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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-8574
UNITED FOODS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 74-1264568
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(State of incorporation) (I.R.S. Employer Identification No.)
Ten Pictsweet Drive, Bells, Tennessee 38006
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(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 on
Title of Each Class Which Registered
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Class A Common Stock and American Stock Exchange and
Class B Common Stock Pacific 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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
On May 4, 1999, 2,617,243 shares of Class A Common Stock and 4,192,686
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 $8,246,000, assuming
for purposes of this report that all executive officers and directors of the
registrant are affiliates.
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TABLE OF CONTENTS
<TABLE>
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Part I ..................................................................................................3
Item 1. Business...............................................................................3
Item 2. Properties.............................................................................6
Item 3. Legal Proceedings......................................................................7
Item 4. Submission of Matters to a Vote of Security Holders....................................7
Part II ..................................................................................................8
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters........................................................8
Item 6. Selected Financial Data................................................................8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations..........................................9
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk...........................................................................19
Item 8. Financial Statements and Supplementary Data...........................................20
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................................................42
Part III .................................................................................................42
Item 10. Directors and Executive Officers......................................................42
Item 11. Executive Compensation................................................................45
Item 12. Security Ownership of Certain Beneficial Owners
and Management........................................................................47
Item 13. Certain Relationships and Related Transactions........................................48
Part IV .................................................................................................49
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K...................................................................49
Signatures................................................................................................50
Index to Exhibits.........................................................................................51
</TABLE>
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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 growing, processing, marketing and
distribution of food products.
PRODUCTS
The Company's primary food products include frozen 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, turnips, white acre peas, various vegetable mixes and
blends, and fresh mushrooms.
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 75% of the Company's
revenue for the fiscal year ended February 28, 1999. The Company's principal
brand name is "Pictsweet," which is used throughout the United States and in
military commissaries overseas. 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 retail market has experienced a consolidation of participants
in recent years, furthering a trend towards fewer and larger customers. The
Company's five largest customers are the Defense Personnel Support Center, Food
Lion, Inc., The Kroger Company, Publix Supermarkets, Inc. and the J. R. Simplot
Company. Sales to these five customers represented approximately 36% of the
Company's revenue for the fiscal year ended February 28, 1999, with sales to one
particular customer representing approximately 13.1% of such revenue. Due to
competition, as well as consolidation in the retail grocery industry, the
Company's mix of customers may change. It is possible that the Company may lose
one or more of its larger customers from time to time, and such loss could have
a material adverse effect on revenue and results of operations.
As a part of its marketing program, the Company may use sales
allowances in certain instances. These sales allowances may include cash
discounts for prompt payment, freight allowances, customer incentive programs,
advertising allowances and other sales allowances based on competitive factors.
The Company may also make additional expenditures in connection with the
introduction of new products or the maintenance or expansion of its market
position.
The Company primarily conducts its business through purchase orders.
The Company accepts purchase orders, and may invoice such purchases,
electronically. The Company also monitors the inventory levels of certain of its
customers electronically and, based on the customer's stated expectations,
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automatically generates a purchase order on such customer's behalf, ships the
appropriate food products and then invoices the customer. The Company believes
that it and its significant customers will be Year 2000 compliant. However, if
the Company or one or more significant third parties with whom the Company does
business fail to become Year 2000 compliant in a timely manner, such failure may
have a material adverse effect on the Company's results of operations.
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 16% of the Company's revenue for
the fiscal year ended February 28, 1999.
In addition, the Company sells certain of its food products directly to
other food companies. Such sales represented approximately 7% of the Company's
revenue for the year ended February 28, 1999.
The Company's food brokers are compensated on a commission basis.
The Company does not consider backlog at fiscal 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 larger volumes of fresh fruits
and vegetables are available.
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
revenue for the fiscal year ended February 28, 1999.
Rental and miscellaneous income accounted for less than 1% of the
Company's revenue for the fiscal year ended February 28, 1999.
TRADEMARKS
Approximately 67% of the Company's revenues are derived from sales
under the "Pictsweet" brand and other registered trademarks. These trademarks
expire over various periods of up to 20 years, but may be renewed.
OPERATIONS
Agricultural products comprising approximately 22% of the total pounds
of product sold by the Company are grown on Company-operated farms. The Company
farms approximately 8,000 acres of land in west Tennessee, of which
approximately 7,000 acres are leased, and operates mushroom farms on the west
coast and in Utah. Procurement of the remaining requirements is generally either
by contract with growers, from assemblers or from other food processing
companies. Agricultural crops have seasonal features and availability is subject
to unpredictable changes in growing conditions that are inherent in the
agriculture industry. The Company bears part of the growing risks and all of the
processing and marketing risks associated with its agricultural products.
Weather abnormalities and other adverse growing conditions sometimes result in
substantial reductions in the annual volumes processed in the Company's
facilities. When this occurs, the Company may have to procure raw and processed
products from alternative sources
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at higher than expected costs and the reduced volume of products grown and/or
processed by the Company results in increased unit costs. When growing
conditions result in yields that exceed expectations, the Company will generally
pack only volumes required by anticipated demand, or will sell excess inventory
through alternative channels. Additionally, selling prices are impacted by
industry-wide production and inventory levels. Bumper crops and resulting
increased inventory levels will tend to decrease average selling prices, while
crop shortages typically do not result in increased selling prices.
The Company has entered into multi-year supply agreements with other
food processing companies. Prices for food products pursuant to these agreements
are determined annually. Through these agreements, the Company procures food
products to meet its production and inventory requirements. Quantities available
pursuant to these agreements are generally limited as to individual food
products and in the aggregate. Generally, the purchaser bears the risks
associated with limited supplies under these agreements. Under these supply
agreements, the Company also is obligated to sell food products produced at its
Tennessee and Santa Maria, California facilities to the other food processing
companies.
The time and duration of production seasons vary considerably according
to the specific product. For example, the annual requirement for white acre peas
is available only during a period of approximately two weeks, while broccoli is
available for approximately ten months of each year and mushrooms are available
year round. Thus, substantial inventories are required for long periods of time
to support the consumer demand for certain items throughout the year.
Working capital requirements generally follow inventory levels and the
Company looks to its lenders to meet its working capital requirements. The
interest rate on the Company's working capital loan fluctuates with the prime
rate.
COMPETITION
The Company is faced with substantial competition in all aspects of its
business. The food industry is highly competitive and the competition has
increased in intensity in recent years. The principal methods of competition in
the food industry involve product branding, price, service and advertising. Over
the past several years, imports of food products have increased substantially
and significant new production capacity has been put in place in the United
States, Mexico and Canada. As a result, the industry's total production capacity
is now substantially in excess of current requirements.
The foregoing factors, coupled with low overall growth and retail
grocery consolidation, have led to weak market pricing. In an effort to address
this intense competition, the Company intends to continue to invest in
maintaining and expanding its distribution base and to make substantial
expenditures to maintain and improve its plants, equipment and technological
systems.
The Company has developed the "Pictsweet" brand into a national brand
which enables it to differentiate its products on a basis other than price.
Additionally, the Company has a broad-based distribution system for its products
that gives it a competitive advantage in the area of customer service. The
Company also offers electronic links with customers which may be used to
transmit purchase orders and invoices and to monitor customers' inventory
levels.
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EMPLOYEES
At February 28, 1999, the Company had approximately 2,100 employees, of
whom approximately 1,960 were engaged in farming, manufacturing, distribution
and service activities and 140 in sales and administration. Because of the
seasonal nature of its production activities, the Company utilizes temporary
employees. Peak employment during the year was approximately 2,400 employees of
whom approximately 2,100 were full time employees and approximately 300 were
temporary employees.
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 certain of the facilities, all the facilities operate during a
substantial part of the year. Set forth in the table below is a list of all
facilities with certain information concerning each:
<TABLE>
<CAPTION>
APPROXIMATE SQUARE
LOCATION SPACE DEVOTED TO FOOTAGE(1)
- ----------------------------- ------------------------------ -------------------
<S> <C> <C>
Bells, Tennessee Processing Plant 212,000
Cold Storage and Distribution
Warehouse 239,000
Ogden, Utah Processing Plant 68,000
Cold Storage and Distribution
Warehouse 150,000
Fillmore, Utah Mushroom farming, packaging
and distribution 186,000
Santa Maria, California Processing Plant 150,000
Cold Storage Warehouse 42,000
Ventura, California Mushroom farming, packaging
and distribution 282,000
Salem, Oregon Mushroom farming, packaging
and distribution 289,000
West Tennessee Farming 8,000
</TABLE>
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(1) Except for farm land in west Tennessee which is measured in acres.
The Company believes the condition of its facilities, in the aggregate,
is within industry standards. However, in response to competitive factors, the
Company anticipates making substantial expenditures to maintain and improve its
plants, equipment and technological systems.
Substantially all land, buildings and equipment are pledged as
collateral for outstanding debt (See Note 3 - Notes to the Financial
Statements). Approximately 7,000 acres of the farm land are leased (See Note 7 -
Notes to the Financial Statement) and approximately 1,000 acres are owned. 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% for the Bells, Tennessee
facility and near 100% for all other facilities.
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ITEM 3. LEGAL PROCEEDINGS
A complaint was filed by a stockholder of the Company on March 8, 1999,
against the Company and its directors in the matter of Rolfe Glover v. United
Foods, Inc., et al., Chancery Court of the State of Delaware (New Castle
County)(C.A. No. 17006 NC). The complaint seeks class action status and alleges
(among other things) that the defendants breached their fiduciary duties to the
Company's stockholders with respect to a proposal by the Company's Chairman and
Chief Executive Officer, James I. Tankersley, his wife and their children to
acquire the remaining shares of the Company's Common Stock that are not owned by
them in a merger in which the other stockholders would receive $3.00 per share.
See "Certain Relationships and Related Transactions." The complaint requests an
injunction prohibiting the consummation of the transaction, damages and other
relief. A second complaint was filed by a stockholder of the Company on May 3,
1999, against the Company and its directors in the matter of Robert I. Strougo
v. James I. Tankersley, et al., Chancery Court of the State of Delaware (New
Castle County)(C.A. No. 17137 NC). This complaint also seeks class action
status, makes similar allegations with respect to the transaction and requests
similar relief.
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 28, 1999.
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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 Class B Common Stock of the Company are traded on the
American Stock Exchange and the Pacific Exchange. Ticker Symbols: UFD A and UFD
B.
<TABLE>
<CAPTION>
CLASS A CLASS B
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SALE PRICE SALE PRICE
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QUARTER ENDED HIGH LOW DIVIDEND(1) HIGH LOW DIVIDEND(1)
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May 31, 1997 2 1/8 1 7/16 - 2 3/16 1 9/16 -
August 31, 1997 2 15/16 2 - 2 15/16 2 1/8 -
November 30, 1997 2 3/4 2 1/4 - 2 3/4 2 1/8 -
February 28, 1998 4 2 3/8 - 3 13/16 2 3/8 -
May 31, 1998 3 15/16 2 1/2 - 3 11/16 2 15/16 -
August 31, 1998 3 1/2 2 1/2 - 3 5/8 2 3/4 -
November 30, 1998 2 15/16 2 3/8 - 3 2 7/16 -
February 28, 1999 2 13/16 2 3/8 - 2 15/16 2 3/8 -
</TABLE>
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(1) Restrictive covenants in various loan agreements limit retained earnings
available for payment of dividends to $3,735,000 at February 28, 1999 (See
Note 3- Notes to Financial Statements).
APPROXIMATE NUMBER OF COMMON EQUITY SECURITY HOLDERS
<TABLE>
<CAPTION>
APPROXIMATE NUMBER OF
RECORD HOLDERS AS OF
TITLE OF CLASS FEBRUARY 28, 1999
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<S> <C>
Class A Common Stock...................................................... 2,000
Class B Common Stock...................................................... 1,500
</TABLE>
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.
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<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
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1999 1998 1997 1996 1995
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(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
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Operating Statement Data:
Net sales and service revenues...... 206,760 195,087 195,820 191,714 190,256
Operating income.................... 5,219 4,842 4,672 2,914 6,984
Net income (loss)................... 520 460 922 (660) 2,402
Per Share Data:
Basic and diluted earnings (loss)
per common share(1)............... .08 .06 .08 (.06) .19
Cash dividends per common
share:
Class A........................... - - - - -
Class B........................... - - - - -
Balance Sheet Data:
Long-term debt...................... 48,302 42,168 36,244 46,650 30,076
Total assets........................ 123,400 115,884 119,108 128,188 114,157
</TABLE>
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(1) Basic and diluted earnings per common share have been computed using the
average number of shares required to be recognized during the respective
periods. Earnings per share are the same for basic and diluted
computations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report on Form 10-K and other reports and statements issued
on behalf of the Company may include forward-looking information in reliance on
the safe harbor provided by the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to substantial risks and
uncertainties including those discussed below, and actual results may differ
materially from those contained in any such forward-looking statement. The
review of factors pursuant to the Private Securities Litigation Act of 1995
should not be construed as exhaustive. Further, the Company undertakes no
obligation to update or revise any such forward-looking statements to reflect
subsequent events or circumstances.
The Company's liquidity, capital resources and results of operations
may be affected from time to time by a number of factors and risks, including,
but not limited to: the impact of the Merger Agreement and Merger referred to
herein; trends in the economy as a whole, which may affect consumer confidence
and consumer demand for the types of food products sold by the Company;
competitive pressures from domestic and foreign processors and distributors of
fresh, dry, frozen and canned food products which may affect the nature and
viability of the Company's business strategy; competitive pressures from
imported food products; unpredictable changes in growing conditions inherent in
agriculture; other agricultural risks, including those associated with
pesticides, herbicides and disease control and crop protection efforts; the
Company's ability to maintain and expand its distribution base; the Company's
ability to maintain and improve its plants, equipment and technological systems;
changes in the Company's customer base as the result of competition and/or
consolidation of retail grocery chains; risks associated with governmental
regulation and taxation, including the existence or effects of tariffs;
availability and cost of labor employed;
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changes in industry capacity and production; the availability, costs and terms
of financing, including the risk of rising interest rates; availability of trade
credit and terms with vendors; the Company's use of financial leverage and the
potential impact of such leverage on the Company's ability to execute its
operating strategies; the ability to maintain gross profit margins; the seasonal
nature of the Company's business and the ability of the Company to predict
consumer demand as a whole, as well as demand for specific items; costs
associated with the storage, shipping, handling and control of inventory;
potential adverse publicity for the food industry or certain of the Company's
food products; and the ability of the Company and significant third parties with
whom it does business to effect conversions to new technological systems,
including becoming Year 2000 compliant.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash are operations and external
committed credit facilities. At February 28, 1999, the Company's revolving
credit facility totaled $18,000,000, all of which was available. The Company's
sources of liquidity are expected to meet adequately the 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 costs. The Company's $18,000,000 revolving credit facility currently
matures in fiscal 2002. The Company's $3,000,000 revolving credit facility was
canceled upon the closing of a term loan during December 1998. One-year
extensions of maturity dates of the $18,000,000 revolving credit facility will
be considered by the lender 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.
The Company closed on two term loans during December 1998. One term
loan in the amount of $15,000,000 has a ten year term, provides for monthly
principal and interest payments based on a twelve year amortization, with an
interest rate of 6.8% per annum and is secured by the Company's mushroom farms
located in California, Utah and Oregon. The other term loan in the amount of
$10,000,000 has a ten year term, provides for monthly principal and interest
payments based on a fifteen year amortization, with an interest rate of 6.8% per
annum and is secured by the Company's Santa Maria, California vegetable
processing facility. The proceeds of the loans were used to repay the balances
outstanding under existing mortgages on these properties totaling approximately
$9,000,000, to repay the outstanding balance of $3,000,000 on the Company's
$3,000,000 revolving credit note, and to repay fully the outstanding balance
under the other revolving credit facility.
In March 1998, the Company entered into a $10,000,000 credit facility
to support the acquisition of trucks, trailers and similar equipment. The
agreement was terminated during March 1999 and all outstanding borrowings under
the facility, which totaled approximately $740,000, were repaid. Another
$10,000,000 credit facility was entered into with a different lender during
March 1999. Interest under the terms of the new facility will be 225 basis
points over the yield for treasuries with a maturity equal to the amortization
period of the equipment being financed. Each loan will be secured by specific
equipment and will be amortized over three to seven years, depending on the type
of equipment.
Operating activities provided net cash of $9,699,000 in fiscal 1999, as
compared with $5,917,000 provided in fiscal 1998. The increase from 1998 to 1999
resulted primarily from changes in accounts
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receivable during fiscal 1998. Increases in accounts receivable during fiscal
1998 resulted from increased sales during the month of February, as well as from
normal timing factors associated with cash receipts.
Investing activities used cash of $12,521,000 in fiscal 1999 and
$4,454,000 in 1998 and provided cash of $205,000 in 1997. These changes resulted
primarily from an increase in capital expenditures from $693,000 in 1997 to
$4,546,000 in 1998 and $12,538,000 in 1999. Proceeds from the sale of property
and equipment totaled $17,000 in fiscal 1999, compared with $92,000 in 1998 and
$898,000 in 1997.
Financing activities provided cash of $4,203,000 during fiscal 1999 and
used cash of $4,589,000 during fiscal 1998 and $10,301,000 during fiscal year
1997. The Company closed on two term loans totaling $25,000,000 during December
1998, the proceeds of which were used to repay existing mortgages on the
financed properties totaling approximately $9,000,000 and to repay borrowings
under revolving credit agreements.
On May 19, 1997, the Company initiated a cash tender offer for up to
1,000,000 shares of its Class A and Class B Common Stock at a price of $2.50 per
share. On June 17, 1997, the Company amended the cash tender offer by extending
the expiration date to July 3, 1997 and by increasing the number of shares it
offered to purchase from 1,000,000 shares of its Class A and Class B Common
Stock to up to 2,500,000 shares of its Class A Common Stock and up to 1,500,000
shares of its Class B Common Stock, each at a price of $2.50 per share. A total
of approximately 2,641,299 shares of Class A common Stock and approximately
1,720,932 shares of Class B Common Stock were validly tendered and not withdrawn
in response to the offer, as amended. The purchases of shares were prorated in
accordance with the terms of the offer, as amended, for each class of Common
Stock. The purchase, which totaled approximately $10,168,000, including
expenses, was funded with borrowings from the Company's revolving credit
facilities and available cash.
On September 16, 1998, the Company received an offer from its chairman
and chief executive officer, James I. Tankersley, and his family to acquire the
remaining shares of the Company's common stock that are not already owned by Mr.
Tankersley, his wife or their children, in a merger in which the other
stockholders would receive $3.00 per share. On receiving the proposal, the Board
of Directors of the Company appointed two outside directors to a special
transaction committee. The Board designated the committee for the purpose of
evaluating and making recommendations with respect to the proposal. After
receiving the recommendation of the special transaction committee, on May 14,
1999, the Company entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Pictsweet LLC, a Delaware limited liability company and UF
Acquisition Corp., a wholly-owned subsidiary of Pictsweet LLC, pursuant to which
UF Acquisition Corp. will be merged with and into the Company with the Company
being the surviving corporation and becoming a wholly-owned subsidiary of the
Pictsweet LLC, subject to the conditions set forth in the Merger Agreement.
Pursuant to the Merger Agreement, outstanding shares of the Company's Common
Stock, except for Common Stock held by Pictsweet LLC and Common Stock owned by
stockholders who perfect their appraisal rights in accordance with Delaware law,
will be converted into the right to receive $3.50 per share in cash. If
consummated, the Jim Tankersley Family will directly or indirectly own the
entire equity interest of the Company. See "Certain Relationships and Related
Transactions." The Company has incurred approximately $300,000 of expenses with
respect to the proposed transaction through February 28, 1999.
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Proceeds totaling approximately $14,000,000 from two term loans that
closed during the fourth quarter of fiscal 1997 and cash provided by operations
during fiscal 1997 were used to reduce borrowings under the Company's revolving
credit agreements.
Working capital at February 28, 1999 amounted to $39,585,000, compared
to working capital of $39,179,000 at February 28, 1998. The increase in working
capital in fiscal 1999 resulted primarily from an increase in cash as a result
of the operating, investing and financing activities previously mentioned.
The Company's ratio of debt to equity was 1.67 to 1 at February 28,
1999, an increase from 1.53 to 1 at February 28, 1998. The increase resulted
primarily from the increased borrowings previously mentioned.
CAPITAL EXPENDITURES
Capital expenditures, on an accrual basis, amounted to $12,953,000 in
fiscal 1999 as compared with $4,774,000 and $533,000 in fiscal 1998 and 1997,
respectively. Fiscal 1999 capital spending included expenditures for new
equipment, farm land, increased storage, trucks, trailers and similar equipment
and vehicles. Capital expenditures for fiscal 2000 are estimated to be
approximately $17,400,000, which is approximately $9,000,000 more than
depreciation expense projected for fiscal 2000. Capital expenditures anticipated
in fiscal 2000 include outlays to be funded under the terms of the $10,000,000
credit facility, previously mentioned, as well as for improvements to the
Company's plants, equipment and technological systems, and the purchase of
certain leased equipment.
YEAR 2000 ISSUES
The Company believes it has developed a comprehensive strategy for
updating its systems for Year 2000 ("Y2K") compliance. The Company's information
technology ("IT") systems include in-house developed software, as well as
software purchased from third parties. All software has been identified and
assessed to determine the extent of renovations required in order to be Y2K
compliant. Renovations to programs that utilize in-house developed computer code
are complete and have been validated. The Company believes vendor developed
software will be made Y2K compliant before the end of the current calendar year
through vendor-provided updates or replacement with other Y2K compliant hardware
and software.
The Company has identified significant non-IT systems which may be
impacted by the Y2K problem, including those relating to production, processing,
storage, and communication equipment, and is in the process of determining
through inquiries of equipment suppliers, as well as testing of such equipment,
the extent of renovations required, if any. The Company believes the assessment
will be completed before the end of the Company's second quarter, and that
renovation, validation and implementation will be completed before the end of
the current calendar year.
The Company has identified third parties with which it has a
significant relationship that, in the event of a Y2K failure, could have a
material impact on the Company's financial position or operating results. The
third parties include energy and utility suppliers, creditors, material and
product suppliers, communication vendors, including value-added network vendors,
and the Company's significant customers. These relationships, especially those
associated with certain suppliers and customers, are material to the Company and
a Y2K failure for one or more of these parties could result in a material
adverse effect on
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the Company's operating results and financial position. The Company is making
inquiries of these third parties to assess their Y2K readiness. The Company
expects that this process will be on-going throughout the remainder of the
current calendar year.
The Company expects that the costs to address the Y2K issues will total
approximately $600,000, of which approximately $500,000 (approximately 35% of
fiscal 1999 management information system expense) was spent in fiscal 1999. The
remainder will be spent during the first three quarters of fiscal 2000. These
costs include salary and fringe benefits for personnel, hardware and software
costs, and consulting and travel expenses associated, directly or indirectly,
with addressing Y2K issues. Y2K issues have received a high priority within the
Company and, as a result, certain other IT projects have been delayed. While
such non-Y2K projects are expected to enhance operational efficiencies and
improve the quality of information available to management, the delay of such
projects is not expected to have material impact on the Company's operations.
The impact of Y2K scenarios could be limited to insignificant matters
such as a minor interruption in production or shipping resulting from
unanticipated problems encountered in the IT systems of the Company, or any of
the significant third parties with whom the company does business. The
pervasiveness of the Y2K issue makes it likely that previously unidentified
issues will require remediation during the normal course of business. In such a
case, the Company anticipates that transactions could be processed manually
while IT and other systems are repaired, and that such interruptions would have
a minor effect on the Company's operations. Worst case Y2K scenarios could be as
catastrophic as an extended loss of utility service resulting from interruptions
at the point of power generation, long-line transmission, or local distribution
to the Company's processing and storage facilities. Such an interruption could
result in an inability to provide products to the Company's customers, as well
as impairment of the Company's production capabilities and its fresh and frozen
inventories, resulting in a material adverse effect on the Company's operating
results and financial position.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
13
<PAGE> 14
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities ("SFAS 133").
SFAS 133 requires companies to recognize all derivatives contracts as either
assets or liabilities in the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged assets or liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change. SFAS 133 amends the guidance in
SFAS No. 52, "Foreign Currency Translation," to permit special accounting for a
hedge of a foreign currency forecasted transaction with a derivative. It also
supersedes SFAS No. 80, "Accounting for Futures Contracts," SFAS No. 105,
"Disclosure of Information about Financial Instruments with Off-Balance-Sheet
Risk and Financial Instruments with Concentrations of Credit Risk," and SFAS No.
119, "Disclosure about Derivative Financial Instruments." In addition, it amends
SFAS no. 107, "Disclosures about Fair Value of Financial Instruments," to
include in SFAS No. 107 the disclosure provisions about concentrations of credit
risk from SFAS No. 105.
SFAS 133 is effective for financial statements for periods beginning
after June 15, 1999. Historically, the Company has not entered into derivatives
contracts either to hedge existing risk or for speculative purposes.
Accordingly, the Company does not expect adoption of the new standard to affect
its financial statements.
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 the Company's facilities. 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 may decrease but selling prices will, in general, be depressed.
14
<PAGE> 15
The Company is faced with strong competition in the marketplace from
large brand name competitors, private regional U.S. growers and processors, and
privately-owned Mexican and Canadian growers and processors. These competitive
pressures, coupled with low overall growth and retail grocery consolidation,
have led to weak market pricing, and a substantial increase in trade spending
required for the Company to maintain its market position. These factors have
adversely impacted earnings in certain prior periods and, as a result, certain
discretionary repair and maintenance projects were deferred to later periods.
The Company anticipates that these competitive conditions will continue.
The Company believes that recently imposed interim tariffs on imported
canned mushrooms from certain countries has had the effect of increasing prices
and profitability for this portion of the Company's product line. In cases
involving imported canned mushrooms from Chile, India, Indonesia and China, the
tariff has been approved for a five-year period. It is anticipated that the
effect of such tariffs might be temporary, due to worldwide shifts in
production and distribution of mushrooms resulting from the tariffs.
The Company believes that, in order to address the intense competition
within its industry, it must improve its operational efficiency, lower its
costs, improve its customer service and provide value-added services to its
customers. Accordingly, the Company intends to continue to invest in maintaining
and expanding its distribution base and to make substantial expenditures to
maintain and improve its plants, equipment and technological systems. The
Company believes these expenditures are necessary to keep its business
competitive and will fund such spending during periods when earnings are
available. As a result, the Company expects that its future net income may be
adversely affected during certain periods.
In addition to general inflation and the growing, processing and
marketing risks described above, the Company is facing the significant costs
associated with governmental regulation, the loss of land and water available
for agriculture in California and the increasing competition due to world wide
facilitation of trade, notwithstanding the impact of the previously mentioned
tariff on certain imported canned mushrooms. As a result of these factors, the
Company's earnings are subject to fluctuations and will continue to be so for
the foreseeable future.
The effect on the Company's operations and its ability to withstand the
costs of developing healthcare, OSHA, EPA, taxation and other governmental
regulations is unknown.
SERVICE REVENUES
Service revenues consist primarily of outside revenue from the
Company's trucking operations, rental and miscellaneous income.
SUPPLY AGREEMENTS
The Company has entered into multi-year supply agreements with other
food processing companies. Through these agreements the Company procures food
products to meet production and inventory requirements. The Company is obligated
to sell food products processed at its Tennessee and Santa Maria, California
facilities to the other food processing companies.
15
<PAGE> 16
FISCAL 1999 COMPARED TO FISCAL 1998
NET SALES AND SERVICE REVENUES
Net sales and service revenues increased $11,673,000 or 6.0% for fiscal
1999 as compared with fiscal 1998 as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
--------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Gross Sales Revenues:
Food Products .................... $ 247,795,000 $ 231,430,000
Services ......................... 2,831,000 3,557,000
------------- -------------
Total Gross Revenues ................. 250,626,000 234,987,000
Less Sales Allowances on Food Products (43,866,000) (39,900,000)
------------- -------------
Net Sales and Service Revenues ... $ 206,760,000 $ 195,087,000
============= =============
</TABLE>
Food Product gross sales revenue increased $16,365,000 or 7.1% in
fiscal 1999 as compared with fiscal 1998 and included sales volume increases of
6.1%. The average selling price of food products increased .9%. The average
selling price of food products sales, excluding the effect of sales to other
food processing companies, increased 1.7% from fiscal 1998 to 1999. Sales
allowances increased $3,966,000 or 9.9% from the prior year primarily as a
result of sales volume increase, competitive market conditions and the Company's
efforts in maintaining current and obtaining additional distribution.
COST OF SALES AND SERVICES
Cost of sales and services increased $8,773,000 or 5.5% in fiscal 1999
as compared with the previous year, primarily as the result of the sales volume
increase of 6.0%. Additionally, adverse weather conditions resulted in reduced
yields and increased unit costs during fiscal 1999. However, the increased unit
costs were partially mitigated by the relatively lower average unit costs with
respect to beginning year inventories. Moreover, the average cost per pound was
reduced as the result of changes in the overall sales mix. Gross profit
increased $2,900,000 or 8.0% in fiscal 1999 as compared with the previous year
and the gross profit margin was 19.0% for fiscal 1999 and 18.7% for fiscal 1998.
The increase in gross profit resulted primarily from the increased sales volume
and increased average selling prices previously mentioned.
Operating results for fiscal 1999 included a charge to operations of
approximately $2,200,000 as compared with approximately $1,850,000 in fiscal
1998, as the result of a plant repair and maintenance program. It is expected
that repair and maintenance expenditures under this program will continue to be
significant during fiscal 2000.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling, administrative and general expenses increased $2,523,000
(8.0%) in fiscal 1999 as compared with the previous year. Administrative and
general selling expense increased $1,237,000 (8.2%) primarily as the result of
costs associated with the Company's Y2K efforts and increases in other general,
administrative and selling expenses. Incentive compensation expense increased
$624,000 (81%). Storage expense increased $187,000 (1.9%), primarily as the
result of repairs to the Company's cold storage
16
<PAGE> 17
facilities. Brokerage expense increased $276,000 (6.5%), primarily as the result
of increased sales. Advertising and other direct selling expenses increased
$199,000 (11.6%).
INTEREST EXPENSES
Interest expenses decreased $3,000 (.1%) in fiscal 1999 from fiscal
1998. The effect of additional indebtedness incurred during fiscal 1999 was
substantially mitigated by lower average interest rates.
MISCELLANEOUS INCOME
Miscellaneous Income (Expense) - Net was $(155,000) in fiscal 1999 as
compared with $53,000 for fiscal 1998. Fiscal 1999 includes expense of $145,000
related to disposals of property, plant and equipment and leasehold
improvements. Fiscal 1998 includes $51,000 resulting from 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 1999 and 1998.
FISCAL 1998 COMPARED TO FISCAL 1997
NET SALES AND SERVICE REVENUES
Net sales and service revenues decreased $733,000 or .4% for fiscal
1998 as compared with fiscal 1997 as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Gross Sales Revenues:
Food Products .................... $ 231,430,000 $ 227,192,000
Services ......................... 3,557,000 3,173,000
------------- -------------
Total Gross Revenues ................. 234,987,000 230,365,000
Less Sales Allowances on Food Products (39,900,000) (34,545,000)
------------- -------------
Net Sales and Service Revenues ... $ 195,087,000 $ 195,820,000
============= =============
</TABLE>
Food product gross sales revenue increased $4,238,000 or 1.9% in fiscal
1998 as compared with fiscal 1997 and included sales volume increases of 3.0%.
The average selling price of food products decreased 1.1%, primarily as the
result of a five million pound (14.0%) increase in sales to other food
processing companies in connection with the previously mentioned multi-year
reciprocal supply agreements. the volume increase in sales to other food
processing companies accounted for approximately one half of the Company's total
sales volume increase. The average selling price of food products sales,
excluding the effect of sales to other food processing companies, increased .3%
from 1997 to 1998. Sales allowances increased $5,355,000 or 15.5% from the prior
year primarily as the result of competitive market conditions and the Company's
efforts in maintaining current, and obtaining additional, distribution.
17
<PAGE> 18
COST OF SALES AND SERVICES
Cost of sales and services decreased $485,000 or .3% in fiscal 1998 as
compared with the previous year primarily as the result of the effect of
improved production efficiencies in 1998, the effects of which were partially
mitigated by the 3.0% volume increase. Gross profit decreased $248,000 or .7% in
fiscal 1998 as compared with the previous year and the gross profit margin was
18.7% for both fiscal 1998 and 1997. The decrease in gross profit resulted
primarily from the increased promotional allowances and decreased average
selling prices previously mentioned, the effects of which were partially
mitigated by favorable production efficiencies in fiscal 1998 as compared with
fiscal 1997.
Operating results for fiscal 1998 include a charge to operations of
approximately $1,850,000 as compared with approximately $1,100,000 in fiscal
1997, as the result of a plant repair and maintenance program.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling, administrative and general expenses decreased $418,000 (1.3%)
in fiscal 1998 as compared with the previous year, primarily as the result of a
fiscal 1997 charge of approximately $829,000 resulting from the Company's
adoption of a non-contributory, unqualified supplemental retirement plan for
management employees. Storage expense increased $443,000 for fiscal 1998 as
compared with fiscal 1997 primarily as the result of repairs to the Company's
cold storage facilities. Other expenses increased $32,000 in fiscal 1998 as
compared with fiscal 1997.
INTEREST EXPENSE
Interest expense increased $270,000 (7.0%) in fiscal 1998 from fiscal
1997, primarily as the result of higher average borrows resulting from the stock
purchase previously mentioned.
MISCELLANEOUS INCOME
Miscellaneous Income - Net was $53,000 in fiscal 1998 as compared with
$707,000 for fiscal 1997. Fiscal 1997 includes $314,000 resulting from net gains
realized on disposal of property, plant and equipment, and $212,000 to restore
the carrying value of certain property held for disposal to original cost, based
on its current fair market value. Further, miscellaneous income in fiscal 1997
includes the realization of a claim in the amount of $167,000 related to
operations which were discontinued in 1992.
TAXES ON INCOME
Taxes on income consist of current and deferred income taxes required
to be recognized for fiscal 1998 and 1997.
18
<PAGE> 19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not engage in hedging or other market structure
derivative trading activities. Additionally, the Company's debt obligations are
primarily fixed-rate in nature and, as such, are not sensitive to changes in
interest rates. The following table summarizes as of February 28, 1999, the
amount of fixed-rate indebtedness and the amount of variable-rate indebtedness
that will mature during the fiscal years indicated.
EXPECTED MATURITY DATES OF LONG-TERM DEBT AS OF FEBRUARY 28, 1999
(INCLUDING CURRENT PORTION)($000)
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total Fair Value
------ ------ ------ ------ ------ ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt $2,278 $2,457 $2,498 $2,630 $2,841 $32,069 $44,773 $45,757
Average interest rate 7.7% 7.7% 7.7% 7.7% 7.7% 7.8%
Variable rate debt 218 220 221 221 223 4,922 6,025 6,025
------- -------
Average interest rate 7.3% 7.3% 7.3% 7.3% 7.3% 7.3%
Total debt $2,496 $2,677 $2,719 $2,851 $3,064 $36,991 $50,798 $51,782
======= =======
</TABLE>
19
<PAGE> 20
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 28, 1999 and 1998, and the related statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended February 28, 1999. 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 28, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended February 28, 1999, in
conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
Memphis, TN
April 1, 1999
20
<PAGE> 21
UNITED FOODS, INC.
BALANCE SHEETS
================================
<TABLE>
<CAPTION>
FEBRUARY 28,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
------
CURRENT:
Cash and cash equivalents .............................................. $ 2,027,000 $ 646,000
Trade accounts receivable, less allowance of $500,000 and $285,000 for
possible losses (Notes 1 and 3) ...................................... 19,154,000 19,263,000
Inventories (Notes 2 and 3) ............................................ 37,785,000 37,344,000
Prepaid expenses and miscellaneous ..................................... 3,296,000 3,935,000
Deferred income taxes (Note 5) ......................................... 1,641,000 1,249,000
------------ ------------
TOTAL CURRENT ASSETS ............................................... 63,903,000 62,437,000
------------ ------------
PROPERTY AND EQUIPMENT (Note 3):
Land and land improvements ............................................. 13,814,000 9,968,000
Buildings .............................................................. 22,227,000 21,399,000
Machinery and equipment ................................................ 103,388,000 94,870,000
------------ ------------
139,429,000 126,237,000
Less accumulated depreciation and amortization ......................... (80,876,000) (74,151,000)
------------ ------------
NET PROPERTY AND EQUIPMENT ......................................... 58,553,000 52,086,000
------------ ------------
OTHER ASSETS .............................................................. 944,000 1,361,000
------------ ------------
$123,400,000 $115,884,000
============ ============
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
21
<PAGE> 22
UNITED FOODS, INC.
BALANCE SHEETS
(CONCLUDED)
================================
<TABLE>
<CAPTION>
FEBRUARY 28,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 13,638,000 $ 12,191,000
Accruals:
Compensation and related taxes ....................................... 2,994,000 2,889,000
Pension contributions (Note 8) ....................................... 1,020,000 965,000
Income taxes (Note 5) ................................................ 514,000 46,000
Workers' compensation claims (Note 9) ................................ 1,209,000 993,000
Interest ............................................................. 311,000 448,000
Promotional allowances ............................................... 1,566,000 905,000
Miscellaneous ........................................................ 570,000 394,000
Current maturities of long-term debt (Notes 3 and 8) ................... 2,496,000 4,427,000
------------ ------------
TOTAL CURRENT LIABILITIES ........................................ 24,318,000 23,258,000
LONG-TERM DEBT, less current maturities (Notes 3 and 8) ................... 48,302,000 42,168,000
DEFERRED INCOME TAXES (Note 5) ............................................ 4,512,000 4,710,000
------------ ------------
TOTAL LIABILITIES................................................. 77,132,000 70,136,000
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 7, 8, and 9)
STOCKHOLDERS' EQUITY (Note 4):
Preferred stock, $1 par, shares authorized 10,000,000 .................. -- --
Common stock, Class A, $1 par, shares authorized 12,000,000;
outstanding 2,617,243 and 2,616,139 .................................. 2,617,000 2,616,000
Common stock, Class B, $1 par, shares authorized 6,000,000; outstanding
4,192,686 and 4,193,790 .............................................. 4,193,000 4,194,000
Additional paid-in capital ............................................. 3,993,000 3,993,000
Retained earnings (Note 3) ............................................. 35,465,000 34,945,000
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ....................................... 46,268,000 45,748,000
------------ ------------
$123,400,000 $115,884,000
============ ============
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
22
<PAGE> 23
UNITED FOODS, INC.
STATEMENTS OF INCOME
================================
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-------------------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
NET SALES AND SERVICE REVENUES (Note 9) ............ $ 206,760,000 $ 195,087,000 $ 195,820,000
COST OF SALES AND SERVICES ......................... 167,408,000 158,635,000 159,120,000
------------- ------------- -------------
Gross profit .................................. 39,352,000 36,452,000 36,700,000
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES........ 34,133,000 31,610,000 32,028,000
------------- ------------- -------------
Operating income .............................. 5,219,000 4,842,000 4,672,000
------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest expense ................................ (4,138,000) (4,141,000) (3,871,000)
Miscellaneous income (expense), net ............. (155,000) 53,000 707,000
------------- ------------- -------------
Total other income (expense), net ............. (4,293,000) (4,088,000) (3,164,000)
------------- ------------- -------------
Income before taxes on income ................. 926,000 754,000 1,508,000
TAXES ON INCOME (Note 5) ........................... 406,000 294,000 586,000
------------- ------------- -------------
NET INCOME ......................................... $ 520,000 $ 460,000 $ 922,000
============= ============= =============
BASIC AND DILUTED EARNINGS PER COMMON SHARE (Note 6) $ .08 $ .06 $ .08
============= ============= =============
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
23
<PAGE> 24
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 29, 1996 ........... 7,649,457 $ 7,650,000 7,096,180 $ 7,096,000
Net income for the year .............. -- -- -- --
Exchange of Class B common stock for
Class A common stock .............. 6,000 6,000 (6,000) (6,000)
Retirement of treasury stock (Note 4) (2,539,382) (2,540,000) (1,396,326) (1,396,000)
---------- ----------- ---------- -----------
Balance, February 28, 1997 ........... 5,116,075 5,116,000 5,693,854 5,694,000
Net income for the year .............. -- -- -- --
Exchange of Class B common stock for
Class A common stock .............. 64 -- (64) --
Purchase of treasury stock (Note 4) .. -- -- -- --
Retirement of, and adjustment in
connection with, treasury stock
(Note 4) .......................... (2,500,000) (2,500,000) (1,500,000) (1,500,000)
---------- ----------- ---------- -----------
Balance, February 28, 1998 ........... 2,616,139 2,616,000 4,193,790 4,194,000
Net income for the year .............. -- -- -- --
Exchange of Class B common stock for
Class A common stock .............. 1,104 1,000 (1,104) (1,000)
---------- ----------- ---------- -----------
Balance, February 28, 1999 ........... 2,617,243 $ 2,617,000 4,192,686 $ 4,193,000
========== =========== ========== ===========
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
24
<PAGE> 25
<TABLE>
<CAPTION>
ADDITIONAL TREASURY STOCK
PAID-IN RETAINED ------------------------------
CAPITAL EARNINGS SHARES AMOUNT TOTAL
- ----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
$ 8,644,000 $ 41,261,000 3,935,708 $(10,117,000) $ 54,534,000
-- 922,000 -- -- 922,000
-- -- -- -- --
(6,181,000) -- (3,935,708) 10,117,000 --
- ----------- ------------ ---------- ------------ ------------
2,463,000 42,183,000 -- -- 55,456,000
-- 460,000 -- -- 460,000
-- -- -- -- --
-- -- 4,000,000 (10,168,000) (10,168,000)
1,530,000 (7,698,000) (4,000,000) 10,168,000 --
- ----------- ------------ ---------- ------------ ------------
3,993,000 34,945,000 -- -- 45,748,000
-- 520,000 -- -- 520,000
-- -- -- -- --
- ----------- ------------ ---------- ------------ ------------
$ 3,993,000 $ 35,465,000 -- $ -- $ 46,268,000
=========== ============ ========== ============ ============
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
25
<PAGE> 26
UNITED FOODS, INC.
STATEMENTS OF CASH FLOWS
================================
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------------------------------
1999 1998 1997
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 520,000 $ 460,000 $ 922,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ........................................ 7,119,000 7,285,000 7,859,000
Provision for losses on accounts receivable ........... 210,000 81,000 60,000
Net loss (gain) on disposal of property and equipment.. 145,000 (51,000) (314,000)
Recovery of writedown on property held for disposal.... -- -- (212,000)
Deferred income taxes ................................. (590,000) (305,000) (626,000)
Change in operating assets and liabilities:
Accounts receivable ................................. (101,000) (1,811,000) (3,091,000)
Inventories ......................................... (441,000) (650,000) 6,405,000
Prepaid expenses and miscellaneous .................. 639,000 (64,000) 721,000
Other assets ........................................ (387,000) (16,000) 508,000
Income taxes payable ................................ 468,000 (282,000) 122,000
Accounts payable and accruals ....................... 2,117,000 1,270,000 485,000
------------ ----------- ------------
Net cash provided by operating activities ......... 9,699,000 5,917,000 12,839,000
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................... (12,538,000) (4,546,000) (693,000)
Proceeds from sale of property and equipment ............ 17,000 92,000 898,000
------------ ----------- ------------
Net cash provided (used) by investing activities... $(12,521,000) $(4,454,000) $ 205,000
------------ ----------- ------------
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
26
<PAGE> 27
UNITED FOODS, INC.
STATEMENTS OF CASH FLOWS
(CONCLUDED)
================================
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------------------------------
1999 1998 1997
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under line of credit
agreements ......................................... $ (9,448,000) $ 9,448,000 $(20,095,000)
Proceeds from long-term borrowings ................... 26,728,000 922,000 14,884,000
Purchase of treasury stock ........................... -- (10,168,000) --
Reduction of long-term debt .......................... (13,077,000) (4,791,000) (5,090,000)
------------ ------------ ------------
Net cash provided (used) by financing activities 4,203,000 (4,589,000) (10,301,000)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH FOR THE YEAR ............ 1,381,000 (3,126,000) 2,743,000
CASH AND CASH EQUIVALENTS, beginning of year ............ 646,000 3,772,000 1,029,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year .................. $ 2,027,000 $ 646,000 $ 3,772,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ............................................. $ 3,672,000 $ 3,618,000 $ 3,690,000
Income taxes ......................................... $ 487,000 $ 854,000 $ 1,084,000
</TABLE>
Non-cash investing and financing activities:
Capital expenditures of $643,000 and $228,000 are included in accounts payable
at February 28, 1999 and 1998, respectively.
See accompanying summary of accounting policies and
notes to financial statements.
27
<PAGE> 28
UNITED FOODS, INC.
SUMMARY OF ACCOUNTING POLICIES
================================
LINES OF BUSINESS
The Company is principally engaged in the growing, processing,
marketing and distribution of food products, primarily frozen vegetables and
fresh mushrooms.
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. In addition, the Company purchases and sells certain products under
reciprocal supply agreements with other food processors.
The Company currently operates six owned facilities in California,
Oregon, Tennessee and Utah. Although production varies with the seasons at three
frozen vegetable plants, all the facilities operate during a substantial part of
the year.
USE OF ESTIMATES
The preparation of the Company's 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; and for raw materials and growing crops, market is based
on replacement cost.
28
<PAGE> 29
UNITED FOODS, INC.
SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)
================================
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:
<TABLE>
<CAPTION>
DESCRIPTION YEARS
----------------------------------- -----
<S> <C>
Land improvements................... 10-40
Buildings........................... 5-60
Machinery and equipment............. 3-13
</TABLE>
For income tax purposes, depreciation on property and equipment is
computed primarily on accelerated methods.
The Company continually reviews property and equipment to determine
that the carrying values have not been impaired.
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 historically
deferred and amortized product introduction and related costs over a
twelve-month period. In February 1997, the Company began expensing such costs in
the period incurred due to the increasingly competitive nature of the industry
which has resulted in the inability to reasonably estimate the period benefited
by these costs. The effect of this change was to decrease after-tax net income
for the year ended February 28, 1997, by $551,000.
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.
29
<PAGE> 30
UNITED FOODS, INC.
SUMMARY OF ACCOUNTING POLICIES
(CONCLUDED)
================================
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), which supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise." SFAS 131 establishes standards for the way that public
companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. In addition, SFAS 131 permits
the aggregation of two or more operating segments if it is consistent with the
objectives and principles of the statement, if they have similar economic
characteristics, and if the segments meet the aggregation criteria set forth in
the statement. The Company has determined that its operating segments meet these
criteria and, accordingly, no disaggregated information regarding the Company's
operating segments has been included in these financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 requires companies to recognize all derivatives contracts as
either assets or liabilities in the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of gain or
loss recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are attributable
to the hedged risk or (ii) the earnings effect of the hedged forecasted
transaction. For a derivative not designated as a hedging instrument, the gain
or loss is recognized in income in the period of change. SFAS 133 amends the
guidance in SFAS No. 52, "Foreign Currency Translation," to permit special
accounting for a hedge of a foreign currency forecasted transaction with a
derivative. It also supersedes SFAS No. 80, "Accounting for Futures Contracts,"
SFAS No. 105, "Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk," and SFAS No. 119, "Disclosure about Derivative Financial Instruments." In
addition, it amends SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments," to include in SFAS No. 107 the disclosure provisions about
concentrations of credit risk from SFAS No. 105.
SFAS 133 is effective for financial statements for periods beginning
after June 15, 1999. Historically, the Company has not entered into derivatives
contracts either to hedge existing risk or for speculative purposes.
Accordingly, the Company does not expect adoption of the new standard to affect
its financial statements.
RECLASSIFICATIONS
Certain prior year amounts in the financial statements have been
reclassified to conform to the current year presentation.
30
<PAGE> 31
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
================================
NOTE 1. RECEIVABLES
Activity in the allowance for possible losses is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-----------------------------------------
1999 1998 1997
-------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year .......... $285,000 $ 308,000 $ 260,000
Charged to expense .................... 210,000 81,000 60,000
Balances written off, net of recoveries 5,000 (104,000) (12,000)
-------- --------- ---------
Balance at end of year ................ $500,000 $ 285,000 $ 308,000
======== ========= =========
</TABLE>
NOTE 2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
FEBRUARY 28,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Finished products ...... $32,675,000 $31,607,000
Raw materials .......... 2,223,000 2,303,000
Growing crops .......... 2,342,000 2,644,000
Merchandise and supplies 545,000 790,000
----------- -----------
$37,785,000 $37,344,000
=========== ===========
</TABLE>
31
<PAGE> 32
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================
NOTE 3. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
FEBRUARY 28,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
6.8% term notes, payable in monthly installments of $241,000, including
interest, through January 2009, collateralized by certain real estate and
equipment located in California, Oregon and Utah (approximate
carrying value of $17,800,000) .............................................. $ 24,900,000 $ --
9.10% term note, payable in monthly installments of $194,000 through March 1998,
and $148,000 thereafter, including interest, through March 2007,
collateralized by certain real estate and equipment located in Bells,
Tennessee (approximate carrying value of $27,100,000)........................ 13,535,000 14,096,000
8.98% term note, payable in monthly installments of $61,000, including interest,
through January 2007, collateralized by certain real estate and equipment
located in Ogden, Utah (approximate carrying value of $1,900,000) ........... 5,578,000 5,799,000
7.08% to 7.35% notes payable through April 2005, collateralized by certain
equipment located in California, Tennessee and Utah (approximate
carrying value of $822,000) ................................................. 760,000 --
9.25% term notes payable (repaid December 1998) ................................ -- 7,357,000
$18 million revolving credit note payable to bank, collateralized by certain
trade receivables and inventories (approximate carrying value of
$49,100,000), due June 2001, with interest at the bank's prime rate
less fifty basis points (7.25% at February 28, 1999) ........................ -- 6,448,000
6.97% term note payable (repaid December 1998) ................................. -- 3,857,000
$3 million revolving credit note payable to bank (repaid December 1998) ........ -- 3,000,000
6.48% term note payable (repaid January 1999) .................................. -- 689,000
Deferred compensation agreements, with interest credited at a rate equal
to that which the Company pays on its revolving credit borrowings
(7.25% at February 28, 1999) (Note 8) ....................................... 6,025,000 5,349,000
------------ ------------
Totals ......................................................................... 50,798,000 46,595,000
Less current maturities ........................................................ (2,496,000) (4,427,000)
------------ ------------
Long-term debt, less current maturities ........................................ $ 48,302,000 $ 42,168,000
============ ============
</TABLE>
During fiscal year 1999, borrowings under the revolving credit note
averaged $4,890,000, with a maximum amount borrowed of $11,548,000, as compared
to fiscal year 1998 when borrowings averaged $6,017,000, with a maximum amount
borrowed of $12,508,000.
32
<PAGE> 33
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>
2000 ..... $ 2,496,000
2001 ..... 2,677,000
2002 ..... 2,719,000
2003 ..... 2,851,000
2004 ..... 3,064,000
After 2004 36,991,000
-----------
Total .... $50,798,000
===========
</TABLE>
The terms of various notes include certain negative covenants which
provide for, among other things, restrictions relating to maximum leverage and
the maintenance of minimum levels of working capital and equity, and the payment
of dividends. Under the most restrictive of these provisions, retained earnings
of $31,730,000 is restricted at February 28, 1999.
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.
On May 19, 1997, the Company initiated a cash tender offer for up to
one million shares of its Class A and Class B common stock at a price of $2.50
per share. On June 17, 1997, the Company amended the cash tender offer by
extending the expiration date to July 3, 1997, and by increasing the number of
shares it offered to purchase from one million shares of its Class A and Class B
common stock to up to 2,500,000 shares of its Class A common stock and up to
1,500,000 shares of its Class B common stock, each at a price of $2.50 per
share. A total of 2,641,299 shares of Class A common stock and 1,720,932 shares
of Class B common stock were validly tendered and not withdrawn in response to
the offer, as amended. The purchase of shares was prorated in accordance with
the terms of the offer, as amended, for each class of common stock. The
purchase, which totaled approximately $10,168,000, including expenses, was
funded with borrowings from the Company's revolving credit facilities and
available cash.
The Company had an incentive stock option plan for granting key
employees options to purchase shares of the Company's Class A common stock which
was terminated, effective with the expiration of all the options outstanding, in
December 1997.
33
<PAGE> 34
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================
NOTE 4. COMMON STOCK (CONTINUED)
James I. Tankersley (the Company's chairman and chief executive
officer), Edna W. Tankersley, Kelle T. Northern (a director), Darla T. Darnall
(a director) and James W. Tankersley (a director) (collectively the "Jim
Tankersley Family") have offered to acquire the remaining shares of the
Company's common stock that are not already owned by them in a merger in which
the other stockholders would receive $3 per share. The Board of Directors of the
Company appointed two outside directors to a special transaction committee. The
Board designated the committee for the purpose of evaluating and making
recommendations with respect to the proposal. If consummated, the proposal would
result in the direct or indirect ownership of the entire equity interest of the
Company by the Jim Tankersley Family (Note 9.c.).
NOTE 5. TAXES ON INCOME
The components of income tax expense are as follows:
<TABLE>
YEAR ENDED FEBRUARY 28,
-----------------------------------------------
1999 1998 1997
--------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal ....... $ 719,000 $ 475,000 $ 1,006,000
State ......... 277,000 124,000 206,000
--------- ----------- -----------
996,000 599,000 1,212,000
--------- ----------- -----------
Deferred:
Federal ....... (497,000) (273,000) (502,000)
State ......... (93,000) (32,000) (124,000)
--------- ----------- -----------
(590,000) (305,000) (626,000)
--------- ----------- -----------
Income tax expense $ 406,000 $ 294,000 $ 586,000
========= =========== ===========
</TABLE>
34
<PAGE> 35
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================
NOTE 5. TAXES ON INCOME (CONTINUED)
The components of the net deferred income tax assets and liabilities
consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Jobs and other tax credit carryforwards $ 1,743,000 $ 2,804,000
Inventory overhead adjustment .......... 379,000 380,000
Accrued vacation ....................... 472,000 472,000
Deferred compensation .................. 2,318,000 2,029,000
Accrued workers' compensation claims ... 366,000 271,000
Package design costs ................... 283,000 163,000
Other .................................. 460,000 242,000
----------- -----------
Total deferred income tax assets .......... $ 6,021,000 $ 6,361,000
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Deferred income tax liabilities:
Fixed asset carrying value difference .. $(8,854,000) $(9,707,000)
Other .................................. (38,000) (115,000)
----------- -----------
Total deferred income tax liabilities ..... (8,892,000) (9,822,000)
----------- -----------
Net deferred income tax liabilities ....... (2,871,000) (3,461,000)
Current deferred income tax asset ......... 1,641,000 1,249,000
----------- -----------
Net long-term deferred income tax liability $(4,512,000) $(4,710,000)
=========== ===========
</TABLE>
35
<PAGE> 36
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================
NOTE 5. TAXES ON INCOME (CONTINUED)
The effective tax rate on income before taxes on income 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 28,
------------------------------------------
1999 1998 1997
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 ......... 5.6 8.1 2.2
Fuels and jobs tax credits ............................. (5.8) (5.8) (3.3)
Other items ............................................ 10.0 2.7 5.9
--------- --------- ----------
Taxes on income at effective rate ......................... 43.8 39.0 38.8
========= ========= ==========
</TABLE>
NOTE 6. EARNINGS PER SHARE AND CAPITAL STOCK
Earnings per share of common stock and common stock equivalents have
been computed using 6,809,929 shares in 1999, 8,256,504 shares in 1998, and
11,077,372 shares in 1997, which represent the weighted average number of shares
of Class A and Class B common stock required to be recognized during the
respective periods. As of February 28, 1997, holders of substantially all of the
Company's common stock options had agreed not to exercise their options in
exchange for an agreed-upon amount of deferred compensation and, therefore, the
assumed exercise of the common stock options is not included in the computation
of common stock equivalents for 1998, but were included in computing the
weighted average number of shares for 1997 due to the fact that the agreements
to allow options to expire were not signed until late February 1997.
Earnings per share has been calculated using the following weighed
average number of shares:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ----------
<S> <C> <C> <C>
Weighted average number of common shares used for Basic EPS 6,809,929 8,256,504 10,809,929
Effect of dilutive stock options .......................... -- -- 267,443
--------- --------- ----------
Weighted average number of common shares and dilutive
potential common stock used in diluted EPS ............. 6,809,929 8,256,504 11,077,372
========= ========= ==========
</TABLE>
NOTE 7. LEASES
The Company leases certain property, including land used in farming
operations, 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.
36
<PAGE> 37
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================
NOTE 7. LEASES (CONTINUED)
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>
<S> <C>
YEAR ENDING FEBRUARY 28 OR 29,
------------------------------
2000.......................... $ 2,315,000
2001.......................... 2,274,000
2002.......................... 1,587,000
2003.......................... 1,242,000
2004 ......................... 811,000
After 2004 ................... 3,883,000
-----------
Total minimum lease payments.. $12,112,000
===========
</TABLE>
Rent expense under operating leases amounted to $3,808,000, $3,588,000
and $3,552,000 for the years ended February 28, 1999, 1998 and 1997,
respectively.
Certain leases contain renewal options and some have purchase options,
and generally provide that the Company shall pay for insurance, taxes and
maintenance.
NOTE 8. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company had a defined contribution pension plan for hourly
non-clerical employees. Contributions to the plan were based upon hours worked
during the plan year and participants could make voluntary contributions to the
plan of up to 10% of their compensation (as defined). The Company paid all
administrative expenses related to the plan. Cost of the plan charged to
operations for fiscal 1998 and 1997 amounted to approximately $499,000 and
$463,000, respectively. This plan was terminated on February 28, 1998.
The Company also provided a defined contribution pension plan for
certain salaried employees. Company contributions to the plan were discretionary
but could not exceed 15% of participants' compensation. Participants could make
voluntary contributions up to 10% of their compensation (as defined) to the
plan. Cost of the plan charged to operations for fiscal 1998 and 1997 amounted
to approximately $74,000 and $94,000, respectively. This plan was terminated on
February 28, 1998.
On March 1, 1998, the Company established a defined contribution plan
for certain salaried and hourly employees. The plan provides for a dollar for
dollar match by the Company of participant contributions up to 3% of
compensation (as defined) and for participants to make additional voluntary
contributions to the plan of up to 22% of their compensation (as defined). Cost
of the plan charged to operations for fiscal 1999 amounted to approximately
$514,000.
37
<PAGE> 38
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================
NOTE 8. EMPLOYEE BENEFIT PLANS (CONTINUED)
INCENTIVE PLANS
During 1997, the Company had an incentive compensation plan, now
terminated, which computed benefits in accordance with a formula which
incorporated net after tax profits, return on average assets and return on
equity. Costs of the plan charged to operations for fiscal 1997 was
approximately $241,000.
The Company adopted incentive compensation plans in fiscal 1998 which
cover certain key employees. Company benefits under the plans are discretionary.
Costs of the plans charged to operations for fiscal 1999 and 1998 were
approximately $350,000 and $277,000, respectively. The Company has also adopted
an incentive compensation plan for the Chairman of the Board which computes
benefits in accordance with a formula which incorporates earnings before
interest, taxes, depreciation and amortization. Cost of the plan charged to
operations for fiscal 1999 and 1998 were approximately $438,000 and $280,000,
respectively.
A portion of the benefits provided under these plans were credited to
deferred compensation accounts which earn an interest rate equal to that which
the Company pays on its revolving credit borrowings. Interest expense during
fiscal 1999, 1998 and 1997 includes approximately $41,000, $41,000 and $36,000,
respectively, related to these accounts.
OTHER BENEFIT PLANS
The Company also has a deferred compensation plan which permits
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 this plan is
interest on the deferred amounts. Interest is credited to participant accounts
at a rate equal to that which the Company pays on its revolving credit
borrowings. Interest expense during fiscal 1999, 1998 and 1997 includes
$182,000, $178,000 and $139,500, respectively, related to these plans.
In February 1997, the Company adopted a non-contributory, unqualified
supplemental retirement plan for management employees, whereby an amount
specified by the board of directors is held in a deferred compensation account
for each covered employee to be paid either in a lump sum or in approximate
equal installments over ten years at the date of such employee's retirement from
the Company. The board of directors specified that each management employee
currently holding the Company's incentive stock options be offered the
alternative of receiving deferred compensation under the plan in an amount equal
to $1 for each unexercised stock option currently held. Any employee electing to
so participate was required to agree not to exercise the related options through
the option expiration date in December 1997. Employees holding 829,384 options
elected to participate in this deferred compensation plan, resulting in a charge
to operations of $829,384 in 1997. Interest is credited to participant accounts
at a rate equal to that which the Company pays on its revolving credit
borrowings. Interest expense during fiscal 1999 and 1998 includes $72,000 and
$74,000, respectively, related to this plan.
38
<PAGE> 39
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================
NOTE 8. EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company also has 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 upon the latter of such officer's date of disability
as defined, termination from the Company, or 65th birthday. The compensation
expense for this plan in fiscal 1999, 1998 and 1997 was $221,000, $264,000 and
$242,000, respectively. Interest is credited to participant accounts at a rate
equal to that which the Company pays on its revolving credit borrowings.
Interest expense during fiscal 1999, 1998 and 1997 includes $136,000, $121,000
and $88,000, respectively, related to this plan.
The Company has included $6,025,000 and $5,349,000 in long-term debt at
February 28, 1999 and 1998, respectively, to reflect its liability under these
unfunded plans.
NOTE 9. COMMITMENTS AND CONTINGENCIES
A. SALES AND MAJOR CUSTOMER
A large part of the Company's sales are made in the retail market and a
significant proportion of the retail grocery trade in the United States is
concentrated in the hands of national grocery chains. As such, a large part of
the Company's revenue is derived from sales to these chains. Sales to one of the
Company's customers totaled $27,036,000, $26,374,000 and $22,328,000,
representing 13.1%, 13.5% and 11.4% of total Company revenues in 1999, 1998 and
1997, respectively. Competition results in changes in the Company's customer
base over time and it is, therefore, possible that the Company may lose one or
more of its largest customers over time and, as a result, operations could be
materially impacted.
B. PRODUCT PROCUREMENT AND AVAILABILITY
Crops have seasonal features and availability is subject to
unpredictable changes in growing conditions that are inherent in the agriculture
industry. The Company bears part of the growing risks and all of the processing
and marketing risks associated with its agricultural products. Weather
abnormalities and other adverse growing conditions sometimes result in
substantial reductions in the annual volumes processed in the Company's plants.
When this occurs, the Company may have to procure raw and processed vegetables
from alternative sources at higher than expected costs and the reduced volume of
vegetables processed in the Company's plants results in increased unit costs.
When growing conditions result in yields that exceed expectations, the Company
will generally pack only volumes required by anticipated demand through the next
pack season. Additionally, selling prices are impacted by industry-wide
production and inventory levels. Bumper crops and resulting increased inventory
levels tend to decrease average selling prices, while crop shortages typically
do not result in increased selling prices.
39
<PAGE> 40
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================
NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
C. 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.
During March 1999, a complaint was filed against the Company and its
directors by a stockholder of the Company in a Delaware Chancery Court. The
complaint seeks class action status and requests injunctive and other relief
with respect to a pending proposal by the Jim Tankersley Family to acquire the
remaining shares of the Company's common stock that are not owned by them for
$3.00 per share in cash. The Company believes the complaint to be without merit
(Note 4).
D. SUPPLY AGREEMENTS
The Company has entered into multi-year reciprocal supply agreements
with other food processing companies. Through these agreements the Company
procures food products to meet its production and inventory requirements. Also,
the Company sells food products processed at the Company's Tennessee and
California facilities to the other food processing companies.
E. 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 where they are self-insured by obtaining bonds totaling approximately
$2,700,000.
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 28, 1999, the estimated fair
value of debt instruments with fixed interest rates was approximately
$45,757,000 as compared with the carrying value of such instruments of
$44,773,000.
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.
40
<PAGE> 41
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
================================
NOTE 11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
----------- ------------ ----------- ------------
YEAR ENDED FEBRUARY 28, 1999:
-----------------------------
<S> <C> <C> <C> <C>
Revenues ......................................... $49,934,000 $ 45,888,000 $55,525,000 $ 55,413,000
Gross profit ..................................... 9,389,000 7,940,000 10,845,000 11,178,000
Income (loss) from operations before taxes
on income (benefit) ........................... 401,000 (775,000) 1,074,000 226,000
Net income (loss) ................................ 247,000 (477,000) 661,000 89,000
Basic and diluted earnings (loss) per common share .04 (.07) .10 .01
YEAR ENDED FEBRUARY 28, 1998:
-----------------------------
Revenues ......................................... $46,963,000 $ 42,579,000 $51,407,000 $ 54,138,000
Gross profit ..................................... 8,878,000 6,873,000 9,429,000 11,272,000
Income (loss) before taxes on income (benefit) ... 650,000 176,000 1,470,000 (1,542,000)
Net income (loss) ................................ 400,000 (949,000) 108,000 901,000
Basic and diluted earnings (loss) per common share .04 (.11) .02 .13
</TABLE>
41
<PAGE> 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
DR. JOSEPH A. GEARY (AGE 46), CLASS A DIRECTOR
Minister, St. Paul United Methodist Church, Memphis, Tennessee since
1996. He has been a Director of the Company since 1991.
B. M. ENNIS (AGE 61), CLASS B DIRECTOR
President of the Company since 1989. Mr. Ennis has been associated with
the Company since 1968 and has been a Director of the Company since 1978.
DANIEL B. TANKERSLEY(AGE 52), CLASS B DIRECTOR
Chief manager of Dover Communications LLC, a political consulting,
direct mail and media broker since 1998. Vice Chairman of the Board from 1992 to
1998 and Secretary of the Company from 1978 to 1998. Mr. Tankersley was
Executive Vice President and General Counsel of the Company from 1989 to 1992
and Vice President of the Company from 1979 to 1989. He has been associated with
the Company since 1973 and has been a Director of the Company since 1979.
JAMES I. TANKERSLEY (AGE 57), CLASS B DIRECTOR
Chairman of the Board of the Company since 1986. Mr. Tankersley has
been the Chief Executive Officer of the Company since 1983 and served as
President of the Company from 1977 to 1989. He has been associated with the
Company since 1964 and has been a Director of the Company since 1972.
JOHN S. WILDER (AGE 77), CLASS A DIRECTOR
Speaker of the Senate and Lieutenant Governor of the State of Tennessee
since 1970 and has served continuously in the Tennessee State Legislature since
1968, having served two year terms in 1959 and 1966. Governor Wilder is an
attorney with Wilder and Johnston, PLC, a law firm in Somerville, Tennessee and
is also Chairman of the Board of Cumberland Bancorp, Inc., a director of
Cumberland Bank of Carthage, Tennessee, Chairman of the Board of First Federal
Bankshares, Inc., a director of First Federal Bank, FSB of Collierville,
Tennessee and a director of the Bank of Green Hills of Nashville, Tennessee. He
is Vice-President of the Longtown Supply Company, Inc. of Longtown, Tennessee, a
farming, cotton-ginning and merchandise business, a partner in Longtown Farms, a
partnership engaged in the business of farming and a director of Health
Management, Inc., a pathological waste disposal company. He has been a Director
of the Company since 1979.
42
<PAGE> 43
DARLA T. DARNALL (AGE 35), CLASS B DIRECTOR
Marketing Analyst for the Company's Pictsweet Frozen Foods Division
from 1985 to 1990. Mrs. Darnall has been associated with the Company since 1981
and has been a Director of the Company since 1990.
KELLE T. NORTHERN (AGE 32), CLASS B DIRECTOR
Manager - Human Resources for the Company's Pictsweet Frozen Foods
Division from 1990 to 1996. Mrs. Northern has been associated with the Company
since 1982 and has been a Director of the Company since 1991.
THOMAS A. HOPPER, JR. (AGE 39), CLASS A DIRECTOR
President since 1993 of the Hopper Company, a media and strategic
consulting business. He was a regional director of the Republican National
Committee from 1993 to 1997. He has been a Director of the Company since 1997.
CARL W. GRUENEWALD, II (AGE 65), CLASS B DIRECTOR
Senior Vice President-Finance of the Company since 1982 and Treasurer
of the Company since 1977. Mr. Gruenewald has been associated with the Company
since 1966 and has been a Director of the Company since 1981.
JULIA T. WELLS (AGE 60), CLASS B DIRECTOR
Director of Marketing Services for the Company's Pictsweet Frozen Foods
Division since 1986. Mrs. Wells has been associated with the Company since 1964
and has been a Director of the Company since 1990.
JAMES W. TANKERSLEY (AGE 27), CLASS B DIRECTOR
Purchasing Manager for the Company since 1995 and a Director of the
Company since 1997 and has been associated with the Company since 1987.
43
<PAGE> 44
EXECUTIVE OFFICERS
The names and positions of all the executive officers of the Company
are listed below along with their business experience during the past five
years. Officers are appointed annually by the Board of Directors at the meeting
of directors immediately following the Annual Meeting. There are no arrangements
or understandings between any officer and any other person pursuant to which the
officer was appointed.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- -------------------------------------- ----------------------------------------------------------------
<S> <C>
James I. Tankersley, 57............... Chairman of the Board since 1986; Chief Executive Officer since
Chairman of the Board and 1983.
Chief Executive Officer
B. M. Ennis, 61....................... President since 1989.
President
Carl W. Gruenewald, II, 65............ Senior Vice President and Chief Financial Officer since 1982 and
Senior Vice President, Chief Treasurer since 1977.
Financial Officer and
Treasurer
Donald Dresser, 51.................... Senior Vice President, Administration and Secretary since August
Senior Vice President, 1998. Executive Vice President and Director of Development from
Administration and Secretary 1989 to August 1998.
Mason A. Leonard, 54.................. Division President since 1989.
Division President Pictsweet
Frozen Foods
John D. Haltom, 51.................... Division President since 1990.
Division President Pictsweet
Mushroom Farms
</TABLE>
FAMILY RELATIONSHIPS
James I. Tankersley, Daniel B. Tankersley and Julia T. Wells are
brothers and sister. Darla T. Darnall and Kelle T. Northern are the daughters
and James W. Tankersley is the son of James I. Tankersley. These are the only
family relationships between any director or executive officer and any other
director or executive officer of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of the reports furnished to the Company or
written representations from the Company's directors and executive officers, the
Company believes that none of its directors, officers, or ten percent
shareholders failed to file on a timely basis reports required by Section 16 (a)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") during
the most recent fiscal year.
44
<PAGE> 45
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total annual compensation paid or
accrued by the Company during the three years ended February 28, 1999 for the
account of each of the Chief Executive Officer and four most highly compensated
executive officers of the Company whose total cash compensation exceeded
$100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)(2)
--------------------------- ---- ------ ----- ------------------
<S> <C> <C> <C> <C>
James I. Tankersley ........................ 1999 $750,000 $438,400 $312,218
Chairman & CEO 1998 750,000 282,317 335,960
1997 750,000 51,417 220,299
Daniel B. Tankersley ....................... 1999 $221,153 $ -- $ 96,186
Vice Chairman & Secretary (3) 1998 500,000 31,116 179,978
1997 500,000 33,873 161,010
B. M. Ennis ................................ 1999 $250,000 $ 34,623 $107,438
President 1998 250,000 14,847 95,198
1997 250,000 16,080 290,709
Carl W. Gruenewald, II ..................... 1999 $235,000 $ 32,646 $110,512
Senior VP, CFO & Treasurer 1998 235,000 14,002 96,206
1997 235,000 15,177 199,821
Donald Dresser ............................. 1999 $287,000 $ 38,573 $ 34,079
Senior Vice President, Administration and 1998 256,600 14,915 54,653
Secretary 1997 235,000 14,957 275,502
Mason A. Leonard ........................... 1999 $278,000 $ 36,527 $ 23,968
President, Pictsweet Frozen Foods 1998 228,691 13,053 44,613
1997 175,000 10,856 165,493
</TABLE>
- ------------
(1) Represents:
<TABLE>
<CAPTION>
UNFUNDED GROUP LIFE
COMMITTEE RETIREMENT INSURANCE
NAME AND PRINCIPAL POSITION YEAR BOARD FEES FEES PLANS PREMIUMS
--------------------------- ---- ---------- ---- ----- --------
<S> <C> <C> <C> <C> <C>
James I. Tankersley ........ 1999 $53,750 $ -- $142,795 $25,873
Chairman & CEO 1998 52,000 17,500 123,027 23,779
1997 52,000 30,000 118,150 20,149
Daniel B. Tankersley ....... 1999 $53,750 $ -- $ 27,893 $ 6,260
Vice Chairman & Secretary 1998 52,000 17,500 74,615 8,027
1997 52,000 30,000 71,931 7,079
B. M. Ennis ................ 1999 $53,750 $ -- $ 30,959 $22,729
President 1998 52,000 -- 24,265 18,933
1997 52,000 -- 221,499 17,210
</TABLE>
45
<PAGE> 46
<TABLE>
<S> <C> <C> <C> <C> <C>
Carl W. Gruenewald, II ..... 1999 $53,750 $ -- $ 29,920 $26,842
Senior VP, CFO & Treasurer 1998 52,000 -- 23,649 20,557
1997 52,000 -- 127,127 20,694
Donald Dresser ............. 1999 $ -- $ -- $ 26,017 $ 8,062
Senior Vice President, 1998 -- 28,000 18,975 7,678
Administration and Secretary 1997 -- 52,000 217,549 5,953
Mason A. Leonard ........... 1999 $ -- $ -- $ 18,409 $ 5,559
President, Pictsweet Frozen 1998 -- 28,000 11,154 5,459
Foods 1997 -- 52,000 108,306 5,187
</TABLE>
(2) Includes a non-accountable expense allowance and reimbursement for related
tax effect in the amount of $89,900 and $119,654 for the Chairman during
fiscal 1999 and 1998, respectively, and $8,283 and $27,836 for the Vice
Chairman during fiscal 1999 and 1998, respectively.
(3) Mr. Daniel B. Tankersley resigned as the Company's Vice Chairman and
Secretary in August 1998.
OPTION/SAR GRANTS
The Company did not grant stock options or stock appreciation rights
("SARs") to any of the officers named in the Summary Compensation Table during
the last fiscal year.
OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
None of the officers named in the Summary Compensation Table exercised
stock options or SARs during the last fiscal year or held unexercised options or
SARs at fiscal year-end.
COMPENSATION OF DIRECTORS
All directors of the Company receive an annual fee of $45,000 for
service on the Board of Directors and $1,750 for each meeting of the Board of
Directors attended (not including telephone meetings). In addition, any director
subject to self-employment tax is reimbursed for one-half of the self-employment
taxes payable with respect to director or committee fees, plus an amount equal
to the additional taxes resulting from such reimbursement. Mrs. Darnall and Mrs.
Northern, non-employee directors, receive additional compensation in the form of
personal travel expense reimbursement and use of a Company car, but in no case
does the value of such compensation exceed $15,000.
46
<PAGE> 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 4, 1999 the number of shares
of Common Stock which are, to the best of management's belief, controlled or
beneficially owned, directly or indirectly, by each of the present directors and
nominees, by each executive officer of the Company named in the Summary
Compensation Table, all directors and executive officers of the Company as a
group and any holders of five percent or more of either class of Common Stock:
<TABLE>
<CAPTION>
BENEFICIAL STOCK OWNERSHIP
----------------------------------------------------
PERCENT OF PERCENT OF
NAME CLASS A(1) CLASS(2)(3) CLASS B CLASS(3)
---- ---------- ----------- ------- --------
<S> <C> <C> <C> <C>
Darla T. Darnall .......................... 440,871 14.4% 440,871 10.5%
Donald Dresser ............................ -- -- -- --
B. M. Ennis ............................... -- -- -- --
Dr. Joseph A. Geary ....................... 1,000 * -- --
Carl W. Gruenewald, II .................... -- -- -- --
Thomas A. Hopper, Jr ...................... -- -- -- --
Mason A. Leonard .......................... 1,000 * 500 *
Kelle T. Northern ......................... 440,871 14.4% 440,871 10.5%
Daniel B. Tankersley ...................... 712,176 24.3% 312,783 7.5%
James I. Tankersley(4) .................... 2,553,415 49.4% 2,553,415 60.9%
James W. Tankersley ....................... 440,871 14.4% 440,871 10.5%
Julia T. Wells ............................ 327,770 12.5% -- --
John S. Wilder ............................ 1,000 * 1,000 *
Jim Tankersley Family(5) .................. 2,553,415 49.4% 2,553,415 60.9%
All Directors and Executive Officers of the
Company as a Group (14 Persons) ....... 3,605,561 65.7% 2,871,698 68.5%
</TABLE>
(1) The following table shows shares of Class A Common Stock, included in the
number of shares beneficially owned, which may be acquired upon the
conversion of Class B Common Stock.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NAME SHARES NAME SHARES
---- ------ ---- ------
<S> <C> <C> <C>
Darla T. Darnall...................... 440,871 James W. Tankersley......................... 440,871
Mason A. Leonard...................... 500 Daniel B. Tankersley........................ 312,783
Kelle T. Northern..................... 440,871 All Directors and Executive Officers of the
James I. Tankersley(4)................ 2,553,415 Company as a Group (14 person)............. 2,871,698
</TABLE>
(2) Total Class A shares used to calculate percent of class includes the shares
of Class A Common Stock which may be acquired by the beneficial owner upon
the conversion of Class B Common Stock. See Note (1).
(3) (*) Indicates less than one percent of class.
(4) Includes shares beneficially owned by other members of the Jim Tankersley
Family.
(5) The following table sets forth information with respect to shares of Common
Stock beneficially owned by the members of the Jim Tankersley Family:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
NAME CLASS A(1) CLASS(2)(3) CLASS B OF CLASS(3)
---- ---------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Darla T. Darnall ...... 440,871 14.4% 440,871 10.5%
Kelle T. Northern ..... 440,871 14.4% 440,871 10.5%
Edna W. Tankersley .... 9,474 * 9,474 *
James I. Tankersley ... 1,221,328 31.8% 1,221,328 29.1%
James W. Tankersley ... 440,871 14.4% 440,871 10.5%
</TABLE>
James I. Tankersley has no power to vote or dispose of and disclaims
beneficial ownership of the 9,474 shares of Class B Common Stock owned by
his spouse, Edna W. Tankersley. All members of the above group may be
reached at Ten Pictsweet Drive, Bells, Tennessee 38006.
47
<PAGE> 48
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 16, 1998, James I. Tankersley (the Company's chairman and
chief executive officer), his wife, Edna W. Tankersley, and their children,
Kelle T. Northern (a director of the Company), Darla T. Darnall (a director of
the Company) and James W. Tankersley (a director of the Company) (collectively
the "Jim Tankersley Family") offered to acquire the remaining shares of the
Company's common stock that are not already owned by them in a merger in which
the other stockholders would receive $3.00 per share. The Board of Directors of
the Company appointed two outside directors to a special transaction committee.
The Board designated the committee for the purpose of evaluating and making
recommendations with respect to the proposal.
On May 14, 1999, after receiving the recommendation of the special
transaction committee, the Company entered into the Merger Agreement with
Pictsweet LLC, a Delaware limited liability company and UF Acquisition Corp., a
wholly-owned subsidiary of Pictsweet LLC, pursuant to which UF Acquisition Corp.
will be merged with and into the Company (the "Merger") with the Company being
the surviving corporation and becoming a wholly-owned subsidiary of Pictsweet
LLC, subject to the conditions set forth in the Merger Agreement. Pursuant to
the Merger Agreement, all of the outstanding public shares of the Company's
Common Stock, except for Common Stock held by Pictsweet LLC and Common Stock
owned by stockholders who perfect their appraisal rights in accordance with
Delaware law, will be converted into the right to receive $3.50 per share in
cash. Consummation of the Merger is subject to certain conditions, including the
approval of the Merger Agreement by (i) a majority of all votes of the
outstanding shares of Common Stock entitled to vote thereon and (ii) a majority
of all shares of Common Stock entitled to vote thereon which are actually voted
"for" or "against" the proposal (in item (ii), (x) excluding from such
computation all Common Stock held by any of the Jim Tankersley Family (as
defined in the Merger Agreement) or Pictsweet LLC and (y) counting each share of
Common Stock actually voted as one full vote, regardless of class). If
consummated, the Jim Tankersley Family will directly or indirectly own the
entire equity interest of the Company.
48
<PAGE> 49
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 28, 1999 and February 28, 1998.
Statements of Operations for the years ended February 28, 1999, 1998
and 1997.
Statements of Stockholder's Equity for the years ended February 28,
1999, 1998 and 1997.
Statements of Cash Flows for the years ended February 28, 1999, 1998
and 1997.
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.
EXHIBITS INCLUDED IN PART IV OF THIS REPORT
See "Index to Exhibits."
REPORTS ON FORM 8-K
The Company filed a Form 8-K dated March 18, 1999, disclosing that a
Complaint was filed against the Company and its directors by a stockholder of
the Company in a Delaware Chancery Court with respect to the proposal by the Jim
Tankersley Family.
49
<PAGE> 50
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.
/s/ United Foods, Inc.
May 10, 1999 By: /s/ Carl W. Gruenewald, II
--------------------------
Carl 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.
Signature Title Date
/s/ James I. Tankersley Chairman of the Board May 10, 1999
- -------------------------------------
James I. Tankersley
/s/ B. M. Ennis President May 10, 1999
- -------------------------------------
B. M. Ennis
/s/ Daniel B. Tankersley Director May 10, 1999
- -------------------------------------
Daniel B. Tankersley
/s/ Joseph A. Geary Director May 10, 1999
- -------------------------------------
Joseph A. Geary
/s/ Darla T. Darnall Director May 10, 1999
- -------------------------------------
Darla T. Darnall
/s/ Julia T. Wells Director May 10, 1999
- -------------------------------------
Julia T. Wells
/s/ Kelle T. Northern Director May 10, 1999
- -------------------------------------
Kelle T. Northern
/s/ John S. Wilder Director May 10, 1999
- -------------------------------------
John S. Wilder
/s/ James W. Tankersley Director May 10, 1999
- -------------------------------------
James W. Tankersley
/s/ Thomas A. Hopper, Jr. Director May 10, 1999
- -------------------------------------
Thomas A. Hopper, Jr.
50
<PAGE> 51
UNITED FOODS, INC.
INDEX TO EXHIBITS
Exhibit Exhibit
Number Description
- ------- -----------------------------------------------------------------
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, 1998, is
incorporated by reference herein (restated electronically for SEC
filing purposes only).
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, 1998, is incorporated by reference
herein (restated electronically for SEC filing purposes only).
10.1 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.
10.2 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.
10.3 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, Exhibit 10.12 to the Annual
Report on Form 10-K of United Foods, Inc. filed for the fiscal
year ended February 29, 1996, is incorporated by reference
herein.
10.4 Modification dated June 21, 1995, to that certain Revolving Loan
Agreement between First American National Bank and United Foods,
Inc., dated April 7, 1993, Exhibit 10.13 to the Annual Report on
Form 10-K of United Foods, Inc. filed for the fiscal year ended
February 29, 1996, is incorporated by reference herein.
10.5 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, Exhibit 10.14 to the
Annual Report on Form 10-K of United Foods, Inc. filed for the
fiscal year ended February 29, 1996, is incorporated by reference
herein.
10.6 Modification dated December 31, 1995, to that certain Revolving
Loan Agreement between First American National Bank and United
Foods, Inc., dated April 7, 1993, Exhibit 10.15 to the Annual
Report on Form 10-K of United Foods, Inc. filed for the fiscal
year ended February 29, 1996, is incorporated by reference
herein.
10.7 Fourth Amendment, dated February 7, 1997, to that certain
Revolving Loan Agreement between First American National Bank and
United Foods, Inc., dated April 7, 1993, Exhibit 10.19 to the
Annual Report on Form 10-K of United Foods, Inc. filed for the
fiscal year ended February 28, 1997, is incorporated by reference
herein.
10.8 Fifth Amendment, dated May 15, 1997, to that certain Revolving
Loan Agreement between First American National Bank and United
Foods, Inc. dated April 7, 1993, Exhibit (b) (8) to the Schedule
13E-4 of United Foods, Inc. filed on May 20, 1997, is
incorporated by reference herein.
51
<PAGE> 52
Exhibit Exhibit
Number Description
- ------- -----------------------------------------------------------------
10.9 Sixth Amendment, dated June 17, 1997, to that certain Revolving
Loan Agreement between First American National Bank and United
Foods, Inc. dated April 7, 1993, Exhibit (b) (9) to the Schedule
13E-4/A-2 of United Foods, Inc. filed on June 18, 1997, is
incorporated by reference herein.
10.10 Seventh Amendment, dated July 16, 1998, to that certain Revolving
Loan Agreement between First American National Bank and United
Foods, Inc. dated April 7, 1993, filed as Exhibit 10.1 to the
quarterly report on Form 10-Q of United Foods, Inc. filed for the
fiscal quarter ended August 31, 1998, is incorporated by
reference herein.
10.11 Loan Agreement and Secured Promissory Note between United Foods,
Inc. and Metropolitan Life Insurance Company all dated January 7,
1997, Exhibit 10.22 to the Annual Report on Form 10-K of United
Foods, Inc. filed for the fiscal year ended February 28, 1997, is
incorporated by reference herein.
10.12 Consolidation, Renewal, and Restatement of Deed of Trust and
Security Agreement, and Consolidation, Renewal, and Restatement
of Promissory Notes each between United Foods, Inc. and the
Northwestern Mutual Life Insurance Company all dated January 30,
1997, Exhibit 10.23 to the Annual Report on Form 10-K of United
Foods, Inc. filed for the fiscal year ended February 28, 1997, is
incorporated by reference herein.
10.13 Promissory Note in the principal amount of $10,000,000 and Deed
of Trust between United Foods, Inc. and Monumental Life Insurance
Company, dated December 15, 1998, Exhibit 10.1 to the quarterly
report on Form 10-Q of United Foods, Inc. filed for the fiscal
quarter ended November 30, 1998, is incorporated by reference
herein.
10.14 Promissory Note in the principal amount of $15,000,000 and Deeds
of Trust between United Foods, Inc. and Monumental Life Insurance
Company, dated December 15, 1998, Exhibit 10.2 to the quarterly
report on Form 10-Q of United Foods, Inc. filed for the fiscal
quarter ended November 30, 1998, is incorporated by reference
herein.
10.15* United Foods, Inc. Second Management Retirement Plan dated
February 26, 1997, Exhibit 10.24 to the Annual Report on Form
10-K of United Foods, Inc. filed for the fiscal year ended
February 28, 1997, is incorporated by reference herein.
10.16* United Foods, Inc. Incentive Compensation Plan for the Chairman
of the Board of Directors dated August 12, 1997, Appendix A to
the Proxy Statement of United Foods, Inc., filed August 18, 1997,
is incorporated by reference herein.
10.17 Master Security Agreement between United Foods, Inc. and General
Electric Credit Corporation, dated March 17, 1999.
10.18 Aircraft Security Agreement dated April 29, 1999 and Promissory
Note dated April 30, 1999 in the principal amount of $5,400,000
between United Foods, Inc. and Ridgebury Funding, L.L.C.
10.19 Cross-Collateral and Cross-Default Agreement between United
Foods, Inc. and General Electric Capital Corporation, dated April
29, 1999.
10.20* United Foods, Inc. Master Deferred Compensation Plan dated May
10, 1999.
10.21 Agreement and Plan of Merger, dated as of May 14, 1999, by and
between United Foods, Inc., Pictsweet LLC and UF Acquisition
Corp., Exhibit 2 to the Current Report on Form 8-K of United
Foods, Inc. dated May 19, 1999, is incorporated herein by
reference.
27 Financial Data Schedule (for SEC use only).
*Compensatory Plan.
52
<PAGE> 1
EXHIBIT 10.17
MASTER SECURITY AGREEMENT
dated as of March 17, 1999 ("Agreement")
THIS AGREEMENT is between General Electric Capital Corporation
(together with its successors and assigns, if any, "Secured Party"), and UNITED
FOODS, INC. ("Debtor"). Secured Party has an office at 1000 Windward Concourse
Suite 403, Alpharetta, GA 30005. Debtor is a corporation organized and existing
under the laws of the state of Delaware. Debtor's mailing address and chief
place of business is Ten Pictsweet Drive, Bells, TN, 38006.
RECITALS
AGREEMENT TO LEND. Secured Party hereby agrees to make loans to Debtor
in accordance with the terms and conditions set forth herein, in the aggregate
principal amount of up to Ten Million Dollars ($10,000,000.00) (the "Loan"). The
proceeds of the Loan shall be used by Debtor to finance the purchase of certain
personal property consisting of rolling stock, including cars, light trucks,
heavy trucks, forklifts, tractors, farm machinery, earth movers, trailers,
compost turners and harvesters (the "Equipment") and to refinance certain
Equipment purchased prior to the date hereof.
Debtor shall repay the Loan in accordance with the terms of certain
Promissory Notes (each a "Note" and collectively the "Notes") executed by Debtor
upon receipt of an advance under the Loan. The term of each Note shall be for a
period not to exceed eight-four (84) months for purchases of new Equipment,
depending upon the type of Equipment purchased with the funds advanced under
that Note. Notes evidencing Loan proceeds used to refinance Equipment purchased
by Debtor prior to the date hereof shall have a term mutually agreeable to
Secured Party and Debtor. Each Note shall bear interest at a fixed rate equal to
the sum of (i) Two and Twenty-Five One Hundredths Percent (2.25%) per annum plus
(ii) a per annum interest rate listed for U.S. Treasuries with the same
scheduled maturities as said Note in the "Treasury Bond, Notes & Bills" column
of the Wall Street Journal, Eastern Edition, published as of the fifth (5th)
Business Day (any day other than a day on which commercial banks in the City of
New York are required or authorized to be closed) preceding the date of said
Note. Debtor may prepay in full or in part, its Remaining Indebtedness under a
Note upon a payment of an additional sum as a premium equal to the following
percentages for the indicated period: (a) two percent (2%) prior to the first
annual anniversary date of said Note; (b) one percent (1%) thereafter and prior
to the second annual anniversary date of said Note; and (c) zero percent (-0-%)
thereafter. The Remaining Indebtedness shall mean the outstanding principal
balance under said note calculated on a simple interest per annum basis at the
contract rate.
Secured Party's commitment to make advances under the Loan shall expire
one year from the date hereof and is subject to Debtor's compliance with all its
obligations under this Agreement and the Notes; provided however, that Secured
Party may extend the term and aggregate principal amount of the Loan thereafter
subject to (i) Secured Party's investment and credit approval process; and (ii)
subsequent execution of all documentation in the form and substance satisfactory
to Secured Party and Debtor.
<PAGE> 2
1. CREATION OF SECURITY INTEREST.
Debtor grants to Secured Party, its successors and assigns, a security
interest in and against all property listed on any collateral schedule now or in
the future annexed to or made a part of this Agreement ("Collateral Schedule"),
and in and against all additions, attachments, accessories and accessions to
such property, all substitutions, replacements or exchanges therefor, and all
insurance and/or other proceeds thereof (all such property is individually and
collectively called the "Collateral"). This security interest is given to secure
the payment and performance of all debts, obligations and liabilities of any
kind whatsoever of Debtor to Secured Party, now existing or arising in the
future, including but not limited to the payment and performance of certain
Promissory Notes from time to time identified on any Collateral Schedule
(collectively "Notes" and each a "Note"), and any renewals, extensions and
modifications of such debts, obligations and liabilities thereof (such Notes,
debts, obligations and liabilities are called the "Indebtedness").
Notwithstanding anything to the contrary contained in this Agreement, to the
extent that Secured Party asserts a purchase money security interest in any
items of Collateral ("PMSI Collateral"): (i) the PMSI Collateral shall secure
only that portion of the Indebtedness which has been advanced by Secured Party
to enable Debtor to purchase, or acquire rights in or the use of such PMSI
Collateral (the "PMSI Indebtedness"), and (ii) no other Collateral shall secure
the PMSI Indebtedness.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.
Debtor represents, warrants and covenants as of the date of this
Agreement and as of the date of each Collateral Schedule that:
(a) Debtor is, and will remain, duly organized, existing and in good
standing under the laws of the State set forth in the preamble of this
Agreement, has its chief executive offices at the location specified in the
preamble, and is, and will remain, duly qualified and licensed in every
jurisdiction wherever necessary to carry on its business and operations;
(b) Debtor has adequate power and capacity to enter into, and to
perform its obligations under this Agreement, each Note and any other documents
evidencing, or given in connection with, any of the Indebtedness (all of the
foregoing are called the "Debt Documents");
(c) This Agreement and the other Debt Documents have been duly
authorized, executed and delivered by Debtor and constitute legal, valid and
binding agreements enforceable in accordance with their terms, except to the
extent that the enforcement of remedies may be limited under applicable
bankruptcy and insolvency laws;
(d) No approval, consent or withholding of objections is required from
any governmental authority or instrumentality with respect to the entry into, or
performance by Debtor of any of the Debt Documents, except any already obtained;
<PAGE> 3
(e) The entry into, and performance by, Debtor of the Debt Documents
will not (i) violate any of the organizational documents of Debtor or any
judgment, order, law or regulation applicable to Debtor, or (ii) result in any
breach of or constitute a default under any contract to which Debtor is a party,
or result in the creation of any lien, claim or encumbrance on any of Debtor's
property (except for liens in favor of Secured Party) pursuant to any indenture,
mortgage, deed of trust, bank loan, credit agreement, or other agreement or
instrument to which Debtor is a party;
(f) Except as disclosed to Secured Party, there are no suits or
proceedings pending in court or before any commission, board or other
administrative agency against or affecting Debtor which could, in the aggregate,
have a material adverse effect on Debtor, its business or operations, or its
ability to perform its obligations under the Debt Documents, nor does Debtor
have reason to believe that any such suits or proceedings are threatened;
(g) All financial statements delivered to Secured Party in connection
with the Indebtedness have been prepared in accordance with generally accepted
accounting principles, and since the date of the most recent financial
statement, there has been no material adverse change in Debtors financial
condition;
(h) The Collateral is not, and will not be, used by Debtor for
personal, family or household purposes;
(i) The Collateral is, and will remain, in good condition and repair
and Debtor will not be negligent in its care and use;
(j) Debtor is, and will remain, the sole and lawful owner, and in
possession of, the Collateral, and has the sole right and lawful authority to
grant the security interest described in this Agreement; and
(k) The Collateral is, and will remain, free and clear of all liens,
claims and encumbrances of any kind whatsoever, except for (i) liens in favor of
Secured Party, (ii) liens for taxes not yet due or for taxes being contested in
good faith and which do not involve, in the judgment of Secured Party, any risk
of the sale, forfeiture or loss of any of the Collateral, and (iii) inchoate
materialmen's, mechanic's, repairmen's and similar liens arising by operation of
law in the normal course of business for amounts which are not delinquent (all
of such liens are called "Permitted Liens").
3. COLLATERAL.
(a) Until the declaration of any default, Debtor shall remain in
possession of the Collateral; except that Secured Party shall have the right to
possess (i) any chattel paper or instrument that constitutes a part of the
Collateral, and (ii) any other Collateral in which Secured Party's security
interest may be perfected only by possession. Secured Party may inspect any of
the Collateral during normal business hours after giving Debtor reasonable prior
notice. If Secured Party asks, Debtor will promptly notify Secured Party in
writing of the location of any Collateral.
<PAGE> 4
(b) Debtor shall (i) use the Collateral only in its trade or business,
(ii) maintain all of the Collateral in good operating order and repair, normal
wear and tear excepted, (iii) use and maintain the Collateral only in compliance
with manufacturers recommendations and all applicable laws, and (iv) keep all of
the Collateral free and clear of all liens, claims and encumbrances (except for
Permitted Liens).
(c) Debtor shall not, without the prior written consent of Secured
Party, (i) part with possession of any of the Collateral (except to Secured
Party or for maintenance and repair), (ii) remove any of the Collateral from the
continental United States, or (iii) sell, rent, lease, mortgage, grant a
security interest in or otherwise transfer or encumber (except for Permitted
Liens) any of the Collateral.
(d) Debtor shall pay promptly when due all taxes, license fees,
assessments and public and private charges levied or assessed on any of the
Collateral, on its use, or on this Agreement or any of the other Debt Documents
except to the extent such taxes, fees, assessment or charges are Permitted
Lines. At its option, Secured Party may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and may pay for the maintenance, insurance and preservation of the Collateral
and effect compliance with the terms of this Agreement or any of the other Debt
Documents. Debtor agrees to reimburse Secured Party, on demand, all costs and
expenses incurred by Secured Party in connection with such payment or
performance and agrees that such reimbursement obligation shall constitute
Indebtedness.
(e) Debtor shall, at all times, keep accurate and complete records of
the Collateral, and Secured Party shall have the right to inspect and make
copies of all of Debtor's books and records relating to the Collateral during
normal business hours, after giving Debtor reasonable prior notice.
(f) Debtor agrees and acknowledges that any third person who may at any
time possess all or any portion of the Collateral shall be deemed to hold, and
shall hold, the Collateral as the agent of, and as pledge holder for, Secured
Party. Secured Party may at any time give notice to any third person described
in the preceding sentence that such third person is holding the Collateral as
the agent of, and as pledge holder for, the Secured Party.
4. INSURANCE.
(a) Debtor shall at all times bear the entire risk of any loss, theft,
damage to, or destruction of, any of the Collateral from any cause whatsoever.
(b) Debtor agrees to keep the Collateral insured against loss or damage
by fire and extended coverage perils, theft, burglary, and for any or all
Collateral which are vehicles, for risk of loss by collision, and if requested
by Secured Party, against such other risks as Secured Party may reasonably
require. Such insurance shall be provided by self-insurance or third party
providers acceptable to Secured Party. The insurance coverage shall be in an
amount no less than
<PAGE> 5
the full replacement value of the Collateral, and deductible amounts, insurers
and policies shall be acceptable to Secured Party. Debtor shall deliver to
Secured Party policies or certificates of insurance evidencing such coverage.
Each policy shall name Secured Party as a loss payee, shall provide for coverage
to Secured Party regardless of the breach by Debtor of any warranty or
representation made therein, shall not be subject to co-insurance, and shall
provide that coverage may not be canceled or altered by the insurer except upon
thirty (30) days prior written notice to Secured Party. Debtor appoints Secured
Party as its attorney-in-fact to make proof of loss, claim for insurance and
adjustments with insurers, and to receive payment of and execute or endorse all
documents, checks or drafts in connection with insurance payments. Secured Party
shall not act as Debtors attorney-in-fact unless Debtor is in default. Proceeds
of insurance shall be applied, at the option of Secured Party, to repair or
replace the Collateral or to reduce any of the Indebtedness.
5. REPORTS.
(a) Debtor shall promptly notify Secured Party of (i) any change in the
name of Debtor, (ii) any relocation of its chief executive offices, (iii) any
relocation of any of the Collateral, (iv) any of the Collateral being lost,
stolen, missing, destroyed, materially damaged or worn out, or (v) any lien,
claim or encumbrance other than Permitted Liens attaching to or being made
against any of the Collateral.
(b) Debtor will deliver to Secured Party Debtors complete financial
statements, certified by a recognized firm of certified public accountants,
within ninety (90) days of the close of each fiscal year of Debtor. If Secured
Party requests, Debtor will deliver to Secured Party copies of Debtors quarterly
financial reports certified by Debtors chief financial officer, within ninety
(90) days after the close of each of Debtors fiscal quarter. Debtor will deliver
to Secured Party copies of all Forms 10-K and 10-Q, if any, within 30 days after
the dates on which they are filed with the Securities and Exchange Commission.
6. FURTHER ASSURANCES.
(a) Debtor shall, upon request of Secured Party, furnish to Secured
Party such further information, execute and deliver to Secured Party such
documents and instruments (including, without limitation, Uniform Commercial
Code financing statements) and shall do such other acts and things as Secured
Party may at any time reasonably request relating to the perfection or
protection of the security interest created by this Agreement or for the purpose
of carrying out the intent of this Agreement. Without limiting the foregoing,
Debtor shall cooperate and do all acts deemed necessary or advisable by Secured
Party to continue in Secured Party a perfected first security interest in the
Collateral, and shall obtain and furnish to Secured Party any subordinations,
releases, landlord, lessor, or mortgagee waivers, and similar documents as may
be from time to time requested by, and in form and substance satisfactory to,
Secured Party.
<PAGE> 6
(b) Debtor irrevocably grants to Secured Party the power to sign
Debtor's name and generally to act on behalf of Debtor to execute and file
applications for title, transfers of title, financing statements, notices of
lien and other documents pertaining to any or all of the Collateral; this power
is coupled with Secured Party's interest in the Collateral. Debtor shall, if any
certificate of title be required or permitted by law for any of the Collateral,
obtain and promptly deliver to Secured Party such certificate showing the lien
of this Agreement with respect to the Collateral.
(c) Debtor shall indemnify and defend the Secured Party, its successors
and assigns, and their respective directors, officers and employees, from and
against all claims, actions and suits (including, without limitation, related
attorneys' fees) of any kind whatsoever arising, directly or indirectly, in
connection with any of the Collateral.
7. DEFAULT AND REMEDIES.
(a) Debtor shall be in default under this Agreement and each of the
other Debt Documents if:
(i) Debtor breaches its obligation to pay when due any
installment or other amount due or coming due under any of the Debt Documents,
and such breach is not cured within ten (10) days notice thereof;
(ii) Debtor, without the prior written consent of Secured
Party, attempts to or does sell, rent, lease, mortgage, grant a security
interest in, or otherwise transfer or encumber (except for Permitted Liens) any
of the Collateral;
(iii) Debtor breaches any of its insurance obligations under
Section 4;
(iv) Debtor breaches any of its other obligations under any of
the Debt Documents and fails to cure that breach within thirty (30) days after
written notice from Secured Party;
(v) Any warranty, representation or statement made by Debtor
in any of the Debt Documents or otherwise in connection with any of the
Indebtedness shall be false or misleading in any material respect;
(vi) Any of the Collateral is subjected to attachment,
execution, levy, seizure or confiscation in any legal proceeding or otherwise,
or if any legal or administrative proceeding is commenced against Debtor or any
of the Collateral, which in the good faith judgment of Secured Party subjects
any of the Collateral to a material risk of attachment, execution, levy, seizure
or confiscation and no bond is posted or protective order obtained to negate
such risk;
(vii) Debtor breaches or is in default under any other
agreement between Debtor and Secured Party;
<PAGE> 7
(viii) Debtor or any guarantor or other obligor for any of the
Indebtedness (collectively "Guarantor") dissolves, terminates its existence,
becomes insolvent or ceases to do business as a going concern;
(ix) If Debtor or any Guarantor is a natural person, Debtor or
any such Guarantor dies or becomes incompetent;
(x) A receiver is appointed for all or of any part of the
property of Debtor or any Guarantor, or Debtor or any Guarantor makes any
assignment for the benefit of creditors; or
(xi) Debtor or any Guarantor files a petition under any
bankruptcy, insolvency or similar law, or any such petition is filed against
Debtor or any Guarantor and is not dismissed within sixty (60) forty-five (45)
days.
(b) If Debtor is in default, the Secured Party, at its option, may
declare any or all of the Indebtedness to be immediately due and payable,
without demand or notice to Debtor or any Guarantor. The accelerated obligations
and liabilities shall bear interest (both before and after any judgment) until
paid in full at the lower of eighteen percent (18%) per annum or the maximum
rate not prohibited by applicable law.
(c) After default, Secured Party shall have all of the rights and
remedies of a Secured Party under the Uniform Commercial Code, and under any
other applicable law. Without limiting the foregoing, Secured Party shall have
the right to (i) notify any account debtor of Debtor or any obligor on any
instrument which constitutes part of the Collateral to make payment to the
Secured Party, (ii) with or without legal process, enter any premises where the
Collateral may be and take possession of and remove the Collateral from the
premises or store it on the premises, (iii) sell the Collateral at public or
private sale, in whole or in part, and have the right to bid and purchase at
said sale, or (iv) lease or otherwise dispose of all or part of the Collateral,
applying proceeds from such disposition to the obligations then in default. If
requested by Secured Party, Debtor shall promptly assemble the Collateral and
make it available to Secured Party at a place to be designated by Secured Party
which is reasonably convenient to both parties. Secured Party may also render
any or all of the Collateral unusable at the Debtor's premises and may dispose
of such Collateral on such premises without liability for rent or costs. Any
notice that Secured Party is required to give to Debtor under the Uniform
Commercial Code of the time and place of any public sale or the time after which
any private sale or other intended disposition of the Collateral is to be made
shall be deemed to constitute reasonable notice if such notice is given to the
last known address of Debtor at least five (5) days prior to such action.
(d) Proceeds from any sale or lease or other disposition shall be
applied: first, to all costs of repossession, storage, and disposition including
without limitation attorneys', appraisers', and auctioneers' fees; second, to
discharge the obligations then in default; third, to discharge any other
Indebtedness of Debtor to Secured Party, whether as obligor, endorser,
guarantor, surety or indemnitor; fourth, to expenses incurred in paying or
settling liens and claims against the Collateral; and lastly, to Debtor, if
there exists any surplus. Debtor shall remain fully liable for any deficiency.
<PAGE> 8
(e) Debtor agrees to pay all reasonable attorneys' fees and other costs
incurred by Secured Party in connection with the enforcement, assertion, defense
or preservation of Secured Party's rights and remedies under this Agreement, or
if prohibited by law, such lesser sum as may be permitted. Debtor further agrees
that such fees and costs shall constitute Indebtedness.
(f) Secured Party's rights and remedies under this Agreement or
otherwise arising are cumulative and may be exercised singularly or
concurrently. Neither the failure nor any delay on the part of the Secured Party
to exercise any right, power or privilege under this Agreement shall operate as
a waiver, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise of that or any other right,
power or privilege. SECURED PARTY SHALL NOT BE DEEMED TO HAVE WAIVED ANY OF ITS
RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OTHER AGREEMENT, INSTRUMENT OR PAPER
SIGNED BY DEBTOR UNLESS SUCH WAIVER IS EXPRESSED IN WRITING AND SIGNED BY
SECURED PARTY. A waiver on any one occasion shall not be construed as a bar to
or waiver of any right or remedy on any future occasion.
(g) DEBTOR AND SECURED PARTY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED
HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY RELATING TO THE SUBJECT
MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER
DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
8. MISCELLANEOUS.
(a) This Agreement, any Note and/or any of the other Debt Documents may
be assigned, in whole or in part, by Secured Party without notice to Debtor, and
Debtor agrees not to assert against any such assignee, or assignee's assigns,
any defense, set-off, recoupment claim or counterclaim which Debtor has or may
at any time have against Secured Party for any reason whatsoever. Debtor agrees
that if Debtor receives written notice of an assignment from Secured Party,
Debtor will pay all amounts payable under any assigned Debt Documents to such
assignee or as instructed by Secured Party. Debtor also agrees to confirm in
writing receipt of the notice of assignment as may be reasonably requested by
assignee.
<PAGE> 9
(b) All notices to be given in connection with this Agreement shall be
in writing, shall be addressed to the parties at their respective addresses set
forth in this Agreement (unless and until a different address may be specified
in a written notice to the other party), and shall be deemed given (i) on the
date of receipt if delivered in hand or by facsimile transmission, (ii) on the
next business day after being sent by express mail, and (iii) on the fourth
business day after being sent by regular, registered or certified mail. As used
herein, the term "business day" shall mean and include any day other than
Saturdays, Sundays, or other days on which commercial banks in New York, New
York are required or authorized to be closed.
(c) Secured Party may correct patent errors and fill in all blanks in
this Agreement or in any Collateral Schedule consistent with the agreement of
the parties.
(d) Time is of the essence of this Agreement. This Agreement shall be
binding, jointly and severally, upon all parties described as the "Debtor" and
their respective heirs, executors, representatives, successors and assigns, and
shall inure to the benefit of Secured Party, its successors and assigns.
(e) This Agreement and its Collateral Schedules constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior understandings (whether written, verbal or
implied) with respect to such subject matter. THIS AGREEMENT AND ITS COLLATERAL
SCHEDULES SHALL NOT BE CHANGED OR TERMINATED ORALLY OR BY COURSE OF CONDUCT, BUT
ONLY BY A WRITING SIGNED BY BOTH PARTIES. Section headings contained in this
Agreement have been included for convenience only, and shall not affect the
construction or interpretation of this Agreement.
(f) This Agreement shall continue in full force and effect until all of
the Indebtedness has been indefeasibly paid in full to Secured Party. The
surrender, upon payment or otherwise, of any Note or any of the other documents
evidencing any of the Indebtedness shall not affect the right of Secured Party
to retain the Collateral for such other Indebtedness as may then exist or as it
may be reasonably contemplated will exist in the future. This Agreement shall
automatically be reinstated if Secured Party is ever required to return or
restore the payment of all or any portion of the Indebtedness (all as though
such payment had never been made).
(g) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF CONNECTICUT (WITHOUT REGARD TO THE CONFLICT OF
LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT.
IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally
bound hereby, have duly executed this Agreement in one or more counterparts,
each of which shall be deemed to be an original, as of the day and year first
aforesaid.
SECURED PARTY: DEBTOR:
General Electric Capital Corporation UNITED FOODS, INC.
By: /s/ Mike Caruso By: /s/ Carl W. Gruenewald, II
Name: Mike Caruso Name: Carl W. Gruenewald, II
Title: Sr. Risk Analyst Title: Senior Vice President, CFO,
Treasurer
#2013629
<PAGE> 1
EXHIBIT 10.18
AIRCRAFT SECURITY AGREEMENT
THIS AIRCRAFT SECURITY AGREEMENT ("AGREEMENT") is made and entered into as of
4/29/99, by and between RIDGEBURY FUNDING, L.L.C., a Delaware limited liability
company, having an office at 1000 WINDWARD CONCOURSE SUITE 403, ALPHARETTA, GA
(together with its successors and assigns, if any, "SECURED PARTY") and UNITED
FOODS, INC., a corporation organized and existing under the laws of the State of
Delaware and having its chief executive offices located at TEN PICTSWEET DRIVE,
P.O. BOX 119, BELLS, TN 38006-0119 ("DEBTOR").
1. GRANT OF SECURITY INTEREST. To secure Debtor's payment and performance of any
and all debts, obligations and liabilities of any kind, nature or description
whatsoever (whether due or to become due) of Debtor to Secured Party, including
but not limited to those arising under the promissory note of even date herewith
(the "NOTE"), this Agreement, and/or any related documents (the Note, this
Agreement and all such related documents being hereinafter collectively referred
to as the "DEBT DOCUMENTS"), and any renewals, extensions, replacements and
modifications of such debts, obligations and liabilities (all of the foregoing
being hereinafter referred to as the "OBLIGATIONS"), Debtor grants to Secured
Party a security interest in the aircraft and other property described below and
in all additions and accessions thereto as more fully described in the Schedule
(attached hereto) and substitutions therefor, now or hereafter owned, all
unearned insurance premiums and insurance proceeds relating to such property,
and the proceeds of all of the foregoing (all of such property and proceeds are
collectively referred to as the "Aircraft"):
AIRCRAFT MAKE: CESSNA; MODEL NO.: 650; SERIAL NO.: 650-0001; REGISTRATION NO.:
N651CC; ENGINE MAKE: GARRETT; MODEL NO.: TFE-731-3C-100S WITH MSP; SERIAL
NUMBERS: P-87180 4897 TT, P-87182 4897 TT; PROPELLER MAKE: N/A; MODEL NO.: N/A;
SERIAL NUMBERS: N/A; TOGETHER WITH ALL OTHER PROPERTY ESSENTIAL AND APPROPRIATE
TO THE OPERATION OF THE AIRCRAFT, INCLUDING BUT NOT LIMITED TO ALL INSTRUMENTS,
AVIONICS, EQUIPMENT AND ACCESSORIES ATTACHED TO AND CONNECTED WITH THE AIRCRAFT,
AND ALL LOGS, MANUALS AND OTHER DOCUMENTS ISSUED FOR, OR REFLECTING USE OR
MAINTENANCE OF, THE AIRCRAFT.
1
<PAGE> 2
Notwithstanding anything to the contrary in this Agreement or any other Debt
Document, if no event of default has occurred and is continuing under this
Agreement, the Note or the Debt Documents, upon payment in full of all amounts
owing by Debtor under the Note, the security interest of Secured Party in the
Aircraft will immediately terminate.
2. HOME AIRPORT. The home airport of the Aircraft will be:
MCKELLAR AIRPORT, JACKSON, MADISON COUNTY, TN, and will not be changed without
the prior written consent of Secured Party.
(Name of Airport, Township, County, State)
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR. Debtor represents,
warrants and covenants that:
(a) Debtor (i) is, and will remain, duly organized, existing and in good
standing under the laws of the State set forth in the preamble of this
Agreement, (ii) has its chief executive offices at the location set forth in
such paragraph, (iii) is, and will remain, duly qualified and licensed in every
jurisdiction wherever necessary to carry on its business and operations, and
(iv) is and will continue to be a "citizen of the United States", within the
meaning of the Title 49, Subtitle VII of the United States Code, as amended (the
"FAA ACT"), and the regulations thereunder so long as any Obligations are due to
Secured Party under the Debt Documents or otherwise;
(b) Debtor has adequate power and capacity to enter into, and to perform its
obligations under, each of the Debt Documents and has full right and lawful
authority to grant the security interest described in this Agreement;
(c) The Debt Documents have been duly authorized, executed and delivered by
Debtor and constitute legal, valid and binding agreements enforceable under all
applicable laws in accordance with their terms, except to the extent that the
enforcement of remedies may be limited under applicable bankruptcy and
insolvency laws;
2
<PAGE> 3
(d) No approval, consent or withholding of objections is required from any
governmental authority or instrumentality or any other entity with respect to
the entry into, or performance by, Debtor of any of the Debt Documents, except
such as have already been obtained;
(e) The entry into, and performance by, Debtor of the Debt Documents will not
(i) violate any of Debtor's organizational documents or any judgment, order, law
or regulation applicable to Debtor, or (ii) result in any breach of, constitute
a default under, or result in the creation of, any lien, claim or encumbrance on
any of Debtor's property (except for liens in favor of Secured Party) pursuant
to, any indenture mortgage, deed of trust, bank loan, credit agreement, or other
agreement or instrument to which Debtor is a party;
(f) Except as disclosed to Secured Party, there are no suits or proceedings
pending or threatened in court or before any commission, board or other
administrative agency against or affecting Debtor which could, in the aggregate,
have a material adverse effect on Debtor, its business or operations, or its
ability to perform its obligations under the Debt Documents;
(g) All audited financial statements delivered to Secured Party in connection
with the Obligations have been prepared in accordance with generally accepted
accounting principles, and since the date of the most recent financial statement
there has been no material adverse change in Debtor's financial condition or
business prospects;
(h) Debtor is (or, to the extent that the Aircraft is to be acquired hereafter,
will be) and will remain the sole lawful owner, in sole, open and notorious
possession of the Aircraft, free from any security interest, lien or encumbrance
whatsoever other than those in favor of Secured Party and Debtor shall defend
the Aircraft against all claims and demands of all other persons claiming any
interest therein;
(i) Debtor shall promptly pay or cause to be paid all taxes, license fees,
assessments and public and private charges, that are or may be levied or
assessed on or against the Aircraft or the ownership or use thereof, or on this
Agreement;
(j) if at the time of Debtor's execution of this Agreement, Debtor is not the
registered owner of the Aircraft, as shown in the records of the United States
Federal Aviation Administration ("FAA"), Debtor at
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<PAGE> 4
its own expense shall immediately register the Aircraft in its name with the FAA
and, so long as any Obligation is due to Secured Party, Debtor shall not impair
such registration or cause it to be impaired, suspended or cancelled, nor
register the Aircraft under the laws of any country except the United States of
America.
(k) Debtor shall promptly notify Secured Party of any facts or occurrences which
do or, by passage of time or otherwise will, constitute a breach of any of the
above warranties and covenants;
4. DEBTOR SHALL EXECUTE AND DELIVER DOCUMENTS. Debtor shall, at Secured Party's
request, furnish Secured Party such information and execute and deliver to
Secured Party such documents and do all such acts and things as Secured Party
may reasonably request as necessary or appropriate to establish and maintain a
valid first priority security interest in the Aircraft and to assure that the
Aircraft is titled, registered and the security interest perfected to Secured
Party's satisfaction. Debtor shall pay the cost of filing all appropriate
documents in all public offices where Secured Party deems such filings necessary
or desirable.
5. USE, OPERATION, MAINTENANCE AND REPAIR. Debtor shall use, operate, maintain
and repair the Aircraft and retain actual and operational control and possession
thereof in compliance with the following provisions:
(a) Debtor shall use, operate, maintain and store the Aircraft, and every part
thereof, properly, carefully and in compliance with all applicable statutes,
ordinances and regulations of all jurisdictions in which the Aircraft is
operated or used, as well as all applicable insurance policies, manufacturer's
recommendations and operating and maintenance manuals. Debtor shall use the
Aircraft predominantly for business purposes and only for the purposes and in
the manner set forth in the application for insurance executed at the time of
negotiating the purchase of the Aircraft. At all times during the term of this
Agreement, Debtor shall not operate or locate the aircraft, or suffer or permit
the aircraft to be operated, located, or otherwise permitted to go into or over
(i) any area of hostilities, or (ii) any geographic area which is not covered by
the insurance policies required by this Agreement. Notwithstanding the
foregoing, in no event shall the Aircraft be located or operated in Cuba or over
Cuba (unless in compliance with all applicable federal regulations), or outside
of the continent of North America and the Caribbean. The engines identified in
4
<PAGE> 5
Section 1 of this Agreement shall be used only on the airframe described in that
Section and shall only be removed for maintenance in accordance with the
provisions of this Agreement. Debtor shall not use, attempt to use, or suffer
the Aircraft to be used in any manner which may or does contravene any
applicable law, rule or regulation governing the Aircraft, including without
limitation those relating to intoxicating liquors, narcotics, firearms or
similar products, and shall not attempt to sell, lease, rent, assign or dispose
of the Aircraft, or any interest herein or therein, or any part thereof, without
Secured Party's prior written consent.
(b) The Aircraft will be operated at all times by a currently certificated pilot
having the minimum total pilot hours and minimum pilot-in-command hours required
by FAA rules or regulations or as required by applicable insurance policies,
whichever requirements are stricter. Debtor shall be responsible for and pay for
all expenses of owning and operating the Aircraft, including but not limited to
storage, fuel, lubricants, service, inspections, overhauls, replacements,
maintenance and repairs, all in compliance with the manufacturer's operating and
maintenance manuals and with FAA rules and regulations. Debtor shall properly
maintain all records and other materials pertaining to the maintenance and
operation of the Aircraft, including but not limited to those required by
applicable law, rule or regulation and by the manufacturer for the enforcement
of any warranty.
(c) The Aircraft is and shall at all times be maintained by Debtor at its
expense in good repair in the configuration and condition existing on the date
hereof, and in airworthy condition necessary for all aircraft licenses under the
laws, ordinances, rules and regulations of all jurisdictions in which the
Aircraft will at any time be operated. Debtor shall ensure timely compliance
with all applicable mandatory Service Bulletins, Service Letters, Manufacturer's
Directives and Airworthiness Directives. Debtor shall submit written evidence of
such maintenance and condition to Secured Party upon its written request from
time to time. Debtor shall use reasonable care to prevent the Aircraft from
being damaged or injured, and shall promptly (but in no event later than 60 days
after discovery) replace any part or component of the Aircraft which may be
damaged, worn out, lost, destroyed, confiscated or otherwise rendered
unsatisfactory or unavailable for use in or upon the Aircraft.
(d) Debtor shall at its expense timely make any alterations or modifications to
the Aircraft that may at any time during the term of this Agreement be required
to maintain the Aircraft in the condition required by
5
<PAGE> 6
this Agreement. Debtor shall in no way alter, attempt to alter or otherwise
change the identity or appearance of the Aircraft, including but not limited to
the "N" number, exterior paint and symbols, without the express prior written
consent of Secured Party.
6. INDEMNIFICATION AND INSURANCE.
(a) Debtor shall indemnify and save Secured Party harmless from and against all
claims, expenses, damages and liabilities whatsoever, including without
limitation personal injury, death and property damage claims arising in tort or
otherwise, under any legal theory including but not limited to strict liability,
in any manner occasioned by or related to the Aircraft, its operation, use,
ownership, possession, manufacture or otherwise.
6
<PAGE> 7
(b) Debtor shall at all times bear all risk of loss, damage, destruction or
confiscation of or to the Aircraft. Debtor shall, at its own expense, keep the
Aircraft insured at all times against confiscation, expropriation, and all
physical damage to the Aircraft including damage or destruction by fire, theft,
crash, vandalism, and all other causes with standard loss payable clause and
breach of warranty endorsement in favor of Secured Party and shall carry
liability insurance, all of which shall be in such amounts, under such forms of
policies, upon such terms, for such periods and with such companies or
underwriters as Secured Party may approve, losses or refunds in all cases to be
first payable to Secured Party or its assigns, as its interest may appear.
Notwithstanding any provision of this Agreement to the contrary, failure to
obtain Secured Party's approval of any insurer or policy shall not excuse Debtor
from its obligation to maintain insurance coverage. In no event shall the
amounts of such insurance be less than the principal amount of the Note. All
insurance policies shall provide for at least 30 days prior written notice to
Secured Party of any cancellation or material modification, shall contain a
severability of interest clause providing that such policy shall operate in the
same manner as if a separate policy covered each insured, shall waive any right
of set-off against Debtor or Secured Party, shall waive any right of subrogation
against Secured Party and shall be primary and not subject to any offset by any
other insurance carried by Debtor or Secured Party. Debtor shall pay any
deductible portion of such insurance and any expense incurred in collecting
insurance proceeds. Debtor shall furnish to Secured Party copies of all
insurance policies required by this paragraph. Debtor hereby assigns to Secured
Party the proceeds of all such insurance (including any refund of premium) to
the extent of the Obligations secured hereby, directs the insurer to pay any
losses or refunds due Debtor directly to Secured Party, and appoints Secured
Party as attorney-in-fact to make proof of loss and claim for all insurance and
refunds thereupon and to endorse all documents, contracts drafts, checks or
forms of payment of insurance or premiums. Upon the occurrence of a default
hereunder, Secured Party may at its option apply insurance proceeds, in whole or
in part, to (i) repair or replace the Aircraft or any part thereof or (ii)
satisfy any of Debtor's Obligations to Secured Party. Any surplus proceeds shall
be paid to Debtor.
7. DEBTOR'S POSSESSION. Until default, Debtor may possess the Aircraft and use
it in any lawful manner not inconsistent with this agreement. Debtor shall at
all times keep the Aircraft and any proceeds therefrom separate and distinct
from other property of the Debtor and shall keep accurate and complete records
of the Aircraft and all such proceeds. Secured Party may examine and inspect the
Aircraft, wherever located, at any reasonable time, on land and in flight.
7
<PAGE> 8
8. DEFAULT. Debtor shall be in default under this Agreement and each of the
other Debt Documents upon the occurrence of any of the following Events of
Default:
(a) Debtor fails to pay within 10 days after its due date any installment or
other amount due or coming due under any of the Debt Documents and such failure
continues for more than 10 days after Secured Party gives Debtor written notice
thereof;
(b) Debtor fails to maintain at all times insurance coverage as required by
paragraph 6(b) of this Agreement;
(c) Any attempt by Debtor, without the prior written consent of Secured Party,
to sell, rent, lease, mortgage, grant a security interest in or otherwise
deliver possession of (except for maintenance purposes), transfer or encumber
the Aircraft;
(d) Debtor breaches any of its other Obligations under any Debt Document and
fails to cure the breach within 30 days after Secured Party gives Debtor written
notice thereof;
(e) Any warranty, representation or statement made by Debtor in any of the Debt
Documents or otherwise in connection with any of the Obligations is false or
misleading in any material respect;
(f) Debtor or any guarantor or surety for the Obligations dies, becomes
insolvent or ceases to do business as a going concern;
(g) The Aircraft or any other property of Debtor is confiscated, sequestered,
seized or levied upon;
(h) The Aircraft is lost, stolen, secreted, abused, illegally used, misused, or
destroyed;
(i) Any part of the Aircraft (which would cost more than the lesser of (i) ten
percent (10%) of the original loan balance or (ii) $250,000.00 to repair or
replace) is damaged, lost, stolen or destroyed, and such part is not replaced or
repaired within 60 days of the date that such part is damaged, lost, stolen or
destroyed;
8
<PAGE> 9
(j) One or more final, nonappealable judgments for the payment of money in
excess of $50,000.00 shall have been entered against Debtor, which judgment or
judgments shall have remained undischarged and unstayed for a period of sixty
(60) consecutive days;
(k) Debtor or any guarantor of or surety for the Obligations makes an assignment
for the benefit of creditors, applies to or petitions any tribunal for the
appointment of a custodian, receiver or trustee for itself or for any
substantial part of its property, or commences any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, or if any such petition or
application is filed or any such proceeding is commenced against Debtor or any
guarantor or surety, and such petition, application or proceeding is not
dismissed within 30 days, or Debtor or any such guarantor or surety by any act
or omission shall indicate its consent to, approval of or acquiescence in any
such petition, application, proceeding, order for relief or such appointment of
a custodian, receiver or trustee;
(l) Debtor conceals or removes, or permits to be concealed or removed, any part
of its assets, so as to hinder, delay or defraud any of its creditors, or makes
or suffers a transfer of any of its assets which would be fraudulent under any
bankruptcy, insolvency, fraudulent conveyance or similar law or makes any
transfer of its assets to or for the benefit of a creditor at a time when other
creditors similarly situated have not been paid, or suffers or permits, while
insolvent, any creditor to obtain a lien upon any of Debtor's property through
legal proceedings or distraint, or if a tax lien is filed against Debtor.
9. REMEDIES OF SECURED PARTY:
(a) Upon the occurrence of any Event of Default under this Agreement, Secured
Party, at its option, may declare any or all of the Obligations, including but
not limited to the Note, to be immediately due and payable, without demand or
notice to Debtor or any guarantor. The Obligations and liabilities accelerated
thereby shall bear interest from the Event of Default (both before and after any
judgment) until paid in full at the lesser of eighteen percent (18%) per annum
or the maximum rate not prohibited by applicable law.
9
<PAGE> 10
(b) Upon the occurrence of any Event of Default, Secured Party shall
additionally have all of the rights and remedies of a secured party under the
Uniform Commercial Code and under any other applicable law. Without limiting the
foregoing and without notice or demand, Secured Party shall have the right at
its option to immediately exercise one or more of the following remedies: (i)
refuse to extend any further credit to Debtor; (ii) terminate this Agreement
immediately without notice; (iii) take immediate and exclusive possession of the
Aircraft, wherever it may be found; (iv) enter any of Debtor's premises, with or
without process of law, wherever the Aircraft may be or Secured Party reasonably
believes it to be, and search for it, and if the Aircraft or any part of it is
found, to take possession of and remove it; (v) sell, lease and otherwise
dispose of the Aircraft or any part of it, at public auction or private sale,
for cash or on credit, as Secured Party may elect at its option and Secured
Party shall have the right to bid and become the purchaser at any such sale, or
keep the Aircraft idle; (vi) notify, in Secured Party's own name, or in Debtor's
name, all obligors of Debtor and demand, collect, receive, receipt for, sue,
compromise and give acquittance for, any and all amounts due on contracts and
credits, and endorse Debtor's name on any commercial paper or instrument given
as full or partial payment thereon; (vii) direct the Debtor to assemble all
parts and components of the Aircraft and deliver it to Secured Party, at
Debtor's expense, at a place designated by Secured Party which is reasonably
convenient to Secured Party and Debtor; and/or (viii) hold, appropriate, apply
or set-off any and all moneys, credits and indebtedness due from Secured Party,
its affiliates, parents or subsidiaries, to Debtor.
(c) Upon the occurrence of any Event of Default, Debtor shall pay all reasonable
costs incurred by Secured Party in collecting any of the Obligations owed
Secured Party by Debtor and enforcing any Obligations of Debtor to Secured
Party, including but not limited to reasonable attorneys' fees and legal
expenses.
(d) Notwithstanding the availability of any other remedy and in addition
thereto, if Debtor fails to perform any of its Obligations hereunder or under
any of the Debt Documents, Secured Party may perform the same, but shall not be
obligated to do so, for the account of Debtor, and Debtor shall immediately
repay to Secured Party on demand any amounts paid or incurred by Secured Party
in such performance together with interest thereon accrued from the date paid or
incurred by Secured Party until repaid in full by Debtor at the lesser of one
and one half percent (1 1/2%) per month and the maximum interest rate permitted
by applicable law to be charged Debtor by Secured Party.
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<PAGE> 11
(e) Notwithstanding any other provision hereof to the contrary, any notice
required to be given by law or pursuant to this Agreement with respect to
disposition of the Aircraft or any part of it shall be deemed reasonably and
properly given if mailed by first class United States Mail, postage prepaid, by
prepaid express mail service (private or government) or by hand delivery to
Debtor at its last known address, at least ten (10) days before the disposition
of the subject matter of such notification.
(f) Any proceeds realized by Secured Party upon the sale or other disposition of
the Aircraft shall first be applied by the Secured Party to the payment of the
reasonable expenses (including interest) of retaking, holding, preparing for
sale, selling and the like, including reasonable attorneys' fees and legal
expenses and any balance of such proceeds may be applied by the Secured Party
toward the satisfaction of Debtor's Obligations in such order of application as
the Secured Party may in its sole discretion determine. Any surplus remaining
after all of Debtor's Obligations to Secured Party shall have been paid in full
shall be paid to Debtor. Debtor shall be liable for and shall promptly pay on
demand any deficiency resulting from any such disposition of Aircraft.
(g) The foregoing remedies shall not be exclusive or alternative but shall be
cumulative and in addition to all other remedies in favor of Secured Party
existing at law or in equity.
10. WAIVER OF DEFAULT. No waiver by Secured Party of any default shall operate
as a waiver of any other default or of the same default on a future occasion.
11. REPORTS.
(a) Debtor shall promptly notify Secured Party in the event of (i) any change in
Debtor's name, (ii) any relocation of Debtor's chief executive offices, (iii)
any permanent or indefinite relocation of the Aircraft or its home airport, (iv)
the Aircraft being lost, stolen, missing, confiscated, appropriated, seized,
sequestered, destroyed, materially damaged or worn out, (v) any accident
involving the Aircraft or (vi) any lien, claim or encumbrance attaching or being
made against the Aircraft (other than liens in favor of Secured Party). Such
notice shall contain all pertinent details of the event being reported, and
shall be supplemented promptly upon Secured Party's request.
11
<PAGE> 12
(b) Debtor agrees to furnish its annual financial statements and such interim
statements as Secured Party may require in form satisfactory to Secured Party.
Any and all financial statements submitted and to be submitted to Secured Party
have and will have been prepared on a basis of generally accepted accounting
principles consistently applied, and are and will be complete and correct and
fairly present Debtor's financial condition as at the date thereof. Secured
Party may at any reasonable time examine Debtor's books and records and make
copies thereof.
12. MISCELLANEOUS:
(a) This Agreement, the Note and/or any of the other Debt Documents may be
assigned, in whole or in part, by Secured Party without notice to Debtor, and
Debtor hereby waives and agrees not to assert against any assignee any defense,
counterclaim, right of set-off or cross-complaint Debtor may have against
Secured Party for any reason whatsoever, agreeing that Secured Party shall be
solely responsible therefor.
(b) All notices to be given in connection with this Agreement and the Debt
Documents shall be in writing, shall be addressed to the parties at their
respective addresses set forth hereinabove (unless and until a different address
may be specified in a written notice to the other party), and shall be deemed
given (i) on the date of receipt if delivered in hand or by facsimile
transmission, (ii) on the next business day after being sent by express mail
(government or private), and (iii) on the fourth business day after being sent
by regular, registered or certified mail. As used herein, "business day" means
any day other than a Saturday, a Sunday, or other day on which commercial banks
in New York, New York are required or authorized to be closed.
(c) Secured Party may correct patent errors herein and fill in all blanks herein
or in the Debt Documents consistent with the agreement of the parties as
confirmed in writing by Debtor prior to Secured Party making such corrections.
(d) Time is of the essence hereof. This Agreement and the Debt Documents shall
be binding, jointly and severally, upon all parties described as the "Debtor"
and their respective heirs, executors, representatives, successors and assigns,
and shall inure to the benefit of Secured Party, its successors and assigns.
12
<PAGE> 13
(e) The unenforceability of any provision hereof or of the Debt Documents shall
not affect the validity of any other provision hereof or thereof.
(f) This Agreement and the Debt Documents constitute the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior understandings (whether written, oral or implied) with respect thereto.
THIS AGREEMENT AND THE DEBT DOCUMENTS SHALL NOT BE CHANGED OR TERMINATED, NOR
SHALL ANY WAIVER BE GIVEN, ORALLY OR BY COURSE OF CONDUCT, BUT ONLY BY A WRITING
SIGNED BY BOTH PARTIES HERETO. Section headings in this Agreement are for
convenience only, and shall not affect the construction or interpretation
hereof.
(g) DEBTOR HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
AGREEMENT, ANY OF THE DEBT DOCUMENTS, ANY DEALINGS BETWEEN DEBTOR AND SECURED
PARTY RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED
TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN DEBTOR
AND SECURED PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
13
<PAGE> 14
(h) Subject to the provisions of that certain Cross-Collateral and Cross-Default
Agreement dated as of APRIL 29, 1999, between Debtor and General Electric
Capital Corporation, this Agreement shall continue in full force and effect
until all of the Obligations have been indefeasibly paid in full to Secured
Party. This Agreement shall automatically be reinstated in the event that
Secured Party is ever required to return or restore the payment of all or any
portion of the Obligations (all as though such payment had never been made).
SECURED PARTY: DEBTOR:
RIDGEBURY FUNDING, L.L.C. UNITED FOODS, INC.
by its Attorney-in-Fact,
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Mike Caruso By: /s/ Donald Dresser
----------------------------------
Name: Mike Caruso Name: Donald Dresser
--------------------------------
Title: Senior Risk Analyst Title: Senior Vice President,
-------------------------------- Administration
By: /s/ Carl W. Gruenewald, II
Name: Carl W. Gruenewald, II
Title: Senior Vice President,
CFO & Treasurer
14
<PAGE> 15
PROMISSORY NOTE
APRIL 30, 1999 (001)
(DATE)
TEN PICTSWEET DRIVE_, BELLS_, CROCKET COUNTY, TN 38006
(ADDRESS OF MAKER)
FOR VALUE RECEIVED, UNITED FOODS, INC. ("MAKER") promises, jointly and severally
if more than one, to pay to the order of RIDGEBURY FUNDING, L.L.C., a Delaware
limited liability company, or any subsequent holder hereof (each, a "PAYEE") at
its office located at 1000 WINDWARD CONCOURSE SUITE 403, ALPHARETTA, GA 30005 or
at such other place as Payee or the holder hereof may designate, the principal
sum of FIVE-MILLION FOUR-HUNDRED THOUSAND AND 00/100 DOLLARS ($5,400,000.00),
with interest on the unpaid principal balance, from the date hereof through and
including the dates of payment, at a fixed interest rate OF SEVEN AND
SEVENTY-THREE ONE-HUNDREDTHS PERCENT (7.73%) per annum, to be paid in lawful
money of the United States, in ONE-HUNDRED TWENTY (120) consecutive monthly
installments of principal and interest as follows:
PERIODIC INSTALLMENT AMOUNT
---------------------------
1 - 120 $64,749.04
each ("Periodic Installment") and a final installment which shall be in the
amount of the total outstanding principal and interest. The first Periodic
Installment shall be due and payable on JUNE 1, 1999 and the following Periodic
Installments and the final installment shall be due and payable on the same day
of each succeeding month (each, a "Payment Date"). Such installments have been
calculated on the basis of a 360 day year of twelve 30-day months. Each payment
may, at the option of the Payee, be calculated and applied on an assumption that
such payment would be made on its due date. In the event the Promissory Note is
funded on a day other than the first of a calendar month, Maker shall pay as
interim interest ("Interim Interest") for the period from and including the date
hereof, through and including the last calendar day of the month immediately
preceding the first Periodic Installment (the "Interim Period" ) which shall be
the product of the contract rate set forth above divided by 360 times the
principal sum set forth above.
The acceptance by Payee of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute a waiver of Payee's
right to receive payment in full at such time or at any prior or subsequent
time.
The Maker hereby expressly authorizes the Payee to insert the date value is
actually given in the blank space on the face hereof and on all related
documents pertaining hereto.
This Note may be secured by a security agreement, chattel mortgage, pledge
agreement or like instrument (each of which is hereinafter called a "SECURITY
AGREEMENT").
Time is of the essence hereof. If any installment or any other sum due under
this Note or any Security Agreement is not received within ten (10) days after
its due date, the Maker agrees to pay, in addition to the amount of each such
installment or other sum, a late payment charge of five percent (5%) of the
amount of said installment or other sum, but not exceeding any lawful maximum.
If (i) Maker fails to make payment of any amount due hereunder within ten (10)
days after the same becomes due and payable and such failure is not cured within
ten (10) days
<PAGE> 16
written notice to Maker; or (ii) Maker is in default under, or fails to perform
under any term or condition contained in any Security Agreement, then the entire
principal sum remaining unpaid, together with all accrued interest thereon and
any other sum payable under this Note or any Security Agreement, at the election
of Payee, shall immediately become due and payable, with interest thereon at the
lesser of eighteen percent (18%) per annum or the highest rate not prohibited by
applicable law from the date of such accelerated maturity until paid (both
before and after any judgment).
The Maker may prepay in full or in part, its indebtedness hereunder upon payment
of the entire or partial indebtedness plus an additional sum as a premium equal
to the following percentages of the original principal balance for the indicated
period: (a) three percent (3%) prior to the first annual anniversary date of
said Note; (b) two percent (2%) thereafter and prior to the second annual
anniversary date of said Note; (c) one percent (1%) thereafter and prior to the
third annual anniversary date of said Note; and zero percent (-0-%) thereafter.
It is the intention of the parties hereto to comply with the applicable usury
laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in this Note or any Security Agreement, in no event shall this Note or
any Security Agreement require the payment or permit the collection of interest
in excess of the maximum amount permitted by applicable law. If any such excess
interest is contracted for, charged or received under this Note or any Security
Agreement, or if all of the principal balance shall be prepaid, so that under
any of such circumstances the amount of interest contracted for, charged or
received under this Note or any Security Agreement on the principal balance
shall exceed the maximum amount of interest permitted by applicable law, then in
such event (a) the provisions of this paragraph shall govern and control, (b)
neither Maker nor any other person or entity now or hereafter liable for the
payment hereof shall be obligated to pay the amount of such interest to the
extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be
either applied as a credit against the then unpaid principal balance or refunded
to Maker, at the option of the Payee, and (d) the effective rate of interest
shall be automatically reduced to the maximum lawful contract rate allowed under
applicable law as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
this Note or any Security Agreement which are made for the purpose of
determining whether such rate exceeds the maximum lawful contract rate, shall be
made, to the extent permitted by applicable law, by amortizing, prorating,
allocating and spreading in equal parts during the period of the full stated
term of the indebtedness evidenced hereby, all interest at any time contracted
for, charged or received from Maker or otherwise by Payee in connection with
such indebtedness; provided, however, that if any applicable state law is
amended or the law of the United States of America preempts any applicable state
law, so that it becomes lawful for the Payee to receive a greater interest per
annum rate than is presently allowed, the Maker agrees that, on the effective
date of such amendment or preemption, as the case may be, the lawful maximum
hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.
The Maker and all sureties, endorsers, guarantors or any others (each such
person, other than the Maker, an "OBLIGOR") who may at any time become liable
for the payment hereof jointly and severally consent hereby to any and all
extensions of time, renewals, waivers or modifications of, and all substitutions
or releases of, security or of any party primarily or secondarily liable on this
Note or any Security Agreement or any term and provision of either, which may be
made, granted or consented to by Payee, and agree that suit may be brought and
maintained against any one or more of them, at the election of Payee without
joinder of any
<PAGE> 17
other as a party thereto, and that Payee shall not be required first to
foreclose, proceed against, or exhaust any security hereof in order to enforce
payment of this Note. The Maker and each Obligor hereby waives presentment,
demand for payment, notice of nonpayment, protest, notice of protest, notice of
dishonor, and all other notices in connection herewith, as well as filing of
suit (if permitted by law) and diligence in collecting this Note or enforcing
any of the security hereof, and agrees to pay (if permitted by law) all expenses
incurred in collection, including Payee's actual attorneys' fees. Maker and each
Obligor agrees that fees not in excess of twenty percent (20%) of the amount
then due shall be deemed reasonable.
THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
This Note and any Security Agreement constitute the entire agreement of the
Maker and Payee with respect to the subject matter hereof and supersedes all
prior understandings, agreements and representations, express or implied.
No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an
authorized representative of Maker and Payee. Any such waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given.
Any provision in this Note or any Security Agreement which is in conflict with
any statute, law or applicable rule shall be deemed omitted, modified or altered
to conform thereto.
UNITED FOODS, INC.
By: /s/ Donald Dresser By: /s/ Carl W. Gruenewald, II
Donald Dresser, Senior Vice President Carl W. Gruenewald, II,
Administration Senior Vice President,
CFO and Treasurer
74-1264568
----------
(Federal tax identification number)
<PAGE> 1
EXHIBIT 10.19
CROSS-COLLATERAL AND CROSS-DEFAULT AGREEMENT
DATED AS OF APRIL 29, 1999
General Electric Capital Corporation
1000 Windward Concourse; Ste. 403
Alpharetta GA 30005
(770) 999-4900
RECITALS
You (and/or your successors or assigns, "you") have entered into that
certain Master Security Agreement dated as of March 17, 1999 (the "Master
Agreement"), whereby you have made, or will make direct loans or otherwise
extend credit to us in the aggregate principal amount of up to TEN-MILLION
DOLLARS ($10,000,000.00), evidenced by now existing or hereafter acquired
Promissory Notes (each a "Note" and collectively "Notes"). Each Note is secured
by specific Collateral arising from the bona fide sale to us, by various
vendors, of equipment (collectively, the "Collateral"). The specific Collateral
associated with each Note is listed on a collateral schedule ("Collateral
Schedule") that references the related Note and is incorporated by reference
into the Master Agreement (each Note together with the related Collateral
Schedule an "Account" and collectively the "Accounts").
You (or your successors or assigns) have or will enter into that certain
Aircraft Security Agreement dated as of April 29, 1999 and related Promissory
Note (the "Aircraft Note") in the aggregate principal amount OF FIVE-MILLION
FOUR-HUNDRED THOUSAND DOLLARS ($5,400,000.00) (the "Aircraft Loan"), granting
you a security interest in a 1983 Cessna Citation III; serial number 650-0001;
FAA Registration number N651CC; with two Garrett model TFE-731-3C-100S engines,
serial numbers P-87180-4897-TT and P-87182-4897-TT used by us to purchase;
together with all instruments, avionics, equipment and accessories attached
and/or connected thereto, plus all logs, manuals issued for, or reflecting use
or maintenance thereon (herein, the "Aircraft").
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AGREEMENT
In order to induce you to extend our time of payment on one or more of
the Accounts and/or the Aircraft Loan, and to make additional loans to us under
the Master Agreement, and in consideration of you so doing, and for other good
and valuable consideration, the receipt of which we hereby acknowledge, we agree
as follows:
All Collateral presently existing and hereafter acquired by us and
financed by you under the Master Agreement in which you have or shall have a
security interest, as well as the Aircraft acquired by us and financed by you
under the Aircraft Loan, shall secure the payment and performance of all of our
liabilities and obligations to you of every kind and character, whether joint or
several, direct or indirect, absolute or contingent, due or to become due, and
whether under presently existing or hereafter created under the Accounts and the
Aircraft Loan.
Except as hereinafter provided, we agree that your security interest (i)
in the Collateral covered by the Master Agreement and any Account thereto now
held or hereafter acquired by you; and (ii) the Aircraft under the Aircraft
Loan, shall not be terminated in whole or in part until and unless all
indebtedness of every kind, due or to become due, owed by us to you is fully
paid and satisfied and the terms of every Account have been fully performed by
us. Further, except as hereinafter provided, it is agreed that you are to retain
your security interest in all Collateral covered by all Accounts held or
acquired by you under the Master Agreement and the Aircraft Loan, as security
for payment and performance under each such Account and the Aircraft Loan,
notwithstanding the fact that one or more of such Accounts may become fully
paid.
Notwithstanding anything to the contrary contained in the paragraph
immediately preceding or herein or in the Master Agreement, for so long as no
event of default has occurred and is continuing by us to you under the Master
Agreement, the Accounts, or the Aircraft Loan, you agree that upon partial
prepayment or payment in full of any Note under the Master Agreement or the
Aircraft Note under the Aircraft Loan, you will
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release that part of the Collateral or Aircraft to which such prepayment or
payment in full is attributable, based upon the original cost of such Collateral
or Aircraft.
This instrument is intended to create cross-default and cross-security
between and among all the Accounts under the Master Agreement now owned or
hereafter acquired by you and the Aircraft Loan.
A default under the Master Agreement, the Accounts, or the Aircraft Loan
shall be deemed to be a default under all other such agreements. A default shall
result if we fail to pay any sum when due under the Master Agreement, an Account
or the Aircraft Loan, or if we breach any of the other terms and conditions
thereof, or if we become insolvent, cease to do business as a going concern,
make an assignment for the benefit of creditors, or if a petition for a receiver
or in bankruptcy is filed by or against us, or if any of our property is seized,
attached or levied upon. Upon our default under the Master Agreement, any or all
Accounts or the Aircraft Loan, all such obligations thereunder shall, at your
option, become immediately due and payable without notice or demand to us or any
other party obligated thereon, and you shall have and may exercise any and all
rights and remedies of a secured party under the Uniform Commercial Code as
enacted in the applicable jurisdiction and as otherwise granted to you under
such agreements. We hereby waive, to the maximum extent permitted by law,
notices of default, notices of repossession and sale or other disposition of
collateral, and all other notices, and in the event any such notice cannot be
waived, we agree that if such notice is mailed to us postage prepaid at the
address shown below at least five (5) days prior to the exercise by you of any
of your rights or remedies, such notice shall be deemed to be reasonable and
shall fully satisfy any requirement for giving notice.
All rights granted to you hereunder shall be cumulative and not
alternative, shall be in addition to and shall in no manner impair or affect
your rights and remedies under any existing Account, agreement, statute or rule
of law.
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This agreement may not be varied or altered nor its provisions waived
except by your duly executed written agreement. This agreement shall inure to
the benefit of your successors and assigns and shall be binding upon our heirs,
administrators, executors, legal representatives, successors and assigns.
IN WITNESS WHEREOF, this agreement is executed this 29th day of
April, 1999.
UNITED FOODS, INC.
By: /s/ Donald Dresser By: /s/ Carl W. Gruenewald, II
Donald Dresser Carl W. Gruenewald, II
Title: Senior Vice President, Title: Senior Vice President,
Administration CFO & Treasurer
AGREED AND ACCEPTED:
GENERAL ELECTRIC CAPITAL CORPORATION (and its successors and assigns)
BY /s/ Mike Caruso
----------------------------------
TITLE Senior Risk Analyst
---------------------------------
DATE April 29, 1999
----------------------------------
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<PAGE> 1
EXHIBIT 10.20
UNITED FOODS, INC.
MASTER DEFERRED COMPENSATION PLAN
The Employer hereby establishes a deferred compensation arrangement for eligible
employees as provided in this United Foods, Inc. Master Deferred Compensation
Plan (the "Plan") and the accompanying Schedules of Specifications. This
arrangement is an amendment and restatement of several existing deferred
compensation plans and a newly established program, all of which are being
merged into a single plan for administrative convenience.
ARTICLE I
PURPOSE
The purpose of the Plan is to provide deferred compensation benefits for members
of the Board of Directors and a select group of management or highly compensated
employees of United Foods, Inc. It is intended that the Plan will aid in
retaining and attracting directors and managers of exceptional ability by
providing such individuals with these benefits.
ARTICLE II
DEFINITIONS
For the purposes of the Plan, the following words and phrases shall have the
meanings indicated, unless the context clearly indicates otherwise:
2.1 Beneficiary. "Beneficiary" means the person, persons, or entity designated
by the Participant, or as provided in Article VI, to receive any Plan Benefit
payable after the Participant's death.
2.2 Benefit Determination Date. "Benefit Determination Date" means the date on
which any Plan Benefit is to commence. The occurrence of a Benefit Determination
Date shall be determined, consistent with the terms of the Plan, in the sole
discretion of the Committee based on evidence satisfactory to it and such
determination shall be final and binding, except as otherwise provided in
Section 7.3 and Article VIII. A leave of absence approved by the Committee shall
not be deemed a cessation of Employment for purposes of determining whether a
Benefit Determination Date has occurred.
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2.3 Board. "Board" means the Board of Directors of the Employer.
2.4 Chief Executive Officer. "Chief Executive Officer" means the Chief Executive
Officer of the Employer.
2.5 Committee. "Committee" means the committee appointed to administer the Plan
pursuant to Article VII.
2.6 Deferral Election. "Deferral Election" means an election to defer salary,
bonus, incentive compensation award or director fees made by a Participant and
for which a Participation Agreement has been filed with the Committee.
2.7 Deferral Period. "Deferral Period" means a single calendar year for which a
Participation Agreement has been filed or for which a Participation Agreement
remains in effect for the Participant.
2.8 Deferred Compensation. "Deferred Compensation" means the amount of
compensation provided in a Schedule of Specifications to be deferred hereunder.
2.9 Deferred Compensation Account. "Deferred Compensation Account" means the
bookkeeping account maintained by the Employer with respect to each
Participant's Deferred Compensation pursuant to Article IV.
2.10 Director. "Director" means a member of the Board.
2.11 Employer. "Employer" means United Foods, Inc. and any successor or
successors to the businesses thereof.
2.12 Employment. "Employment" means the period of time that a Participant is on
the Employer's payroll.
2.13 Hardship. "Hardship" means an immediate and heavy financial need of the
Participant as determined by the Committee. Financial needs shall be limited to
a severe financial emergency incurred by the Participant because of sudden and
unexpected sickness, accident, death, disability or other medical need in the
Participant's immediate family, loss of Participant's property due to casualty
or other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant that the Participant is
not able to pay out of liquid assets, reimbursement or compensation by
insurance, cessation of deferrals under the Plan or current cash flow. For
purposes of this definition, the term "immediate family" means (i) the wife,
husband, child, father, or mother of a Participant, (ii) the father or mother of
a spouse of a Participant or (iii) a related dependent residing with the
Participant.
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2.14 Interest. "Interest" means the amount to be credited to a Participant's
Deferred Compensation Account pursuant to paragraph 4.5.
2.15 Management Employee. "Management Employee" means an employee of the
Employer who is a select member of management with significant policy-making,
supervisory or administrative responsibilities in the conduct of the Employer's
business and who, by virtue of his position with the Employer, is uniquely
informed as to the Employer's operation and has the ability to materially affect
the Employer's profitability and operations.
2.16 Named Executive. "Named Executive" means one of the five most highly
compensated Management Employees of the Employer.
2.17 Participant. "Participant" means any individual who is participating or has
participated in the Plan as provided in Article III.
2.18 Participation Agreement. "Participation Agreement" means the agreement
filed by the Participant with the Committee prior to the beginning of the
Deferral Period, in which the Participant (i) elects to participate in the Plan,
(ii) agrees to be bound by the terms of the Plan as a condition precedent to
receiving Deferred Compensation, (iii) makes certain elections as to the receipt
of a Plan Benefit and, if applicable, makes a Deferral Election. A new
Participation Agreement may be filed by the Participant for each Deferral Period
but a Participation Agreement may provide for its remaining in effect for future
Deferral Periods unless revoked or modified by the Participant by December 15 of
the calendar year immediately preceding the Deferral Period.
2.19 Plan Benefit. "Plan Benefit" means the benefit payable to a Participant as
calculated in Article V.
2.20 Quarterly Valuation Date. "Quarterly Valuation Date" means the last day of
May, August, November and February.
2.21 Schedule of Specifications. "Schedule of Specifications" means that portion
of the Plan that sets forth certain Plan provisions that apply only to the
particular group of employees described in that document, each of which
Schedules of Specifications shall set forth:
(a) Participants;
(b) Deferred Compensation, the method by which such Deferred Compensation
is determined and the time period over which such deferral shall occur;
(c) Interest;
(d) Benefit Determination Date; and
(e) The form of Plan Benefit payment.
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Each Schedule of Specifications shall be attached hereto and become a part
hereof.
2.22 Total Disability. "Total Disability" means total disability as defined in
the Employer's disability insurance plan under which the Participant is covered.
ARTICLE III
PARTICIPATION AND DEFERRAL
3.1 Eligibility. Directors and Management Employees who have been (i) selected
to participate by the Chief Executive Officer (or, in the case of Named
Executives, by the Board upon the recommendation of the Compensation Committee
of the Board) or (ii) designated in a Schedule of Specifications shall be
eligible to participate in the Plan.
3.2 Participation. A Director or Management Employee shall become a Participant
at such time as the Chief Executive Officer (or, in the case of Named
Executives, the Board upon the recommendation of the Compensation Committee of
the Board) selects such individual to participate pursuant to paragraph 3.1 or
adopts a Schedule of Specifications that provides for Deferred Compensation for
the account of such Director or Management Employee and such Director or
Management Employee elects to participate in the Plan and files a Participation
Agreement with respect thereto.
3.3 Election to Participate. A Participant may elect to participate in the Plan
with respect to any Deferral Period by filing a Participation Agreement with the
Committee by December 15 of the calendar year immediately preceding the Deferral
Period. In the event that an individual first becomes eligible to participate
during a calendar year, a Participation Agreement must be filed no later than 30
days following the effective date of his eligibility to participate, and such
Participation Agreement shall be effective only prospectively following the
filing of the Participation Agreement with the Committee.
3.4 Deferral. An amount equal to the Participant's Deferred Compensation shall
be credited to the Participant's Deferred Compensation Account.
3.5 Limits on Deferral. Unless an exception is specifically made by the
Committee, in its sole discretion, a Participant shall not be permitted to defer
under the Plan amounts payable to the Participant after (i) the Participant's
death; or (ii) the Employer has terminated future deferrals pursuant to
paragraph 9.2.
3.6 Modification of Deferral Election. A Deferral Election shall be irrevocable
for any Deferral Period for which it has been filed or for which it remains in
effect; provided, however, the Committee may reduce the amount of the Deferral
Election or waive the remainder of the Deferral Election upon a finding, based
upon uniform standards established by the Committee, that the
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Participant has suffered a Hardship or that a bona fide mistake occurred in
filling out a form or responding to instructions.
ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
4.1 Deferred Compensation Account. For record keeping purposes only, one or more
Deferred Compensation Accounts shall be maintained for each Participant. The
amount of the Participant's Deferred Compensation for any Deferral Period shall
be credited to his Deferred Compensation Account for that Deferral Period. A
separate Deferred Compensation Account shall be maintained for each Deferral
Period or set of Deferral Periods for which a different election has been made
with respect to the form of receipt of a Plan Benefit or which is attributable
to a separate Schedule of Specifications. The existence of a Deferred
Compensation Account shall not require any segregation of assets by the
Employer.
4.2 Elective Deferred Compensation. A Participant's current compensation shall
be reduced by the amount of a Participant's Deferral Election and such amount
shall be credited to the Participant's Deferred Compensation Account as the
compensation becomes payable.
4.3 Taxes. Any withholding of taxes or other amounts with respect to Deferred
Compensation required by state, federal or local law may be made from the
Participant's non-deferred compensation.
4.4 Vesting of Deferred Compensation Accounts. Each Participant shall be 100%
vested at all times in the amount of Deferred Compensation that is credited to
such Participant's Deferred Compensation Account and earnings thereon. Plan
Benefits, however, shall only be payable in accordance with the terms of the
Plan.
4.5 Valuation of Deferred Compensation Accounts. Each Participant's Deferred
Compensation Account as of each Quarterly Valuation Date shall consist of the
balance of the Participant's Deferred Compensation Account as of the immediately
preceding Quarterly Valuation Date, plus the Participant's Deferred Compensation
credited in accordance with this Article IV, and Interest credited, minus the
amount of any distributions made since the immediately preceding Quarterly
Valuation Date. Interest to be credited shall be calculated as of each Quarterly
Valuation Date based upon the average daily balance of the account since the
preceding Quarterly Valuation Date.
4.6 Statement of Deferred Compensation Accounts. The Committee shall submit to
each Participant, within one hundred twenty (120) days of each Quarterly
Valuation Date and at such other time as determined by the Committee, a
statement setting forth the balance to the credit of each Deferred Compensation
Account maintained for the Participant.
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ARTICLE V
PLAN BENEFITS
5.1 Plan Benefit. The Employer shall, commencing at the time provided in
paragraph 5.5, pay to each Participant a Plan Benefit equal to the amount of
each Participant's Deferred Compensation Account determined as of the Benefit
Determination Date applicable to such Deferred Compensation Account.
5.2 Hardship Distributions. Upon a finding that a Participant has suffered a
Hardship, the Committee may, in its sole discretion, allow distributions from
the Participant's Deferred Compensation Account prior to the time otherwise
specified for payment of Participant's Plan Benefit. The amount of such
distribution shall be limited to the amount reasonably necessary to satisfy the
Participant's Hardship. The amount of such distribution shall reduce the
Deferred Compensation Account balance.
5.3 Form of Plan Benefit Payment. Plan Benefits shall be paid in accordance with
the applicable Schedule of Specifications.
5.4 Withholding; Payroll Taxes. The Employer shall withhold from payments made
hereunder any taxes required to be withheld from the Participant's Plan Benefit
by the federal government or any state or local government.
5.5 Commencement of Payments. Payment shall commence as soon as practicable
following the Benefit Commencement Date, but no later than sixty (60) days after
the end of the month in which such Benefit Determination Date falls.
5.6 Full Payment of Benefits. Notwithstanding any other provision of the Plan,
all of a Participant's Plan Benefit shall be paid no later than the date the
Participant attains age eighty-five (85).
5.7 Payment to Guardian. If a Plan Benefit is payable to a minor or a person
declared incompetent or to a person incapable of handling the disposition of
property, the Committee may direct payment of such Plan Benefit to the guardian,
legal representative or person having the care and custody of such minor or
incompetent person. The Committee may require proof of incompetency, minority,
incapacity or guardianship as it may deem appropriate prior to distribution of
the Plan Benefit. Such distribution shall completely discharge the Committee and
the Employer from all liability with respect to such Plan Benefit.
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ARTICLE VI
BENEFICIARY DESIGNATION
6.1 Beneficiary Designation. Each participant shall have the right, at any time,
to designate any person or persons as his Beneficiary or Beneficiaries (both
principal and contingent) to whom payment under the Plan shall be paid in the
event of his death prior to complete distribution to the Participant of the Plan
Benefits due him under the Plan. Each beneficiary designation shall be in a
written form prescribed by the Committee and will be effective only if filed
with the Committee during the Participant's lifetime. If the Participant's Plan
Benefit is community property, any Beneficiary designation shall be valid or
effective only as permitted under applicable law. A separate Beneficiary
designation may be made with respect to each Deferred Compensation Account
maintained for the Participant.
6.2 Amendments. Any Beneficiary designation may be changed by the Participant
without the consent of any designated Beneficiary by the filing of a new
Beneficiary designation with the Committee. The filing of a new Beneficiary
designation form will cancel all Beneficiary designations previously filed.
6.3 No Beneficiary Designation. If any Participant fails to designate a
Beneficiary in the manner provided above, or if the Beneficiary designated by a
deceased Participant dies before the Participant or before complete distribution
of the Participant's Plan Benefit, the Employer shall distribute such
Participant's Plan Benefit, (or the balance thereof) to the following successive
preference beneficiaries:
(a) The surviving spouse;
(b) The Participant's children, except that if any of the children
predecease the Participant but leave issue surviving, then such issue shall
take by right of representation the share the parent would have taken if
living;
(c) The Participant's estate.
6.4 Effect of Payment. The payment to the Beneficiary shall completely discharge
the Employer's obligations under the Plan.
ARTICLE VII
ADMINISTRATION
7.1 Committee. The Plan shall be administered by the Employer's Employee
Benefits Committee, which shall consist of not less than three (3) individuals
selected by the Board of Directors of Employer. Members of the Committee may be
Participants in the Plan.
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7.2 Agents. The Committee shall appoint an individual to be the Committee's
agent with respect to the day-to-day administration of the Plan. In addition,
the Committee may, from time to time, employ other agents and delegate to them
such administrative duties as it sees fit, and may from time to time consult
with counsel who may be counsel to the Employer.
7.3 Binding Effect of Decision. The decision or action of the Committee,
consistent with the terms of the Plan, in respect of any question arising out of
or in connection with the administration, interpretation and application of the
Plan and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the Plan, subject
to the claims procedure in Article VIII and the rights of a Participant under
Title IV of the Employee Retirement Income Security Act of 1974, as amended.
7.4 Indemnity of Committee. The Employer shall, to the extent permitted by the
charter and bylaws of the Employer and applicable law, indemnify and hold
harmless the members of the Committee or any agents or employees of the Employer
against any and all claims, loss, damage, expense, or liability arising from any
action or failure to act with respect to the Plan, except in the case of willful
misconduct by the Committee, Committee member, or such agent or employee of the
Employer.
ARTICLE VIII
CLAIMS PROCEDURE
8.1 Claim. Any Participant, former Participant, Beneficiary, or legal
representative thereof, may file a claim for a Plan Benefit by submitting to the
Committee a written statement describing the nature of the claim and requesting
a determination of its validity under the terms of the Plan. The Committee shall
issue a ruling and written notice with respect to the claim within 30 days after
such claim is received. If the claim is wholly or partially denied, written
notice shall be furnished to the claimant, which notice shall set forth in a
manner calculated to be understood by the claimant;
(a) the specific reason or reasons for denial;
(b) specific reference to pertinent Plan provisions on which the denial
is based;
(c) a description of any additional materials or information necessary
for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) an explanation of the claims review procedures.
8.2 Review of Claim. Any Participant, former Participant, or Beneficiary (or
their authorized representatives) whose claim for Plan Benefits has been denied,
may appeal such denial by resubmitting to the Committee a written statement
requesting a further review of the decision within 60 days of the date the
claimant received notice of such denial. The statement shall set forth the
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reasons supporting the claim, the reasons such claim should not have been
denied, and any other issues or comments that the claimant deems appropriate
with respect to the claim. The Committee shall, if requested, make copies of the
Plan documents available for examination by the claimant. The Committee shall
issue a ruling and written notice which shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, with
specific references to the pertinent Plan provisions on which the decision is
based. The written notice to the claimant on review shall be provided no later
than 60 days after the receipt of a request for review by the claimant unless
special circumstances require an extension of time for processing, in which case
a decision shall be rendered as soon as possible, but not later than 120 days
after receipt of a request for review.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment.
(a) The Board may at any time amend the Plan in whole or in part, and may impose
different requirements for different Participants; provided, however, that (i)
no amendment shall be effective to decrease or restrict the amount accrued to
that date on any Deferred Compensation Account maintained pursuant to the Plan;
and (ii) on amounts that have been credited to Deferred Compensation Accounts up
to the date of amendment, no amendment shall be effective to reduce the Interest
credited or to be credited to Deferred Compensation Accounts until their payment
date without the consent of all Participants (or a Beneficiary in case a
Participant is then deceased) who may be affected by such change.
(b) The Committee may make administrative amendments to the Plan including but
not limited to amendments to clarify the Plan language and to simplify and
implement various administrative procedures, including matters relating to the
calculation of Plan Benefits and payments to Beneficiaries that the Committee
determines are consistent with the purpose and intent of the Plan.
9.2 Employer's Right to Terminate Future Deferrals. The Board may at any time
terminate further deferrals into the Plan by or for any person and may reject
additional Participants in the Plan, if, in its sole judgment, such would be in
the best interest of Employer. Plan Benefits from amounts credited to Deferred
Compensation Accounts up to the date of termination shall be paid in accordance
with the terms of the Plan prior to such termination, including crediting of
Interest, until all payments are complete.
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ARTICLE X
MISCELLANEOUS
10.1 Unfunded Plan. For income tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended, the Plan is an
unfunded plan maintained primarily to provide deferred compensation benefits for
Directors and a select group of management employees or highly compensated
employees. The Plan is not intended to create an investment contract.
10.2 Unsecured General Creditor. The Participants and their Beneficiaries,
heirs, successors, and assigns shall have no legal or equitable rights,
interest, or claims in any property or assets of the Employer, nor shall they be
Beneficiaries of, or have any rights, claims, or interests in any life insurance
policies, annuity contracts or the proceeds therefrom owned or that may be
acquired by the Employer, if any. The preceding sentence shall not preclude a
Participant, his estate or other Beneficiaries from receiving the proceeds of
life insurance or other benefit therefrom pursuant to the terms of such policies
to the extent such policies are unrelated to the Plan. Such policies, if any, or
other assets of the Employer shall not be held as collateral security for the
fulfilling of the obligation of Employer under the Plan, and shall be the
general, unpledged, unrestricted assets of the Employer, and the Employer may
transfer, assign, sell, or use such policies and any other of its property or
assets without restriction. The Employer's obligation under the Plan shall be
merely that of an unfunded and unsecured promise of the Employer to pay money in
the future. The Employer shall have no obligation under the Plan with respect to
any individuals other than Participants or Beneficiaries thereof.
10.3 Non-assignability. Neither the Participant nor any other person shall have
any right to commute, sell, assign, alienate, transfer, pledge, anticipate,
mortgage, or otherwise encumber, transfer, hypothecate, or convey in advance of
actual receipt the amounts, if any, payable hereunder, or any part thereof,
which are, and all rights to which are, expressly declared to be unassignable
and nontransferable. No part of the amounts payable shall, prior to actual
payment, be subject to seizure, attachment, garnishment or sequestration for the
payment of any debts, judgments, alimony, or separate maintenance owed by the
Participant or any other person, nor be transferable by operation of law in the
event of the Participant's or any other person's bankruptcy or insolvency.
10.4 Not a Contract of Employment. The terms and conditions of the Plan shall
not be deemed to constitute a contract of employment between the Employer and
the Participant, and neither the Participant nor his Beneficiary shall have any
right against the Employer except as may otherwise be specifically provided
herein. Moreover, nothing in the Plan shall be deemed to give the Participant
the right to be retained in the service of the Employer or to interfere with the
right of the Employer to discipline or discharge the Participant at any time.
10.5 Protective Provisions. By participating, under the terms of the Plan, each
Participant thereby agrees to cooperate with the Employer by furnishing any and
all information requested by
10
<PAGE> 11
the Employer in order to facilitate the payment of Plan Benefits and to take
such other action as may be reasonably requested by the Employer.
10.6 Terms. Whenever any words are used herein in the masculine, they shall be
construed as though they were used in the feminine in all cases where they would
so apply; and wherever any words are used herein the singular or in the plural,
they shall be construed as though they were used in the plural or the singular,
as the case may be, in all cases where they would so apply.
10.7 Governing Law. The provisions of the Plan shall be construed and
interpreted according to the laws of the State of Tennessee.
10.8 Validity. In case any provision of the Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but the Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.
10.9 Notice. Any notice or filing required or permitted to be given to the
Committee under the Plan shall be sufficient if in writing and hand delivered,
or sent by registered or certified mail, to any member of the Committee, the
Chief Executive Officer, or the Employer's statutory agent. Such notice shall be
deemed given as of the date of delivery or, if delivery is made by mail, as of
the date shown on the postmark on the receipt for registration or certification.
10.10 Successors. The provisions of the Plan shall bind and inure to the benefit
of the Employer and its successors and assigns. The term successors as used
herein shall include any corporate or other business entity that shall, whether
by merger, consolidation, purchase or otherwise acquire all or substantially all
of the business and assets of the Employer and successors of any such
corporation or other business entity.
IN WITNESS WHEREOF, and pursuant to resolution of the Board of Directors
of the undersigned corporation, such corporation has caused this instrument to
be executed by its duly authorized officers this 10th day of May, 1999,
effective March 1, 1999.
UNITED FOODS, INC.
By: /s/ B. M.Ennis
----------------------------------
Title: President
-------------------------------
Attest: /s/ D. Dresser
-------------------------------
Title: Senior Vice President
--------------------------------
11
<PAGE> 12
UNITED FOODS, INC.
MASTER DEFERRED COMPENSATION PLAN
SCHEDULE OF SPECIFICATIONS NUMBER 1
The Employer hereby sets forth certain provisions of the United Foods, Inc.
Master Deferred Compensation Plan (the "Plan") that apply only to the
Participants described in this Schedule of Specifications Number 1. This
Schedule 1 and the accompanying Plan amend and restate the United Foods, Inc.
Management Retirement Compensation Plan, which was effective as of October 31,
1990, as amended from time to time thereafter.
PARTICIPANTS
Each Management Employee who has been credited with deferred compensation as a
result of receiving a Tier 1 Award under Section 6 of the United Foods, Inc.
Incentive Compensation Plan adopted March 1, 1984 ("Incentive Compensation
Plan") and who has filed a Participation Agreement with respect thereto is a
Participant.
DEFERRED COMPENSATION
Deferred Compensation is the amount of compensation that has been directed under
Section 6 of the Incentive Compensation Plan to be credited to a deferred
compensation account maintained for a participant in Tier 1 of such plan.
BENEFIT DETERMINATION DATE
Payment of a Plan Benefit shall commence upon cessation of Employment for any
reason whatsoever, including but not limited to death, retirement, or
disability.
INTEREST
Each Participant's Deferred Compensation Account shall be credited with
Interest, compounded quarterly, beginning on the date each amount of Deferred
Compensation is credited to such account at an annual rate, expressed as an
annual percentage, equal to the rate of interest that the Employer paid on its
revolving credit borrowings during the preceding quarter as determined by the
Employer and approved by the Committee. In the event that the Employer had no
revolving credit borrowings outstanding during the preceding quarter, the rate
of Interest shall be equal to the sum of (i) the
1
<PAGE> 13
average of the high and low Federal Funds Rate as published in the "Money Rates"
section of The Wall Street Journal on the first business day of the quarter for
which such interest is credited and (ii) 1.25%. Interest shall be calculated and
credited to Participants' accounts quarterly.
FORM OF PLAN BENEFIT PAYMENT
A Plan Benefit shall be paid in one of the following forms as elected by the
Participant in a Participation Agreement for each Deferred Compensation Account:
(a) Substantially equal monthly installments of the Deferred
Compensation Account and Interest amortized over a period of 10 years. Interest
shall be credited to the remaining portion of the Deferred Compensation Account
balance in accordance with paragraph 4.5 of the Plan.
(b) A lump sum payment.
(c) Any other form selected and approved by the Committee in
writing or by the publication of forms to implement the Plan.
(d) If the Participant fails to elect the form of benefit payment,
the Plan Benefit shall be paid in accordance with (a) above over a period of 10
years.
IN WITNESS WHEREOF, and pursuant to resolution of the Board of
Directors of the undersigned corporation, such corporation has caused this
instrument to be executed by its duly authorized officers this 10th day of
May, 1999, effective March 1, 1999.
UNITED FOODS, INC.
By: /s/ B.M. Ennis
-----------------------------------
Title: President
---------------------------------
Attest: /s/ D. Dresser
--------------------------------
Title: Senior Vice President
--------------------------------
2
<PAGE> 14
UNITED FOODS, INC.
MASTER DEFERRED COMPENSATION PLAN
SCHEDULE OF SPECIFICATIONS NUMBER 2
The Employer hereby sets forth certain provisions of the United Foods, Inc.
Master Deferred Compensation Plan (the "Plan") that apply only to the
Participants described in this Schedule of Specifications Number 2. This
Schedule 2 and the accompanying Plan amend and restate the United Foods, Inc.
Second Management Retirement Compensation Plan adopted February 26, 1997.
PARTICIPANTS
Each Management Employee who:
(a) On February 27, 1997 held unexercised incentive stock options
issued pursuant to the 1987 Incentive Stock Option Plan of United
Foods, Inc. (the "Options");
(b) Elected to participate in the United Foods, Inc. Second Management
Retirement Compensation Plan on or before February 27, 1997; and
(c) Agreed to let the Options held by him or her on February 27, 1997
be unexercised through their expiration date of December 6, 1997
and who has filed a Participation Agreement with respect to thereto is a
Participant.
DEFERRED COMPENSATION
Deferred Compensation is an amount equal to $1.00 for each Option held on
February 27, 1997 that remained unexercised through its expiration date of
December 6, 1997.
BENEFIT DETERMINATION DATE
Payment of a Plan Benefit shall commence upon cessation of Employment for any
reason whatsoever, including but not limited to death, retirement or Total
Disability.
INTEREST
Each Participant's Deferred Compensation Account shall be credited with
Interest, compounded quarterly, beginning on the date each amount of Deferred
Compensation is credited to such account at an annual rate, expressed as an
annual percentage, equal to the rate of interest that the Employer
1
<PAGE> 15
paid on its revolving credit borrowings during the preceding quarter as
determined by the Employer and approved by the Committee. In the event that the
Employer had no revolving credit borrowings outstanding during the preceding
quarter, the rate of Interest shall be equal to the sum of (i) the average of
the high and low Federal Funds Rate as published in the "Money Rates" section of
The Wall Street Journal on the first business day of the quarter for which such
interest is credited and (ii) 1.25%. Interest shall be calculated and credited
to Participants' accounts quarterly.
FORM OF PLAN BENEFIT PAYMENT
A Plan Benefit shall be paid in one of the following forms as elected by the
Participant in a Participation Agreement for each Deferred Compensation Account:
(a) Substantially equal monthly installments of the Deferred
Compensation Account and Interest amortized over a period of 10 years. Interest
shall be credited to the remaining portion of the Deferred Compensation Account
balance in accordance with paragraph 4.5 of the Plan.
(b) A lump sum payment.
(c) Any other form selected and approved by the Committee in
writing or by the publication of forms to implement the Plan.
(d) If the Participant fails to elect the form of benefit payment,
the Plan Benefit shall be paid in accordance with (a) over a period of 10 years.
IN WITNESS WHEREOF, and pursuant to resolution of the Board of
Directors of the undersigned corporation, such corporation has caused this
instrument to be executed by its duly authorized officers this 10th day of
May, 1999, effective March 1, 1999.
UNITED FOODS, INC.
By: /s/ B.M. Ennis
----------------------------------------
Title: President
-------------------------------------
Attest: /s/ D. Dresser
------------------------------------
Title: Senior Vice President
-------------------------------------
2
<PAGE> 16
UNITED FOODS, INC.
MASTER DEFERRED COMPENSATION PLAN
SCHEDULE OF SPECIFICATIONS NUMBER 3
The Employer hereby sets forth certain provisions of the United Foods, Inc.
Master Deferred Compensation Plan (the "Plan") that apply only to the
Participants described in this Schedule of Specifications Number 3. This
Schedule 3 and the accompanying Plan amend and restate the United Foods, Inc.
Officer's Retirement Compensation Plan as adopted as of August 25, 1995.
PARTICIPANTS
Each Management Employee who is an Executive Officer of the Employer who has
filed a Participation Agreement is a Participant with respect to amounts that
have been credited to Deferred Compensation Accounts up to the date of this
Schedule 3.
Each Management Employee who is an Executive Officer of the Employer may elect
to participate with respect to future Deferred Compensation under this Schedule
3.
Executive Officer means the Chairman of the Board, the President, any Vice
President, any Division President, the Secretary and the Treasurer.
DEFERRED COMPENSATION
Deferred Compensation shall be an amount sufficient to adjust the Participant's
annual Employer-sourced after-tax earnings in calendar year 1993 and subsequent
years, to the level it would have been using 1992 federal tax rates, assuming
standard deductions and no other income.
BENEFIT DETERMINATION DATE
Payment of a Plan Benefit shall commence upon the later of Participant's
cessation of Employment or the Participants 65th birthday; provided, however, if
such Participant's cessation of Employment is a result of such Participant's
death or Total Disability, payment shall commence on such Participant's death or
Total Disability.
1
<PAGE> 17
INTEREST
Each Participant's Deferred Compensation Account shall be credited with
Interest, compounded quarterly, beginning on the date each amount of Deferred
Compensation is credited to such account at an annual rate, expressed as an
annual percentage, equal to the rate of interest that the Employer paid on its
revolving credit borrowings during the preceding quarter as determined by the
Employer and approved by the Committee. In the event that the Employer had no
revolving credit borrowings outstanding during the preceding quarter, the rate
of Interest shall be equal to the sum of (i) the average of the high and low
Federal Funds Rate as published in the "Money Rates" section of The Wall Street
Journal on the first business day of the quarter for which such interest is
credited and (ii) 1.25%. Interest shall be calculated and credited to
Participants' accounts quarterly. Interest on Deferred Compensation attributable
to Deferral Periods after December 31, 1999 shall not exceed an annual rate of
10%.
FORM OF PLAN BENEFIT PAYMENT
A Plan Benefit shall be paid in substantially equal monthly installments of the
Deferred Compensation Account and Interest amortized over a period of 10 years.
Interest shall be credited to the remaining portion of the Deferred Compensation
Account balance in accordance with paragraph 4.5 of the Plan.
IN WITNESS WHEREOF, and pursuant to resolution of the Board of
Directors of the undersigned corporation, such corporation has caused this
instrument to be executed by its duly authorized officers this 10th day of
May, 1999, effective March 1, 1999.
UNITED FOODS, INC.
By: /s/ B.M. Ennis
------------------------------------
Title: President
---------------------------------
Attest: /s/ D. Dresser
-------------------------------
Title: Senior Vice President
---------------------------------
2
<PAGE> 18
UNITED FOODS, INC.
MASTER DEFERRED COMPENSATION PLAN
SCHEDULE OF SPECIFICATIONS NUMBER 4
The Employer hereby sets forth certain provisions of the United Foods, Inc.
Master Deferred Compensation Plan (the "Plan") that apply only to the
Participants described in this Schedule of Specifications Number 4. This
Schedule 4 and the accompanying Plan amend and restate the United Foods, Inc.
Management Deferred Compensation Plan originally effective October 31, 1990 as
amended from time to time thereafter.
PARTICIPANTS
Each Director and each Management Employee who has filed a Participation
Agreement is a Participant with respect to amounts that have been credited to
Deferred Compensation Accounts under the United Foods, Inc. Management Deferred
Compensation Plan up to the date of this Schedule 4. Any such Participation
Agreement filed by a Management Employee eligible to be a Participant described
in Schedule of Specifications Number 5 making a Deferral Election with respect
to the 1999 Deferral Period shall, effective March 1, 1999, be treated (i) as a
Deferral Election under Schedule of Specifications Number 5 with respect to
compensation up to 3% of base salary payable during the remainder of such
Deferral Period and (ii) as a Deferral Election under this Schedule 4 as to any
additional compensation payable during such period.
Each Director and each Management Employee selected pursuant to paragraph 3.1 of
the Plan may elect to be a Participant with respect to future Deferred
Compensation under this Schedule 4.
DEFERRED COMPENSATION
Deferred Compensation is the amount of compensation that has been set forth by
the Participant in a Deferral Election. For any Deferral Period the Participant
may elect to defer:
(a) up to 50% of base salary earned during the Deferral Period;
(b) up to 100% of bonus earned during the Deferral Period;
(c) up to 100% of incentive compensation awards earned during the Deferral
Period; and
(d) with respect to a participating Director, up to 100% of fees earned during
the Deferral Period.
1
<PAGE> 19
BENEFIT DETERMINATION DATE
The Participant may elect in a Participation Agreement to have a Plan Benefit
commence either,
(a) Upon the Participant's cessation of Employment for any reason whatsoever,
including but not limited to death, retirement or Total Disability,
(b) Upon the Participants cessation of Employment or the Participants 65th
birthday as elected by the Participant in the Participation Agreement; provided,
however, if such Participant's cessation of Employment is a result of such
Participant's death or Total Disability, payment shall commence on such
Participant's death or Total Disability, or
(c) Any other date selected and approved by the Committee in writing or by the
publication of forms to implement the Plan.
INTEREST
Each Participant's Deferred Compensation Account shall be credited with
Interest, compounded quarterly, beginning on the date each amount of Deferred
Compensation is credited to such account at an annual rate, expressed as an
annual percentage, equal to the rate of interest that the Employer paid on its
revolving credit borrowings during the preceding quarter as determined by the
Employer and approved by the Committee. In the event that the Employer had no
revolving credit borrowings outstanding during the preceding quarter, the rate
of Interest shall be equal to the sum of (i) the average of the high and low
Federal Funds Rate as published in the "Money Rates" section of The Wall Street
Journal on the first business day of the quarter for which such interest is
credited and (ii) 1.25%. Interest shall be calculated and credited to
Participants' accounts quarterly. Interest on Deferred Compensation attributable
to Deferral Periods after December 31, 1999 shall not exceed an annual rate of
10%.
FORM OF PLAN BENEFIT PAYMENT
A Plan Benefit shall be paid in one of the following forms as elected by the
Participant in a Participation Agreement for each Deferred Compensation Account;
provided, however, that, for Deferral Elections made after the execution of this
Schedule of Specifications Number 4, a Plan Benefit shall be paid in accordance
with (a) over a period of 10 years:
(a) Substantially equal monthly installments of the Deferred
Compensation Account and Interest amortized over a period of 10 years. Interest
shall be credited to the remaining portion of the Deferred Compensation Account
balance in accordance with paragraph 4.5 of the Plan.
2
<PAGE> 20
(b) A lump sum payment.
(c) Any other form selected and approved by the Committee in
writing or by the publication of forms to implement the Plan.
(d) If the Participant fails to elect the form of benefit
payment, the Plan Benefit shall be paid in accordance with (a) over a period of
10 years.
IN WITNESS WHEREOF, and pursuant to resolution of the Board of
Directors of the undersigned corporation, such corporation has caused this
instrument to be executed by its duly authorized officers this 10th day of
May, 1999, effective March 1, 1999 as amended effective May 10, 1999.
UNITED FOODS, INC.
By: /s/ B.M. Ennis
----------------------------------
Title: President
--------------------------------
Attest: /s/ D. Dresser
-------------------------------
Title: Senior Vice President
-------------------------------
3
<PAGE> 21
UNITED FOODS, INC.
MASTER DEFERRED COMPENSATION PLAN
SCHEDULE OF SPECIFICATIONS NUMBER 5
The Employer hereby sets forth certain provisions of the United Foods, Inc.
Master Deferred Compensation Plan (the "Plan") that apply only to the
Participants described in this Schedule of Specifications Number 5.
PARTICIPANTS
Each Management Employee selected pursuant to paragraph 3.1 of the Plan may
elect to be a Participant provided he is a highly compensated employee within
the meaning of Internal Revenue Code Section 414(q) by filing a Participation
Agreement. To the extent provided in Schedule of Specifications Number 4, a
Deferral Election made under the United Foods, Inc. Management Deferred
Compensation Plan with respect to the 1999 Deferral Period shall be treated as a
Deferral Election under this Schedule 5.
DEFERRED COMPENSATION
Deferred Compensation is the amount of compensation that the Participant may
elect to defer as set forth by the Participant in a Deferral Election executed
before the Deferral Period plus the amount of matching Deferred Compensation
described below. For any Deferral Period the Participant may elect to defer up
to 3% of base salary payable during the Deferral Period. In addition, the
Employer shall award matching Deferred Compensation to each Participant in an
amount equal to 100% of 3% of the Participant's base salary, to the extent
deferred. For the year ending December 31, 1999, the 3% of base salary shall be
determined based on the projected base salary of a Participant for the period
from March 1, 1999 through December 31, 1999, but such total amount shall be
allocated on a pro rata basis over base salary earned after the election date..
Finally, the Employer may, at its sole discretion exercisable annually by the
Board, award additional Deferred Compensation to any or all Participants in an
amount determined for each Participant by the Board.
BENEFIT DETERMINATION DATE
Payment of a Plan Benefit shall commence upon the later of Participant's
cessation of Employment or the Participant's 65th birthday; provided, however,
if such Participant's cessation of Employment is a result of such Participant's
death or Total Disability, payment shall commence on such Participant's death or
Total Disability.
1
<PAGE> 22
INTEREST
Each Participant's Deferred Compensation Account shall be credited with
Interest, compounded quarterly, beginning on the date each amount of Deferred
Compensation is credited to such account at an annual rate, expressed as an
annual percentage, equal to the rate of interest that the Employer paid on its
revolving credit borrowings during the preceding quarter as determined by the
Employer and approved by the Committee. In the event that the Employer had no
revolving credit borrowings outstanding during the preceding quarter, the rate
of Interest shall be equal to the sum of (i) the average of the high and low
Federal Funds Rate as published in the "Money Rates" section of The Wall Street
Journal on the first day of the quarter for which such interest is credited and
(ii) 1.25%. Interest shall be calculated and credited to Participants' accounts
quarterly. Interest shall not exceed an annual rate of 10%.
FORM OF BENEFIT PAYMENT
A Plan Benefit shall be paid in substantially equal monthly installments of the
Deferred Compensation Account and Interest amortized over a period of 10 years.
Interest shall be credited to the remaining portion of the Deferred Compensation
Account balance in accordance with paragraph 4.5 of the Plan.
IN WITNESS WHEREOF, and pursuant to resolution of the Board of
Directors of the undersigned corporation, such corporation has caused this
instrument to be executed by its duly authorized officers this 10th day of
May, 1999, effective March 1, 1999 as amended effective May 10, 1999.
UNITED FOODS, INC.
By: /s/ B.M. Ennis
--------------------------------------
Title: President
-----------------------------------
Attest: /s/ D. Dresser
----------------------------------
Title: Senior Vice President
----------------------------------
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNITED FOODS INC. FOR THE YEAR ENDED FEBRUARY 28, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-28-1999
<EXCHANGE-RATE> 1
<CASH> 2,027
<SECURITIES> 0
<RECEIVABLES> 19,650
<ALLOWANCES> 500
<INVENTORY> 37,785
<CURRENT-ASSETS> 63,903
<PP&E> 139,429
<DEPRECIATION> 80,876
<TOTAL-ASSETS> 123,400
<CURRENT-LIABILITIES> 24,318
<BONDS> 48,302
0
0
<COMMON> 6,810
<OTHER-SE> 39,458
<TOTAL-LIABILITY-AND-EQUITY> 123,400
<SALES> 206,760
<TOTAL-REVENUES> 206,760
<CGS> 167,408
<TOTAL-COSTS> 167,408
<OTHER-EXPENSES> 34,113
<LOSS-PROVISION> 210
<INTEREST-EXPENSE> 4,138
<INCOME-PRETAX> 926
<INCOME-TAX> 406
<INCOME-CONTINUING> 520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 520
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
