be elected by such shares, shall be elected; votes against the
director and votes withheld shall have no legal effect. In voting on all other
matters submitted to a vote of the shareholders, each share shall be entitled to
one vote, unless provided otherwise in the Articles of Incorporation.
2.9. VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT. The
transactions of any meeting of shareholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though they had been
taken at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these by-laws, the waiver of notice or
consent or approval shall state the general nature of the proposal. All such
waivers, consents and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver
of notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any annual or special meeting of shareholders may
be taken without a meeting and without prior notice, if a consent in writing,
setting forth the action to taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take that action at a meeting at which all shares entitled to
vote on that action were present and voted.
In the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors. However, a director may be elected at any
time to
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<PAGE>
fill any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these by-laws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of the Code, and (iv) a distribution in dissolution other than
in accordance with the rights of outstanding preferred shares, pursuant to
Section 2007 of the Code, the notice shall be given at least 10 days before the
consummation of any action authorized by that approval.
2.11. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS.
For purposes of determining the shareholders entitled to notice of any meeting
or to vote thereat or entitled to give consent to corporate action without a
meeting, the board of directors may fix, in advance, a record date, which shall
not be more than 60 days nor less than 10 days before the date of any such
meeting nor more than 60 days before any such action without a meeting, and in
such event only shareholders of record on the date so fixed are entitled to
notice and to vote or to give consents, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date,
except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on
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which notice is given or, if notice is waived, at the close of business on
the business day next preceding the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, (i) when no
prior action by the board has been taken, shall be the day on which the
first written consent is given, or (ii) when prior action by the board has
been taken, shall be at the close of business on the day on which the
board adopts the resolution relating to that action, or the 60th day
before the date of such other action, whichever is later.
The record date for any other purpose shall be as provided in
Article VIII of these by-laws.
2.12. PROXIES. Every person entitled to vote for directors, or on
any other matter, shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i) the
person who executed the proxy revokes it prior to the time of voting by
delivering a writing to the corporation stating that the proxy is revoked or by
executing a subsequent proxy and presenting it to the meeting or by voting in
person at the meeting, or (ii) written notice of the death or incapacity of the
maker of that proxy is received by the corporation before the vote pursuant to
that proxy is counted; provided, however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy, unless otherwise
provided in the proxy. The dates contained on the forms of proxy presumptively
determine the order of execution, regardless of the postmark dates on the
envelopes in which they are mailed. The revocability of a proxy that states on
its face that it is irrevocable shall be governed by the provisions of Sections
705(e) and 705(f) of the Code.
2.13. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the board of directors may appoint an inspector or inspectors of election to act
at the meeting or its adjournment. If no inspector of election is so appointed,
then the chairman of the meeting may, and on the request of any shareholder or a
shareholder's proxy shall, appoint an inspector or inspectors of election to act
at the meeting. The number of inspectors shall be either one (1) or three (3).
If inspectors are appointed at a meeting pursuant to the request of one (1) or
more shareholders or proxies, then the holders of a majority of shares or their
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proxies present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, then the chairman of the meeting may, and
upon the request of any shareholder or a shareholder's proxy shall, appoint a
person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of
proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1. POWERS. Subject to the provisions of the Code and any
limitations in the articles of incorporation and these by-laws relating to
action required to be approved by the shareholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of
directors initially shall be three and thereafter shall be such number as fixed
or determined by resolution of the board of directors or by action of the
shareholders, subject to the provisions of the Code. Directors need not be
residents of the State of California nor shareholders of the Corporation.
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No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be
elected at each annual meeting of shareholders to hold office until the next
annual meeting. Each director, including a director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.
3.4. RESIGNATION AND VACANCIES. Any director may resign effective on
giving written notice to the chairman of the board, the president, the secretary
or the board of directors, unless the notice specifies a later time for that
resignation to become effective. If the resignation of a director is effective
at a future time, the board of directors may elect a successor to take office
when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of
the remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
3.5. PLACE OF MEETINGS; MEETINGS BY TELEPHONE. Regular meetings of
the board of directors may be held at any place within or outside the State of
California that have been designated from time to time by resolution of the
board. In the
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absence of such a designation, regular meetings shall be held at the principal
executive office of the corporation. Special meetings of the board may be held
at any place within or outside the State of California that has been designated
in the notice of the meeting or, if not stated in the notice or if there is no
notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all directors participating in
the meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6. REGULAR MEETINGS. Regular meetings of the board of directors
may be held without notice if the times of such meetings are fixed by the board
of directors.
3.7. SPECIAL MEETINGS; NOTICE. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the chairman
of the board, the president, any vice president, the secretary or any two
directors.
Notice of the time and place of special meetings shall be delivered
personally, by facsimile or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least 48 hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8. QUORUM. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 3.10 of these by-laws. Every act or decision done or made by
a majority of the directors present at a duly held meeting at which a quorum is
present shall be regarded as the act of the board of directors, subject to the
provisions of Section 310 of the Code (as to approval of contracts or
transactions in which a director has a direct or indirect material financial
interest), Section 311 of the Code (as to appointment of committees), Section
317(e) of the Code (as to indemnification of directors), the articles of
incorporation, and other applicable law.
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A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9. WAIVER OF NOTICE. Notice of a meeting need not be given to any
director (i) who signs a waiver of notice or a consent to holding the meeting or
an approval of the minutes thereof, whether before or after the meeting or (ii)
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. All such waivers, consents,
and approvals shall be filed with the corporate records or made part of the
minutes of the meeting. A waiver of notice need not specify the purpose of any
regular or special meeting of the board of directors.
3.10. ADJOURNMENT. A majority of the directors present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.
3.11. NOTICE OF ADJOURNMENT. Notice of the time and place of holding
an adjourned meeting need not be given unless the meeting is adjourned for more
than 24 hours. If the meeting is adjourned for more than 24 hours, then notice
of the time and place of the adjourned meeting shall be given before the
adjourned meeting takes place, in the manner specified in Section 3.7 of these
by-laws, to the directors who were not present at the time of the adjournment.
3.12. BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
required or permitted to be taken by the board of directors may be taken without
a meeting, provided that all members of the board individually or collectively
consent in writing to that action. Such action by written consent shall have the
same force and effect as a unanimous vote of the board of directors. Such
written consent and any counterparts thereof shall be filed with the minutes of
the proceedings of the board.
3.13. FEES AND COMPENSATION OF DIRECTORS. Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
board of directors. This Section 3.13 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those services.
3.14. APPROVAL OF LOANS TO OFFICERS. The corporation may, upon the
approval of the board of directors alone, make loans of money or property to, or
guarantee the obligations of, any officer of the corporation or its parent or
subsidiary, whether or not a director, or adopt an employee benefit plan or
plans authorizing such loans or guaranties provided that (i) the
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board of directors determines that such a loan or guaranty or plan may
reasonably be expected to benefit the corporation, (ii) the corporation has
outstanding shares held of record by 100 or more persons (determined as provided
in Section 605 of the Code) on the date of approval by the board of directors,
and (iii) the approval of the board of directors is by a vote sufficient without
counting the vote of any interested director or directors.
ARTICLE IV
COMMITTEES
4.1. COMMITTEES OF DIRECTORS. The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one (1) or more committees, each consisting of two or more directors,
to serve at the pleasure of the board. The board may designate one (1) or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or alternate
members of a committee requires the vote of a majority of the authorized number
of directors. Any committee, to the extent provided in the resolution of the
board, shall have all the authority of the board, except with respect to:
(a) the approval of any action which, under the Code, also
requires shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in
any committee;
(c) the fixing of compensation of the directors for serving on
the board or any committee;
(d) the amendment or repeal of these by-laws or the adoption
of new by-laws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation
(except at a rate or in a periodic amount or within a price range
determined by the board of directors); or
(g) the appointment of any other committees of the board of
directors or the members of such committees.
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4.2. MEETINGS AND ACTION OF COMMITTEES. Meetings and actions of
committees shall be governed by, and held and taken in accordance with, the
bylaw provisions applicable to meetings and actions of the board of directors as
provided in Section 3.5 (place of meetings), Section 3.6 (regular meetings),
Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9
(waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice of
adjournment), and Section 3.12 (action without meeting), with such changes in
the context of those by-laws as are necessary to substitute the committee and
its members for the board of directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the board of directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the board of
directors, and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these by-laws.
ARTICLE V
OFFICERS
5.1. OFFICERS. The officers of the corporation shall be a president,
a secretary, and a chief financial officer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or more
vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 5.3 of these by-laws. Any number of offices may be held by
the same person.
5.2. ELECTION OF OFFICERS. The officers of the corporation, except
such officers as may be appointed in accordance with the provisions of Section
5.3 or Section 5.5 of these by-laws, shall be chosen be the board, subject to
the rights, if any, of an officer under any contract of employment.
5.3. SUBORDINATE OFFICERS. The board of directors may appoint, or
may empower the president to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these by-laws or as
the board of directors may from time to time determine.
5.4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the board of directors at any regular or
special meeting of the board or, except in case of an officer chosen by
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the board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these by-laws for regular appointments to that office.
5.6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an
officer be elected, shall, if present, preside at meetings of the board of
directors and exercise and perform such other powers and duties as may from time
to time be assigned to him by the board of directors or as may be prescribed by
these by-laws. If there is no president, then the chairman of the board shall
also be the chief executive officer of the corporation and shall have the powers
and duties prescribed in Section 5.7 of these by-laws.
5.7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the board of directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and the officers of
the corporation. He shall preside at all meetings of the shareholders and, in
the absence or nonexistence of a chairman of the board, at all meetings of the
board of directors. He shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and duties as may be prescribed by the board of directors or these
by-laws.
5.8. VICE PRESIDENTS. In the absence or disability of the president,
the vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors, these by-laws, the president or the chairman of the board.
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5.9. SECRETARY. The secretary shall keep or cause to be kept, at the
principal executive office of the corporation or such other place as the board
of directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the board of directors required to be given
by law or by these by-laws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these by-laws.
5.10. CHIEF FINANCIAL OFFICER. The chief financial officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings, and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or these by-laws.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation
shall, to the maximum extent and in the manner permitted by the Code, indemnify
each of its directors and officers against expenses (as defined in Section
317(a) of the Code), judgments, fines, settlements, and other amounts actually
and reasonably incurred in connection with any proceeding (as defined in Section
317(a) of the Code), arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Article VI, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2. INDEMNIFICATION OF OTHERS. The corporation shall have the
power, to the extent and in the manner permitted by the Code, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(as defined in Section 317(a) of the Code), judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any proceeding
(as defined in Section 317(a) of the Code), arising by reason of the fact that
such person is or was an agent of the corporation. For purposes of this Article
VI, an "employee" or "agent" of the corporation (other than a director or
officer) includes any person (i) who is or was an employee or agent of the
corporation, (ii) who is or was serving at the request of the corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or (iii) who was an employee or agent of a corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.3. PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred in defending
any civil or criminal action or proceeding for which indemnification is required
pursuant to Section 6.1 or for which indemnification is permitted pursuant to
Section 6.2 following authorization thereof by the Board of Directors may be
paid by the corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of the indemnified
party to repay such amount if it shall ultimately be determined that the
indemnified party is not entitled to be indemnified as authorized in this
Article VI.
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6.4. INDEMNITY NOT EXCLUSIVE. The indemnification provided by this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, to the extent that such additional rights to indemnification are
authorized in the Articles of Incorporation.
6.5. INSURANCE INDEMNIFICATION. The corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation against any liability
asserted against or incurred by such person in such capacity or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of this
Article VI.
6.6. CONFLICTS. No indemnification or advance shall be made under
this Article VI, except where such indemnification or advance is mandated by law
or the order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:
(a) That it would be inconsistent with a provision of the
Articles of Incorporation, these by-laws, a resolution of the shareholders
or an agreement in effect at the time of the accrual of the alleged cause
of the action asserted in the proceeding in which the expenses were
incurred or other amounts were paid, which prohibits or otherwise limits
indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation
shall keep either at its principal executive office or at the office of its
transfer agent or registrar (if either be appointed), as determined by
resolution of the board of directors, a record of its shareholders listing the
names and addresses of all shareholders and the number and class of shares held
by each shareholder.
A shareholder or shareholders of the corporation who holds at least
five percent in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent of such voting shares and has
filed a Schedule 14B with
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the Securities and Exchange Commission relating to the election of directors,
may (i) inspect and copy the records of shareholders' names, addresses, and
shareholdings during usual business hours on five days' prior written demand on
the corporation, (ii) obtain from the transfer agent of the corporation, on
written demand and on the tender of such transfer agent's usual charges for such
list, a list of the names and addresses of the shareholders who are entitled to
vote for the election of directors, and their shareholdings, as of the most
recent record date for which that list has been compiled or as of a date
specified by the shareholder after the date of demand. Such list shall be made
available to any such shareholder by the transfer agent on or before the later
of five days after the demand is received or five days after the date specified
in the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in
person or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2. MAINTENANCE AND INSPECTION OF BY-LAWS. The corporation shall
keep at its principal executive office or, if its principal executive office is
not in the State of California, at its principal business office in California
the original or a copy of these by-laws as amended to date, which by-laws shall
be open to inspection by the shareholders at all reasonable times during office
hours. If the principal executive office of the corporation is outside the State
of California and the corporation has no principal business office in such
state, then the secretary shall, upon the written request of any shareholder,
furnish to that shareholder a copy of these by-laws as amended to date.
7.3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The
accounting books and records and the minutes of proceedings of the shareholders,
of the board of directors, and of any committee or committees of the board of
directors hall be kept at such place or places as are designated by the board of
directors or, in absence of such designation, at the principal executive office
of the corporation. The minutes shall be kept in written form, and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time
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during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate. The
inspection may be made in person or by an agent or attorney and shall include
the right to copy and make extracts. Such rights of inspection shall extend to
the records of each subsidiary corporation of the corporation.
7.4. INSPECTION BY DIRECTORS. Every director shall have the absolute
right at any reasonable time to inspect all books, records, and documents of
every kind as well as the physical properties of the corporation and each of its
subsidiary corporations. Such inspection by a director may be made in person or
by an agent or attorney. The right of inspection includes the right to copy and
make extracts of documents.
7.5. ANNUAL REPORT TO SHAREHOLDERS; WAIVER. The board of directors
shall cause an annual report to be sent to the shareholders not later than 120
days after the close of the fiscal year adopted by the corporation. Such report
shall be sent at least 15 days (or, if sent by third-class mail, 35 days) before
the annual meeting of shareholders to be held during the next fiscal year and in
the manner specified in Section 2.5 of these by-laws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so
long as the shares of the corporation are held by fewer than 100 holders of
record.
7.6. FINANCIAL STATEMENTS. If no annual report for the fiscal year
has been sent to shareholders, then the corporation shall, upon the written
request of any shareholder made more than 120 days after the close of such
fiscal year, deliver or mail to the person making the request, within 30 days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than 30 days before the date of the request, and for a balance sheet
of the corporation as of the end of that period,
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then the chief financial officer shall cause that statement to be prepared, if
not already prepared, and shall deliver personally or mail that statement or
statements to the person making the request within 30 days after the receipt of
the request. If the corporation has not sent to the shareholders its annual
report for the last fiscal year, the statements referred to in the first
paragraph of this Section 7.6 shall likewise be delivered or mailed to the
shareholder or shareholders within 30 days after the request.
The quarterly income statements and balance sheets referred to in
this section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of
the board, the president or any vice president, the chief financial officer, the
secretary or assistant secretary of this corporation, or any other person
authorized by the board of directors or the president or a vice president, is
authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority herein granted may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
ARTICLE VIII
GENERAL MATTERS
8.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the shareholders
entitled to exercise any rights in respect of any other lawful action (other
than action by shareholders by written consent without a meeting), the board of
directors may fix, in advance, a record date, which shall not be more than 60
days before any such action. In that case, only shareholders of record at the
close of business on the date so fixed are entitled to receive the dividend,
distribution or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided in the Code.
If the board of directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on
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which the board adopts the applicable resolution or the 60th day before the date
of that action, whichever is later.
8.2. CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS. From time to time,
the board of directors shall determine by resolution which person or persons may
sign or endorse all checks, drafts, other orders for payment of money, notes or
other evidences of indebtedness that are issued in the name of or payable to the
corporation, and only the persons so authorized shall sign or endorse those
instruments.
8.3. CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED. The board of
directors, except as otherwise provided in these by-laws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
8.4. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of the corporation shall be issued to each shareholder when any of such
shares are fully paid. The board of directors may authorize the issuance of
certificates for shares partly paid provided that these certificates shall state
the total amount of the consideration to be paid for them and the amount
actually paid. All certificates shall be signed in the name of the corporation
by the chairman of the board or the vice chairman of the board or the president
or a vice president and by the chief financial officer or an assistant treasurer
or the secretary or an assistant secretary, certifying the number of shares and
the class or series of shares owned by the shareholder. Any or all of the
signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5. LOST CERTIFICATES. Except as provided in this Section 8.5, no
new certificates for shares shall be issued to replace a previously issued
certificate unless the latter is surrendered to the corporation and canceled at
the same time. The board of directors may, in case any share certificate or
certificate for any other security is lost, stolen or destroyed, authorize the
issuance of replacement certificates on such terms and conditions as the board
may require; the board may require
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indemnification of the corporation secured by a bond or other adequate security
sufficient to protect the corporation against any claim that may be made against
it, including any expense or liability, on account of the alleged loss, theft or
destruction of the certificate or the issuance of the replacement certificate.
8.6. CONSTRUCTION; DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in the
Code shall govern the construction of these by-laws. Without limiting the
generality of this provision, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both a
corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1. AMENDMENT BY SHAREHOLDERS. New by-laws may be adopted or these
by-laws may be amended or repealed by the vote or written consent of holders of
a majority of the outstanding shares entitled to vote; provided, however, that
if the articles of incorporation of the corporation set forth the number of
authorized directors of the corporation, then the authorized number of directors
may be changed only by an amendment of the articles of incorporation.
9.2. AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided in Section 9.1 of these by-laws, by-laws, other than a
bylaw or an amendment of a bylaw changing the authorized number of directors
(except to fix the authorized number of directors pursuant to a bylaw providing
for a variable number of directors), may be adopted, amended or repealed by the
board of directors.
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Exhibit 12.1
CFP GROUP, INC.
EARNINGS TO FIXED CHARGE RATIO
<TABLE>
<CAPTION>
Predecessor Company CFP Group, Inc.
-------------------------- ------------------------------------------------------------------------
Six Months Six Months
Year Ended Ended Ended Year Ended September Six Months Ended
------------------------
September 30, March 31, September 30, 30, March 31, March 31,
-----------------------------
1992 1993 1993 1994 1995 1996 1996 1997
------------- ---------- ------------- ----------------------------- -------------------------
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Loss) Earnings Before Tax $ (28,834) $ 365 $ 574 $ 1,713 $ 2,343 $ (1,562) $(2,883) $(3,902)
----------- --------- --------- -------- -------- --------- ------- -------
Plus: Fixed Charges
Interest Expense 3,717 1,906 1,307 2,443 2,632 3,232 1,512 4,681
1/3 of rent exp 187 108 94 217 206 206 103 148
------------------------- --------- ------------------------------------------------------
TOTAL FIXED CHARGES 3,904 2,014 1,401 2,660 2,838 3,438 1,615 4,829
----------- --------- --------- -------- -------------------- ------- -------
Earnings $ (24,930) $ 2,379 $1,975 $ 4,373 $ 5,181 $ 1,876 $ 1,268 $ 927
------------------------- --------- -----------------------------------------------------
Ratio --- 1.18 1.41 1.64 1.83 --- --- ---
------------------------- ----------------------------------------------------------------------
------------------------- ----------------------------------------------------------------------
Deficiency (28,834) (1,187) (2,883) (3,902)
</TABLE>
