<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED FEBRUARY 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
------------- -----------
COMMISSION FILE NUMBER 1-8574
UNITED FOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-1264568
(State of Incorporation) (I.R.S. Employer Identification No.)
TEN PICTSWEET DRIVE, BELLS, TN 38006
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 422-7600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------------ --------------------------
CLASS A COMMON STOCK AMERICAN STOCK EXCHANGE
AND CLASS B COMMON STOCK AND PACIFIC STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this Chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
On April 30, 1996, 5,110,075 shares of Class A Common Stock and 5,699,854
shares of Class B Common Stock of United Foods, Inc. were outstanding and the
aggregate market value of such Common Stock held by nonaffiliates (based on its
closing transaction price on such date) was approximately $12,004,000.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement for the annual meeting of stockholders on
July 10, 1996, to be filed with the Commission by June 20, 1996 (the "1996
Proxy Statement"), has been incorporated by reference into Part III.
1
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
United Foods, Inc. (the "Company") was incorporated under the laws of
Texas on March 9, 1956 and became a Delaware Corporation on September 30, 1983.
The Company is principally engaged in the production, marketing and
distribution of food products.
PRODUCTS
The Company's primary food products include asparagus, black-eyed peas,
broccoli, brussels sprouts, carrots, cauliflower, corn, green beans, green peas,
green peppers, lima beans, mushrooms, onions, okra, southern greens, spinach,
squash, strawberries, turnips, and various vegetable mixes and blends.
MARKETING
The Company's food products are primarily sold directly to large national
grocery chains and through food brokers to numerous independent food stores
located throughout the United States for resale in the retail market. These
products are sold both under the Company's brand names and under buyers' labels,
and to military commissaries in the United States and overseas under the
Company's brand names. Such sales represented approximately 72% of the Company's
revenue for the year ended February 29, 1996. Since such a large part of the
Company's sales are made in the retail market and since a significant proportion
of the retail grocery trade in the United States is concentrated in the hands of
national grocery chains, a large part of the Company's revenue is derived from
sales to these chains. The Company's five largest customers are the Defense
Personnel Support Center, Food Lion, Inc., The Kroger Company, Kenneth O. Lester
Co., Inc. and J. R. Simplot Company, Inc. Sales to these five customers
represented approximately 32% of the Company's revenue for the year ended
February 29, 1996. Due to competition, the Company's mix of customers changes
over time. Therefore, it is possible that the Company will lose one or more of
its largest customers over time, and it is possible its operations will suffer
materially as a result.
The Company's principal brand name is "Pictsweet," which is used throughout
the United States and in military commissaries overseas.
The Company also sells certain of its food products, directly and through
food brokers, to institutions located throughout the United States, such as
restaurants, schools, hospitals, hotels, and federal and state government
agencies. Such sales represented approximately 18% of the Company's revenue for
the year ended February 29, 1996.
In addition, the Company sells certain of its food products directly to
other food companies. Such sales represented approximately 8% of the Company's
revenue for the year ended February 29, 1996.
The Company's food brokers are compensated on a commission basis.
The Company does not consider backlog at year end to be material to an
understanding of its business.
Sales are somewhat seasonal. Historically, sales have been lower during
the Company's second quarter (summer months) when fresh vegetables are more
available to the consumer.
The Company operates a truck fleet which transports a substantial portion
of the Company's products. Transportation services are also provided to
customers other than the Company and accounted for less than 1% of the
Company's revenues for the year ended February 29, 1996.
Rental and miscellaneous income accounted for approximately 2% of the
Company's revenue for the year ended February 29, 1996.
2
<PAGE> 3
TRADEMARKS
Approximately 70% of the Company's revenues are derived from sales under
the "Pictsweet" brand and other registered trademarks. These renewable
trademarks expire over the next 20 years.
OPERATIONS
Mushrooms and certain vegetables processed in the Company's Tennessee plant
are grown on Company operated farms. Procurement of the remaining raw vegetables
is generally either by contract with growers or from vegetable assemblers.
Vegetable crops have seasonal features and their availability is subject to
unpredictable changes in growing conditions which are inherent in the
agriculture industry. The Company's operations were adversely affected by
shortages of raw vegetables during fiscal 1993 and 1994. This caused the Company
to procure raw and processed vegetables from alternative sources at higher than
expected costs. Additionally, the reduced quantities of vegetables processed in
the Company's plants caused increases in unit costs.
The Company farms approximately 7,000 acres of leased land in West
Tennessee. These farm operations supply part of the vegetables required for the
Company's Tennessee plant.
The Company has entered into reciprocal supply agreements with several
other food processors under which the Company procures from these food
processors, among other products, products that were previously processed at
its Fairmont, Minnesota facility, which was closed in December, 1992, and the
Company supplies to these food processors frozen vegetables processed at its
Bells, Tennessee and Santa Maria, California facilities.
The time and duration of processing seasons vary considerably according to
the specific product. For example, all the white acre peas for a full year are
processed in a short period of approximately two weeks, while broccoli is
processed during approximately ten months of each year. Thus, substantial
inventories are required for long periods of time to support the consumer
demand for frozen vegetables throughout the year. Mushrooms are grown twelve
months of each year.
Working capital requirements follow inventory levels and the company looks
to its lenders to cover working capital requirements. Interest rates on the
Company's working capital loans fluctuate with the lender's prime rate,
established base rates, the Term Federal Funds rate and LIBOR.
COMPETITION
The Company is faced with substantial competition in all aspects of its
business. The food industry is highly competitive, and competition has increased
in recent years as a result of the efforts by the "Birdseye" and "Green Giant"
brands to increase market share. The principal methods of competition in the
food industry involve price and service. The Company has developed the Pictsweet
brand into a national brand for fresh and frozen vegetables which enables it to
differentiate its products on a basis other than price. In addition, the Company
has a broad based national distribution system for frozen vegetables and a
western regional distribution system for fresh mushrooms which give it a
competitive advantage in the area of customer service. Over the past several
years, imports of frozen vegetables have increased substantially and significant
new processing capacity has been constructed in the United States. As a result,
the total production capacity of frozen vegetables is now substantially in
excess of current requirements.
EMPLOYEES
At February 29, 1996, the company had approximately 2,100 full-time
employees, of whom approximately 1,930 were engaged in farming, manufacturing
and service activities and 170 in sales and administration. In addition,
because of the seasonal nature of the production activities of the company, the
company has numerous additional temporary employees. Peak employment during the
year was approximately 2,800 employees of whom approximately 2,100 were full
time employees and approximately 700 were temporary employees.
One union has, intermittently, claimed bargaining rights at the Ventura,
California mushroom farm. Currently, there are no negotiations underway.
3
<PAGE> 4
The Company's ongoing efforts to achieve the lowest possible costs includes
analyzing its operations and selling, administrative and general expenses to
identify areas in which costs can be reduced. These efforts resulted during
fiscal 1996 in a reduction in the number of full time employees by approximately
100. A further reduction in full time employment of approximately 50 has
occurred since February 29, 1996.
ITEM 2. PROPERTIES
OPERATING PLANTS
The Company owns and is currently operating six facilities in California,
Oregon, Tennessee and Utah. Although production varies with the seasons at the
frozen vegetable plants, all the facilities operate during a substantial part
of the year. Set forth in the table below is a list of the six facilities with
various information concerning each:
<TABLE>
<CAPTION>
APPROXIMATE SQUARE
LOCATION SPACE DEVOTED TO FOOTAGE
- -------- ---------------- ------------------
<S> <C> <C>
Bells, Tennessee Processing Plant 212,000
Cold Storage Warehouse 239,000
Ogden, Utah Processing Plant 68,000
Cold Storage Warehouse 150,000
Santa Maria, California Processing Plant 150,000
Cold Storage Warehouse 42,000
Fillmore, Utah Mushroom Farm 284,000
Salem, Oregon Mushroom Farm 348,000
Ventura, California Mushroom Farm 279,000
</TABLE>
Substantially all land, buildings and equipment are pledged as collateral
for outstanding debt (See Note 3 - Notes to the Financial Statements).
The Company farms approximately 7,000 acres of leased farmland in West
Tennessee to supply part of the vegetables required for the Company's Bells,
Tennessee plant. The Company owns or leases the machinery and equipment located
at all of its facilities. Although utilization of production capacity varies
from facility to facility, overall utilization is approximately 75%.
4
<PAGE> 5
ITEM 3. LEGAL PROCEEDINGS
On December 13, 1993, the Company entered into an agreement with the United
States Environmental Protection Agency ("USEPA") in settlement of alleged
violations of the Clean Water Act in clearing land in Rossville, Tennessee for
use as a vegetable farm. The agreement provides that the Company will restore
certain wetlands, plant hardwood trees and construct a levee on sections of the
property, monitor the site for five years and make periodic reports to the
USEPA and Army Corps of Engineers. This agreement will not materially and
adversely affect the Company's financial position or results of its operations.
With the exception of the USEPA matter, there are no legal proceedings
required to be reported pursuant to Item 103 of Regulation S-K. (See Note 9.B -
Notes to Financial Statements).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders
during the quarter ended February 29, 1996.
5
<PAGE> 6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Class A and B Common Stocks of the Company are both traded on the
American and Pacific Coast Stock Exchanges. Ticker Symbols: UFD A and UFD B.
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------------------- -----------------------------
SALE PRICE SALE PRICE
---------- ----------
QUARTER ENDED HIGH LOW DIVIDEND(1) HIGH LOW DIVIDEND(1)
- ------------- ---- --- ----------- ---- --- -----------
<S> <C> <C> <C> <C> <C> <C>
February 28, 1994 2 1/8 1 5/8 - 2 1/8 1 11/16 -
May 31, 1994 2 5/16 1 9/16 - 2 3/8 1 9/16 -
August 31, 1994 2 5/16 1 15/16 - 2 5/16 1 15/16 -
November 30, 1994 2 3/8 1 15/16 - 2 7/16 2 -
February 28, 1995 2 5/8 1 15/16 - 2 13/16 2 -
May 31, 1995 2 5/8 2 - 2 3/4 2 1/8 -
August 31, 1995 2 9/16 1 5/8 - 2 9/16 1 3/4 -
November 30, 1995 2 5/16 1 3/4 - 2 1/2 1 3/4 -
February 29, 1996 2 1/8 1 5/8 - 2 1/8 1 5/8 -
</TABLE>
(1) Restrictive covenants in various loan agreements limit retained earnings
available for payment of dividends to $6,856,000 at February 29, 1996 (See
Note 3- Notes to Financial Statements).
APPROXIMATE NUMBER OF COMMON EQUITY SECURITY HOLDERS
APPROXIMATE NUMBER OF
TITLE OF CLASS RECORD HOLDERS AS OF FEBRUARY 29, 1996
- -------------------------- --------------------------------------
Common Stock, $1 par value
Class A 2,400
Class B 1,900
6
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Company should be read in
conjunction with the financial statements and notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations,
included elsewhere herein. The financial information has been derived from
audited financial statements of the Company.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales and service revenues................ 191,714 190,256 175,796 156,318 154,368
Operating income.............................. 2,914 6,984 3,286 2,914 4,669
Income (loss) from continuing
operations before cumulative effect of
change in accounting(1)..................... (660) 2,402 90 (221) 3,940
Cumulative effect on prior years of
change in accounting for income
taxes(2).................................... - - - (1,895) -
Net income (loss)............................. (660) 2,402 90 (2,116) 35
Earnings (loss) per share of common
stock and common stock equivalents:(3)
Income (loss) from continuing operations.. (0.06) .19 .01 (.02) .30
Loss from discontinued operations......... - - - - (.30)
Cumulative effect of accounting
change - - - (.14) -
Net income (loss)......................... (0.06) .19 .01 (.16) .00
Long-term debt................................ 46,650 30,076 27,148 37,882 48,929
Total assets.................................. 128,188 114,157 109,516 119,960 128,885
Cash dividends per common share:
Class A..................................... - - - - -
Class B..................................... - - - - -
</TABLE>
(1) The Company recorded estimated pre-tax gains on an insurance claim of
$5,806,000 and $6,440,000 in fiscal 1992 and 1991, respectively. In fiscal
1993, the Company agreed to a settlement of the claim that reduced pre-tax
income by $726,000.
(2) Effective March 1, 1992, the Company adopted FAS 109, "Accounting for
Income Taxes."
(3) Earnings per share of common stock and common stock equivalents have been
computed on the average number of shares required to be recognized during
the respective periods. Earnings per share are the same for primary and
fully diluted computations.
7
<PAGE> 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash are operations and external
committed credit facilities. At February 29, 1996 the Company's revolving
credit facilities totaled $26,000,000, all of which was currently available.
(See Note 3- Notes to Financial Statements). During fiscal 1996, the Company
obtained a $5,000,000 increase in one of its revolving credit facilities for
the months of September through November, 1995, such increase reducing to
$3,000,000 for December, 1995, $2,000,000 for January, 1996 and $1,000,000 for
February, 1996.
The Company's sources of liquidity are expected to adequately meet
requirements for the upcoming year and the foreseeable future; however, new
financing alternatives are constantly evaluated to determine their practicality
and availability in order to provide the Company with sufficient and timely
funding at the least possible cost. The $3,000,000 and $23,000,000 revolving
credit facilities currently mature in fiscal 1999. One-year extensions of
maturity dates of the revolving credit facilities will be considered by the
lenders annually. If annual extensions are not granted, the Company will then
investigate revolving credit facilities with other lenders and believes it can
replace any current revolving credit facility within its remaining 24-month
term.
Operations provided net cash flows of $5,890,000 in fiscal 1996. Increases
in inventories were offset in part by increases in accounts payable and
accruals as the result of timing factors. Operations provided net cash flows of
$6,747,000 in fiscal 1995. The $4,957,000 increase in inventories in fiscal
1995 generally represents a build-up to normal levels following weather related
shortages of raw product experienced in fiscal 1994 and 1993. Operations
provided net cash flows of $16,370,000 in fiscal 1994 which included the
collection of accounts receivable related to discontinued operations in the
amount of $4,379,000 and a reduction in inventories in the amount of $4,532,000
and other assets in the amount of $1,105,000.
Investing activities used cash of $12,006,000 in fiscal 1996, $10,588,000
in fiscal 1995 and $2,530,000 in fiscal 1994. The increased investments in
fiscal 1996 compared to 1995 were primarily the result of additional capital
expenditures of $1,033,000 and a reduction in property and equipment disposals.
The increased investments in fiscal 1995 compared to fiscal 1994 were primarily
the result of additional capital expenditures of $3,100,000 in fiscal 1995 and
the cash provided by the collection of insurance proceeds of $3,640,000 in
fiscal 1994 from a fiscal 1991 involuntary conversion.
Financing activities provided cash of $6,693,000 and $297,000 in fiscal
1996 and 1995, respectively, and used cash of $11,362,000 in fiscal 1994. The
cash generated by operating activities in fiscal 1995 and 1994 was used to
reduce long-term debt. The purchases of treasury stock in fiscal 1996 and 1995
used cash in the amount of $2,284,000 and $2,588,000, respectively.
Additionally, $1,033,000 and $3,100,000 was borrowed to finance increases in
capital expenditures in fiscal 1996 and 1995, respectively.
Working capital at February 29, 1996 amounted to $42,164,000, compared to
working capital of $41,013,000 at February 28, 1995 and $39,535,000 as of
February 28, 1994. This increase in working capital in 1996 was primarily the
result of increased inventories, offset in part by a decrease in trade
receivables.
The Company's ratio of debt to equity was 1.35 to 1 at February 29, 1996,
an increase from .99 to 1 at February 28, 1995 primarily as a result of the
purchase of the Company's previously leased facility located in Santa Maria,
California on September 29, 1995 in exchange for $8,000,000 of mortgage notes
(See Note 3-Notes to Financial Statements), combined with the $2,284,000
purchase of treasury stock in November 1995.
8
<PAGE> 9
CAPITAL EXPENDITURES
Capital expenditures, on an accrual basis amounted to $19,914,000 in
fiscal 1996 compared with $9,874,000 and $9,133,000 in fiscal 1995 and 1994,
respectively. The fiscal 1996 capital expenditures include the purchase of its
leased facility in Santa Maria, California financed in exchange for $8,000,000
in mortgage notes (See Note 3-Notes to Financial Statements). Capital
expenditures for fiscal 1997 are estimated to be $4,000,000 which is
approximately $4,000,000 less than depreciation expense projected for fiscal
1997.
Capital expenditures are expected to be for normal replacement of older
equipment with more efficient and energy saving equipment, for equipment to
restore the throughput of the Company's frozen vegetable plants to their
approximate original capacity, and for equipment to expand production capacity
to permit the Company to meet its obligations under multi-year reciprocal
supply agreements (See "Supply Agreements"). These expenditures are expected to
be funded from operations and the Company's revolving credit facilities.
IMPACT OF INFLATION
Whether current selling prices will be maintained or future selling price
increases will be sufficient to match any future cost increases is not
determinable at the present time due to the highly competitive conditions which
exist in the food industry.
RESULTS OF OPERATIONS
OVERVIEW AND TRENDS
The Company's product line is made up of agricultural products which are
subject to the cyclical conditions and risks inherent in the agricultural
industry. The Company bears part of the growing risks and all of the processing
and marketing risks of these agricultural products. Weather abnormalities and
excess inventories sometimes cause substantial reductions in the annual volume
of product processed in facilities that are owned or leased by the Company.
When this happens, the unit cost of that year's production will increase
substantially, resulting in reduced profit margins for one or more years. On
the other hand, when bumper crops occur unit costs will decrease but selling
prices will, in general, be depressed.
Operating results for the years ended February 28, 1994 and 1993 were
adversely impacted by weather-related shortages of certain vegetables from
planned sources. This required the Company to procure raw and processed product
from alternative sources at higher than expected costs and reduced quantities
of raw product processed at Company owned and leased facilities, which also
increased unit costs.
The Company has always been faced with very strong competition in the
marketplace from large brand name competitors, private regional U.S. vegetable
processors, and privately-owned Mexican vegetable processors. These competitive
pressures, coupled with low overall growth, have led to weak market pricing. We
anticipate that this condition will continue for several years.
In addition to general inflation and the growing, processing and marketing
risks described above, the Company is facing the significant costs associated
with increasing governmental regulation, the loss of land and water available
for agriculture in California and the increasing competition due to world-wide
facilitation of trade. As a result of these factors, the Company's earnings
history is cyclical and will continue to be so in the future.
The effect on the Company's operations and its ability to withstand the
costs of developing healthcare, labeling, OSHA, EPA, taxation and other
governmental regulations is unknown.
9
<PAGE> 10
SERVICE REVENUES
Service revenues consist primarily of outside revenue from the Company's
trucking operations used in the distribution of frozen vegetables, rental and
miscellaneous income.
SUPPLY AGREEMENTS
The Company has entered into two multi-year reciprocal supply agreements
with other food processing companies. Through these agreements the Company
procures frozen vegetables to meet production and inventory requirements.
Also, the Company sells frozen vegetables processed at the Company's Tennessee
and California facilities to the other food processors.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," ("FAS 121") which will be effective for
fiscal years beginning after December 15, 1995. For assets that will be held
and used, FAS 121 will require an impairment to be recognized if the expected
future cash flows from the use and eventual disposition of the asset are less
than the carrying amount of the asset. Such an impairment loss will be
measured as the difference between the fair value and the carrying value of the
asset. Assets to be disposed of that are not covered by Accounting Principles
Board Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," will be reported at the lower
of the carrying amount or fair value less cost to sell. The adoption of FAS
121 is not expected to have a material effect on the Company's financial
position or results of operations.
FASB statement No. 123, "Account for Stock-Based Compensation" ("FAS
123"), was issued in October 1995 and is effective for transactions entered
into in fiscal years that begin after December 15, 1995. The disclosure
requirements of FAS 123 are also effective for financial statements for fiscal
years beginning after December 15, 1995. This new standard encourages entities
to adopt a fair value method of accounting for employee stock-based
compensation plans and requires such accounting for transactions in which an
entity acquires goods or services from non employees through issuance of equity
instruments. As allowed under the provisions of FAS 123, the Company will
continue to measure compensation cost for employee stock-based compensation
plans using the intrinsic value based method of accounting prescribed by the
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." As such, the Company will make pro forma disclosures of net income
and earnings per share as if the fair value based method of accounting had been
applied. The Company does not expect adoption to have a material effect on its
financial position or results of operations.
10
<PAGE> 11
(The following discussions address income from continuing operations only
unless otherwise noted.)
FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES AND SERVICE REVENUES
Net sales and service revenues increased $1,458,000 or .8% for fiscal 1996
as compared with fiscal 1995 as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 29 OR 28
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Gross Sales Revenues:
Food Product.......................... $221,991,000 $222,285,000
Services.............................. 3,192,000 2,820,000
------------ ------------
Total Gross Revenues.................. 225,183,000 225,105,000
Less Sales Allowances on Food Products (33,469,000) (34,849,000)
------------ ------------
Net Sales and Service Revenues........ $191,714,000 $190,256,000
============ ============
</TABLE>
Food product gross sales decreased $294,000 or .1% in fiscal 1996 as
compared with fiscal 1995 and included sales volume increases of .3%. Sales to
other food processing companies in connection with multi-year reciprocal supply
agreements (previously mentioned) decreased $2,550,000 (23%). Average selling
prices of other food product sales decreased 2.2% from 1995 to 1996 as the
result of continuing competitive pricing pressures. Sales allowances decreased
$1,380,000 or 4.0% primarily as the result of lower promotional expenses
resulting from changes in the sales of the Company's various marketing programs
which promote at differing rates. Service revenues increased $372,000 or 13.2%
primarily as the result of an increase in rental and miscellaneous income of
$667,000 (51.2%) which was offset by decreased revenue of $295,000 (19.4%) for
the Company's owner-operated truck fleet.
COST OF SALES AND SERVICES
Cost of sales and services increased $6,583,000 or 4.4% in fiscal 1996 as
compared with the previous year primarily as the result of less than expected
raw product growing yields which resulted in increased unit production costs.
Gross profit decreased $5,125,000 in fiscal 1996 as compared with the previous
year and the gross profit margin was 19.0% for fiscal 1996 as compared with
21.8% for fiscal 1995. The decreases in gross profit and gross profit margin
result primarily from increased unit costs and decreased average selling prices
previously mentioned.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling, administrative and general expenses decreased $1,055,000 (3.1%)
primarily as the result of decreased pension and incentive compensation of
$1,682,000 (55.5%) ($1,006,000 of which is related to decreased production
incentive compensation), increased brokerage expense of $96,000 (attributable
to increase in brokered gross food products sales) increased administrative,
general selling expenses and other expenses of $395,000 and increased storage
costs of $136,000 due to increase in average frozen inventory.
11
<PAGE> 12
INTEREST EXPENSE
Interest expense increased $1,145,000 (40.4%) due to higher average
borrowings related to higher average inventories, capital expenditures and the
purchase of treasury stock, and to an overall increase in average interest
rates.
MISCELLANEOUS EXPENSE
Miscellaneous Income - Net in the amount of $28,000 for fiscal 1996,
reflects net gains realized on disposal of property, plant and equipment of
$34,000 offset by miscellaneous expenses of $6,000.
TAXES ON INCOME
Taxes on income consist of current and deferred income taxes required to
be recognized for fiscal 1996.
12
<PAGE> 13
FISCAL 1995 COMPARED TO FISCAL 1994
NET SALES AND SERVICE REVENUES
Net sales and service revenues increased $14,460,000 or 8.2% for fiscal
1995 as compared with fiscal 1994 as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Gross Sales Revenues:
Food Products......................... $222,285,000 $204,496,000
Services............................ 2,820,000 2,876,000
------------ ------------
Total Gross Revenues.................. 225,105,000 207,372,000
Less Sales Allowances on Food Products (34,849,000) (31,576,000)
------------ ------------
Net Sales and Service Revenues...... $190,256,000 $175,796,000
============ ============
</TABLE>
Food product gross sales increased $17,789,000 or 8.7% in fiscal 1995 as
compared to fiscal 1994, and sales volume increased 10.9%. Sales to another
food processing company, in connection with a five-year reciprocal supply
agreement (previously mentioned), accounted for 28.7% of the gross sales dollar
increase and 69.0% of the volume increase. The balance of the gross sales
dollar and volume increase is generally attributable to increased demand for
certain food products. Continued competitive pricing pressures adversely
impacted food product net sales revenues during fiscal 1995 primarily as the
result of sales allowances increasing $3,273,000 or 10.4%, due to higher
promotional expenses and freight costs. Service revenues decreased $56,000 or
1.9% primarily as the result of decreased outside revenues from the Company's
trucking operations of $248,000 and increased other revenue of $192,000.
COST OF SALES AND SERVICES
Cost of sales and services increased $5,176,000 or 3.6% in fiscal 1995 as
compared with the previous year, primarily as a result of the 10.9% sales
volume increase. The increase in margins resulted primarily from a combination
of an increase in demand for some products and reduced costs for certain raw
products due to improved weather conditions.
During the third and fourth quarters of fiscal 1995, the Company recorded
a repair and maintenance charge to operations of approximately $1,972,000 as
part of a program to restore the throughput of the Company's plants to their
approximate original capacity. The increased throughput is needed to
accommodate the significant increase in frozen vegetable production. It is
expected that repair and maintenance expenditures under this program will
continue to be significant during the next three fiscal years. During the
fourth quarter of fiscal 1994, the Company charged $1,925,000 to cost of sales
for impaired pension deposits.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling, administrative and general expenses increased $5,586,000 (19.3%)
primarily as the result of increased storage of $2,230,000 (due to a 12.3%
increase in average frozen inventory levels and increased cold storage cost in
fiscal 1995), increased pension and incentive compensation of $1,796,000
($1,164,000 of which is related to increased production incentive
compensation), increased brokerage expense of $104,000 (attributable to the
fiscal 1995 increased in brokered gross food products sales) and increased
administrative, general selling expenses and other expenses of $1,456,000
(primarily attributable to increased compensation, associated payroll taxes and
benefits or $1,230,000).
13
<PAGE> 14
INTEREST EXPENSE
Interest expense decreased $308,000 (9.8%) due to lower average
borrowings, offset in part by higher average interest rates.
MISCELLANEOUS EXPENSE
Miscellaneous Expense - Net in the amount of $176,000 for fiscal 1995,
reflects a $300,000 charge resulting from a reduction in the carrying value of
property held for disposal, offset primarily by net gains realized on disposal
of property, plant and equipment.
TAXES ON INCOME
Taxes on income consist of current and deferred income taxes required to
be recognized for fiscal 1995. At February 28, 1995, the Company had a
$557,000 net current deferred tax asset which is more likely than not to be
realized through the reversal of deferred tax liabilities and/or future taxable
income.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
United Foods, Inc.
We have audited the accompanying balance sheets of United Foods, Inc. as
of February 29, 1996 and February 28, 1995, and the related statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended February 29, 1996. 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 audits 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 United Foods, Inc. at
February 29, 1996 and February 28, 1995, and the results of its operations and
its cash flows for each of the three years in the period ended February 29,
1996 in conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
----------------
BDO Seidman, LLP
Memphis, Tennessee
April 4, 1996
15
<PAGE> 16
UNITED FOODS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 29 OR 28,
----------------------------
ASSETS 1996 1995
---------------------- ------------- -------------
<S> <C> <C>
CURRENT:
Cash and cash equivalents.............................................. $1,029,000 $452,000
Trade accounts receivable, less allowance of $260,000 and $235,000
for possible losses (Notes 1 and 3).................................. 14,502,000 15,328,000
Inventories (Notes 2 and 3)............................................ 43,099,000 40,364,000
Prepaid expenses and miscellaneous..................................... 4,592,000 5,061,000
Deferred income taxes (Note 5)......................................... 777,000 557,000
------------ ------------
TOTAL CURRENT ASSETS................................................. 63,999,000 61,762,000
------------ ------------
PROPERTY AND EQUIPMENT (Notes 3 and 7):
Land and land improvements............................................. 8,965,000 8,083,000
Buildings.............................................................. 21,039,000 18,224,000
Machinery and equipment................................................ 92,536,000 75,163,000
------------ ------------
122,540,000 101,470,000
Less accumulated depreciation and amortization......................... (60,204,000) (52,241,000)
------------ ------------
NET PROPERTY AND EQUIPMENT........................................... 62,336,000 49,229,000
------------ ------------
OTHER ASSETS............................................................. 1,853,000 3,166,000
------------ ------------
$128,188,000 $114,157,000
============ ============
</TABLE>
See accompanying summary of accounting
policies and notes to financial
statements
16
<PAGE> 17
<TABLE>
<CAPTION>
FEBRUARY 29 OR 28,
------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
--------------------------------------------- ----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable..................................................... $11,092,000 $8,301,000
Accruals:
Compensation and related taxes..................................... 2,816,000 4,401,000
Pension contributions (Note 8)..................................... 550,000 458,000
Income taxes (Note 5).............................................. 206,000 742,000
Workers' compensation claims (Note 9).............................. 1,144,000 1,371,000
Interest........................................................... 665,000 342,000
Miscellaneous...................................................... 695,000 832,000
Current maturities of long-term debt (Notes 3 and 8)................. 4,667,000 4,302,000
------------ ------------
TOTAL CURRENT LIABILITIES.............................................. 21,835,000 20,749,000
LONG-TERM DEBT, less current maturities (Notes 3 and 8)................ 46,650,000 30,076,000
DEFERRED INCOME TAXES (Note 5)......................................... 5,169,000 5,892,000
------------ ------------
TOTAL LIABILITIES............................................... 73,654,000 56,717,000
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 4, 8, and 9)
STOCKHOLDERS' EQUITY (Note 4):
Preferred stock, $1 par - shares authorized, 10,000,000.............. - -
Common stock, Class A, $1 par (one-tenth vote per share when
Class A and B vote together, elects 25% of Board), shares
authorized 25,000,000; issued 7,649,457 and 7,647,932.............. 7,650,000 7,648,000
Common stock, Class B, $1 par, convertible into Class A on a share
for share basis (elects 75% of Board) - shares authorized
10,000,000; issued 7,096,180 and 7,097,705......................... 7,096,000 7,098,000
Additional paid-in capital............................................. 8,644,000 8,687,000
Retained earnings (Note 3)............................................. 41,261,000 41,921,000
------------ ------------
64,651,000 65,354,000
Treasury stock, at cost, 3,935,708 and 2,953,139 shares, respectively.. (10,117,000) (7,914,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY...................................... 54,534,000 57,440,000
------------ ------------
$128,188,000 $114,157,000
============ ============
</TABLE>
17
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE> 18
UNITED FOODS, INC.
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 29 OR 28,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES AND SERVICE REVENUES......................... $191,714,000 $190,256,000 $175,796,000
COST OF SALES AND SERVICES............................. 155,343,000 148,760,000 143,584,000
------------ ------------ ------------
Gross profit........................................ 36,371,000 41,496,000 32,212,000
SELLING, ADMINISTRATIVE AND GENERAL
EXPENSES............................................. 33,457,000 34,512,000 28,926,000
------------ ------------ ------------
Operating income.................................... 2,914,000 6,984,000 3,286,000
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense...................................... (3,976,000) (2,831,000) (3,139,000)
Miscellaneous income (expense), net................... 28,000 (176,000) (97,000)
------------ ------------ ------------
Total other expense................................. (3,948,000) (3,007,000) (3,236,000)
------------ ------------ ------------
Income (loss) before taxes on income (benefit) (1,034,000) 3,977,000 50,000
TAXES ON INCOME (BENEFIT)(Note 5)...................... (374,000) 1,575,000 (40,000)
------------ ------------ ------------
NET INCOME (LOSS)...................................... $ (660,000) $ 2,402,000 $ 90,000
============ ============ ============
EARNINGS (LOSS) PER SHARE (Note 6):
Net income (loss)...................................... $ (0.06) $ 0.19 $ 0.01
============ ============ ============
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
18
<PAGE> 19
UNITED FOODS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
<TABLE>
<CAPTION>
COMMON STOCK - CLASS A COMMON STOCK - CLASS B
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, February 28, 1993..................... 7,647,732 $7,648,000 7,097,905 $7,098,000
Net income for the year........................ - - - -
Exchange of Class B common
stock for Class A common stock............... 100 - (100) -
Purchase of treasury stock (Note 6) - - - -
--------- ---------- --------- ----------
Balance, February 28, 1994 7,647,832 7,648,000 7,097,805 7,098,000
Net income for the year........................ - - - -
Exchange of Class B common
stock for Class A common stock............... 100 - (100) -
Purchase of treasury stock (Note 6)............ - - - -
Exercise of options....... .................... - - - -
--------- ---------- --------- ----------
Balance, February 28, 1995 7,647,932 7,648,000 7,097,705 7,098,000
Net loss for the year..... .................... - - - -
Exchange of Class B common
stock for Class A common stock............... 1,525 2,000 (1,525) (2,000)
Purchase of treasury stock (Note 6)............ - - - -
Exercise of options....... .................... - - - -
--------- ---------- --------- ----------
Balance, February 29, 1996..................... 7,649,457 $7,650,000 7,096,180 $7,096,000
========= ========== ========= ==========
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
19
<PAGE> 20
<TABLE>
<CAPTION>
TREASURY STOCK
-------------------------
ADDITIONAL RETAINED
PAID-IN CAPITAL EARNINGS SHARES AMOUNT TOTAL
- --------------- ------------ --------- ------------- -------------
<S> <C> <C> <C> <C>
$ 8,693,000 $ 39,429,000 1,875,004 $ (5,339,000) $ 57,529,000
- 90,000 - - 90,000
- - - - -
- - 58 - -
- --------------- ------------ --------- ------------- -------------
8,693,000 39,519,000 1,875,062 (5,339,000) 57,619,000
- 2,402,000 - - 2,402,000
- - - - -
- - 1,083,077 (2,588,000) (2,588,000)
(6,000) - (5,000) 13,000 7,000
- --------------- ------------ --------- ------------- -------------
8,687,000 41,921,000 2,953,139 (7,914,000) 57,440,000
- (660,000) - - (660,000)
- - - - -
- - 1,012,569 (2,284,000) (2,284,000)
(43,000) - (30,000) 81,000 38,000
- --------------- ------------ --------- ------------- -------------
$ 8,644,000 $ 41,261,000 3,935,708 $ (10,117,000) $ 54,534,000
=============== ============ ========= ============= =============
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
20
<PAGE> 21
UNITED FOODS, INC.
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 29 OR 28,
--------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ (660,000) $2,402,000 $ 90,000
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation............................................ 7,362,000 6,637,000 6,005,000
Provision for losses on accounts receivable............. 43,000 20,000 50,000
Loss (gain) on disposal of property and equipment....... (34,000) 475,000 113,000
Writedown of property held for disposal................. - 300,000 -
Deferred income taxes................................... (943,000) (292,000) (249,000)
Change in operating assets and liabilities:
Accounts and notes receivable......................... 783,000 (1,378,000) 197,000
Inventories........................................... (2,735,000) (4,957,000) 4,532,000
Refundable income taxes............................... - 959,000 263,000
Prepaid expenses and miscellaneous.................... 469,000 (695,000) (50,000)
Other assets.......................................... 716,000 228,000 1,105,000
Income taxes payable.................................. (536,000) 600,000 -
Accounts payable and accruals......................... 1,407,000 2,237,000 (125,000)
Changes in net assets of discontinued operations 18,000 211,000 4,379,000
Provision for loss on net assets of discontinued
operations............................................ - - 60,000
----------- ----------- ----------
Net cash provided by operating activities............ 5,890,000 6,747,000 16,370,000
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................................... (12,064,000) (11,031,000) (7,931,000)
Proceeds from sale of property and equipment............. 58,000 443,000 1,761,000
Proceeds from involuntary conversion..................... - - 3,640,000
----------- ----------- ----------
Net cash used by investing activities.............. (12,006,000) (10,588,000) (2,530,000)
----------- ----------- ----------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
21
<PAGE> 22
UNITED FOODS, INC.
STATEMENTS OF CASH FLOWS
(CONCLUDED)
------------------------
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 29 OR 28,
----------------------------------------
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES: ---------- ---------- -----------
Proceeds from long-term borrowings..................... $1,169,000 $1,073,000 $ -
Exercise of stock options.............................. 38,000 7,000 -
Net borrowings under line-of-credit agreement 12,209,000 6,386,000 1,500,000
Reduction of long-term debt............................ (4,439,000) (4,581,000) (12,862,000)
Purchase of treasury stock............................. (2,284,000) (2,588,000) -
---------- ---------- -----------
Net cash provided (used) by financing
activities........................................ 6,693,000 297,000 (11,362,000)
---------- ---------- -----------
NET INCREASE (DECREASE) IN CASH FOR THE
YEAR................................................... 577,000 (3,544,000) 2,478,000
CASH AND CASH EQUIVALENTS, beginning of year............. 452,000 3,996,000 1,518,000
---------- ---------- -----------
CASH AND CASH EQUIVALENTS, end of year................... $1,029,000 $ 452,000 $ 3,996,000
========== ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest............................................... $3,452,000 $2,706,000 $ 3,004,000
Income taxes........................................... $1,157,000 $1,169,000 $ 435,000
</TABLE>
Non-cash investing and financing activities:
In September 1995, the Company purchased the facility it was previously
leasing in Santa Maria, California for $8,000,000 which was financed with
mortgage notes (Note 3).
Capital expenditures of $160,000, $310,000 and $1,469,000 are included in
accounts payable at February 29 or 28, 1996, 1995 and 1994, respectively.
See accompanying summary of accounting policies and notes to financial
statements.
22
<PAGE> 23
UNITED FOODS, INC.
SUMMARY OF ACCOUNTING POLICIES
LINES OF BUSINESS
The Company is principally engaged in the production, marketing and
distribution of food products, primarily frozen vegetables and fresh mushrooms.
Some of the Company's food products are distributed for resale in the
retail market directly to large national grocery chains and through food
brokers to numerous independent food stores located throughout the United
States, both under the Company's brand name and under buyers' labels, and to
military commissaries in the United States and overseas under the Company's
brand name.
The Company also sells certain of its food products, directly and through
food brokers, to institutions located throughout the United States, such as
restaurants, schools, hospitals, hotels, and federal and state government
agencies.
The Company is currently operating six owned facilities in California,
Oregon, Tennessee and Utah. Although production varies with the seasons at the
respective frozen vegetable plants, all the facilities operate during a
substantial part of the year.
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.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company classifies cash
on hand, savings and checking accounts and short-term investments with initial
maturities of less than 90 days as cash equivalents.
INVENTORY VALUATION
Substantially all of the Company's inventories are valued at the lower of
cost (first-in, first-out) or market. Market for finished goods is based on
net realizable value; raw materials and growing crops are based on replacement
cost.
PROPERTY, EQUIPMENT, DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Depreciation and amortization
on property and equipment are computed principally on the straight-line method
for financial reporting purposes over the following estimated useful lives:
DESCRIPTION YEARS
----------- -----
Buildings...................... 5-60
Machinery and equipment........ 3-13
For income tax purposes, depreciation on property and equipment is
computed primarily on accelerated methods.
23
<PAGE> 24
UNITED FOODS, INC.
SUMMARY OF ACCOUNTING POLICIES
(CONCLUDED)
REVENUE RECOGNITION
Sales and related cost of sales are recognized primarily upon shipment of
products.
PRODUCT INTRODUCTION AND MARKETING COSTS
In connection with the introduction of new product lines or the expansion
of its market position in the United States, the Company defers and amortizes
product introduction and related costs over a twelve-month period.
PENSION PLANS
The Company has separate defined contribution pension plans for hourly
non-clerical employees and for salaried and hourly clerical employees. The
Company funds pension costs as accrued.
TAXES ON INCOME
The Company provides for estimated income taxes payable or refundable on
current year income tax returns and for the estimated future tax effects
attributable to temporary differences and carryforwards. Measurement of
deferred income taxes is based on enacted tax laws and tax rates, with the
measurement of deferred income tax assets being reduced by estimated amounts of
tax benefits not likely to be realized.
STOCK OPTIONS
Stock options are granted to certain key employees at the prevailing
market price on the date of the grant. Proceeds from the sale of unissued
common stock under these options are credited to common stock and additional
paid-in capital at the time the options are exercised. If treasury stock is
issued, the Company credits cost of treasury stock and charges additional
paid-in capital for the excess of cost over the option price. The Company
makes no charge to earnings with respect to these options.
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common
shares outstanding during each year. Common stock equivalents in the form of
stock options are also considered in the computation when the effect is
dilutive.
24
<PAGE> 25
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. RECEIVABLES
Activity in the allowance for possible losses is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 29 OR 28,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year................. $ 235,000 $ 215,000 $1,005,000
Charged to expense........................... 43,000 20,000 50,000
Balances written off, net of recoveries...... (18,000) - (840,000)
---------- ---------- ----------
Balance at end of year....................... $ 260,000 $ 235,000 $ 215,000
========== ========== ==========
</TABLE>
NOTE 2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
FEBRUARY 29 OR 28,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Finished products....... $ 36,863,000 $ 35,358,000
Raw materials........... 3,129,000 2,296,000
Growing crops........... 1,948,000 2,008,000
Merchandise and supplies 1,159,000 702,000
------------ ------------
$ 43,099,000 $ 40,364,000
============ ============
</TABLE>
25
<PAGE> 26
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
FEBRUARY 29 OR 28,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
6.97% term note, payable in quarterly installments of $643,000, plus
interest, through July 1999, collateralized by certain trade
receivables, inventory, farms and equipment located in California,
Oregon and Utah............................................................. $ 9,000,000 $11,571,000
10% term note, payable in monthly installments of $161,000 including
interest, through August 2002, collateralized by certain plant and
equipment located in Bells, Tennessee....................................... 8,965,000 9,950,000
9.25% term notes, payable in monthly installments aggregating
$82,000 including interest through October 2010, collateralized by
certain real estate and equipment located in California..................... 7,916,000 -
6.48% term note, payable in quarterly installments of $179,000, plus
interest through October 1999, collateralized by certain real estate
and equipment located in West Tennessee..................................... 2,427,000 3,141,000
Revolving credit note to bank, collateralized by certain trade
receivables and inventories; borrowing limit $23,000,000, due June
1998, with interest at the bank's prime rate (8.25% at February 29,
1996)....................................................................... 17,095,000 4,886,000
Revolving credit note to bank, collateralized by certain trade
receivables, inventory, farms and equipment located in California,
Oregon and Utah, borrowing limit of $3,000,000 due August 1998,
with interest at 1.3% over the Term Federal Funds rate (6.9485% at
February 29, 1996).......................................................... 3,000,000 3,000,000
Deferred compensation agreements and miscellaneous notes 2,914,000 1,830,000
----------- -----------
Totals........................................................................ 51,317,000 34,378,000
Less current maturities....................................................... (4,667,000) (4,302,000)
----------- -----------
Long-term debt, less current maturities....................................... $46,650,000 $30,076,000
=========== ===========
</TABLE>
26
<PAGE> 27
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. LONG-TERM DEBT (CONTINUED)
Principal payments required to be made for each of the next five fiscal
years and thereafter are summarized as follows:
<TABLE>
<S> <C> <C>
1997................................. $ 4,667,000
1998................................. 4,819,000
1999................................. 25,038,000
2000................................. 3,398,000
2001................................. 2,017,000
After 2001........................... 11,378,000
-----------
Total................................ $51,317,000
===========
</TABLE>
The terms of various notes include certain negative covenants which
provide for, among other things, restrictions relating to the maintenance of
minimum levels of working capital and equity, payment of dividends and the
incurrence of additional indebtedness. Under the most restrictive of these
provisions, retained earnings of $34,405,000 is restricted at February 29,
1996.
NOTE 4. COMMON STOCK
Each Class B common share is convertible into one share of Class A common
stock at the holders' election. Holders of the Class A common stock are
entitled to a preference dividend of $.025 per share for any quarter and each
preceding quarter of the Company's fiscal year before the holders of the Class
B common stock are entitled to any regular cash dividend. With respect to
election of directors, holders of Class A common stock are entitled to elect
25% of the directors, and holders of Class B common stock are entitled to elect
the remaining directors. On matters requiring the classes to vote together,
the Class A holders are entitled to 1/10 vote per share and holders of Class B
common stock are entitled to one vote per share.
The Company has an incentive stock option plan for granting key employees
options to purchase shares of the Company's Class A common stock. The exercise
price of the incentive stock options is the fair market value of the Class A
common stock on the date the option is granted. Options are exercisable upon
issuance and expire up to ten years from the date granted.
At February 29, 1996, 1,328,500 Class A common shares were reserved for
issuance of options and unexercised outstanding options for the purchase of
889,384 shares as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
------ ------------
<S> <C> <C>
Outstanding, February 28, 1993 989,384 $1.25-1.375
Cancelled..................... (65,000) 1.25-1.375
-------
Outstanding, February 28, 1994 924,384 1.25
Exercised..................... (5,000) 1.25
-------
Outstanding, February 28, 1995 919,384 1.25
Exercised..................... (30,000) 1.25
-------
Outstanding, February 29, 1996 889,384 1.25
=======
</TABLE>
27
<PAGE> 28
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5. TAXES ON INCOME
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 29 OR 28,
-----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................... $498,000 $1,625,000 $220,000
State..................... 71,000 242,000 (11,000)
--------- ---------- --------
569,000 1,867,000 209,000
--------- ---------- --------
Deferred:
Federal................... (868,000) (261,000) (222,000)
State..................... (75,000) (31,000) (27,000)
--------- ---------- --------
(943,000) (292,000) (249,000)
--------- ---------- --------
Income tax expense (benefit) $(374,000) $1,575,000 $(40,000)
========= ========== ========
</TABLE>
The components of the net deferred income tax assets and liabilities
consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 29 OR 28,
---------------------
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....... $766,000 $1,272,000
Jobs and other tax credit carryforwards 3,445,000 2,821,000
Inventory overhead (UCR adjustment).... 659,000 655,000
Accrued vacation....................... 475,000 447,000
Deferred compensation.................. 1,072,000 650,000
Charitable contributions carryforward.. - 249,000
Other.................................. 799,000 753,000
--------- ----------
Total deferred income tax assets....... 7,216,000 6,847,000
--------- ----------
</TABLE>
28
<PAGE> 29
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5. TAXES ON INCOME (CONTINUED)
<TABLE>
<CAPTION>
FEBRUARY 29 OR 28,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Deferred income tax liabilities:
Fixed asset basis difference............... (10,873,000) (11,019,000)
LIFO spread adjustment..................... (313,000) (625,000)
Product introduction allowances............ (254,000) (354,000)
Other...................................... (168,000) (184,000)
----------- -----------
Total deferred income tax liabilities...... (11,608,000) (12,182,000)
----------- -----------
Net deferred income tax liabilities........ (4,392,000) (5,335,000)
Current deferred income tax asset.......... 777,000 557,000
----------- -----------
Net long-term deferred income tax liability $(5,169,000) $(5,892,000)
=========== ===========
</TABLE>
The effective tax rate on income before taxes on income from operations is
different from the federal statutory tax rate. The following summary reconciles
taxes at the federal statutory tax rate with the effective rate:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 29 OR 28,
-----------------------------
1996 1995 1994
PERCENT PERCENT PERCENT
------- ------- -------
<S> <C> <C> <C>
Taxes on income at statutory rate............. 34.0 34.0 34.0
Increase (reduction) resulting from:
State income taxes, net of federal tax benefit 0.3 3.5 (50.0)
Fuels and jobs tax credits.................... 3.2 (1.0) (150.3)
Other items................................... (1.3) 3.1 86.3
---------- ---------- ----------
Taxes on income (benefit) at effective rate... 36.2 39.6 (80.0)
========== ========== ==========
</TABLE>
Approximately $1,742,000 in tax basis federal operating loss carryforwards
remain at February 29, 1996. The carryforwards expire $1,656,000 in 2007 and
$86,000 in 2008.
29
<PAGE> 30
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 6. EARNINGS PER SHARE
Earnings per share of common stock and common stock equivalents have been
computed using 11,470,173 shares in 1996, 12,480,161 shares in 1995, and
13,123,565 shares in 1994, which represent the weighted average number of
shares of Class A and Class B common stock required to be recognized during the
respective periods. The effect of shares issuable under the stock option plan
was excluded for 1996 as the effect would be anti-dilutive, and were included
in computing the weighted average number of shares for 1995 and 1994.
In May 1994, the Company commenced a tender offer, which was completed in
June 1994, to repurchase 956,401 shares of Class A and 126,674 shares of Class
B common stock at a cost of $2.25 per share, plus expenses of approximately
$150,000. In November 1995, the Company purchased 831,169 shares of Class A
and 181,400 shares of Class B common stock at a cost of $2.25 per share, plus
expenses of approximately $5,000. The Company funded the purchases of these
shares from borrowings under its $23,000,000 revolving credit facility.
NOTE 7. LEASES
The Company leases certain property and equipment under noncancellable
leases which expire at various dates to 2013. In most cases, management
expects that in the normal course of business, leases that expire will be
renewed or replaced by other leases.
The future minimum lease payments required under operating leases that
have initial or remaining noncancellable terms in excess of one year were as
follows:
<TABLE>
<CAPTION>
YEAR ENDING FEBRUARY 28 OR 29, OPERATING LEASES
- ------------------------------ ----------------
<S> <C>
1997.......................... $ 2,792,000
1998.......................... 2,570,000
1999.......................... 2,269,000
2000.......................... 2,201,000
2001.......................... 2,025,000
After 2001.................... 4,398,000
-----------
Total minimum lease payments.. $16,255,000
===========
</TABLE>
Rent expense under operating leases used in continuing operations amounted
to $4,066,000, $4,212,000 and $3,623,000 in fiscal 1996, 1995 and 1994,
respectively.
Certain leases contain renewal options and some have purchase options, and
generally provide that the Company shall pay for insurance, taxes and
maintenance.
30
<PAGE> 31
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 8. EMPLOYEE BENEFIT PLANS
A. PENSION PLANS
The Company has a defined contribution pension plan for hourly
non-clerical employees. Contributions to the plan are based upon hours worked
during the plan year and participants may make voluntary contributions to the
plan of up to 10% of their compensation (as defined). The Company pays all
administrative expenses related to the plan. Costs of the plan charged to
operations for fiscal 1996, 1995 and 1994 amounted to approximately $492,000,
$445,000, and $421,000, respectively.
The Company also provides either an unfunded management retirement
compensation plan or a funded defined contribution pension plan for salary and
hourly clerical employees. Company contributions to the plans are discretionary
but may not exceed 15% of participants' compensation. Participants may make
voluntary contributions up to 10% and 25% of their compensation (as defined) to
the funded and unfunded plans, respectively. Costs of these plans charged to
operations for fiscal 1995 and 1994 amounted to approximately $317,000 and
$34,000, respectively. No costs were charged to operations for fiscal 1996.
B. INCENTIVE PLANS
The Company has an incentive compensation plan which covers 43 key
employees. The costs of the plan are computed in accordance with a formula
which incorporates return on average assets and return on equity. Costs of the
plan charged to operations for fiscal 1996, 1995 and 1994 were approximately
$126,000, $484,000 and $136,000, respectively.
C. OTHER BENEFIT PLANS
The Company also has two deferred compensation plans which permit
directors and certain management employees to defer portions of their
compensation and earn a guaranteed interest rate on the deferred amounts. The
salaries, which have been deferred since the inception of the plans, have been
accrued and the primary expense, other than salaries, related to these plans is
interest on the deferred amounts. Interest expense during fiscal 1996, 1995
and 1994 includes $139,700, $69,900 and $17,500, respectively, related to these
plans.
During fiscal 1995, the Company approved a non-contributory, unqualified
supplemental retirement plan for eight officers whereby a calculated amount is
held in a deferred salary account for each covered officer. The calculation
provides an amount sufficient to adjust the officers' annual United Foods,
Inc.-sourced after income tax earnings for 1993 and each year thereafter to the
level it would have been using 1992 federal tax rates, assuming standard
deductions and no other income. The deferred salary will be paid in
approximate equal installments over ten years at the later of such officer's
date of disability as defined, termination from the Company, or 65th birthday.
The expense for this plan in fiscal 1996 and 1995 was $378,400 and $522,900,
respectively.
The Company has included $2,336,000 and $1,378,000 in long-term debt at
February 29, 1996 and February 28, 1995, respectively, to reflect its liability
under these unfunded plans.
31
<PAGE> 32
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 9. COMMITMENTS AND CONTINGENCIES
A. MAJOR CUSTOMER
Sales to one of the Company's customers totaled $20,977,000, $21,370,000
and $20,594,000, representing 10.9%, 11.2% and 11.7% of total Company revenues
in fiscal 1996, 1995 and 1994, respectively.
B. LEGAL PROCEEDINGS
There are several lawsuits against the Company on a variety of matters.
While it is not feasible to predict the ultimate outcome of these matters with
certainty, based on evaluations of the facts and on advice of counsel handling
the defense of these matters, the Company does not believe their outcome will,
in the aggregate, have a material adverse effect on its financial position or
its results of operations.
C. SUPPLY AGREEMENTS
The Company has entered into two multi-year reciprocal supply agreements
with other food processing companies. Through these agreements the Company
procures frozen vegetables to meet production and inventory requirements.
Also, the Company sells frozen vegetables processed at the Company's Tennessee
and California facilities to the other food processors.
D. WORKERS' COMPENSATION
The Company is self-insured for workers' compensation claims up to
$300,000 each. Provisions for expected future payments are accrued based on
the Company's estimate of its aggregate liability for all open claims. The
Company has secured its liability for potential workers' compensation claims in
the states of California and Oregon by obtaining a standby letter of credit and
a bond in the amount of approximately $1,250,000 and $300,000, respectively.
32
<PAGE> 33
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
NOTE 10. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments bearing a variable interest rate, it is presumed
that recorded book values are reasonable estimates of fair value. For all
other financial instruments, the following methods and assumptions are used to
estimate fair values:
Cash and cash equivalents, receivables, accounts payable and accruals -
Recorded book values are a reasonable estimate of fair value.
Long-term debt - Current market values for debt instruments with fixed
interest rates are estimated based on borrowing rates currently available to
the Company for loans with similar terms. At February 29, 1996, the estimated
fair value of debt instruments with fixed interest rates was approximately
$28,968,000 as compared with the carrying value of such instruments of
$28,308,000.
The remaining assets and liabilities of the Company are not considered
financial instruments and have not been valued differently than is customary
under historical cost accounting.
NOTE 11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
------------------------------------------------------
YEAR ENDED FEBRUARY 29, 1996: 1ST 2ND 3RD 4TH
- ----------------------------- --- --- --- ---
<S> <C> <C> <C> <C>
Revenues..................... $44,819 $39,885 $52,847 $54,163
Gross profit................. 9,176 7,396 8,483 11,316
Income (loss) from
operations before taxes on
income (benefit)............. 523 (914) (1,147) 504
Net income (loss)............ 316 (552) (712) 288
EARNINGS (LOSS) PER SHARE OF
COMMON STOCK AND COMMON
STOCK EQUIVALENTS:
Net income (loss)............ 0.03 (0.05) (0.06) 0.03
YEAR ENDED FEBRUARY 28, 1995:
- -----------------------------
Revenues..................... $44,428 $44,061 $49,632 $52,135
Gross profit................. 10,173 9,932 10,440 10,951
Income from operations
before taxes on income....... 1,538 888 876 675
Net income................... 946 529 513 414
EARNINGS PER SHARE OF COMMON
STOCK AND COMMON STOCK
EQUIVALENTS:
Net income................... 0.07 0.04 0.04 0.03
</TABLE>
33
<PAGE> 34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
For information concerning this item, see "Election of Directors" and
Executive Officers" set forth in the 1996 Proxy Statement which is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
For information concerning this item, see "Compensation of Directors and
Executive Officers" set forth in the 1996 Proxy Statement which is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
For information concerning this item, see "Security Ownership" set forth
in the 1996 Proxy Statement which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning this item, see "Certain Relationships" set
forth in the 1996 Proxy Statement which is incorporated herein by reference.
34
<PAGE> 35
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
FINANCIAL STATEMENTS INCLUDED IN PART II OF THIS REPORT
Report of Independent Certified Public Accountants
Balance Sheets at February 29, 1996 and February 28, 1995.
Statements of Operations for the years ended February 28 or 29, 1996, 1995
and 1994.
Statements of Stockholders' Equity for the years ended February 28 or 29,
1996, 1995 and 1994.
Statements of Cash Flows for the years ended February 28 or 29, 1996, 1995
and 1994.
Summary of Accounting Policies
Notes to Financial Statements
FINANCIAL STATEMENT SCHEDULES INCLUDED IN PART IV OF THIS REPORT
Schedules have not been filed because the conditions requiring the filing
do not exist or the required information is given in the financial statements,
including the notes thereto.
35
<PAGE> 36
EXHIBITS INCLUDED IN PART IV OF THIS REPORT
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of United Foods, Inc., as amended, Exhibit
3.1 to the Annual Report on Form 10-K of United Foods, Inc., filed for the
fiscal year ended February 28, 1994, is incorporated by reference herein.
3.2 By-Laws of United Foods, Inc., as amended, Exhibit 3.2 to the Annual
Report on Form 10-K of United Foods, Inc. filed for the fiscal year ended
February 28, 1993, is incorporated by reference herein.
10.1 The 1987 Incentive Stock Option Plan of United Foods, Inc. Exhibit 10.1 to
the Annual Report on Form 10-K of United Foods, Inc., filed for the fiscal
year ended February 28, 1994, is incorporated by reference herein.
10.2 Revolving Credit Agreement between United Foods, Inc. and Cooperatieve
Centrale Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland", dated
August 20, 1992, Exhibit 10.2 to the Annual Report on Form 10-K of United
Foods, Inc. filed for the fiscal year ended February 28, 1993, is
incorporated by reference herein.
10.3 Term Loan Agreement between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland", dated August 20,
1992, Exhibit 10.3 to the Annual Report on Form 10-K of United Foods, Inc.
filed for the fiscal year ended February 28, 1993, is incorporated by
reference herein.
10.4 Loan Agreement, Term Loan Note and Security Agreement between First
American National Bank and United Foods, Inc., all dated December 3, 1992,
Exhibit 10.4 to the Annual Report on Form 10-K of United Foods, Inc. filed
for the fiscal year ended February 28, 1993, is incorporated by reference
herein.
10.5 First Amendment, dated January 11, 1993, to each of that certain Term Loan
Agreement and that certain Revolving Credit Agreement, each dated August
20, 1992 between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland", Exhibit 10.5 to
the Annual Report on Form 10-K of United Foods, Inc. filed for the fiscal
year ended February 28, 1993, is incorporated by reference herein.
10.6 Loan Agreement, Revolving Credit Note and Security Agreement between First
American National Bank and United Foods, Inc., all dated April 7, 1993,
Exhibit 10.6 to the Annual Report on Form 10-K of United Foods, Inc. filed
for the fiscal year ended February 28, 1993, is incorporated by reference
herein.
10.7 Second Amendment, dated October 4, 1993, to each of that certain Term Loan
Agreement and that certain Revolving Credit Agreement, each dated August
20, 1992 between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland", Exhibit 10.7 to
the Annual Report on Form 10-K of United Foods, Inc. filed for the fiscal
year ended February 28, 1994, is incorporated by reference herein.
10.8 Third Amendment, dated February 14, 1994, to each of that certain Term
Loan Agreement and that certain Revolving Credit Agreement, each dated
August 20, 1992 between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland", Exhibit 10.8 to
the Annual Report on Form 10-K of United Foods, Inc. filed for the fiscal
year ended February 28, 1994, is incorporated by reference herein.
10.9 First Amendment, dated June 29, 1994, to that certain Term Loan Agreement
between First American National Bank and United Foods, Inc., dated
December 3, 1992 Exhibit 10.9 to the Annual Report on Form 10-K of United
Foods, Inc. filed for the fiscal year ended February 28, 1995, is
incorporated by reference herein.
</TABLE>
36
<PAGE> 37
EXHIBITS INCLUDED IN PART IV OF THIS REPORT - CONCLUDED
<TABLE>
<S> <C>
10.10 First Amendment dated June 29, 1994, to that certain Revolving Loan
Agreement between First American National Bank and United Foods, Inc.,
dated April 7, 1993 Exhibit 10.10 to the Annual Report on Form 10-K of
United Foods, Inc. filed for the fiscal year ended February 28, 1995, is
incorporated by reference herein.
10.11 Fourth Amendment, dated August 19, 1994, to that certain Revolving Credit
Agreement, between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", dated August 29,
1992 Exhibit 10.11 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 28, 1995, is incorporated
by reference herein.
10.12 Second Amendment dated June 1, 1995, to that certain Revolving Loan
Agreement between First American National Bank and United Foods, Inc.,
dated April 7, 1993.
10.13 Modification dated June 21, 1995, to that certain Revolving Loan
Agreement between First American National Bank and United Foods, Inc.,
dated April 7, 1993.
10.14 Third Amendment dated September 1, 1995, to that certain Revolving Loan
Agreement between First American National Bank and United Foods, Inc.,
dated April 7, 1993.
10.15 Modification dated December 31, 1995, to that certain Revolving Loan
Agreement between First American National Bank and United Foods, Inc.,
dated April 7, 1993.
10.16 Fifth Amendment, dated June 29, 1995, to that certain Revolving Credit
Agreement, between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", dated August 29,
1992.
10.17 Amendment, dated August 1, 1995, to each of that certain Term Loan
Agreement and that certain Revolving Credit Agreement, each dated August
20, 1992 between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B. A., "Rabobank Nederland".
10.18 Note Purchase Agreement between United Foods, Inc. and Northwest National
Life Insurance Company, Northern Life Insurance Company, The North
Atlantic Life Insurance Company, Washington Square Capital, Inc.,
Commercial Union Life Insurance Company of America, Minnesota Mutual Life
Insurance Company and Commercial Union Life Insurance Company of New York
dated September 29, 1995.
11 Computation of earnings per share.
27 Financial Data Schedule (for SEC use only)
</TABLE>
REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter ended
February 29, 1996.
37
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UNITED FOODS, INC.
May 23, 1996 By /s/ C. W. Gruenewald, II
------------------------
C. W. Gruenewald, II
Director, Senior Vice President
Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------- -------------------------- ------------
<S> <C> <C>
/s/ James I. Tankersley Chairman of the Board May 23, 1996
- -----------------------
James I. Tankersley
/s/ Daniel B. Tankersley Vice Chairman of the Board May 23, 1996
- ------------------------ and Secretary
Daniel B. Tankersley
/s/ B. M. Ennis President May 23, 1996
- ------------------------
B. M. Ennis
/s/ Joseph A. Geary Director May 23, 1996
- ------------------------
Joseph A. Geary
/s/ Darla T. Darnall Director May 23, 1996
- ------------------------
Darla T. Darnall
/s/ Julia T. Wells Director May 23, 1996
- ------------------------
Julia T. Wells
/s/ Kelle T. Northern Director May 23, 1996
- ------------------------
Kelle T. Northern
/s/ John S. Wilder Director May 23, 1996
- ------------------------
John S. Wilder
</TABLE>
38
<PAGE> 39
UNITED FOODS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
3.1 Certificate of Incorporation of United Foods, Inc., as amended, Exhibit
3.1 to the Annual Report on Form 10-K of United Foods, Inc., filed for
the fiscal year ended February 28, 1994, is incorporated by reference
herein.
3.2 By-Laws of United Foods, Inc., as amended, Exhibit 3.2 to the Annual
Report on Form 10-K of United Foods, Inc. filed for the fiscal year
ended February 28, 1993, is incorporated by reference herein.
10.1 The 1987 Incentive Stock Option Plan of United Foods, Inc. Exhibit 10.1
to the Annual Report on Form 10-K of United Foods, Inc., filed for the
fiscal year ended February 28, 1994, is incorporated by reference
herein.
10.2 Revolving Credit Agreement between United Foods, Inc. and Cooperatieve
Centrale Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland", dated
August 20, 1992, Exhibit 10.2 to the Annual Report on Form 10-K of
United Foods, Inc. filed for the fiscal year ended February 28, 1993,
is incorporated by reference herein.
10.3 Term Loan Agreement between United Foods, Inc. and Cooperatieve
Centrale Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland", dated
August 20, 1992, Exhibit 10.3 to the Annual Report on Form 10-K of
United Foods, Inc. filed for the fiscal year ended February 28, 1993,
is incorporated by reference herein.
10.4 Loan Agreement, Term Loan Note and Security Agreement between First
American National Bank and United Foods, Inc., all dated December 3,
1992, Exhibit 10.4 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 28, 1993, is incorporated
by reference herein.
10.5 First Amendment, dated January 11, 1993, to each of that certain Term
Loan Agreement and that certain Revolving Credit Agreement, each dated
August 20, 1992 between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland", Exhibit 10.5 to
the Annual Report on Form 10-K of United Foods, Inc. filed for the
fiscal year ended February 28, 1993, is incorporated by reference
herein.
10.6 Loan Agreement, Revolving Credit Note and Security Agreement between
First American National Bank and United Foods, Inc., all dated April 7,
1993, Exhibit 10.6 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 28, 1993, is incorporated
by reference herein.
10.7 Second Amendment, dated October 4, 1993, to each of that certain Term
Loan Agreement and that certain Revolving Credit Agreement, each dated
August 20, 1992 between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland, Exhibit 10.7 to
the Annual Report on Form 10-K of United Foods, Inc. filed for the
fiscal year ended February 28, 1994, is incorporated by reference
herein.."
10.8 Third Amendment, dated February 14, 1994, to each of that certain Term
Loan Agreement and that certain Revolving Credit Agreement, each dated
August 20, 1992 between United Foods, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenlee nbank B. A., "Rabobank Nederland, Exhibit 10.8 to
the Annual Report on Form 10-K of United Foods, Inc. filed for the
fiscal year ended February 28, 1994, is incorporated by reference
herein.."
</TABLE>
39
<PAGE> 40
UNITED FOODS, INC.
INDEX TO EXHIBITS
(CONCLUDED)
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ---------------------------------------------------------------------------------------------------------------- ----
<S> <C> <C>
10.9 First Amendment, dated June 29, 1994, to that certain Term Loan Agreement between First American National
Bank and United Foods, Inc., dated December 3, 1992 filed for the fiscal year ended February 28, 1995, is
incorporated by reference herein.
10.10 First Amendment dated June 29, 1994, to that certain Revolving Loan Agreement between First American
National Bank and United Foods, Inc., dated April 7, 1993 filed for the fiscal year ended February 28,
1995, is incorporated by reference herein.
10.11 Fourth Amendment, dated August 19, 1994, to that certain Revolving Credit Agreement, between United Foods,
Inc. and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", dated August 29, 1992
filed for the fiscal year ended February 28, 1995, is incorporated by reference herein.
10.12 Second Amendment dated June 1, 1995, to that certain Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993.
10.13 Modification dated June 21, 1995, to that certain Revolving Loan Agreement between First American National Bank 42
and United Foods,Inc., dated April 7, 1993. 45
10.14 Third Amendment dated September 1, 1995, to that certain Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993. 48
10.15 Modification dated December 31, 1995, to that certain Revolving Loan Agreement between First American National Bank
and United Foods, Inc., dated April 7, 1993. 51
10.16 Fifth Amendment, dated June 29, 1995, to that certain Revolving Credit Agreement, between United Foods, Inc. and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", dated August 29, 1992. 54
10.17 Amendment, dated August 1, 1995, to each of that certain Term Loan Agreement and that certain Revolving Credit
Agreement, each dated August 20, 1992 between United Foods, Inc. and Cooperatieve Centrale Raiffeisen-Boerenleenbank
B. A., "Rabobank Nederland". 58
10.18 Note Purchase Agreement between United Foods, Inc. and Northwest National Life Insurance Company, Northern Life
Insurance Company, The North Atlantic Life Insurance Company, Washington Square Capital, Inc., Commercial Union Life
Insurance Company of America, Minnesota Mutual Life Insurance Company and Commercial Union Life Insurance Company of
New York dated September 29, 1995. 63
11 Computation of earnings per share. 82
27 Financial Data Schedule (for SEC use only)
</TABLE>
40
<PAGE> 1
EXHIBIT 10. 12
SECOND AMENDMENT DATED JUNE 1, 1995, TO THAT CERTAIN REVOLVING
LOAN AGREEMENT BETWEEN FIRST AMERICAN NATIONAL BANK AND UNITED
FOODS, INC., DATED APRIL 7, 1993.
41
<PAGE> 2
SECOND AMENDMENT TO REVOLVING LOAN AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING LOAN AGREEMENT (the "Agreement") made
and entered into as of June 1, 1995, by and between FIRST AMERICAN NATIONAL
BANK, a national banking association organized and existing under the statutes
of the United States of America (hereinafter "Lender"), and UNITED FOODS, INC.,
a corporation organized and existing under the laws of the state of Delaware
("Borrower").
WITNESSETH:
WHEREAS, Lender and Borrower executed a Loan Agreement dated as of April
7, 1993 (the "Loan Agreement") pursuant to which the Lender made a Twenty-Three
Million dollar ($23,000,000.00) revolving credit loan to Borrower for the
purpose of providing working capital to the Borrower (the "Revolving Loan");
WHEREAS, the Lender and Borrower have previously amended the Loan
Agreement;
WHEREAS, the Lender and Borrower desire to further modify the Loan
Agreement as hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and other good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged by each of the parties, the parties do mutually agree as follows:
1. The definition of "Revolving Credit Loan Maturity Date" shall be
deleted in its entirety and replaced with the following:
June 1, 1998, provided, however, that the Revolving Credit
Loan Maturity Date may be extended by Lender, at the request of
the Borrower but in Lender's sole and absolute discretion, for one
(1) additional year on each anniversary date of this Agreement.
2. Section 4.1 of the Loan Agreement is hereby deleted in its entirety
and the following paragraph is substituted in lieu thereof:
4.1 The commitment. Subject to the terms and conditions
herein set out, Lender agrees and commits to make loan advances
and issue Letters of Credit to or for the account of the Borrower
from time to time, from the closing Date until the Revolving
Credit Loan Maturity Date, in an aggregate amount of Total
Exposure not to exceed, at any one time outstanding, the lesser of
(a) Thirteen Million Dollars ($13,000,000.00) during the months
of January through May of any year, and Twenty-Three Million
Dollars ($23,000,000.00) during the months of June through
December of any year or (b) the Borrower's Borrowing Base, as
defined in Article I. The amounts of the maximum Commitment
provided in clause (a) of the preceding sentence shall be
decreased by Three Million Dollars ($3,000,000.00) upon the
recordation of a mortgage encumbering the Utah Property.
As amended hereby, the Loan Agreement is confirmed and ratified in all
other respects.
IN WITNESS WHEREOF, this Amendment has been executed on the day and year
first above written.
42
<PAGE> 3
FIRST AMERICAN NATIONAL BANK
By: s/nDavid C. May
------ ------------------------
David C. May
Title: Executive Vice President
UNITED FOODS, INC.
By: s/nCarl W. Gruenewald
------ -----------------------------------
Carl Gruenewald
Title: Senior Vice President,
Chief Financial Officer & Treasurer
43
<PAGE> 1
EXHIBIT 10. 13
MODIFICATION DATED JUNE 21, 1995, TO THAT CERTAIN REVOLVING LOAN AGREEMENT
BETWEEN FIRST AMERICAN NATIONAL BANK AND UNITED FOODS, INC., DATED APRIL 7,
1993.
44
<PAGE> 2
June 21, 1995
Mr. Carl Gruenewald
Senior Vice President and CFO
United Foods, Inc.
Ten Pictsweet Drive
Bells, TN 38006-0119
Re: Modification of the Revolving Credit Cap
Dear Carl:
This letter agreement will modify the $23,000,000.00, Loan Agreement dated
April 7, 1993 and Amended on June 29, 1994, whereby Section 4.1 of the Loan
Agreement is hereby deleted in its entirety and the following paragraph is
substituted in lieu thereof:
4.1 The Commitment. Subject to the terms and conditions herein
set out, Lender agrees and commits to make loan advances and issue
Letters of Credit to or for the account of the Borrower from time
to time, from the Closing Date until the Revolving Credit Loan
Maturity Date, in an aggregate amount t of Total Exposure not to
exceed, at any one time outstanding, the lesser of (a) Thirteen
Million Dollars ($13,000,000.00) during the months of January
through May of any year, and Twenty-Three Million Dollars
($23,000,000.00) during the months of June through December of any
year or (b) the Borrower's Borrowing Base, as defined in Article
I. The amounts of the maximum Commitment provided in clause (a) of
the preceding sentence shall be decreased by Three Million Dollars
($3,000,000.00) upon the recordation of a mortgage encumbering the
Utah Property.
If you are in agreement with this modification please sign below and return one
original to me. I have included a second original for your records. Thank you
for your continued business.
Sincerely,
FIRST AMERICAN NATIONAL BANK
s/nDavid C. May
David C. May
Executive Vice President
45
<PAGE> 3
Mr. Carl Gruenewald
Page Two
We hereby agree to the modifications contained herein on this 22nd day of June,
1995:
UNITED FOODS, INC.
By: s/nCarl W. Gruenewald, II
-----------------------------
Carl W. Gruenewald, II
Senior Vice President and CFO
46
<PAGE> 1
EXHIBIT 10.14
THIRD AMENDMENT DATED SEPTEMBER 1, 1995, TO THAT CERTAIN REVOLVING
LOAN AGREEMENT BETWEEN FIRST AMERICAN NATIONAL BANK AND UNITED
FOODS, INC., DATED APRIL 7, 1993.
47
<PAGE> 2
THIRD AMENDMENT TO REVOLVING LOAN AGREEMENT
THIS THIRD AMENDMENT TO REVOLVING LOAN AGREEMENT (the "Agreement") made
and entered into as of September 1, 1995, by and between FIRST AMERICAN
NATIONAL BANK, a national banking association organized and existing under the
statutes of the United States of America (hereinafter "Lender"), and UNITED
FOODS, INC., a corporation organized and existing under the laws of the state
of Delaware ("Borrower").
WITNESSETH:
WHEREAS, Lender and Borrower executed a Loan Agreement dated as of April
7, 1993 (the "Loan Agreement") pursuant to which the Lender made a Twenty-Three
Million Dollar ($23,000,000.00) revolving credit loan to Borrower for the
purpose of providing working capital to the Borrower (the "Revolving Loan");
WHEREAS, the Lender and Borrower have previously amended the Loan
Agreement;
WHEREAS, the Lender and Borrower desire to further modify the Loan
Agreement as hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and other good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged by each of the parties, the parties do mutually agree as follows:
1. Section 1.43 of the Loan Agreement is hereby deleted in its entirety
and the following paragraph is substituted in lieu thereof:
1.43 Revolving Credit Note. The promissory notes dated April
7, 1993 and September 27, 1995 evidencing the Revolving Credit
Loan and all modifications, extensions and renewals thereof.
2. Section 4.1 of the Loan Agreement is hereby deleted in its entirety and
the following paragraph is substituted in lieu thereof:
4.1 The Commitment. Subject to the terms and conditions
herein set out, Lender agrees and commits to make loan advances
and issue Letters of Credit to or for the account of the Borrower
from time to time, from the Closing Date until the Revolving
Credit Loan Maturity Date, in an aggregate amount of Total
Exposure not to exceed, at any one time outstanding, the lesser of
(a) Twenty-Three Million dollars ($23,000,000.00) (provided that
this amount shall be increased to Twenty-Eight Million Dollars
($28,000,000.00) beginning September 27, 1995 and ending December
31, 1995, returning to Twenty-Three Million Dollars at the end of
such period), or (b) the Borrower's Borrowing Base, as defined in
Article I. The amounts of the maximum Commitment provided in
clause (a) of the preceding sentence shall be decreased by Three
Million Dollars ($3,000,000.00) upon the recordation of a mortgage
encumbering the Utah Property.
3. Section 6.1 (m) of the Loan Agreement is hereby deleted in its
entirety and the following subparagraph is substituted in lieu thereof:
48
<PAGE> 3
(m) Tangible Net Worth. As of the fiscal year end of
February 28, 1995, and thereafter, Borrower shall maintain on a
consolidated basis as of the last day of each fiscal quarter a
Tangible Net Worth of not less than Fifty Million Dollars
($50,000,000.00), adjusted upward by fifty percent (50%) of its net
earnings, and adjusted downward by fifty percent (50%) of its net losses,
and adjusted downward by fifty percent (50%) of the actual amount
expended by the Borrower in repurchasing its stock, as permitted by
Section 6.1(w) hereof, in each case on a cumulative basis during the term
of the Revolving Loan; provided that the adjustment required hereby as a
result of fifty percent (50%) of net losses shall never reduce the
Tangible Net Worth requirement below $50,000,000.00. As used herein, the
term "Tangible Net Worth" means the remainder of (i) all assets of
Borrower, other than intangible assets (including, without limitation,
patents, copyrights, licenses, franchises, goodwill, trade names, trade
secrets and leases other than leases required to be capitalized under
generally accepted accounting principles), minus (ii) Borrower's Debt.
The term "Borrower's Debt" means all liabilities and similar balance
sheet items of Borrower.
4. Section 6.1(w) of the Loan Agreement is hereby deleted in its entirety
and the following subparagraph is substituted in lieu thereof:
6.1(w). Stock Repurchase. Notwithstanding any other
provision of this Loan Agreement, the Borrower shall be permitted
to repurchase its own shares, in an amount equal to the lesser of
(i) one million fifteen thousand (1,015,000) shares or (ii) that
number of shares which can be purchased for Two Million Four
Hundred Thousand Dollars ($2,400,000.00), through the end of the
fiscal year ending February 28, 1996. There shall be no future
stock repurchases of the Borrower's shares by the Borrower without
the Lender's written consent.
As amended hereby, the Loan Agreement is confirmed and ratified in all
other respects.
IN WITNESS WHEREOF, this Amendment has been executed on the day and year
first above written.
FIRST AMERICAN NATIONAL BANK
By: s/nMariah G. Lundberg
------------------------
Mariah G. Lundberg
Title: Assistant Vice President
UNITED FOODS, INC.
By: s/nCarl W. Gruenewald, II
------------------------------------------------
Carl W. Gruenewald, II
Title: Senior Vice President, Chief Financial Officer &
Treasurer
49
<PAGE> 1
EXHIBIT 10.15
MODIFICATION DATED DECEMBER 31, 1995, TO THAT CERTAIN REVOLVING
LOAN AGREEMENT BETWEEN FIRST AMERICAN NATIONAL BANK AND UNITED
FOODS, INC., DATED APRIL 7, 1993.
50
<PAGE> 2
MODIFICATION AND EXTENSION AGREEMENT
THIS AGREEMENT is made and entered into on this 31st day of December,
1995, by and between FIRST AMERICAN NATIONAL BANK, a national banking
association having a place of business in Memphis, Tennessee, party of the
first part (hereinafter called "Bank"), and UNITED FOODS, INC., a Delaware
corporation, party of the second part (hereinafter called "Borrower").
Recitals of Fact
By Security Agreement dated as of April 7, 1993, as modified by
Modification to Security Agreement dated as of September 27, 1995 (the Security
Agreement as so modified shall be referred to as the "Security Agreement"),
Borrower has conveyed to Bank a security interest in certain collateral for the
purpose of securing the payment of the indebtedness in said Security Agreement
specified, said indebtedness being evidenced by a promissory note dated April
7, 1993 (hereinafter "First Note"), in the original principal amount of
Twenty-Three Million Dollars ($23,000,000.00), executed by the Borrower and
payable to the order of the Bank on or before June 1, 1998, and a second
promissory note dated September 27, 1995 (hereinafter the "Second Note"), in
the original principal amount of Five Million Dollars ($5,000,000.00) executed
by the Borrower and payable to the order of the Bank on or before December 31,
1995. Certain terms and conditions for the repayment of the First Note and the
Second Note were set forth in a Revolving Loan Agreement between the Bank and
the Borrower dated April 7, 1993, as subsequently amended, most recently by
that certain Third Amendment to Revolving Loan Agreement dated as of September
1, 1995 (the Loan Agreement as so amended being referred to herein as the "Loan
Agreement").
Borrower and Bank now desire to extend the maturity of the indebtedness
evidenced by the Second Note and to modify certain of its terms. Such changes
also require modification of the Security Agreement and the Loan Agreement.
NOW, THEREFORE, in consideration of the premises as set forth in the
Recitals of Fact, the mutual covenants and agreements hereinafter set out, and
other good and valuable considerations, the receipt and sufficiency of which
are hereby acknowledged, it is agreed by the parties as follows:
Agreements
1. The Second Note shall be modified such that the term "Revolving Credit
Note Maturity Date" used therein shall mean February 29, 1996. The parties
also agree that the maximum amount available under the Second Note shall
decrease, as of December 31, 1995, to Three Million Dollars ($3,000,000.00),
and as of January 31, 1996, to Two Million Dollars ($2,000,000.00). All other
provisions of the Second Note shall remain in full force and effect.
2. The Security Agreement and Loan Agreement shall each be deemed modified
to the extent inconsistent with the modification of the Second Note.
3. The First Note shall not be affected by this agreement.
51
<PAGE> 3
IN WITNESS WHEREOF, the Bank and Borrower have caused this Agreement to be
executed on the day and year first above written.
FIRST AMERICAN NATIONAL BANK
By:s/nMariah G. Lundberg
-----------------------------------
Mariah G. Lundberg
Title:Assistant Vice President
-----------------------------------
ATTEST: UNITED FOODS, INC.
s/nLowell E. Pugh, II By: s/nCarl W. Gruenewald, II
--------------------- -----------------------------------
Lowell E. Pugh, II Carl W. Gruenewald, II
Title: Assistant Secretary Title: Sr. Vice President-Finance Treasurer
--------------------- -----------------------------------
52
<PAGE> 1
EXHIBIT 10.16
FIFTH AMENDMENT, DATED JUNE 29, 1995, TO THAT CERTAIN REVOLVING CREDIT
AGREEMENT, BETWEEN UNITED FOODS, INC. AND COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", DATED AUGUST 29, 1992.
53
<PAGE> 2
AMENDMENT NO. 5
Dated as of June 29, 1995
This AMENDMENT between UNITED FOODS, INC., a Delaware corporation (the
"BORROWER"), and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH (the "Bank").
PRELIMINARY STATEMENTS. The Borrower and the Bank have entered into a
Revolving Credit Agreement dated as of August 20, 1992 as amended by a First
Amendment dated as of January 11, 1993, a Second Amendment dated as of October
4, 1993, a Third Amendment dated as of February 14, 1995 and a Fourth Amendment
dated as of August 19, 1994 (as so amended, said Revolving Credit Agreement
being the "Credit Agreement"; the terms defined in the Credit Agreement being
used herein as therein defined). Each of the Borrower and the Bank wish to
amend the Credit Agreement as hereinafter set forth.
NOW, THEREFORE, the Borrower and the Bank hereby agree as follows:
SECTION 1. Amendment to Credit Agreement. The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
Sections 1.01 and 6.09 of the Credit Agreement are hereby amended by
deleting the date "August 31, 1997" appearing in said Sections and
substituting, in lieu thereof, the date "August 31, 1998".
SECTION 2. Conditions of Effectiveness. This Fifth Amendment shall become
effective when, and only when, the Bank shall have received counterparts of
this Fifth Amendment executed by the Borrower.
SECTION 3. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation.
(b) The execution, delivery and performance by the Borrower of the Fifth
Amendment, and the Credit Agreement, as amended hereby, are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (i) the Borrower's charter or by-laws,
or (ii) law or any contractual restriction binding on or affecting the
Borrower, or result in, or require, the creation of any lien, security interest
or other charge or encumbrance upon or with respect to any of its properties.
(c) No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Borrower of this Fifth Amendment
or the Credit Agreement, as amended hereby.
(d) This Fifth Amendment and the Credit Agreement, as amended hereby,
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms, subject,
however, to the effect on such enforceability of (i) any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and (ii) general principles of equity (regardless
whether such enforceability is considered in a proceeding in equity or at law).
(e) There is no pending or threatened action or proceeding affecting the
Borrower or any of its subsidiaries before any court, governmental agency or
arbitrator, which may materially adversely affect the condition, financial or
otherwise, or operations of the Borrower.
54
<PAGE> 3
(f) No event has occurred and is continuing which constitutes an Event of
Default or would constitute an Event of Default but for the requirement that
notice be given or time elapse or both.
SECTION 4. Reference to and Effect on the Credit Agreement. (a) Upon the
effectiveness of Section 1 hereof, on and after the date hereof, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import shall mean and be a reference to the Credit Agreement as
amended hereby, and each reference in the Note and other Loan Documents to the
Credit Agreement shall mean and be a reference to the Credit Agreement as
amended hereby.
(b) Except as specifically amended above, the Credit Agreement and the
Note shall remain in full force and effect and are hereby ratified and
confirmed in all respects.
(c) The execution, delivery and effectiveness of this Fifth Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Bank under the Credit Agreement, nor constitute a
waiver of any provision of the Credit Agreement.
SECTION 5. Costs, Expenses and Taxes. The Borrower agrees to pay on demand
all costs and expenses of the Bank in connection with the preparation,
execution and delivery of this Fifth Amendment and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel (who may be in-house
counsel) for the Bank with respect thereto and with respect to advising the
Bank as to its rights and responsibilities hereunder and thereunder. In
addition, the Borrower shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Fifth Amendment and other instruments and documents to be delivered hereunder,
and agrees to save the Bank harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes.
SECTION 6. Execution in counterparts. This Fifth Amendment may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute but one and the same instrument.
SECTION 7. Governing Law. This Fifth Amendment shall be governed by, and
construed in accordance with, the laws (without giving effect to the conflicts
of laws principles thereof) of the State of New York.
55
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
UNITED FOODS, INC.
By s/nCarl W. Gruenewald, II
-------------------------------------
Title: Carl W. Gruenewald, II
Sr. Vice President-
Finance Treasurer
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B. A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By s/nStephen Rich
------------------------------------
Authorized: Stephen A. Rich
Vice President
By s/nAugust Braaksma
------------------------------------
Authorized Officer
56
<PAGE> 1
EXHIBIT 10.17
AMENDMENT, DATED AUGUST 1, 1995, TO EACH OF THAT CERTAIN TERM LOAN AGREEMENT
AND THAT CERTAIN REVOLVING CREDIT AGREEMENT, EACH DATED AUGUST 20, 1992 BETWEEN
UNITED FOODS, INC. AND COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B. A.,
"RABOBANK NEDERLAND".
57
<PAGE> 2
AMENDMENT TO CREDIT AGREEMENTS
Dated as of August 1, 1995
This AMENDMENT, dated the date hereof, is made to each of that certain
Term Loan Agreement dated as of August 20, 1992, as amended by a First
Amendment dated as of January 11, 1993, a Second Amendment dated as of October
4, 1993, and a Third Amendment dated as of September 7, 1994 (collectively, the
"Term Loan Agreement"), and that certain Revolving Credit Agreement dated as of
August 20, 1992, as amended by a First Amendment dated as of January 11, 1993,
a Second Amendment dated as of October 4, 1993, a Third Amendment dated as of
February 14, 1994, a Fourth Amendment dated as of August 19, 1994, and a Fifth
Amendment dated as of June 29, 1995 (collectively, the "Revolving Credit
Agreement"; as so amended, the Term Loan Agreement and Revolving Credit
Agreement are collectively hereinafter referred to as the "Credit Agreements";
capitalized terms which are used herein but are not defined herein have the
meanings which the Credit Agreements assign to such terms), between UNITED
FOODS, INC., A DELAWARE CORPORATION (the "Borrower"), and COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH (the
"Bank").
WITNESSETH
WHEREAS, pursuant to the Credit Agreements, the Bank has extended credit
to the Borrower; and
WHEREAS, the parties to the Credit Agreements desire to amend certain
covenants in each of the Credit Agreements.
NOW, THEREFORE, the Borrower and the Bank hereby agree as follows:
SECTION 1. Amendment to Credit Agreements.
(a) Excess Cash Flow Prepayment. Section 1.05(b) of the Term Loan
Agreement is hereby amended and restated in its entirety to read as follows:
"(b) Excess Cash Flow Prepayment. In the event that in any fiscal
year the Borrower's annual projection of net income plus
depreciation available for projected capital expenditures and
maturities of long-term debt is exceeded by actual results by more
than 125%, the Bank, at its option, may require, on the next
succeeding Interest Period maturity date, a mandatory prepayment of
principal on the Term Note by an amount equal to 65% of such excess
(after deducting, from such excess, the purchase price paid in 1995
for the Santa Maria processing facility). Such mandatory
prepayments shall be applied to payments due on the Term Note in
the inverse order of their maturity.
(b) The first, second, third and fourth sentences of Section 4.01(e) of
each Credit Agreement are hereby amended and restated in their entirety to read
as follows:
(e) Tangible Net Worth. As of the fiscal year end of February 28,
1995, and as of the last day of each fiscal quarter thereafter,
Borrower shall maintain on a consolidated basis a Tangible Net
Worth of not less than Forty Nine Million Five Hundred Thousand
Dollars ($49,500,000.00), adjusted upward by fifty percent (50%) of
its net earnings, and adjusted downward by (i) fifty percent (50%)
of its net losses plus (ii) fifty percent (50%) of the actual
amount it expends for the purchase of treasury stock (such
adjustment under this clause (ii) not to exceed $1,200,000.00) in
its 1995-1996 fiscal year. All adjustments shall be on a
cumulative basis during the term of this
58
<PAGE> 3
Agreement; provided, that, after giving effect to the above
described adjustments the Tangible Net Worth shall not be less than
$48,300,000.00."
(c) The first sentence of Section 4.01(f) of each Credit Agreement is
hereby amended and restated in its entirety to read as follows:
"(f) Liabilities to Net Worth Ratio. Maintain on a consolidated
basis, as of the last day of each of its fiscal quarters, a ratio
of Total Liabilities (as defined below) to Tangible Net Worth of
not more than 1.50 to 1, except for each fiscal quarter ending in
August and November, as to which such ratio shall be not more than
1.8 to 1.0, and 2.0 to 1.0, respectively."
(d) Section 4.01(h) of each Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"(h) Capital Expenditures. Not incur, on a consolidated basis, in
any of its fiscal years, capital expenditures (other than
expenditures for normal replacements in the ordinary course of
business and other than the purchase price paid in calendar year
1995 for the Santa Maria processing facility) in excess of an
amount equal to (i) 1.5 multiplied by (ii) total depreciation
recorded during the current fiscal year in accordance with GAAP,
except that in its 1995-1996 fiscal year, such amount shall not be
in excess of (i) 2.0 multiplied by (ii) total depreciation recorded
during the current fiscal year in accordance with GAAP."
SECTION 2. Conditions of Effectiveness. This Amendment shall become
effective when, and only when, the Bank shall have received counterparts of
this Amendment executed by the Borrower.
SECTION 3. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation.
(b) The execution, delivery and performance by the Borrower of this
Amendment, and the Credit Agreement, as amended hereby, are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (i) the Borrower's charter or by-laws,
or (ii) law or any contractual restriction binding on or affecting the
Borrower, or result in, or require, the creation of any lien, security interest
or other charge or encumbrance upon or with respect to any of its properties.
(c) No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Borrower of this Amendment or
the Credit Agreements, as amended hereby.
(d) This Amendment and the Credit Agreements, as amended hereby,
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms, subject,
however, to the effect on such enforceability of (i) any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and (ii) general principles of equity (regardless whether such
enforceability is considered in a proceeding in equity or at law).
(e) There is no pending or threatened action or proceeding affecting the
Borrower or any of its subsidiaries before any court, governmental agency or
arbitrator, which may materially adversely affect the condition, financial or
otherwise, or operations of the Borrower.
(f) No event has occurred and is continuing which constitutes an Event of
Default or would constitute an Event of Default but for the requirement that
notice be given or time elapse or both.
59
<PAGE> 4
SECTION 4. Reference to and Effect on the Credit Agreements. (a) Upon
the effectiveness of Section 1 hereof, on and after the date hereof, each
reference in the Credit Agreements to "this Agreement", "hereunder", "hereof",
"herein" or words of like import shall mean and be a reference to the Credit
Agreements as amended hereby, and each reference in the Notes and the other
Loan Documents to the Credit Agreements shall mean and be a reference to the
Credit Agreements as amended hereby.
(b) Except as specifically amended above, the Credit Agreements and the
Notes shall remain in full force and effect and are hereby ratified and
confirmed in all respects.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Bank under the Credit Agreements, nor constitute a
waiver of any provision of the Credit Agreements.
SECTION 5. Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses of the Bank in connection with the preparation,
execution and delivery of this Amendment and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel (who may be in-house
counsel) for the Bank with respect thereto and with respect to advising the
Bank as to its rights and responsibilities hereunder and thereunder. In
addition, the Borrower shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Amendment and the other instruments and documents to be delivered hereunder,
and agrees to save the Bank harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes.
SECTION 6. Execution in Counterparts. This Amendment may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which taken together shall constitute
but one and the same instrument.
SECTION 7. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws (without giving effect to the conflicts
of laws principles thereof) of the State of New York.
SECTION 8. Consent. The Bank hereby consents to the Borrower's purchase
of treasury stock in an aggregate amount not to exceed $2,400,000.00.
SECTION 9. Final Agreement. This Amendment represents the final
agreement between the parties hereto as to the subject matter hereof and may
not be contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
60
<PAGE> 5
UNITED FOODS, INC.
By s/nCarl W. Gruenewald, II
---------------------------------
Name: Carl W. Gruenewald, II
Title: Sr. Vice President-
Finance Treasurer
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By s/nStephen A. Rich
---------------------------------
Name: Stephen A. Rich
Title: Vice President
By s/nW. Jeffrey Vollack
---------------------------------
Name: W. Jeffrey Vollack
Title: Vice President, Manager
61
<PAGE> 1
EXHIBIT 10.18
NOTE PURCHASE AGREEMENT BETWEEN UNITED FOODS, INC. AND NORTHWEST NATIONAL LIFE
INSURANCE COMPANY, NORTHERN LIFE INSURANCE COMPANY, THE NORTH ATLANTIC LIFE
INSURANCE COMPANY, WASHINGTON SQUARE CAPITAL, INC., COMMERCIAL UNION LIFE
INSURANCE COMPANY OF AMERICA, MINNESOTA MUTUAL LIFE INSURANCE COMPANY AND
COMMERCIAL UNION LIFE INSURANCE COMPANY OF NEW YORK DATED SEPTEMBER 29, 1995.
62
<PAGE> 2
UNITED FOODS, INC.
NOTE PURCHASE AGREEMENT
WITH
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
NORTHERN LIFE INSURANCE COMPANY
THE NORTH ATLANTIC LIFE INSURANCE COMPANY OF AMERICA
WASHINGTON SQUARE CAPITAL, INC.
COMMERCIAL UNION LIFE INSURANCE COMPANY OF AMERICA
MINNESOTA MUTUAL LIFE INSURANCE COMPANY
AND
COMMERCIAL UNION LIFE INSURANCE COMPANY OF NEW YORK
Dated as of September 29, 1995
$8,000,000 9.25% Senior Secured Notes Due 2010
63
<PAGE> 3
EXHIBITS
APPENDIX I - PURCHASERS
EXHIBIT A - FORM OF NOTE
EXHIBIT B - FORM OF DEED OF TRUST
EXHIBIT C - FORM OF SECURITY AGREEMENT
EXHIBIT D - FORM OF OPINION OF COMPANY COUNSEL
64
<PAGE> 4
UNITED FOODS, INC.
NOTE PURCHASE AGREEMENT
Dated as of September 29, 1995
The undersigned, United Foods, Inc., a Delaware corporation (the
"Company") hereby confirms its agreements set forth below with the parties
listed on Appendix I hereto (the "Purchasers").
1. Purchase and Sale of Notes.
(a) The Notes. Subject to the terms and conditions herein, including
without limitation the execution and delivery of the Conveyance Agreement
referred to in paragraph 6(h), the Company will sell to each of the Purchasers
on the date of this Agreement (the "Closing Date"), and each of the Purchasers
will purchase from the Company on the Closing Date, at 100% of the principal
amount thereof, a promissory note of the Company (which, together with any note
or notes issued in substitution therefor, are herein collectively called the
"Notes" and individually a "Note"), in the principal amount specified on
Appendix I hereto, dated the Closing Date. The Notes shall bear interest from
the Closing Date until payment in full of the principal amount thereof at the
rate of 9.25% per annum. The Notes shall be payable as follows: Principal and
interest shall be payable on the first of each month in 180 consecutive equal
monthly installments in the amount of $82,335.39 per month, with such payments
commencing November 1, 1995 through and including October 1, 2010. The Notes
shall be subject to prepayment as hereinafter provided, shall in all respects
be subject to the terms of this Agreement, and shall be substantially in the
form of Exhibit A hereto.
(b) Security. The Notes shall be secured by (i) a deed of trust (the
"Deed of Trust") in substantially the form of Exhibit B hereto, on the real
property described therein, and all improvements thereon (the "Mortgaged
Property"), and (ii) a security interest in certain specified equipment (the
"Equipment"), created by a security agreement (the "Security Agreement") in
substantially the form of Exhibit C hereto. Together, the Deed of Trust and
the Security Agreement shall be referred to as the "Security Documents."
(c) Purchases to be Several. The purchase of each of the Notes by the
respective Purchasers shall be separate and several, but the purchase of each
Note shall be a condition concurrent to the purchase of each other Note.
(d) Default Rate. If all or any portion of the principal amount of or
interest on the Notes or any installment thereof shall not be paid when due,
whether at stated maturity, by acceleration or otherwise, such past-due
principal (and, if so permitted by law, such interest) shall bear interest at a
rate equal to the lower of (i) 11.25% per annum or (ii) the highest rate
permitted by law, from the date of such non-payment until such past-due amount
is paid in full.
(e) Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a Saturday, Sunday or
holiday for banks under the laws of the States of Minnesota, Tennessee or New
York, such payment may be made on the next succeeding business day.
2. Prepayments of the Notes.
(a) Voluntary Prepayments. The Company may, at its option, on any
principal and interest payment date, prepay the Notes in whole or in part (but
if in part only in an amount equal to or greater than $250,000), upon 10 days'
prior written notice to the holders of the Notes.
(b) Manner of Effecting Voluntary Prepayment. In the event the Company
shall give notice of any prepayment in accordance with paragraph 2(a) above,
such notice shall specify the date and amount of proposed
65
<PAGE> 5
prepayment, and thereupon the principal amount of the prepayment, together with
accrued and unpaid interest thereon to the prepayment date, shall become due
and payable on the prepayment date. In the event any prepayment shall be less
than the entire unpaid principal amount of the Notes, the amount of such
prepayment shall be applied pro rata on all Notes on the last maturing required
installment or installments of principal in inverse order of their maturity.
The amount of all other remaining installments of principal and interest shall
not be changed, but the portions of each such installment allocable to
principal and to interest shall be recalculated based upon the remaining unpaid
principal amount of the Notes.
(c) Mandatory Prepayments. The Notes shall be subject to mandatory
prepayment, in part, in the amounts and in accordance with paragraphs 9 and 10
hereof, subject to the terms and conditions set forth therein.
3. Representations and Warranties. The Company represents and warrants to
the Purchasers as follows:
(a) Corporate Organization. The Company is organized and existing and in
good standing under the laws of the State of Delaware, and is duly qualified to
do business and is in good standing under the laws of each State where the
nature of the business done or property owned require such qualification and
where the failure to so qualify would have a material adverse effect upon the
Company. The Company does not own, directly or indirectly, more than 1% of the
total outstanding capital stock of any class of any corporation. The Company
does not currently have any Subsidiaries. As used herein, the term
"Subsidiary" or "Subsidiaries" shall mean any corporation or corporations 100%
of the outstanding capital stock of every class of which is owned, directly or
indirectly, by the Company or one or more of its Subsidiaries.
(b) No Prohibition. There is no provision in the Certificate of
Incorporation of the Company, or in its bylaws or in any indenture, contract or
agreement to which the Company is a party or by which it is bound, which
prohibits the execution and delivery by the Company of this Agreement, the
Notes, or the Security Documents or the performance or observance by the
Company of any of the terms or conditions of this Agreement, the Notes or the
Security Documents.
(c) Due Authorization. The execution and delivery of this Agreement, the
Notes and the Security Documents have been duly authorized by all necessary
corporate action of the Company.
(d) Legal Proceedings. There are no actions, suits, or proceedings
pending or, to the knowledge of the Company, threatened against the Company or
any property of the Company in any court or before any federal, state,
municipal or other governmental agency, which, if decided adversely to the
Company, would have a material adverse effect upon the Company. The Company is
not in default with respect to any order of any court or governmental agency.
(e) Financial Statements. The Company has furnished to the Purchasers a
balance sheet and statements of operations, stockholders' equity and cash flows
of the Company for the fiscal year ended February 28, 1995, certified by BDO
Seidman, independent certified public accountants, and an unaudited balance
sheet and statements of operations, stockholders' equity and cash flows of the
Company for the three months ended May 31, 1995. Said financial statements
fairly present the financial condition of the Company at the dates thereof and
the results of operations of the Company for the periods indicated, all in
conformity with generally accepted accounting principles consistently followed
through the periods involved. There have been no material adverse changes in
the condition, financial or otherwise, of the Company since the latest balance
sheet referred to. There are no material liabilities of the Company,
contingent or otherwise, that are not included on the February 28, 1995
financial statements that have been furnished to the Purchasers, including,
without limitation, tax liabilities.
(f) Title to Assets. Except as disclosed to the Purchasers in writing
prior to the date of this Agreement, the Company has good and marketable title
in fee simple to all real property and good title to all personal property it
purports to own, including (except as they have been affected by transactions
in the ordinary
66
<PAGE> 6
course of business) all properties and assets reflected in the most recent
balance sheet referred to in paragraph 3 (e) hereof. Except as disclosed to
the Purchasers in writing prior to the date of this Agreement, in the case of
property used in its trades or businesses but not owned by it, the Company has
a valid, binding and enforceable right to use such property pursuant to a
written lease, license or other agreement. The Company has not granted any
liens or security interests upon any of the Mortgaged Property or the
Equipment, or taken any action that would result in the imposition of any lien,
mortgage, pledge, charge or encumbrance on the Mortgaged Property or the
Equipment, other than Permitted Liens as defined in paragraph 5(e).
(g) Securities Matters. Neither the Company nor any agent acting on the
behalf of the Company has offered the Notes, or any part thereof, or any
similar obligation for sale to, or solicited any offers to buy such Notes, or
any part thereof, or any similar obligation from, any person or persons so as
to bring the issue or sale of the Notes within the provisions of Section 5 of
the Securities Act of 1933, as amended, and the Company will not sell or offer
for sale any note or any similar obligation of the Company to, or solicit any
offer to buy any similar obligation of the Company from, any person or persons
so as to bring the issue or sale of the Notes within the provisions of Section
5 of the Securities Act of 1933, as amended.
(h) Licenses and Permits. The Company has procured and is now in
possession of and in substantial compliance with all licenses or permits
(including, without limitation, environmental permits) required by federal,
state or local laws for the operation of the business of the Company on the
Mortgaged Property except for such licenses and permits the absence of which
would not have a material adverse effect upon the Company or the Mortgaged
Property.
(i) No Defaults on Indebtedness. The Company is not in default in the
payment of the principal of or interest on any indebtedness for borrowed money
nor is in default under any instrument or agreement under and subject to which
any indebtedness for borrowed money having an original principal amount at
least equal to $1,000,000 has been issued, and no event has occurred under the
provisions of any such instrument or agreement which with or without the
passing of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.
(j) ERISA Matters. Each qualified retirement plan (a "Qualified Plan") of
the Company is in substantial compliance with all applicable provisions of
ERISA and all other laws, state or federal, applicable to such employees'
retirement plan. As used herein, the term "ERISA" means the Employee
Retirement Income Security Act of 1974 and the regulations adopted pursuant
thereto. No such Qualified Plan has incurred any material accumulated funding
deficiency within the meaning of Section 302 of ERISA (whether or not waived).
No such Qualified Plan nor, to our knowledge, any trust created thereunder nor
any trustee or administrator thereof has engaged in any "prohibited
transaction". The Company does not contribute to or have any employees who are
covered by any "multi-employer plan", as such term is defined in Section 3(37)
of ERISA, and, except as disclosed to the Purchasers prior to the date of this
Agreement, the Company has not incurred any withdrawal liability with respect
to any such multi-employer plan.
(k) Full Disclosure. Neither this Agreement, the financial statements
referred to in paragraph 3(e) hereof, nor any other document, certificate or
instrument delivered to the Purchasers on behalf of the Company in connection
with the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading. There is no material fact (other
than general economic conditions or facts or information available to the
public generally) that has not been disclosed in writing to the Purchasers that
materially adversely affects or, as far as the Company can now reasonably
foresee, may materially adversely affect, the business operations or financial
or other condition of the Company, or the ability of the Company to perform
this Agreement or to pay the principal of or interest on the Notes and other
sums payable under this Agreement when due.
4. Affirmative Covenants. The Company covenants and agrees that, so long
as any amount shall remain unpaid on any of the Notes, it will:
67
<PAGE> 7
(a) Payment and Performance. Duly and punctually pay or cause to be paid
the principal of and interest on the Notes and will duly and punctually perform
or cause to be performed all things on its part or on the part of any
Subsidiary to be done or performed under this Agreement, the Notes and the
Security Documents.
(b) Maintenance of Books and Records. At all times keep and cause each
Subsidiary to keep proper books of record and account in which full, true and
correct entries will be made of their transactions in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
(c) Inspection of Mortgaged Property, Equipment, and Books and Records.
Permit and cause each Subsidiary to permit the holders of the Notes and their
representatives to inspect (i) at all reasonable times, the Mortgaged Property
and the Equipment, and (ii) upon the occurrence and continuance of an Event of
Default, its books and records (and the holders of the Notes shall be entitled
to make extracts therefrom); provided, however, that any costs associated with
any inspection described in (i) above which is conducted by the holders of the
Notes or their representatives prior to an Event of Default shall be borne by
the holders of the Notes.
(d) Financial Information. In the event that written notice of the
occurrence of an Event of Default shall have been given to the Company, and the
Company shall have notified the holders of the Notes that such Event of Default
has been corrected, the Company shall, upon request of the holders of at least
two-thirds of the unpaid principal amount of the Notes at the time outstanding,
for the purpose of showing that such Event of Default has been corrected, if
the default is in connection with a financial covenant in this Agreement,
furnish to the holders of the Notes a signed copy of an audit report or, if
such matter may be covered in a special report, a special report prepared and
certified by the Company's independent certified public accountant, confirming
that such Event of Default has been corrected. All expenses incurred in
connection with such report shall be borne by the Company. Nothing in this
paragraph 4(d), however, shall diminish, defer, postpone or otherwise limit the
right of the holders of the Notes to take any action permitted by paragraph 7
hereof.
(e) Quarterly Financial Statements. Furnish to the holders of the Notes,
within 60 days after the close of each of the first three quarterly accounting
periods in each fiscal year of the Company and its Subsidiaries, or if an
extension has been granted by the Securities and Exchange Commission for the
filing by the Company and its Subsidiaries of their Quarterly Report on Form
10-Q, then the earlier of the date such Form 10-Q is actually filed and the
last day of such extended time period, copies of the unaudited consolidated and
consolidating balance sheets and statements of operations, stockholders' equity
and cash flows reflecting the financial condition of the Company and its
Subsidiaries at the end of each such quarterly period and the results of
operations during such period, all in reasonable detail, and setting forth
comparable figures for the same accounting period in the preceding fiscal year.
(f) Annual Financial Statements. Furnish to the holders of the Notes, as
soon as available, but in any event within 90 days after the close of each
fiscal year of the Company, a signed copy of an audit report prepared and
certified (without qualification as to the scope of the audit) by BDO Seidman
or another firm of independent certified public accountants of national
standing selected by the Company and satisfactory to the holders of the Notes,
which report shall include a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year and consolidated statements of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries reflecting their operations during such year, all in reasonable
detail and setting forth comparable figures for the preceding fiscal year,
which report shall be accompanied by a statement by such accounting firm
certifying that in making the examination upon which such report was based, no
information came to its attention which to its knowledge indicated a default
under this Agreement had occurred or specifying any such default.
(g) Financial Certification. At the time of the delivery to the holders
of the Notes of the reports referred to in paragraphs 4(e) and 4(f) hereof,
deliver to the holders of the Notes a certificate signed by its chief financial
officer or some other executive officer of the Company who has substantial
responsibility for the financial matters of the Company, certifying that he has
reviewed the provisions of this Agreement and stating, in his opinion, if such
be the fact, that the Company and its Subsidiaries have not been and are not
in default as to any of the provisions contained in this Agreement, or, in the
event the Company or any Subsidiary is or was in
68
<PAGE> 8
default, setting forth the details of such default. Such certificate shall set
forth the computations upon which such officer based the conclusion that the
Company and its Subsidiaries are and have been in compliance with paragraphs
4(l), 4(m) and 5(a) hereof.
(g) Copies of Regulatory Reports. Furnish to the holders of the Notes,
promptly after transmittal or filing thereof by the Company, copies of all
reports which it files with the Securities and Exchange Commission.
(i) Corporate Existence. Except as may be permitted by paragraph 5(c)
hereof, maintain and cause each Subsidiary to maintain its corporate existence
in good standing, and comply with all applicable federal, state and local laws
and regulations except where the noncompliance with such laws and regulations
would not have a material adverse effect on the Company or its Subsidiaries.
(j) Payment of Taxes. Pay and cause each Subsidiary to pay all taxes,
assessments and governmental charges or levies imposed on the Company, any
Subsidiary, the Mortgaged Property, or the Equipment, prior to the date on
which penalties are attached thereto; provided, however, that to the extent
that any of the same shall be contested in good faith by appropriate
proceedings promptly initiated and diligently conducted which will prevent the
forfeiture or sale of the Mortgaged Property or the Equipment or any material
interference with the use thereof by the Company, and adequate reserves as
required by GAAP are set aside to pay the tax or assessment and any interest
charges or penalties associated therewith, the Company shall not be obligated
to pay any of the foregoing unless and until any such taxes, assessments,
claims or charges shall finally be resolved and become a lien against the
Mortgaged Property or the Equipment. As used herein, the term "GAAP" means
generally accepted accounting principles, consistent with those followed in the
preparation of the financial statements referred to in paragraph 3(e) hereof.
(k) Maintenance of Properties. Maintain and cause each Subsidiary to
maintain and keep the Mortgaged Property and the Equipment in as good a
condition and state of repair as at the date of this Agreement; provided that,
the Company and its Subsidiaries shall have no obligation to maintain, replace,
or repair any of the Equipment that is no longer capable of performing its
function due to normal wear and tear or obsolescence. In the event the
Mortgaged Property is damaged or condemned, the Company shall be deemed to be
in compliance with this paragraph 4(k) so long as the Company is in compliance
with paragraph 9 or paragraph 10 hereof, as appropriate.
(l) Net Working Capital. As of the end of each fiscal quarter, maintain
an excess of consolidated current assets over consolidated current liabilities
(in each case as determined in accordance with GAAP) at least equal to
$25,000,000.
(m) Net Worth. As of the end of each fiscal quarter, maintain
Consolidated Tangible Net Worth in an amount at least equal to $25,000,000. As
used herein, the term "Consolidated Tangible Net Worth" shall mean the
aggregate amount of stockholders' equity of the Company and any Subsidiaries it
may have on a consolidated basis, less the purchase price of acquired
businesses in excess of the fair market value of tangible net assets, other
items of goodwill, patents, trademarks, trade names, copyrights, organization
expense, treasury stock, unamortized debt discount and expense, any write-up of
the value of assets subsequent to February 28, 1995, and other like
intangibles, all determined on a consolidated basis in accordance with GAAP.
(n) Notice of Default. Give the holders of Notes prompt notice in writing
of any condition or event which constitutes an Event of Default under paragraph
7 hereof, or which, after notice or lapse of time or both, would constitute an
Event of Default.
(o) Exchange of Notes. At any time, upon written request of the holder of
a Note and surrender of the Note for such purpose, and at the expense of such
holder, issue new Notes in exchange therefor in such denominations of at least
$250,000 as shall be specified by the holder of such Note, in an aggregate
principal amount equal to the then unpaid principal amount of the Note
surrendered and substantially in the form of Exhibit A, with appropriate
insertions and variations (not inconsistent with this Agreement), and bearing
interest from the date to which interest has been paid on the Note surrendered.
69
<PAGE> 9
(p) Maintenance of Liens of Security Documents. Take all actions
necessary in order to perfect and to protect and maintain the lien of the
Security Documents.
(q) Qualified Retirement Plans. Cause each Qualified Plan and the
documents and instruments governing each such Plan to be conformed to when
necessary, and to be administered in a manner consistent with those provisions
of ERISA which may, from time to time, become effective and operative with
respect to such Plans; if requested by the holders of the Notes in writing from
time to time, furnish to the holders of the Notes a copy of any annual report
with respect to each such plan that the Company files with the Internal Revenue
Service pursuant to ERISA. As used herein, the term "Qualified Plan" shall
mean each qualified retirement plan of the Company in which any employees of
the Company participate that is subject to the provisions of ERISA.
5. Negative Covenants. The Company covenants and agrees that so long as
any amount shall remain unpaid on the Notes, it will not and will not permit
any Subsidiary to:
(a) Sale of Assets. Sell the Mortgaged Property or the Equipment without
the full repayment of the Notes except that individual pieces of the Equipment
may be sold for fair market value if the net proceeds are applied against the
Notes within 30 days of such sale. If the Company sells any individual piece
of Equipment for consideration other than cash, the Company will nevertheless
pay in cash the net proceeds of the sale within 30 days of such sale, to be
applied as a prepayment on the Notes.
(b) Merger and Consolidation. Merge, acquire or consolidate with any
corporation except that (i) any Subsidiary may be merged or consolidated with
the Company (if the Company is the surviving corporation) or with another
Subsidiary, or (ii) the Company may merge or consolidate with another
corporation if (A) the surviving corporation would be a U.S. corporation, and
(B) immediately following the merger or consolidation and after giving effect
thereto, (1) the Notes and the obligations of the Company under this Agreement
and the Security Documents shall have become valid, binding and enforceable
obligations of the surviving corporation, and (2) there shall exist no Event of
Default hereunder or any event or condition which, with or without the lapse of
time or the giving of notice or both, would constitute an Event of Default.
(c) Transactions With Affiliates. Enter into any transaction with any
affiliate (as defined in Rule 405 of the Securities Act of 1933, as amended)
except on a reasonable and fair basis when considering comparable "arms length"
transactions.
(d) Permitted Liens. Create, assume, or suffer to exist any mortgage,
pledge, encumbrance, lien, security interest or charge of any kind whether
presently effective, springing, conditional or contingent upon any of the
Mortgaged Property or Equipment, other than Permitted Liens. As used herein,
the term "Permitted Liens" means (i) liens securing the Notes; (ii) existing
liens on the Mortgaged Property set forth on Exhibit A to the Deed of Trust;
(iii) liens for taxes not yet due or which are being contested in good faith by
appropriate proceedings of the nature described in paragraph 4(j) hereof, if
such reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor; (iv) liens imposed by law in favor of
mechanics, repairmen, carriers or warehousemen for sums not yet due or which
are being contested in good faith by appropriate proceedings of the nature
described in paragraph 4(j) hereof, and an adequate reserve is maintained on
the books of the Company as required by GAAP; and (v) other liens, charges, or
encumbrances incidental to the conduct of its business or the ownership of its
property which were not incurred in connection with borrowing of money or the
obtaining of advances or credit and which do not in the aggregate materially
detract from the value of its property or materially impair the use thereof in
the operation of its business.
(e) Dividend Restrictions. Make any Restricted Payments, except that (i)
any Subsidiary may make Restricted Payments to the Company or another
Subsidiary; and (ii) the Company may make Restricted Payments provided that
immediately following the payment and after giving effect thereto, there shall
exist no Event of Default hereunder or event or condition which, with or
without the lapse of time or the giving of notice, or both, would constitute an
Event of Default. As used herein, the term "Restricted Payments" means (i) any
payment in cash, property or other assets upon or in respect of any shares of
any class of capital stock including, without
70
<PAGE> 10
limiting the foregoing, payments as dividends and payments for the purpose
of redeeming, purchasing, or otherwise acquiring any shares of any class of
its capital stock, including in the term "stock" any warrant or option
or other right to purchase such stock, or making any other distribution in
respect of any such shares of stock; however, any distribution which may be
payable solely in common stock of the corporation making the distribution; and
(ii) any declaration of any such payment or distribution.
6. Conditions.
(a) The obligations of the Purchasers to close transaction is subject to
the satisfaction, on or before September 29, 1995, of the following conditions:
(i) The representations and warranties contained in paragraph 3
hereof shall be true and correct as of the Closing Date; the Company
shall not be in default with respect to any of the provisions hereof, and
there shall exist no event which, with the passage of time or the giving
of notice, or both, would constitute such a default; and the Company
shall have delivered to the Purchasers a certificate signed by a
responsible officer of the Company to such effect.
(ii) The Purchasers shall have received from Lowell E. Pugh II,
General Counsel of the Company, a favorable opinion in form and substance
satisfactory to the Purchasers as to all matters specified in Exhibit D
hereto and such other matters incident to the transaction herein
contemplated as the Purchasers may reasonably request.
(iii) The Purchasers shall have received from Latham-Watkins,
special California real estate counsel, a favorable opinion, in form and
substance satisfactory to the Purchasers, as to such matters incident to
the transaction herein contemplated as the Purchasers may reasonably
request.
(iv) The Purchasers shall have received from their special counsel,
Faegre & Benson Professional Limited Liability Partnership, a favorable
opinion in form and substance satisfactory to the Purchasers, as to such
matters incident to the transaction herein contemplated as the Purchasers
may reasonably request.
(v) The Company shall have provided to the Purchasers commitments by
Chicago Title Insurance Company to issue mortgagees' policies of title
insurance on ALTA Lender's Policy Extended Coverage in an aggregate
amount not less than the aggregate principal amount of the Notes covering
the Mortgaged Property, provided that such commitments or the latest
endorsements thereof shall reflect the markup of the Chicago Title
Company Commitment No. 950509, dated August 9, 1995, and previously
provided to the Purchasers, and provided further that in no event shall
such commitments for title insurance (i) reflect any easements,
restrictions, claims, encumbrances or title defects other than
encumbrances permitted by paragraph 5(e) hereof, or (ii) except from
coverage of the policy any (A) lien, or right to a lien for services,
labor or material furnished on or to the Mortgaged Property (regardless
of whether such lien has been recorded prior to the date of issuance of
the title insurance policy), (B) any easements, restrictions or other
encumbrances which a survey would show, or (C) any rights of parties in
possession.
(vi) The Purchasers shall have received a Uniform Commercial Code
Search against the Company from the States of Tennessee and California
and every other state or jurisdiction as the Purchasers may request, as
of a date no more than fifteen days prior to the Closing Date, certified
by a reporting service satisfactory to the Purchasers, and disclosing no
security interests in the Equipment other than those permitted under
paragraph 5(e) of this Agreement.
(vii) The Company shall not have suffered a material adverse change
in financial condition since February 28, 1995, nor shall there exist any
material action, suit or proceeding pending, or to the knowledge of the
Company threatened, against the Company which, if decided adversely to
the Company, would have a material adverse effect upon the Company or
upon any of its businesses or
71
<PAGE> 11
properties or would impair any of the security for the Notes. No other
event shall have occurred which would impair any of the security for
the Notes.
(viii) The Stipulation (herein so called) by and among the Company,
the Purchasers, Bonneville Pacific Corporation, Alpac Foods, Inc.,
Bonneville Foods Corporation, and the bankruptcy trustee for Bonneville
Pacific Corporation and dated as of August __, 1995, shall have been
executed and filed of record in the United States Bankruptcy Court for
the District of Utah in connection with In re Bonneville Pacific
Corporation, Bky. No. 91A-27701, such Stipulation shall have been
approved by the bankruptcy judge in such proceeding, and the transactions
contemplated in such Stipulation shall be consummated contemporaneously
with the closing of the transaction contemplated in this Agreement.
(ix) Pursuant to the Stipulation, the Company shall have deposited
the sum of $200,000 with the closing escrow agent, to be paid to Arthur
James in connection with the Settlement Agreement and Release dated as of
September 20, 1994, among Mr. James, the Company, Bonneville Pacific
Corporation, the Purchasers, and certain other parties.
(x) The execution, delivery and performance of this Agreement and
the Security Documents by the Company shall have been approved by certain
lenders of the Company.
(xi) The approval of the financing by the investment committee (or
its equivalent) of each of the Purchasers.
(xii) The approval of the financing and each of the final agreements
by the Board of Directors of the Company.
(xiii) All proceedings to be taken in connection with the
transaction contemplated by this Agreement and all documents incident
thereto shall be satisfactory in form and substance to the Purchasers and
their counsel and the Purchasers shall have received copies of all
documents which they may reasonably request.
(b) The obligations of the Company to close transaction is subject to the
satisfaction, on or before September 29, 1995, of the following conditions:
(i) The Company shall have obtained a commitment by Chicago Title
Insurance Company to issue an owners policy of title insurance in form
acceptable to the Company, provided that such commitments or the latest
endorsements thereof shall show the status of title to the Mortgaged
Property as of the Closing Date, and provided further that in no event
shall such commitments for title insurance (i) reflect any easements,
restrictions, claims, encumbrances or title defects other than
encumbrances permitted by paragraph 5(e) hereof, or (ii) except from
coverage of the policy any (A) lien, or right to a lien for services,
labor or material furnished on or to the Mortgaged Property (regardless
of whether such lien has been recorded prior to the date of issuance of
the title insurance policy), (B) any easements, restrictions or other
encumbrances which a survey would show or (C) any rights of parties in
possession.
(ii) The Stipulation (herein so called) by and among the Company,
the Purchasers, Bonneville Pacific Corporation, Alpac Foods, Inc.,
Bonneville Foods Corporation and the bankruptcy trustee for Bonneville
Pacific Corporation and dated as of August __, 1995, shall have been
executed and filed of record in the United States Bankruptcy Court for
the District of Utah in connection with In re Bonneville Pacific
Corporation, Bky. No. 91A-27701, such Stipulation shall have been
approved by the bankruptcy judge in such proceeding, and the transactions
contemplated in such Stipulation shall be consummated contemporaneously
with the closing of the transaction contemplated in this Agreement.
(iii) The execution, delivery and performance of this Agreement and
the Security Documents by the Company shall have been approved by certain
lenders of the Company.
72
<PAGE> 12
(iv) The approval of the financing and each of the final agreements
by the Board of Directors of the Company.
(v) All proceedings to be taken in connection with the transaction
contemplated by this Agreement and all documents incident thereto shall
be satisfactory in form and substance to the Company and their counsel
and the Company shall have received copies of all documents which it may
reasonably request.
7. Defaults. If any of the following circumstances shall occur (an "Event
of Default"):
(a) the Company shall fail to pay when due any amounts in connection with
the Notes, the Deed of Trust, the Security Agreement, or this Agreement, and
such failure shall continue for a period of seven days after notice of such
failure from the Purchasers; or
(b) an order for relief shall be entered in any Federal Bankruptcy
proceeding in which the Company or any Subsidiary is the debtor; or bankruptcy,
receivership, insolvency, reorganization, relief, dissolution, liquidation or
other similar proceedings shall be instituted by or against the Company or any
Subsidiary or all or any part of the property of the Company or any Subsidiary
under the Federal Bankruptcy Code or any other law of the United States or any
bankruptcy or insolvency law of any state of competent jurisdiction unless, if
such proceedings are instituted against the Company or any Subsidiary, such
proceedings are dismissed or discharged within 90 days after they are
instituted; or
(c) the Company or any Subsidiary shall have become insolvent or unable to
pay its debts as they mature, cease doing business as a going concern, make an
assignment for the benefit of creditors, admit in writing its inability to pay
its debts as they become due, or if a trustee, receiver or liquidator shall be
appointed for the Company or any Subsidiary or for any substantial portion of
the assets of the Company or any Subsidiary and such appointment shall not be
vacated within 90 days; or
(d) the Company shall fail to perform the covenants contained in paragraph
5(b) or 5(e) of this Agreement; or
(e) the Company shall fail to perform any other covenant or agreement
contained in the Notes, the Deed of Trust, the Security Agreement, or this
Agreement, and such failure shall continue for a period of thirty days after
notice of such failure from the Purchasers; or
(f) any representation, warranty or certification made by the Company in
this Agreement, the Notes, the Deed of Trust or the Security Agreement or in
any certificate delivered pursuant thereto shall have been incorrect in any
material respect when made;
then (i) if such event is an Event of Default specified in clause (a) of this
paragraph 7, the holder of any Note may at its option, by notice in writing to
the Company, declare such Note to be, and such Note shall thereupon be and
become, immediately due and payable together with interest accrued thereon, and
(b) if such event is not an Event of Default specified in clause (a) of this
paragraph 7, then the holders of at least two-thirds of the principal amount of
the Notes may at their option, by notice in writing to the Company, declare the
Notes to be immediately due and payable and thereupon the Notes shall be and
become due and payable, with interest accrued thereon (provided that in the
case of an Event of Default described in paragraph 7(b) or (c), the Notes
shall immediately become due and payable, with interest accrued thereon,
without any notice from the holders of the Notes or otherwise) and the holders
of the Notes may take any action or proceeding at law or in equity which they
deem advisable for the protection of their interests and to collect and enforce
payment, including the right to foreclose on the liens created by the Deed of
Trust and the Security Agreement. The Company shall pay all expenses and costs
(including reasonable attorneys' fees) of the holders of the Notes in
connection with or arising out of any Event of Default hereunder.
8. Insurance.
73
<PAGE> 13
(a) Risks to Be Insured. The Company currently maintains (i) full
replacement value insurance on the Mortgaged Property and the Equipment on an
"all-risks" basis, subject to certain deductibles, and (ii) comprehensive
general liability insurance, including personal injury and property damage,
with a combined single limit of $1,000,000 per occurrence. The Company has
furnished the Purchasers copies of the Company's current insurance policies.
The Company will, to the extent commercially feasible, maintain similar
insurance, in similar amounts and with companies of nationally recognized
financial standing legally qualified to issue insurance, on the Mortgaged
Property and the Equipment for so long as any amounts are outstanding under
the Notes.
(b) Policy Provisions. All insurance maintained by the Company pursuant
to this paragraph 8 shall (i) name the Company as insured and the holders of
the Notes as additional insured, (ii) include effective waivers by the insurers
of all claims for insurance premiums against the holders of the Notes, (iii)
provide that any losses shall be payable notwithstanding any action, inaction
or breach of representation or warranty by the Company, and (iv) provide that
at least ten days' prior written notice of cancellation or of lapse shall be
given to the holders of the Notes by the insurer. If no Event of Default has
occurred and is continuing, then the Company shall have the right to adjust and
settle all insurance claims, and the proceeds shall be paid to the Company. If
there is an Event of Default then the holders of the Notes shall have the right
to adjust and settle all insurance claims, and the proceeds shall be paid to
the holders of the Notes, to be applied in accordance with paragraph 9.
(c) Delivery of Insurance Certificates. The Company will deliver to the
holders of the Notes certificates evidencing the existence of all insurance
policies with respect to the Mortgaged Property and the Equipment which the
Company is required to maintain or cause to be maintained pursuant to this
paragraph 8 together with, upon request by the holders of the Notes, evidence
as to the payment of all premiums then due thereon.
(d) No Other Insurance. The Company shall not obtain or carry separate
insurance concurrent in form or contributing in the event of loss with that
required by this paragraph 8 to be furnished by the Company unless the holders
of the Notes are included therein as a named insured, with loss payable as in
this Agreement provided. The Company shall immediately notify the holders of
the Notes whenever any such separate insurance is obtained and shall deliver to
the holders of the Notes certificates evidencing the same.
9. Damage to or Destruction of Mortgaged Property.
(a) Notice. In case of any material damage to or destruction of the
Mortgaged Property or any part thereof, the Company will promptly give written
notice thereof to the holders of Notes, generally describing the nature and
extent of such damage or destruction.
(b) Adjustment and Collection; Option to Rebuild or Replace. So long as
no Event of Default shall have occurred and be continuing, the Company shall
have the right to (i) adjust all insurance claims, (ii) collect and hold all
insurance proceeds, and (iii) decide whether or not to rebuild or replace the
damaged or destroyed portion of the Mortgaged Property. If an Event of Default
shall have occurred and be continuing, then the holders of the Notes shall have
the right to (i) adjust all insurance claims, (ii) collect and hold all
insurance proceeds, and (iii) decide whether or not to rebuild or replace the
damaged or destroyed portion of the Mortgaged Property.
(c) Company Elects to Restore or Replace. If pursuant to paragraph 9(b)
above the Company elects to rebuild or replace the damaged or destroyed portion
of the Mortgaged Property, the Company, at its expense, will promptly commence
and complete the repair, replacement, rebuilding or restoration of the
Mortgaged Property as nearly as possible to its value, condition and character,
immediately prior to such damage or destruction, with such alterations and
additions as may be made at the Company's election. Any such repair shall be
completed within a reasonable time period (as estimated by the construction
contractor) after the occurrence of such damage or destruction, subject however
to such delays as may be reasonably attributable to governmental restrictions,
failure to obtain materials or labor, weather delays, or other causes, whether
similar or dissimilar, beyond the control of the Company.
74
<PAGE> 14
(d) Prepayment in the Event the Mortgaged Property is Not Restored.
Except as set forth in the last sentence of this paragraph, the Company shall
have no right to use or retain any proceeds of the insurance claim if (i) the
Company elects not to restore or replace the damaged or destroyed portion of
the Mortgaged Property, or (ii) there is an uncured and unwaived Event
of Default and the holders of the Notes elect not to restore or replace the
damaged or destroyed portion of the Mortgaged Property. In either such event
if the Mortgaged Property is destroyed or damaged to such an extent that the
remaining undamaged Mortgaged Property is not capable of operating as an
ongoing facility, the Company shall, within five days after the Company or the
holders of the Notes (as the case may be) receives payment on the insurance
claim, prepay the Notes, without premium, in an amount equal to the then unpaid
principal amount of the Notes plus accrued interest thereon. If, however, the
remaining undamaged Mortgaged Property is capable of operating as an ongoing
facility, the Company shall apply the net insurance proceeds from the casualty
as a partial prepayment on the Notes, but the Company shall not be required to
prepay the Notes in full. Any such prepayment shall be applied on the last
maturing required installment or installments of principal in inverse order of
their maturity. If prepayment of the Notes has been made in whole, any net
insurance proceeds remaining after such prepayment shall be remitted by the
holders of the Notes to the Company within five days after such prepayment.
10. Taking of Mortgaged Property.
(a) Notice; Assignment of Awards. In case of a taking as a result of or
in lieu of or in anticipation of the exercise of the right of condemnation or
eminent domain of all or any part of the Mortgaged Property, or the
commencement of any proceedings or negotiations that might result in any such
taking, the Company will promptly give written notice thereof to the holders of
Notes, generally describing the nature and extent of such taking or the nature
of such proceedings or negotiations and the nature and extent of the taking
that might result therefrom, as the case may be. The Company hereby
irrevocably assigns, transfers and sets over to the holders of Notes all its
rights to any award or payment on account of any taking, to the extent of all
obligations of the Company to the holders of the Notes.
(b) Prosecution and Collection of Claims; Option to Rebuild or Replace.
So long as no Event of Default shall have occurred and be continuing, the
Company shall have the right to (i) prosecute all condemnation claims, (ii)
collect and hold all condemnation proceeds, and (iii) decide whether or not to
restore or replace the condemned portion of the Mortgaged Property. If an
Event of Default shall have occurred and be continuing, then the holders of the
Notes shall have the right to (i) prosecute all condemnation claims, (ii)
collect and hold all condemnation proceeds, and (iii) decide whether or not to
restore or replace the condemned portion of the Mortgaged Property.
(c) Company Elects to Restore or Replace. If pursuant to paragraph 10(b)
above the Company elects to rebuild or replace the condemned portion of the
Mortgaged Property, the Company, at its expense, will promptly commence and
complete the repair, replacement, rebuilding or restoration of the Mortgaged
Property as nearly as possible to its value, condition and character,
immediately prior to such condemnation, with such alterations and additions as
may be made at the Company's election. Any such repair shall be completed
within a reasonable time period (as estimated by the construction contractor)
after the occurrence of such damage or destruction, subject however to such
delays as may be reasonably attributable to governmental restrictions, failure
to obtain materials or labor, weather delays, or other causes, whether similar
or dissimilar, beyond the control of the Company.
(d) Prepayment in the Event the Mortgaged Property is Not Restored.
Except as set forth in the last sentence of this paragraph, the Company shall
have no right to use or retain any proceeds of the condemnation claim if (i)
the Company elects not to restore or replace the condemned portion of the
Mortgaged Property, or (ii) there is an uncured and unwaived Event of Default
and the holders of the Notes elect not to restore or replace the condemned
portion of the Mortgaged Property. In either such event if the Mortgaged
Property has been rendered unsuitable, in the reasonable judgment of the
Company, for continued use or occupancy, even as the remainder thereof may be
restored, or if, in the reasonable judgment of the Company such restoration has
been made impossible or uneconomic by any reduction in area to such an extent
that the remaining undamaged Mortgaged Property is not capable of operating as
an ongoing facility, the Company shall, within five days after the Company
75
<PAGE> 15
or the holders of the Notes (as the case may be) receives payment on the
condemnation claim, prepay the Notes, without premium, in an amount equal
to the then unpaid principal amount of the Notes plus accrued interest thereon.
If, however, the remaining Mortgaged Property is capable of operating as an
ongoing facility, the Company shall apply the net condemnation proceeds from
the casualty as a partial prepayment on the Notes, but the Company shall not be
required to prepay the Notes in full. Any such prepayment shall be applied on
the last maturing required installment or installments of principal in inverse
order of their maturity. If prepayment of the Notes has been made in whole,
any condemnation proceeds remaining after such prepayment shall be remitted by
the holders of the Notes to the Company within five days after such prepayment.
11. Payments on and Registration and Transfer of Notes. The Company
agrees that it will make payment of the principal of and interest on the Notes
by sending checks made payable to each of the Purchasers to their address set
forth on Schedule 1 hereto, or to such other address as may from time to time
be designated by the holders of the Notes, without presentment of the Notes and
without the rendering of any bills therefor. The Company shall record on its
books and records the holders of the Notes. Upon surrender of any Note for
transfer at the office of the Company, the Company shall execute and deliver,
in the name of the designated transferee a new Note in a principal amount equal
to the unpaid principal amount of, and dated the date to which interest has
been paid on, the Note so surrendered. When a Note shall be presented or
surrendered for transfer it shall be duly endorsed, or be accompanied by a
written instrument of transfer duly executed, by the holder thereof or his
attorney duly authorized in writing. The Company may treat the person in whose
name the Note is registered on its books and records as the owner of the Note
for the purpose of receiving payment of principal of and interest on the Note
and for all other purposes and the Company shall not be affected by notice to
the contrary.
12. Expenses. The Company shall not be required to pay to the Purchasers
any loan origination fees, any underwriting fees, or any other loan charges or
fees in connection with the Notes. An environmental survey has already been
completed, and the Company will not be responsible for any fees in connection
therewith. The Purchasers will pay for any appraisal of the Mortgaged Property
or the Equipment. The Company shall not be responsible for any real estate or
personal property taxes accrued with respect to the Equipment or the Mortgaged
Property prior to the closing date of this transaction, and such taxes shall be
paid in full by the Purchasers prior to such closing. The Company hereby
agrees to pay, and hold the Purchasers harmless against liability for the
payment of, the following: (a) all charges for title insurance on the
Mortgaged Property, (b) up to $20,000 of fees and expenses of the Purchasers'
attorneys expended in connection with the negotiation and closing of this
Agreement and the purchase of the Notes, and (c) reasonable fees and expenses
of counsel to the Purchasers in connection with any documentation and related
services arising after the Closing Date in connection with the preparation of
waivers or amendments of any provisions of this Agreement, the Notes, or the
Security Documents (other than those arising in connection with the transfer of
any Note, which fees and expenses shall be borne by the holder of such Note).
The Company represents and warrants that it has not engaged any broker or other
third party who would seek a brokerage or finders fee for the transactions
contemplated by this Agreement, and the Company will hold the Purchasers
harmless against liability for the payment of any such brokerage or finders fee
sought by any such third party who claims that they were engaged by the
Company.
13. Delivery of Documents; Pro Rata Payments; Amendments and Consents.
(a) Delivery of Documents. All notices, certificates, requests,
statements and other documents required or permitted to be delivered to the
Purchasers or the holders of Notes by any provision hereof shall also be
delivered to each holder of a Note, except that financial statements and other
documents provided for in paragraphs 4(e) and 4(f) need not be delivered to any
holder, other than the Purchasers, holding less than 10% of the aggregate
principal amount of Notes from time to time outstanding.
(b) Pro Rata Payments. All interest payments and payments or prepayments
of principal shall be made and applied pro rata on all Notes outstanding in
accordance with the respective unpaid principal amounts thereof.
(c) Amendments and Consents. The registered holder or holders of at least
two-thirds of the unpaid principal amount of the Notes at the time outstanding
may by agreement with the Company amend this
76
<PAGE> 16
Agreement, and any consent, notice, request or demand required or permitted
to be given by the Purchasers or the holders of the Notes by any provision
hereof shall be sufficient if given by the holder or holders of at least
two-thirds of the unpaid principal amount of Notes at the time outstanding
except that, without the written consent of the holders of all Notes at the
time outstanding, no amendment to this Agreement shall extend the maturity of
any Note, or alter the rate of interest or any premium payable with
respect to any Note, or affect the amount of any required prepayments, or
reduce the proportion of the principal amount of the Notes required with
respect to any consent.
14. Representations and Agreements of Purchasers.
(a) Investment Purpose. Each Purchaser represents that its acquisition of
the Notes by it will be for investment and not with a view to resale in
connection with any distribution thereof, it being understood, however, that
the disposition of the property of each Purchaser shall at all times be within
its control.
(b) Confidentiality. It is understood that each holder of a Note will
from time to time receive from the Company or another holder of a Note certain
data and documents regarding the business and operations of the Company and its
Subsidiaries and/or the Notes which are not publicly available and which the
Company and its Subsidiaries consider to be confidential, proprietary or trade
secrets (all such data and documents, collectively, being hereinafter referred
to as "Confidential Information"). Confidential Information does not include
information which (i) becomes generally available to the public other than as a
result of disclosure by such holder of a Note, (ii) was available on a
non-confidential basis prior to its disclosure to such holder of a Note by the
Company, any of its Subsidiaries or their respective representatives, or (iii)
becomes available to such holder of a Note on a non-confidential basis from a
source other than the Company, any of its Subsidiaries or their respective
representatives, provided that such source is not bound by a confidentiality
agreement. No holder of a Note will disseminate any Confidential Information
except, and the Company hereby consents to the dissemination of Confidential
Information by any holder of a Note if the receiving party also agrees to be
bound by this confidentiality agreement: (1) to any transferee or proposed
transferee of a Note; (2) to attorneys, certified public accountants and (to
the extent required by their involvement) other outside consultants and experts
of any holder of a Note, its affiliates and any transferee or proposed
transferee of a Note; or (3) to any other person as may be necessary with
respect to enforcement or protection of rights with respect to the Notes. In
the event that the holder of any Note is requested or required (by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or other process) to disclose any Confidential
Information, such holder will provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such holder's compliance with this provision. No
holder of any Note will oppose action by the Company to obtain an appropriate
protective order or other reliable assurance that confidential treatment will
be afforded Confidential Information. Notwithstanding anything to the contrary
contained in this paragraph, a Purchaser may disclose Confidential Information
to regulatory bodies that regulate the business and affairs of such Purchaser.
(c) Environmental Representations. The Purchasers have obtained an
environmental report on the Mortgaged Property from a reputable environmental
audit firm. The Purchasers hereby represent that (i) based solely on such
environmental report, and without conducting any further investigation of the
Mortgaged Property, they are not aware of any violation of applicable law
concerning the presence, handling, storage, transportation, release or disposal
of Hazardous Materials on, in or under the Mortgaged Property, and (ii) they
have not received any written notices from any governmental authority alleging
any violation of applicable laws in connection with the presence, handling,
storage, transportation, release or disposal of Hazardous Materials on, in or
under the Mortgaged Property. As used herein, the term "Hazardous Materials"
means any hazardous substances or materials the handling, storage,
transportation, release, or disposal of which is regulated by applicable
federal, state, or local statute, regulation, code or ordinance.
15. Future Construction on Mortgaged Property. In the event that the
Company commences construction on a portion of the Mortgaged Property, the
Purchasers hereby agree, subject to the conditions set forth below, to either
subordinate or release the lien of the Deed of Trust on that portion of real
property. The
77
<PAGE> 17
obligation of the Purchasers to subordinate or release the lien of the
Deed of Trust as aforesaid is subject to the satisfaction of the following
conditions:
(a) the building which is constructed on the Mortgaged Property shall be
(A) new processing space, a new warehouse or a new loading dock to be used in
connection with the business of the Company as presently conducted, and (B) not
a replacement for processing space, a warehouse or a loading dock presently
located on the Mortgaged Property on the date hereof;
(b) the Purchasers shall have received consideration for such
subordination or release equal to $1.50 per square foot of area being released,
which consideration shall be applied as a mandatory prepayment against the
Notes, in inverse order of maturity;
(c) there shall at the time of the release or subordination be no Event of
Default hereunder and no event or occurrence which, with the giving of notice
or the passage of time, or both, would constitute such an Event of Default;
(d) the remaining portion of the Mortgaged Property (the "Remaining
Property") shall be an independent parcel with respect to appropriate access,
utility and other easements and/or there shall be reserved for the benefit of
the Remaining Property, and excepted from the release or subordination,
easements for utility facilities and access, if any, in the released portion of
the Mortgaged Property (the "Released Property") which serve the Remaining
Property, in form and substance approved by the Purchasers, which approval
shall not be unreasonably withheld or delayed;
(e) the execution and delivery of documentation satisfactory to legal
counsel for the Purchasers;
(f) the release or subordination of the Released Property shall not create
any present or potential subdivision or related violations with respect to any
or all of the Remaining Property;
(g) the payment by the Company of all reasonable expenses, including
attorneys' fees, incurred by the Purchasers in connection with such
subordination or release;
(h) the Purchasers shall have received assurances that the new
construction on the Released Property shall not encroach on the Remaining
Property; and
(I) the Company shall at its expense provide Purchasers with an
endorsement to Purchasers' mortgage title insurance policy extending the date
of the policy through the date of the filing of the release or subordination
without additional exception to title.
16. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by the Company in connection
herewith shall survive the execution and delivery of this Agreement and of the
Notes.
17. Successors and Assigns. All covenants and agreements in this
Agreement shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto.
18. Notices. All notices shall be sent by first class mail and, if to the
Purchasers, addressed to the Purchasers c/o Washington Square Capital, Inc.,
100 Washington Square, Suite 800, Minneapolis, Minnesota 55401-2147 (provided
that the financial statements and reports required by this Agreement shall be
sent to each of the Purchasers at their address listed on Appendix I hereto),
and if to the Company, addressed to United Foods, Inc., Ten Pictsweet Drive,
Bells, Tennessee 38006, Attention: President, with a copy to the General
Counsel at the same address; provided that any party may change the address
with respect to such party by notifying the other parties in writing.
78
<PAGE> 18
19. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Minnesota.
20. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
<TABLE>
<CAPTION>
UNITED FOODS, INC. WASHINGTON SQUARE CAPITAL, INC.
<S> <C>
By s/nCarl W. Gruenewald, II By s/nGary L. Jacobson
------------------------------ ------------------------------
(Title) Sr. Vice President - (Title) Senior Vice President
-------------------------- --------------------------
Finance Treasurer
-------------------------
NORTHWESTERN NATIONAL COMMERCIAL UNION LIFE INSURANCE
LIFE INSURANCE COMPANY COMPANY OF AMERICA
By s/nGary L. Jacobson By s/nRichard C. Zawalich
------------------------------- ------------------------------
(Title) Authorized Representative (Title) AVP
------------------------- --------------------------
NORTHERN LIFE INSURANCE COMPANY MINNESOTA MUTUAL LIFE INSURANCE
COMPANY
By s/nGary L. Jacobson By s/n
------------------------------- -------------------------------
(Title) Assistant Treasurer
-------------------------- (Title) Second Vice President
--------------------------
COMMERCIAL UNION LIFE INSURANCE
THE NORTH ATLANTIC LIFE INSURANCE COMPANY OF NEW YORK
COMPANY OF AMERICA
By s/nGary L. Jacobson By s/nRichard C. Zawalich
------------------------------- ------------------------------
(Title) Assistant Treasurer (Title) AVP
-------------------------- --------------------------
</TABLE>
79
<PAGE> 19
APPENDIX I
<TABLE>
<CAPTION>
Name and Address Original Note Amount
<S> <C>
Northwestern National Life Insurance Company $3,444,444.44
c/o Washington Square Capital, Inc.
100 Washington Square, Suite 800
Minneapolis, Minnesota 55401-2147
Northern Life Insurance Company $2,222,222.22
c/o Washington Square Capital, Inc.
100 Washington Square, Suite 800
Minneapolis, Minnesota 55401-2147
The North Atlantic Life Insurance $666,666.67
Company of America
c/o Washington Square Capital, Inc.
100 Washington Square, Suite 800
Minneapolis, Minnesota 55401-2147
Washington Square Capital, Inc. $666,666.67
100 Washington Square, Suite 800
Minneapolis, Minnesota 55401-2147
Commercial Union Life Insurance $444,444.44
Company of America
c/o Commercial Union Investment
Management Corp.
One Beacon Street, 17th Floor
Boston, Massachusetts 02108
Attention: Richard C. Zawilich
Robert C. Pickett
Minnesota Mutual Life Insurance Company $333,333.33
c/o Washington Square Capital, Inc.
100 Washington Square, Suite 800
Minneapolis, Minnesota 55401-2147
Commercial Union Life Insurance $222,222.22
Company of New York
c/o Commercial Union Investment
Management Corp.
One Beacon Street, 17th Floor
Boston, Massachusetts 02108
Attention: Richard C. Zawilich
Robert C. Pickett
TOTAL $8,000,000
</TABLE>
80
<PAGE> 1
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
81
<PAGE> 2
EXHIBIT (11)
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
SHARES:
Weighted average number of common shares
outstanding 11,470,173 12,109,529 12,870,609
Effect of shares issuable under stock option plan
as determined by the treasury stock method..... - 370,632 252,956
---------- ---------- ----------
Weighted average number of common shares
outstanding as adjusted.................................. 11,470,173 12,480,161 13,123,565
========== ========== ==========
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK AND COMMON STOCK EQUIVALENTS:
Net income (loss)................................................ $(.06) $0.19 $0.01
===== ===== =====
</TABLE>
82
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> FEB-29-1996
<CASH> 1,029
<SECURITIES> 0
<RECEIVABLES> 14,762
<ALLOWANCES> 260
<INVENTORY> 43,099
<CURRENT-ASSETS> 63,999
<PP&E> 122,540
<DEPRECIATION> 60,204
<TOTAL-ASSETS> 128,188
<CURRENT-LIABILITIES> 21,835
<BONDS> 51,819
0
0
<COMMON> 14,746
<OTHER-SE> 39,788
<TOTAL-LIABILITY-AND-EQUITY> 128,188
<SALES> 191,714
<TOTAL-REVENUES> 191,714
<CGS> 155,343
<TOTAL-COSTS> 155,343
<OTHER-EXPENSES> 33,485
<LOSS-PROVISION> 43
<INTEREST-EXPENSE> 3,976
<INCOME-PRETAX> (1,034)
<INCOME-TAX> (374)
<INCOME-CONTINUING> (660)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (660)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
